<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1998
REGISTRATION NO. 333-48177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
DUNN COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
VIRGINIA 506 54-1890464
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
--------------------------
1306 SQUIRE COURT
STERLING, VIRGINIA 20166
(703) 450-0400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
JOHN D. VAZZANA
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
DUNN COMPUTER CORPORATION
1306 SQUIRE COURT
STERLING, VIRGINIA 20166
(703) 450-0400
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
COPY TO:
KENNETH J. AYRES, ESQ.
JONES, DAY, REAVIS & POGUE
METROPOLITAN SQUARE
1450 G STREET, N.W.
WASHINGTON, D.C. 20005-2088
(202) 879-3791
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the
effective time of the merger of a wholly-owned subsidiary of the Registrant with
and into Dunn Computer Corporation, a Delaware corporation, as described in the
Agreement of Merger dated as of March 18, 1998.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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(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. / / ______________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001................... 5,297,743(1) $9.5625(2) $50,659,667(2) $14,945(3)
Warrants to purchase Common Stock, par value
$0.001 per share............................... 200,000(4) $6.25(5) $1,250,000 $369(3)
</TABLE>
(1) The 5,297,743 shares being registered in connection with the Merger
described herein include (i) 5,097,743 outstanding shares of Dunn Computer
Corporation, a Delaware corporation, to be exchanged on a one-for-one basis
in the Merger, plus (ii) 200,000 shares of Common Stock issuable upon the
exercise of certain warrants being separately registered hereunder. Pursuant
to Rule 416 under the Securities Act of 1933, an indeterminable number of
shares of Common Stock is being registered to cover any adjustments in the
number of shares issuable upon the exercise of the warrants.
(2) Estimated in accordance with Rule 457(f) under the Securities Act of 1933
solely for purposes of calculating the registration fee and based upon the
average of the high and low price of Dunn Computer Corporation, a Delaware
Corporation, as reported on the Nasdaq National Market on March 31, 1998.
(3) In accordance with Section 14(g) of the Securities Exchange Act of 1934 and
Rule 0-11 promulgated thereunder and Rule 457(b) under the Securities Act of
1933, the registration fee of $15,314 for the securities registered hereby
was paid in connection with the filing of the preliminary Registration
Statement on March 18, 1998 and Amendment No. 1 thereto on April 2, 1998 in
the amounts of $13,958 and $1,356, respectively. Accordingly, no fee is
payable upon the filing of this Amendment No. 2 to the Registration
Statement.
(4) Reflects warrants to purchase an aggregate of 200,000 shares of Common
Stock, including warrants to purchase 100,000 shares of Common Stock issued
to JDK & Associates and warrants to purchase, in the aggregate, 100,000
shares of Common Stock issued pursuant to an underwriter's agreement between
Dunn Computer Corporation and Network 1 Financial Securities, Inc. Pursuant
to Rule 416 under the Securities Act of 1933, an indeterminable number of
shares of Common Stock is being registered to cover any adjustments in the
number of shares issuable upon exercise of the warrants.
(5) Reflects an average warrant exercise price of $6.25 per share of Common
Stock.
------------------------------
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 THIS 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>
DUNN COMPUTER CORPORATION
1306 SQUIRE COURT
STERLING, VIRGINIA 20166
APRIL 6, 1998
Dear Stockholder:
You are cordially invited to attend the annual meeting of the stockholders
of Dunn Computer Corporation, a Delaware corporation ("Dunn") to be held at
10:00 a.m. on April 30, 1998, at its offices at 1306 Squire Court, Sterling,
Virginia. A Notice of Annual Meeting of Stockholders, Proxy Statement/
Prospectus and proxy card are enclosed for your review. All holders of shares of
Dunn common stock as of the close of business on April 6, 1998 are entitled to
notice of, and to vote at, the meeting.
The meeting will include a discussion and vote on the matters set forth in
the accompanying Notice of Annual Meeting of Stockholders and the Proxy
Statement/Prospectus.
At the meeting, holders of shares of Dunn common stock will be asked to
approve and adopt an Agreement of Merger (the "Merger Agreement") dated as of
March 18, 1998 among Dunn, Dunn Computer Corporation, a Virginia corporation
(the "Company"), and a wholly-owned subsidiary of the Company. Under the Merger
Agreement, the Company will acquire all of the shares of Dunn in a merger (the
"Merger"), and Dunn shareholders will receive one share of the Company's common
stock in exchange for each of their shares of Dunn common stock. The Company is
a new corporate entity organized by Dunn to be the vehicle for the acquisition
of all of the shares of common stock of International Data Products, Corp. ("IDP
Co.") and substantially all of the net assets of its affiliate, Puerto Rico
Industrial Manufacturing Operations, Corp. ("PRIMO") pursuant to an Acquisition
Agreement (the "Acquisition Agreement") entered into on March 9, 1998 by Dunn,
the Company and the stockholders of IDP Co. and PRIMO (the "IDP Acquisition").
The Merger is contingent upon, and will take place concurrently with, the IDP
Acquisition as well as a public offering of 3,250,000 shares of the Company's
common stock, the proceeds of which will be used to finance a portion of the
purchase price of the IDP Acquisition.
At the meeting Dunn stockholders will also elect the persons to serve as
directors of Dunn for the upcoming year. In addition, at the meeting Dunn
stockholders will be asked to approve an amendment of Dunn's 1997 Stock Option
Plan to increase from 600,000 to 2,200,000 the number of shares of Dunn common
stock subject to issuance thereunder and to approve the adoption by the Company
of a stock option plan that will, in the Merger, be the successor to Dunn's 1997
Stock Option Plan.
You are encouraged to read this Proxy Statement/Prospectus carefully. It
contains a description and copy of the Merger Agreement and the Acquisition
Agreement and other important information regarding the Merger and the IDP
Acquisition. It also contains information about the persons nominated to serve
as directors, as well as a description and copy of the 1997 Stock Option Plan.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the pre-paid envelope promptly. You may attend the meeting and vote in
person even if you have previously returned your proxy. PLEASE DO NOT SEND IN
YOUR STOCK CERTIFICATES UNTIL YOU HAVE RECEIVED SEPARATE INSTRUCTIONS AND A
LETTER OF TRANSMITTAL. IF THE MERGER AGREEMENT IS APPROVED, THESE WILL BE SENT
TO YOU PROMPTLY AFTER THE MERGER IS COMPLETED.
Sincerely,
Thomas P. Dunne
Chairman, Chief Executive Officer and
President
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of Dunn
Computer Corporation, a Delaware corporation ("Dunn"), will be held at 10:00
a.m. on April 30, 1998 at its offices at 1306 Squire Court, Sterling, Virginia.
The annual meeting is called for the purpose of considering and voting upon:
1. A proposal for the holders of Dunn common stock to approve an Agreement
of Merger dated as of March 18, 1998, among Dunn, Dunn Computer
Corporation, a Virginia corporation (the "Company"), and a wholly-owned
subsidiary of the Company, under which all of the shares of Dunn will be
acquired by the Company in a merger (the "Merger"). Upon the consummation
of the Merger, each share of Dunn common stock (other than shares held in
Dunn's treasury) will be converted into the right to receive one share of
the Company's common stock and each outstanding option and warrant of
Dunn will be converted into an option or warrant, respectively, of the
Company on substantially the same terms as applied to each such option or
warrant of Dunn immediately prior to the Merger. (The Merger is being
effected in connection with the Company's acquisition of all of the
shares of common stock of International Data Products, Corp. and
substantially all of the net assets of its affiliate, Puerto Rico
Industrial Manufacturing Operations, Corp. (the "IDP Acquisition"). The
Merger is contingent upon, and will take place concurrently with, the IDP
Acquisition as well as a public offering of 3,250,000 shares of the
Company's common stock, the proceeds of which will be used to finance a
portion of the purchase price of the IDP Acquisition.)
2. The election of directors.
3. A proposal for the holders of Dunn common stock to approve an amendment
of Dunn's 1997 Stock Option Plan to increase from 600,000 to 2,200,000
the number of shares of Dunn common stock subject to issuance thereunder
and to approve the adoption by the Company of a stock option plan that
will, in the Merger, be the successor to Dunn's 1997 Stock Option Plan.
4. Any other matters that may properly come before the meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 6, 1998, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the annual meeting and any adjournments or postponements thereof.
Only holders of record of Dunn common stock on the record date are entitled to
vote at the meeting. A list of such stockholders will be available at the time
and place of the meeting and, during the ten days prior to the meeting, at the
office of the Secretary of Dunn at the above address.
If you would like to attend the meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a recent brokerage
statement or a letter from the nominee confirming your beneficial ownership of
the shares. You must also bring a form of personal identification. In order to
vote your shares at the meeting, you must obtain from the nominee a proxy in
your name.
You can ensure that your shares are voted at the meeting by signing and
dating the enclosed proxy and returning it in the envelope provided. Sending in
a signed proxy will not affect your right to attend the meeting and to vote in
person. You may revoke your proxy at any time before it is voted by notifying
Continental Stock Transfer & Trust Company in writing before the meeting, or by
executing a subsequent proxy, which revokes your previously executed proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors
Thomas P. Dunne
Chairman, Chief Executive Officer and
President
Sterling, Virginia
April 6, 1998
<PAGE>
[DUNN LOGO]
PROXY STATEMENT/PROSPECTUS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1998
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock of Dunn Computer Corporation, a
Delaware corporation ("Dunn"), by the Board of Directors of Dunn to solicit
proxies for the annual meeting of stockholders to be held at Dunn's offices at
1306 Squire Court, Sterling, Virginia, 20166, on April 30, 1998, at 10:00 a.m.,
and at any and all adjournments or postponements thereof. At the meeting, the
holders of Dunn common stock will be asked to approve an Agreement of Merger
(the "Merger Agreement") dated as of March 18, 1998, among Dunn, Dunn Computer
Corporation, a Virginia Corporation (the "Company"), and a wholly-owned
subsidiary of the Company ("Merger Sub"), under which all of the shares of Dunn
will be acquired by the Company in a merger (the "Merger"). The Company is a new
corporate entity organized for the purposes of the acquisition of all of the
shares of International Data Products, Corp. ("IDP Co.") and substantially all
of the net assets of its affiliate, Puerto Rico Industrial Manufacturing
Operations, Corp. ("PRIMO") (collectively, the "IDP Acquisition"). Upon
consummation of the Merger and the IDP Acquisition, the Company will become a
holding company owning, either directly or through subsidiaries, 100% of the
shares of Dunn and IDP Co. and substantially all of the net assets of PRIMO.
In the Merger, each outstanding share of Dunn common stock will be converted
into the right to receive one share of the Company's common stock and each
outstanding option and warrant of Dunn will be converted into an option or
warrant, respectively, of the Company on substantially the same terms as applied
to each such option or warrant of Dunn immediately prior to the Merger. The
Company has filed a registration statement under the Securities Act of 1933 (the
"Securities Act") on Form S-4 for up to 5,297,743 shares of common stock of the
Company and for warrants evidencing the right to purchase 200,000 shares in the
aggregate of the Company's common stock issuable pursuant to the terms of the
Merger Agreement. This Proxy Statement/ Prospectus also constitutes the
Prospectus of the Company filed as part of that registration statement. The
Company's common stock will trade on the Nasdaq National Market under the symbol
"DNCC," under which Dunn's common stock is traded prior to the Merger. On April
1, 1998 the closing price of Dunn's common stock was $9 13/16.
Consummation of the Merger is subject to various conditions, including
completion of the IDP Acquisition and a public offering of 3,250,000 shares of
the Company's common stock (the "Offering"), the proceeds of which will be used
to finance a portion of the purchase price of the IDP Acquisition. See "The
Merger and the IDP Acquisition." The IDP Acquisition, the Offering and the
Merger are each contingent upon completion of the others.
At the meeting Dunn stockholders will also elect the persons to serve as
directors of Dunn for the upcoming year. In addition, Dunn stockholders will be
asked to approve an amendment of Dunn's 1997 Stock Option Plan to increase from
600,000 to 2,200,000 the number of shares of Dunn common stock subject to
issuance thereunder and to approve the adoption by the Company of a stock option
plan that will, in the Merger, be the successor to Dunn's 1997 Stock Option
Plan.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to Dunn stockholders on April 7, 1998. A stockholder who has given
a proxy in respect to this proxy solicitation may revoke it at any time prior to
its exercise. See "Matters Related to the Annual Meeting--Voting of Proxies and
Revocability."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY DUNN STOCKHOLDERS.
---------------------
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 PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Proxy Statement/Prospectus is April 6, 1998.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN OR INCORPORATED HEREIN BY REFERENCE MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE
DISTRIBUTION OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH
HEREIN OR INCORPORATED HEREIN BY REFERENCE SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MATTERS RELATED TO THE ANNUAL MEETING..................................................................... 4
SUMMARY................................................................................................... 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................................................. 10
RISK FACTORS.............................................................................................. 10
DUNN SELECTED CONSOLIDATED FINANCIAL DATA................................................................. 15
IDP SELECTED COMBINED FINANCIAL DATA...................................................................... 16
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA....................................................... 17
SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA.............................................................. 21
PRICE RANGE OF DUNN'S COMMON STOCK........................................................................ 22
DIVIDEND POLICY........................................................................................... 22
THE MERGER AND THE IDP ACQUISITION........................................................................ 23
DESCRIPTION OF THE COMPANY'S COMMON STOCK................................................................. 31
COMPARATIVE RIGHTS OF STOCKHOLDERS........................................................................ 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................................................... 39
BUSINESS.................................................................................................. 46
PRINCIPAL STOCKHOLDERS.................................................................................... 55
ELECTION OF DIRECTORS..................................................................................... 57
DUNN'S BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION................................................ 58
THE COMPANY'S BOARD OF DIRECTORS.......................................................................... 58
MANAGEMENT................................................................................................ 59
CERTAIN TRANSACTIONS...................................................................................... 62
PROPOSAL TO AMEND THE 1997 STOCK OPTION PLAN OF DUNN AND AUTHORIZE THE STOCK OPTION PLAN OF THE COMPANY... 63
STOCK OPTION PLAN SUMMARY................................................................................. 64
LEGAL MATTERS............................................................................................. 66
INDEPENDENT AUDITORS...................................................................................... 66
EXPERTS................................................................................................... 67
</TABLE>
2
<PAGE>
<TABLE>
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PAGE
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OTHER MATTERS............................................................................................. 67
FUTURE STOCKHOLDER PROPOSALS.............................................................................. 67
ADDITIONAL INFORMATION.................................................................................... 67
INDEX TO FINANCIAL STATEMENTS............................................................................. F-1
APPENDIX A--MERGER AGREEMENT.............................................................................. A-1
APPENDIX B--ACQUISITION AGREEMENT......................................................................... B-1
APPENDIX C--1997 STOCK OPTION PLAN........................................................................ C-1
</TABLE>
3
<PAGE>
MATTERS RELATED TO THE ANNUAL MEETING
PURPOSE OF THE ANNUAL MEETING
At the annual meeting, stockholders will act upon the matters outlined in
the accompanying Notice of Annual Meeting of Stockholders.
RECORD DATE
The Board of Directors has fixed the close of business on April 6, 1998 as
the record date for the annual meeting. Only holders of record of common stock
at the close of business on such record date are entitled to notice of and to
vote at the meeting or any adjournments or postponements thereof. On April 6,
1998 there were 5,097,743 shares of Dunn common stock outstanding. A list of
such stockholders will be available at the time and place of the meeting and,
during the ten days prior to the meeting, at the office of the Secretary of Dunn
at the address set forth on the cover page.
VOTING OF PROXIES AND REVOCABILITY
All shares presented by properly executed proxies will be voted in
accordance with the specifications on the proxy. IF NO SUCH SPECIFICATIONS ARE
MADE ON AN EXECUTED PROXY, THE PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREUNDER, FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS LISTED UNDER THE CAPTION "ELECTION OF DIRECTORS" AND FOR
THE APPROVAL OF THE 1997 STOCK OPTION PLAN AND THE COMPANY'S SUCCESSOR STOCK
OPTION PLAN. A stockholder who has given a proxy pursuant to this proxy
solicitation may revoke it at any time before it is exercised by giving written
notice thereof prior to the meeting to Dunn's transfer agent, Continental Stock
Transfer & Trust Company, or by signing and returning a later dated proxy, or by
voting in person at the meeting. Sending in a signed proxy will not affect a
stockholder's right to attend the meeting and vote in person. However, mere
attendance at the meeting will not, in and of itself, have the effect of
revoking the proxy.
Dunn does not know of any matters other than as described in the Notice of
Annual Meeting of Stockholders that are to come before the meeting. If any other
matter or matters are properly presented for action at the meeting, the persons
named in the enclosed proxy card and acting thereunder will have the discretion
to vote on such matters in accordance with their best judgment, unless such
authorization is withheld.
If you would like to attend the meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a recent brokerage
statement or a letter from the nominee confirming your beneficial ownership of
the shares. You must also bring a form of personal identification. In order to
vote your shares at the meeting, you must obtain from the nominee a proxy in
your name.
REQUIRED VOTE
The presence in person or by properly executed proxy of holders of a
majority of the outstanding shares of Dunn common stock is necessary to
constitute a quorum at the meeting. Each holder of Dunn common stock is entitled
to one (1) vote for each share held on the record date. The candidates for
election as Directors will be elected by the affirmative vote of a plurality of
the shares of common stock present in person or by proxy and actually voting at
the meeting. The affirmative vote of a majority of shares of Dunn common stock
outstanding on the record date is required for the approval of the Merger
Agreement. Approval of the 1997 Stock Option Plan and the Company's successor
stock option plan and all other matters that may properly come before the
meeting require for their approval the favorable vote of a majority of the
shares of common stock voted in person or by proxy at the meeting.
4
<PAGE>
Votes cast by proxy or in person at the meeting will be tabulated by the
election inspectors appointed for the meeting, who will determine whether or not
a quorum is present. The election inspectors will treat abstentions and
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any action other than a vote for the
nominee or proposal (including abstentions and broker non-votes) will have the
practical effect of voting against the nominee or proposal, as the case may be.
AS OF THE RECORD DATE THERE WERE 5,097,743 SHARES OF DUNN COMMON STOCK
OUTSTANDING, AND 3,790,000 OF THOSE SHARES ARE OWNED BY THOMAS P. DUNN, JOHN D.
VAZZANA AND CLAUDIA N. DUNNE, OFFICERS AND DIRECTORS OF DUNN WHO HAVE ADVISED
DUNN THAT THEY WILL VOTE (1) FOR THE MERGER AGREEMENT, (2) FOR THE NOMINEES FOR
DIRECTOR SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS AND (3) FOR THE AMENDMENT
OF DUNN'S STOCK OPTION PLAN AND THE ADOPTION BY THE COMPANY OF A SUCCESSOR STOCK
OPTION PLAN. ACCORDINGLY, APPROVAL OF EACH OF THESE ITEMS FOR WHICH PROXIES ARE
BEING SOLICITED IS ASSURED EVEN IF NO ADDITIONAL SHARES OF DUNN COMMON STOCK ARE
VOTED IN FAVOR THEREOF.
NEVERTHELESS, THE MERGER AND THE OTHER MATTERS TO BE CONSIDERED AT THE
MEETING ARE OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF DUNN AND STOCKHOLDERS ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
5
<PAGE>
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement/Prospectus and the Appendices. This summary does not contain a
complete statement of all material information relating to the Merger and the
IDP Acquisition and is qualified by the more detailed information and financial
statements contained in this Proxy Statement/Prospectus. You should read all of
this Proxy Statement/ Prospectus carefully.
THE PARTIES
DUNN
Dunn Computer Corporation, a Delaware corporation ("Dunn"), manufactures and
markets build-to-order computer systems and provides related services to
departments, agencies and offices of the federal government (the "Government")
and selected businesses. Dunn provides its customers with single-source
solutions by manufacturing its own brand of desktop and portable computers and
high performance network client servers and by offering services, which include
network consulting, project implementation and technical support. Dunn currently
derives most of its revenue from computer hardware sales to the Government, but
also sells computer hardware and services to medium and large businesses.
In April 1997, Dunn completed an initial public offering of its common
stock, which since has traded on the Nasdaq National Market under the symbol
"DNCC." Since its initial public offering, Dunn has continued to pursue its
growth strategy of acquiring complementary businesses and further penetrating
its target markets.
In September 1997, Dunn acquired STMS, Inc. ("STMS"), a Virginia-based
network services company (the "STMS Acquisition"). This acquisition expanded
Dunn's capabilities to provide a wide variety of computer services, including
network consulting, project implementation and technical support. Additionally,
the STMS Acquisition provided Dunn with new opportunities to sell computer
hardware into the commercial marketplace as part of a total network solution.
Dunn believes that the rapid technological change and increased complexity of
the computer industry will result in an increasing number of entities
outsourcing total network solutions to third party providers.
On March 9, 1998, Dunn entered into an agreement (the "Acquisition
Agreement") to acquire International Data Products, Corp. ("IDP Co.") and its
affiliate, Puerto Rico Industrial Manufacturing Operations, Corp. ("PRIMO"; IDP
Co. and PRIMO are referred to collectively as "IDP"). IDP, which had total
combined revenue of approximately $71.9 million for its fiscal year ended
September 30, 1997, is primarily a manufacturer of notebooks, desktops and high
performance network servers. IDP manufactures its products in its ISO 9000
certified facility in Gaithersburg, Maryland and in its facility in Guayama,
Puerto Rico. IDP is expected to retain its product brand names and continue to
service its existing contracts. See "Business."
Dunn's management believes that the acquisition of IDP (the "IDP
Acquisition") will result in several benefits, including: (i) doubling Dunn's
Government customer base; (ii) expanding Dunn's portable computer product line;
and (iii) providing cost savings and economies of scale. See "The Merger and the
IDP Acquisition--Recommendation of the Board of Directors; Dunn's Reasons for
the IDP Acquisition."
THE COMPANY
Dunn has organized a new corporate entity, Dunn Computer Corporation, a
Virginia corporation (the "Company"), to be the vehicle for the IDP Acquisition.
At the time the IDP Acquisition is completed and the Merger is effective, the
Company will become a holding company owning 100% of both Dunn and IDP. After
giving effect to the IDP Acquisition and the STMS Acquisition, the Company's pro
forma combined revenue for fiscal 1997 was $109.1 million and for the first
quarter of fiscal 1998 was $35.6 million.
With the combination of Dunn and IDP, the Company will sell its products and
services to more than 950 customers, including customers from agencies within
the Department of Defense, Department of
6
<PAGE>
Justice, Administrative Office of the U.S. Courts, Social Security
Administration, Lockheed Martin Corporation, Blue Cross and Blue Shield
Association and Inova Health Care Systems, Inc. The Government and commercial
markets for computer systems and services are large and growing. The Office of
Management and Budget ("OMB") proposed a Government information technology
("IT") budget of $29.5 billion for fiscal 1998, which is expected to grow
between 3% and 6% over the next five years. Additionally, industry sources
indicate that the total U.S. computer hardware and systems IT market was $66.6
billion in 1996 and estimates growth of approximately 10% over the next three
years.
The Company intends to continue Dunn's strategy of increasing revenues and
profits by providing the Government market and selected businesses with
single-source computer network solutions. The Company plans to achieve this
objective by: (i) leveraging its Government customer base to increase sales of
products and network services; (ii) targeting the commercial market to expand
the sales of its own brand name computer hardware as part of a total network
solution; (iii) focusing on product quality; and (iv) pursuing targeted
acquisitions that complement its core skills and increase the overall value of
the Company.
MERGER SUB
Merger Sub is a wholly-owned subsidiary of the Company formed for the
purpose of consummating the Merger. In accordance with the Merger Agreement
among Dunn, the Company and Merger Sub, Merger Sub will merge with and into
Dunn, the separate existence of Merger Sub will cease, and Dunn will be the
surviving corporation and will be a wholly-owned subsidiary of the Company.
------------------------
The principal executive offices of Dunn, the Company and Merger Sub are
located at 1306 Squire Court, Sterling, Virginia 20166, and their telephone
number is (703) 450-0400.
THE MERGER AND THE IDP ACQUISITION
GENERAL DESCRIPTION OF THE MERGER AND THE IDP ACQUISITION
Under the Merger Agreement, the Company will acquire all of the shares of
Dunn in a merger of Merger Sub with and into Dunn. Each outstanding share of
Dunn common stock (other than shares held in Dunn's treasury) will be converted
into the right to receive one share of the Company's common stock (the "Common
Stock"). The reorganization effected by the Merger is a necessary step towards
completion of the IDP Acquisition. A copy of the Merger Agreement is attached as
Appendix A to this Proxy Statement/ Prospectus.
Under the Acquisition Agreement, Dunn and the Company have agreed to pay the
stockholders of IDP Co. and PRIMO (the "IDP Sellers") $14.9 million in cash and
750,000 shares of the Company's Common Stock to acquire all of the shares of IDP
Co. and substantially all of the net assets of PRIMO. This purchase price is
subject to certain post-closing adjustments. See "The Merger and the IDP
Acquisition--Purchase Price for the IDP Acquisition." A copy of the Acquisition
Agreement is attached as Appendix B to this Proxy Statement/Prospectus. A
portion of the purchase price of the IDP Acquisition will be funded by the
Offering of 3,250,000 shares of the Company's Common Stock.
The Merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State. The certificate of merger will be
filed concurrently with the closing of the IDP Acquisition and the successful
completion of the Offering (collectively, the "Closing"). The Merger, the IDP
Acquisition and the Offering are each contingent upon the consummation of the
others.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF DUNN
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND HAS DETERMINED THAT THE MERGER AND THE IDP
ACQUISITION ARE FAIR TO, AND IN THE BEST INTEREST OF DUNN AND ITS STOCKHOLDERS.
ACCORDINGLY, THE DUNN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
DUNN COMMON STOCK VOTE
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"FOR" THE APPROVAL OF THE MERGER AGREEMENT. SEE "THE MERGER AND THE IDP
ACQUISITION--RECOMMENDATION OF THE BOARD OF DIRECTORS; DUNN'S REASONS FOR THE
MERGER."
TREATMENT OF DUNN STOCK OPTIONS AND WARRANTS
When the Merger is effective, all outstanding options and warrants to
purchase shares of Dunn common stock, whether or not exercisable, will be
converted into options or warrants, as the case may be, to purchase the same
number of shares of the Company's Common Stock at the same exercise price and on
terms and conditions substantially the same as those applicable to the options
or warrants to purchase Dunn common stock prior to the Merger. See "The Merger
and the IDP Acquisition--Treatment of Dunn Stock Options and Warrants."
REPRESENTATIONS AND WARRANTIES; CONDUCT OF BUSINESS PENDING THE IDP
ACQUISITION
Dunn, the Company and the IDP Sellers have made certain customary
representations to each other in the Acquisition Agreement on a variety of
corporate and other matters. Each of Dunn and IDP have also agreed to operate
their business in the usual and ordinary course and generally to preserve their
business organization, properties and assets until the IDP Acquisition is
completed. See "The Merger and the IDP Acquisition--IDP Acquisition
Representations and Warranties" and "--Conduct of Business Pending the IDP
Acquisition."
CONDITIONS TO CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION
In addition to certain standard closing conditions, the IDP Acquisition is
contingent upon, among other things: (i) the execution of employment agreements
with two executives of IDP Co. pursuant to which they will each receive stock
options to purchase up to 300,000 shares of the Company's Common Stock (subject
to adjustment to 400,000 shares under certain conditions), (ii) the election of
two IDP Co. directors to the Company's board of directors; (iii) the successful
completion of the Offering; and (iv) the prior transfer of assets and
liabilities of IDP Co.'s F Squared Engineering division to a separate
subsidiary, and the transfer of such subsidiary to certain IDP Sellers. See "The
Merger and the IDP Acquisition-- Conditions Precedent to the IDP Acquisition."
TERMINATION AND TERMINATION FEE
The Acquisition Agreement may be terminated, among other reasons, by the
mutual consent of the Board of Directors of Dunn and the IDP Sellers or if the
IDP Acquisition is not completed on or before June 30, 1998. The Acquisition
Agreement also provides that if the Acquisition Agreement is terminated because
the closing has not occurred before June 30, 1998, Dunn shall pay to the IDP
Sellers a termination fee in the amount of $500,000, provided that if the
closing does not occur on or before June 30, 1998 because (i) the conditions
precedent to the obligations of Dunn to consummate the IDP Acquisition were not
met, or (ii) the Offering is postponed or terminated because of general market
conditions, then no termination fee shall be paid. See "The Merger and the IDP
Acquisition--Acquisition Agreement Termination and Amendment" and "--IDP
Acquisition Fees and Expenses."
DISSENTERS' RIGHTS
Under Delaware law, Dunn stockholders have no right to an appraisal of the
value of their shares in connection with the Merger. See "The Merger and the IDP
Acquisition--Dissenters' Rights."
APPROVALS
IDP has certain contracts awarded under a program administered by the Small
Business Association ("SBA") which require the SBA's consent to a change in
ownership. Notice has been provided to the SBA regarding the transfer of IDP Co.
shares. See "Risk Factors--Risks Related to the IDP Acquisition and Future
Acquisitions." In addition, the Company's continued eligibility for certain
Puerto Rican tax benefits
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formerly granted to PRIMO depends on an approval to be granted by the Puerto
Rican taxing authorities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is intended that the Merger will constitute a reorganization under
section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and/or a transfer of property by the Dunn stockholders to the Company under
section 351 of the Code. Accordingly, no gain or loss will be recognized for
United States federal income tax purposes by holders of Dunn common stock upon
the conversion of their Dunn common stock into shares of Company Common Stock in
the Merger. Further, no gain or loss will be recognized by the Dunn stockholders
as a result of the IDP Acquisition. Dunn's stockholders are urged to consult
their own tax advisors as to the specific consequences to them of the Merger
under federal, state, local and other applicable laws. See "The Merger and the
IDP Acquisition --Certain Federal Income Tax Considerations."
POSITION OF PRINCIPAL STOCKHOLDERS
Thomas P. Dunne, John D. Vazzana and Claudia N. Dunne, directors and
officers of Dunn who collectively own 3,790,000 shares of Dunn common stock as
of the record date, have advised Dunn that they will vote (1) for the Merger
Agreement, (2) for the nominees for director set forth in this Proxy
Statement/Prospectus, and (3) for the amendment of Dunn's 1997 Stock Option Plan
and adoption by the Company of a successor stock option plan as set forth in
this Proxy Statement/Prospectus. Because the shares owned by these three
principal stockholders constitute 74.3% of the total number of shares of Dunn
common stock that were issued and outstanding as of the record date, approval of
each of these items for which proxies are being solicited is assured even if no
additional shares of Dunn common stock are voted in favor thereof.
COMPARISON OF THE RIGHTS OF HOLDERS OF DUNN COMMON STOCK AND THE COMPANY'S
COMMON STOCK
The rights of stockholders of Dunn currently are governed by Delaware law,
Dunn's Certificate of Incorporation and Dunn's Bylaws. Upon consummation of the
Merger, stockholders of Dunn will become shareholders of the Company, which is a
Virginia corporation, and their rights as shareholders of the Company will be
governed by Virginia law, the Company's Articles of Incorporation and the
Company's Bylaws. For a discussion of various differences between the rights of
stockholders of Dunn and the rights of shareholders, see "Comparative Rights of
Stockholders."
CERTAIN DEFINITIONS
REFERENCES HEREIN TO THE "GOVERNMENT" ARE TO THE FEDERAL GOVERNMENT OF THE
UNITED STATES AND ITS DEPARTMENTS, AGENCIES AND OFFICES.
REFERENCES TO THE "COMPANY" ARE TO DUNN COMPUTER CORPORATION, A VIRGINIA
CORPORATION INCORPORATED ON FEBRUARY 26, 1998, AS IT EXISTS PRIOR TO THE CLOSING
OR, TOGETHER WITH THE COMPANIES THAT WILL BE ITS WHOLLY-OWNED SUBSIDIARIES UPON
THE CLOSING, AS THEY EXIST AND WILL EXIST AFTER THE MERGER AND THE CLOSING, AS
THE CONTEXT MAY REQUIRE.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "DUNN" ARE TO DUNN
COMPUTER CORPORATION, A DELAWARE CORPORATION INCORPORATED ON JANUARY 3, 1997,
AND ITS WHOLLY-OWNED SUBSIDIARIES, AS THEY EXIST AND HAVE EXISTED PRIOR TO THE
CLOSING.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "IDP" ARE TO
INTERNATIONAL DATA PRODUCTS, CORP. AND ITS AFFILIATE, PUERTO RICO INDUSTRIAL
MANUFACTURING OPERATIONS, CORP., AS THEY EXIST AND HAVE EXISTED PRIOR TO THE
CLOSING.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and certain other
statements contained herein regarding matters that are not historical facts are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors."
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, IN CONNECTION
WITH YOUR VOTE ON THE MERGER.
COMPETITION. The markets for the Company's products and services are highly
competitive. Many of the Company's competitors offer broader product lines, have
substantially greater financial, technical, marketing and other resources than
the Company and may benefit from component volume purchasing and product and
process technology license arrangements that are more favorable in terms of
pricing and availability than the Company's arrangements. Competitive pressures
have intensified as large build-to-order multinational computer manufacturers
have entered the Government market. The Company also competes with a large
number of computer systems integrators and resellers. The Company believes that
it is likely that these competitive conditions will continue in the future.
There can be no assurance that the Company will continue to compete successfully
against existing or new competitors that may enter markets in which the Company
operates. See "Business--Competition."
RAPID CHANGES IN PRODUCT STANDARDS AND RISK OF INVENTORY OBSOLESCENCE. The
computer products market is characterized by rapid technological change and the
frequent introduction of new products and product enhancements. As a result,
computer components decline in value rapidly. Dunn has sought to minimize its
inventory exposure through a variety of inventory control procedures and
policies. Historically, Dunn has purchased inventory to fulfill existing orders.
With the IDP Acquisition, the Company will be required to carry increased
inventory levels in order to satisfy a larger number of customers, to obtain
greater purchasing discounts, and to fill commercial orders. The Company will
attempt to react to new product introductions and to mitigate its exposure to
losses from inventory obsolescence. There can be no assurance that such efforts
will be successful or that unexpected new product introductions will not have a
material adverse effect on the Company.
NEED FOR TECHNICAL PERSONNEL. The Company believes that its future success
will depend in large part upon its continued ability to attract and retain
highly qualified management, technical and sales personnel. The computer
industry is currently undergoing a shortage of trained and experienced
technicians. The Company endeavors to be attractive to current and prospective
employees and has an in-house training program to produce its own supply of
highly qualified technicians and service providers. However, there can be no
assurance that the Company will be able to attract and retain the qualified
personnel necessary for its business.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Both Dunn and IDP's results of
operations vary from quarter to quarter as a result of uneven purchasing
patterns and budgetary cycles. For example, in its fiscal year ended October 31,
1997 ("fiscal 1997"), Dunn's quarterly revenues were $5.5 million, $4.0 million,
$2.5 million and $9.8 million in the first, second, third and fourth quarters,
respectively. For IDP, the quarterly revenues for its fiscal year ended
September 30, 1997 ("IDP's fiscal 1997") were $36.0 million, $16.5 million, $7.7
million and $11.7 million in the first, second, third and fourth quarters,
respectively. In the first quarter of their respective fiscal years 1998, Dunn's
and IDP's revenues were $10.4 million and
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$25.2 million, respectively. These quarterly variations are likely to continue
in the future and may cause the market price of the Common Stock to fluctuate.
DEPENDENCE ON THE GOVERNMENT MARKET. The Company's business is highly
dependent on the Government market. Approximately 68% and 70% of Dunn's revenues
in its fiscal year ended October 31, 1996 ("fiscal 1996") and fiscal 1997,
respectively, and approximately 97% and 99% of IDP's revenues in its fiscal year
ended September 30, 1996 ("IDP's fiscal 1996") and IDP's fiscal 1997,
respectively, were derived from contracts or subcontracts with the Government.
The Company believes that the success and development of its business will
continue to be largely dependent upon its ability to participate in Government
contract programs. Accordingly, the Company's financial performance may be
directly affected by changes in Government contracting policies. Among the
factors that could materially adversely affect the Company's Government
contracting business are budgetary constraints and the adoption of new laws or
regulations. Most Government contracts are also subject to modification or
termination in the event of changes in funding, and the Company's contractual
costs and revenues are subject to adjustments as a result of audits by
Government auditors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company derives significant revenues from sales made pursuant to certain
major procurement programs awarded by the Government in the ordinary course of
business. These include its General Services Administration ("GSA") Schedules,
contracts with agencies within the Department of Defense, and contracts with the
Administrative Office of the U.S. Courts, among others. The GSA Schedules are
indefinite delivery, indefinite quantity ("IDIQ") contracts, which the GSA
negotiates with selected vendors and can be used by any Government agency. Both
Dunn and IDP currently have GSA Schedules that are three-year contracts which
expire in March 1999. Both GSA Schedules may be renewed for an additional three
years with the mutual consent of Dunn or IDP, as the case may be, and the GSA.
The inability of either Dunn or IDP to renew or replace its GSA Schedule or
other contracts could have a material adverse effect on the Company. See
"Business--Contracts."
GOVERNMENT CONTRACTING RISKS. Government contracts, by their terms,
generally can be terminated at any time, without cause, for the convenience of
the Government. If a Government contract is so terminated, the contractor
generally is entitled to receive compensation for the services provided or
certain costs incurred at the time of termination and a reasonable profit on the
contract work performed prior to the date of termination. In addition, all
Government contracts require compliance with various contract provisions and
procurement regulations and in certain cases, accounting requirements. If not
cured, certain violations of these regulations could result in the termination
of the contract, imposition of fines, and suspension or debarment from competing
for or receiving awards of additional Government contracts. Exclusion of the
Company from federal procurements, the termination of any of the Company's
significant Government contracts or the imposition of such penalties could have
a material adverse effect on the Company. See "Business-- Contracts."
RISKS RELATED TO THE IDP ACQUISITION AND FUTURE ACQUISITIONS. Following the
consummation of the IDP Acquisition, the Company plans to integrate certain
administrative operations of Dunn and IDP. There can be no assurance that the
Company will: (i) achieve its operating and growth strategies with respect to
these businesses; (ii) obtain increased revenue opportunities as a result of the
anticipated synergies created by expanded product offerings; and (iii) acquire
additional distribution channels or reduce the overall selling, general and
administrative expenses associated with the acquired operation. Additionally,
the integration of any other business the Company may acquire in the future
could involve unforeseen difficulties, which could have a material adverse
effect on the Company's business, financial condition and results of operations
and ultimately the market price of the Common Stock. See "The Merger and the IDP
Acquisition."
Until December 1997, IDP participated in the "8(a) Program" administered by
the SBA. The
8(a) Program affords eligible firms with advantages in competing for Government
contracts based on
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certain disadvantaged statuses. Under SBA regulations, all contracts awarded to
a firm under the 8(a) Program must be terminated for the convenience of the
Government if the program-eligible owner(s) relinquish ownership of the firm,
unless the procuring agency requests a waiver from the SBA. IDP has been awarded
a "Desktop V" contract with the U.S. Air Force pursuant to the 8(a) Program,
which has an estimated delivery quantity valued at $100 million. The Air Force
has been advised of the pending change in ownership of IDP, and has requested a
waiver from the SBA. The Company expects that the SBA will not oppose the
waiver. In the event that the SBA denies the waiver and the Company, after the
IDP Acquisition, will not be able to make sales pursuant to the Desktop V
contract, there would be a material adverse effect on the Company's anticipated
revenue from this contract. See "Business--Contracts."
DEPENDENCE ON MANAGEMENT PERSONNEL. The Company's future success will
depend to a significant extent on the continued efforts of key management
personnel, including Thomas P. Dunne and John D. Vazzana, Chief Executive
Officer and Executive Vice President of both Dunn and the Company, respectively.
Dunn has entered into employment contracts with Mr. Dunne and Mr. Vazzana. The
Company's future success also will depend to a significant extent on the
continued efforts of George D. Fuster and D. Oscar Fuster, from whom the Company
is purchasing IDP and who have heretofore served as President and Executive Vice
President of IDP, respectively. At the Closing, the Company will enter into
employment agreements with George D. Fuster and D. Oscar Fuster who will
thereafter continue in their present positions. The loss of one or more of these
key employees could have a material adverse effect on the Company's business.
See "Management."
CONTROL BY MANAGEMENT STOCKHOLDERS. Upon the completion of the Offering and
the IDP Acquisition, the Company's executive officers will collectively
beneficially own 49.9% (46.0% if the over-allotment option issued in connection
with the Offering is exercised in full) of the Company's outstanding Common
Stock. Because of their beneficial stock ownership, these stockholders as a
group will be in a position to elect the members of the Board of Directors and
decide most, if not all, matters requiring stockholder approval. See "Principal
Stockholders" and "Description of the Company's Common Stock."
IDP'S STATUS UNDER THE 8(A) PROGRAM. IDP was approved to participate in the
SBA's 8(a) Program on June 3, 1994. IDP voluntarily withdrew from the 8(a)
Program on December 4, 1997, by entering into a Voluntary Withdrawal Agreement
with the SBA that, among other things, requires IDP to complete all previously
awarded 8(a) Program contracts and subcontracts, including modifications.
On January 21, 1998, SBA's Office of Inspector General ("OIG") issued a
final audit report closing out an audit concerning IDP's 8(a) Program
eligibility, and concluding that one of IDP's owners exceeded SBA's individual
net worth thresholds both at the time IDP was admitted to the 8(a) Program and
during 1996. The final audit report states, however, that IDP's voluntary
withdrawal from the 8(a) Program meets the intent of OIG's recommendation that
SBA initiate action to terminate IDP from the 8(a) Program. IDP is not aware of
any further SBA action or decision regarding the final audit report or its
recommendation.
While it is possible that the Government could initiate action against IDP
beyond the OIG's recommendation, including seeking to suspend or debar IDP from
contracting or to void or terminate IDP's 8(a) contracts, IDP believes the
following factors would weigh against initiation of such actions: (i) IDP has
already withdrawn from the 8(a) Program; (ii) IDP's Voluntary Withdrawal
Agreement with the SBA requires IDP to complete all of its 8(a) contracts; and
(iii) the OIG final audit report concludes that IDP's voluntary withdrawal from
the 8(a) Program satisfies the report's recommendation. Any action that results
in the voiding or termination of IDP's 8(a) contracts or exclusion of IDP from
federal procurements could have a material adverse effect on the Company. The
Company would expect to contest any such action vigorously.
BID PROTESTS AND SETTLEMENTS. From time to time, competitors of the Company
may commence protest proceedings with respect to Government contracts awarded to
the Company. In the past, Dunn and IDP,
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depending on the most advantageous course of action, have either defended or
settled such protests. Terms of settlement have included cash settlement,
payment of percentage of revenues received from the contract, or an agreement to
share the contract. In the past, certain of such proceedings or settlement
agreements have had a material adverse impact on IDP's results of operation.
There can be no assurance that such protests and or settlement agreements will
not have a material adverse effect on the Company in the future. See
"Business--Contracts."
SHARES ELIGIBLE FOR FUTURE SALE. At Closing, 9,097,743 shares of Common
Stock will be outstanding and the Company will also have outstanding options and
warrants to purchase up to a total of 2,832,000 shares of Common Stock. The
3,250,000 shares sold in the Offering and the 5,097,743 shares exchanged for
Dunn's common stock pursuant to the Merger (other than the 3,790,000 shares
issued to affiliates of the Company) will be freely tradable by the public. The
3,790,000 shares issued to affiliates of the Company in exchange for Dunn's
common stock pursuant to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (which incorporates most of the conditions set forth in Rule 144 described
below) or as otherwise permitted under the Securities Act and the rules and
regulations thereunder. The remaining 750,000 outstanding shares of Common Stock
(collectively, the "Restricted Shares") have not been registered under the
Securities Act and may be resold publicly only pursuant to an effective
registration under that act or pursuant to an available exemption from the
registration requirements of that act (such as Rule 144 thereunder).
In general under Rule 144, if a minimum of one year has elapsed since the
later of the date of acquisition of the restricted securities from the issuer or
from an affiliate of the issuer, a person (or persons whose shares of Common
Stock are aggregated), including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of: (i) 1% of the then
outstanding shares of Common Stock (i.e., 90,977 shares as of the Closing); and
(ii) the average weekly trading volume during a preceding period of four
calendar weeks. Sales under Rule 144 are also subject to certain provisions as
to the manner of sale, notice requirements and the availability of current
public information about the Company. In addition, under Rule 144(k), if a
period of at least two years has elapsed since the later of the date restricted
securities were acquired from the Company or the date they were acquired from an
affiliate of the Company, a stockholder who is not an affiliate of the Company
at the time of sale and has not been an affiliate for at least three months
prior to the sale would be entitled to sell shares of Common Stock in the public
market immediately without compliance with the foregoing requirements under Rule
144. In certain circumstances, Rule 144 permits a holder of restricted shares to
"tack" his holding period with that of his predecessor(s) who were not
affiliates at the time of transfer in order to meet Rule 144's holding period
requirements. Under Rule 144, an affiliate of the Company may sell shares of
Common Stock that are not "restricted securities" without regard to the one-year
holding period applicable in the case of restricted securities, subject to the
satisfaction of other conditions set forth in Rule 144. The foregoing summary of
Rule 144 is not intended to be a complete description thereof.
The Company, its directors and executive officers and certain other security
holders have agreed not to offer or sell any shares of Common Stock, or
securities exchangeable, convertible or exercisable into or for shares of Common
Stock for a period of 180 days following the date of the prospectus for the
Offering without the prior approval of a representative for the underwriters of
the Offering.
The effect, if any, of the availability for sale or the sale of the shares
of Common Stock eligible for future sale on the market price of the Common Stock
prevailing from time to time is unpredictable, and no assurance can be given
that the effect will not be adverse.
VOLATILITY OF STOCK PRICE. The market prices of the stock of companies
providing IT products and services, including Dunn, have been highly volatile.
The market price of the Company's Common Stock is likely to be highly volatile
and may increase or may decrease significantly as a result of factors such as
actual or anticipated fluctuations in the Company's operating results, general
conditions in the computer
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hardware and software industries, announcements of new products, technological
innovations or new contracts by the Company or by its competitors, general
market conditions and other factors. In addition, shortfalls in sales or
earnings as compared with securities analysts' expectations, changes in such
analysts' recommendations or projections and general economic conditions, may
materially and adversely affect the market price of the Common Stock. Because it
is anticipated that there will be a limited public float in the Common Stock and
it will be thinly traded, sales of significant amounts of Common Stock in the
public market could have a material adverse effect on the market price for the
Common Stock. Although the Offering will result in there being a greater number
of shares of the Company's Common Stock publicly traded than the number of Dunn
shares publicly traded prior to the Offering, there can be no assurance that
there will be a more active trading market in the Company's Common Stock than
there has been in Dunn's shares.
REQUIREMENT TO MAINTAIN A SECURITY CLEARANCE. One of the Company's
Government contracts requires the Company to maintain a Government security
clearance. If the Company were to lose this clearance, the Company would not be
able to retain its current contract, and would not be able to obtain new
contracts requiring security clearances.
PROPRIETARY INFORMATION AND TECHNOLOGICAL CHANGE. The Company believes that
its business is dependent on its technical and organizational knowledge,
practices and procedures, and that the future success of the Company is based,
in part, on its ability to keep up to date with new technological breakthroughs
and incorporate such changes in its products, services and processes. Although
Dunn and IDP each seeks to protect its proprietary information by
confidentiality agreements with many of its employees, there can be no assurance
that these measures will prevent the unauthorized disclosure of such
information.
PREFERRED STOCK. The Company's Articles of Incorporation authorize the
issuance of 2,000,000 shares of "blank check" preferred stock with such
designations, rights and preferences as may be fixed from time to time by
amendment of the Articles of Incorporation adopted by the Company's Board of
Directors. Accordingly, the Company's Board of Directors is empowered, without
further stockholder approval, to cause the issuance of preferred stock with
dividend, liquidation, conversion, voting or other rights that could materially
and adversely affect the voting power or other rights of the holders of the
Common Stock. The Company has no current plans to issue any shares of preferred
stock; however, in the event of issuance, the preferred stock could be used,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. See "Description of Company's Common Stock."
NO DIVIDENDS. To date, no dividends have been declared or paid by Dunn, or
by the Company on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. Investors should, therefore, be
aware that it is unlikely that any dividends will be paid on the Common Stock in
the foreseeable future. See "Dividend Policy."
YEAR 2000 UNCERTAINTIES. Recently, national attention has focused on the
potential problems and costs resulting from computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. While the Company believes that its
internal software applications and the software in the systems it sells are year
2000 compliant, there can be no assurance until the year 2000 that all systems
will function adequately then. If they do not, the result could be a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. Further, if the software
applications of others on whose services the Company depends (such as suppliers
and subcontractors) are not year 2000 compliant, such noncompliance could have a
material adverse effect on the Company.
The year 2000 problem can be corrected either through software programming,
or the application can be ported to a client/server network. The Company
believes that with its technical services and its client/ server hardware
product line, it will provide year 2000 solutions.
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DUNN SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data of Dunn should be read in
conjunction with the consolidated financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein. The consolidated statement of income data
set forth below with respect to the fiscal years ended October 31, 1995, 1996
and 1997 and the consolidated balance sheet data as of October 31, 1996 and 1997
is derived from and is referenced to the audited consolidated financial
statements of Dunn (a predecessor to the Company) included elsewhere in this
Proxy Statement/Prospectus. The consolidated statement of income data set forth
below with respect to the fiscal years ended October 31, 1993 and 1994 and the
consolidated balance sheet data as of October 31, 1993, 1994 and 1995 is derived
from audited consolidated financial statements of Dunn not included in this
Proxy Statement/Prospectus.
In the opinion of Dunn's management, the unaudited interim financial data
reflect all adjustments necessary to present fairly the results of operations
for the three months ended January 31, 1997 and 1998 and Dunn's financial
position at January 31, 1998. These adjustments are of a normal, recurring
nature. The results of operations of the interim periods are not necessarily
indicative of results that may be expected for a year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED OCTOBER 31, ENDED JANUARY 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED STATEMENT OF INCOME DATA:
Net revenues.................................. $ 5,812 $ 4,429 $ 7,491 $ 18,099 $ 21,766 $ 5,505 $ 10,429
Costs of revenues............................. 4,858 3,444 6,046 14,103 17,549 4,199 7,990
--------- --------- --------- --------- --------- --------- ---------
Gross profit.................................. 954 985 1,445 3,996 4,217 1,306 2,439
Selling, general and administrative........... 761 1,005 966 1,972 2,198 434 1,290
--------- --------- --------- --------- --------- --------- ---------
Income from operations........................ 193 (20) 479 2,024 2,019 872 1,149
Other income (expense)........................ (1) (32) 8 (9) 98 8 (43)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) before income taxes......... 192 (52) 487 2,015 2,117 880 1,106
Provision for (benefit from) income taxes..... 65 (11) 244 776 795 334 417
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................. $ 127 $ (41) $ 243 $ 1,239 $ 1,322 $ 546 $ 689
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per share (1)................. $ 0.05 $ (0.01) $ 0.06 $ 0.31 $ 0.29 $ 0.14 $ 0.13
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earning (loss) per share(1)--assuming
dilution.................................... $ 0.05 $ (0.01) $ 0.06 $ 0.31 $ 0.28 $ 0.13 $ 0.12
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding(1)........ 2,800 3,158 4,000 4,000 4,552 4,000 5,150
Weighted average shares outstanding(1)
assuming dilution(1)........................ 2,800 3,158 4,000 4,000 4,679 4,050 5,715
</TABLE>
<TABLE>
<CAPTION>
AT OCTOBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AT JANUARY
31,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -------------
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................... $ 351 $ 340 $ 512 $ 1,722 $ 4,339 $ 5,116
Total assets...................................... 1,149 2,503 3,647 5,275 18,703 15,519
Long-term debt.................................... 75 23 -- -- 75 70
Total liabilities................................. 804 2,046 3,047 3,335 10,465 6,592
Stockholders' equity.............................. 345 457 600 1,939 8,238 8,927
</TABLE>
- ------------------------
(1) The earnings per share amounts prior to fiscal 1998 have been restated as
required to comply with Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE. For further discussion of earnings per share and the
impact of Statement No. 128, see Note 2 of the notes to Dunn's consolidated
financial statements included herein.
15
<PAGE>
IDP SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS)
The following selected combined financial data of IDP should be read in
conjunction with the combined financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein. The combined statement of income data set
forth below with respect to the fiscal years ended September 30, 1995, 1996 and
1997 and the combined balance sheet data as of September 30, 1996 and 1997 are
derived from and are referenced to the audited combined financial statements of
IDP included elsewhere in this Proxy Statement/ Prospectus.
The combined statement of income data set forth below with respect to the
fiscal year ended February 28, 1993, the seven month period ended September 30,
1993 and the fiscal year ended September 30, 1994 and the combined balance sheet
data set forth below as of February 28, 1993, and September 30, 1993, 1994 and
1995 are derived from the unaudited combined financial statements of IDP not
included in this Proxy Statement/Prospectus.
In the opinion of IDP's management, the unaudited interim combined financial
data reflects all adjustments necessary to present fairly the combined results
of operations for the three months ended December 31, 1996 and 1997 and IDP's
combined financial position as of December 31, 1997. These adjustments are of a
normal, recurring nature. The results of operations of the interim periods are
not necessarily indicative of results that may be expected for a year.
<TABLE>
<CAPTION>
THREE
MONTHS
SEVEN ENDED
YEAR MONTHS DECEMBER
ENDED ENDED YEAR ENDED SEPTEMBER 30, 31,
FEB. 28, SEPT. 30, ------------------------------------------ -----------
1993 1993 1994 1995 1996 1997 1996
----------- ----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Sales........................................... $ 7,860 $ 6,216 $ 33,354 $ 80,432 $ 84,292 $ 71,921 $ 35,999
Cost of sales................................... 6,056 4,746 28,841 69,025 71,890 58,996 30,838
----------- ----------- --------- --------- --------- --------- -----------
Gross profit.................................... 1,805 1,470 4,513 11,407 12,402 12,925 5,161
Selling, general and administrative............. 1,827 1,156 3,865 8,709 11,233 11,599 3,651
----------- ----------- --------- --------- --------- --------- -----------
Income (loss) from operations................... (22) 314 648 2,698 1,169 1,326 1,510
Other income (expense).......................... (83) (87) 92 (483) (9) (563) (184)
----------- ----------- --------- --------- --------- --------- -----------
Income (loss) before income taxes............... (105) 227 740 2,215 1,160 763 1,326
Income tax expense (benefit).................... (25) 106 306 278 (18) (418) 290
----------- ----------- --------- --------- --------- --------- -----------
Net income (loss)............................... $ (80) $ 121 $ 434 $ 1,937 $ 1,178 $ 1,181 $ 1,036
----------- ----------- --------- --------- --------- --------- -----------
----------- ----------- --------- --------- --------- --------- -----------
<CAPTION>
1997
-------------
<S> <C>
COMBINED STATEMENT OF INCOME DATA:
Sales........................................... $ 25,201
Cost of sales................................... 21,100
-------------
Gross profit.................................... 4,100
Selling, general and administrative............. 3,694
-------------
Income (loss) from operations................... 406
Other income (expense).......................... (218)
-------------
Income (loss) before income taxes............... 188
Income tax expense (benefit).................... 54
-------------
Net income (loss)............................... $ 134
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT FEBRUARY 28, ----------------------------------------------------------- AT DECEMBER 31,
1993 1993 1994 1995 1996 1997 1997
--------------- ----------- ----------- ----------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Working capital................. $ 7 $ 24 $ 136 $ 1,773 $ 2,640 $ 2,935 $ 2,980
Total assets.................... 2,366 2,684 9,444 22,154 25,738 27,312 39,405
Long-term debt.................. 21 49 134 144 225 164 161
Total liabilities............... 2,241 2,327 8,632 19,405 21,810 22,203 34,163
Stockholders' equity............ 125 247 812 2,749 3,928 5,109 5,242
</TABLE>
16
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined balance sheet gives effect to the Merger,
the IDP Acquisition and the sale of 3,250,000 shares of Common Stock offered by
the Company in the Offering (at an assumed price to the public of $9.44 per
share) and the application of net proceeds therefrom, as if each had occurred on
January 31, 1998.
The unaudited pro forma combined statement of operations for the Company's
fiscal year ended October 31, 1997 gives effect to the Merger and the IDP
Acquisition as if each had occurred on November 1, 1996. The unaudited pro forma
combined statement of operations for the Company's three month period ended
January 31, 1998 gives effect to the Merger and the IDP Acquisition as if each
had occurred on November 1, 1996.
The unaudited pro forma combined balance sheet and statements of operations
are based on available information and on certain assumptions and adjustments
described in the accompanying notes, which the Company believes are reasonable.
The unaudited pro forma combined statements of operations are provided for
informational purposes only and do not purport to present the results of
operations of the Company had the transactions assumed therein occurred on or as
of the dates indicated, nor are they necessarily indicative of the results of
operations which may be achieved in the future. The unaudited pro forma combined
statements of operations should be read in conjunction with the consolidated
financial statements of Dunn, including the notes thereto, the combined
financial statements of IDP, including the notes thereto, and the financial
statements of STMS, including the notes thereto, included elsewhere in this
Proxy Statement/Prospectus.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL ACQUISITION OFFERING PRO FORMA
DUNN (A) IDP (B) ADJUSTMENTS (C) ADJUSTMENTS (G) COMBINED
---------- ------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......... $ 162,359 $ 891,493 $ (14,900,000)(c) $ 14,900,000 $ 1,053,852
Accounts receivable, net.......... 8,373,278 14,595,651 -- -- 22,968,929
Employee and stockholder
advances........................ -- 118,587 -- -- 118,587
Prepaid expenses and other
assets.......................... 120,052 1,735,269 -- -- 1,855,321
Inventory, net.................... 2,882,118 18,652,198 -- -- 21,534,316
Income taxes receivable........... -- 401,775 -- -- 401,775
Deferred income taxes............. -- 443,415 -- -- 443,415
---------- ------------- --------------- --------------- -----------
Total current assets................ 11,537,807 36,838,388 (14,900,000) 14,900,000 48,376,195
Property and equipment, net....... 598,257 2,325,143 -- -- 2,923,400
Deferred income taxes............. -- 17,631 -- -- 17,631
Investments....................... 275,000 31,200 -- -- 306,200
Goodwill and other intangible
assets, net..................... 2,920,514 -- 17,492,366(d) -- 20,412,880
Other assets...................... 186,958 193,027 -- -- 379,985
---------- ------------- --------------- --------------- -----------
Total assets........................ $15,518,536 $ 39,405,389 $ 2,592,366 $ 14,900,000 $72,416,291
---------- ------------- --------------- --------------- -----------
---------- ------------- --------------- --------------- -----------
Liabilities and stockholders' equity
Current liabilities
Accounts payable.................. $2,153,011 $ 17,495,811 $ 800,000(e) -- $20,448,822
Accrued expenses.................. 483,151 2,839,493 -- -- 3,322,644
Income taxes payable.............. 417,662 112,174 -- -- 529,836
Notes payable--current portion.... 12,840 420,467 -- -- 433,307
Obligations under capital leases--
current portion................. 54,319 -- -- -- 54,319
Notes payable--related parties.... -- 1,579,973 -- -- 1,579,973
Line of credit.................... 2,826,789 11,340,942 -- (12,732,400) 1,435,331
Unearned revenue.................. 474,345 -- -- -- 474,345
Other liabilities................. -- 69,429 -- -- 69,429
---------- ------------- --------------- --------------- -----------
Total current liabilities........... 6,422,117 33,858,289 800,000 (12,732,400) 28,348,006
Notes payable--long term portion.... 47,105 160,860 -- -- 207,965
Obligation under capital
leases-long-term portion.......... 22,453 -- -- -- 22,453
Deferred rent....................... -- 143,606 -- -- 143,606
Deferred tax credit................. 100,000 -- -- -- 100,000
---------- ------------- --------------- --------------- -----------
Total liabilities................... 6,591,675 34,162,755 800,000 (12,732,400) 28,822,030
Commitments
Stockholders' equity:
Preferred Stock, $.001 par value;
2,000,000 shares authorized, no
shares issued and outstanding... -- -- -- -- --
Common Stock, $.001 par value;
20,000,000 shares authorized,
5,150,000 shares issued and
outstanding, historical Dunn and
9,150,000 shares issued and
outstanding, pro forma combined
basis........................... 5,150 -- 750(f) 3,250 9,150
IDP common stock, no par value;
5,000 shares authorized, 100
shares issued and outstanding... -- 40,000 (40,000)(f) -- --
PRIMO common stock, no par value;
10,000 shares authorized, 7,000
shares issued and outstanding... -- 132,000 (132,000)(f) -- --
Additional paid-in capital........ 5,087,371 -- 7,034,250(f) 27,629,150 39,750,771
Retained earnings................. 3,834,340 5,070,634 (5,070,634)(f) -- 3,834,340
---------- ------------- --------------- --------------- -----------
Total stockholders' equity............ 8,926,861 5,242,634 1,792,366 27,632,400 43,594,261
---------- ------------- --------------- --------------- -----------
Total liabilities and stockholders'
equity................................ $15,518,536 $ 39,405,389 $ 2,592,366 $ 14,900,000 $72,416,291
---------- ------------- --------------- --------------- -----------
---------- ------------- --------------- --------------- -----------
</TABLE>
18
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR 1997
------------------------------------------------------------------------------------
IDP STMS
HISTORICAL HISTORICAL ACQUISITION HISTORICAL ACQUISITION
DUNN (H) IDP (I) ADJUSTMENTS SUBTOTAL (J) STMS (K) ADJUSTMENTS
-------------- ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues....................... $ 21,766,465 $ 71,920,739 $ -- $93,687,204 $15,419,104 $ --
Costs of revenues.................. 17,549,655 58,995,644 -- 76,545,299 13,532,509 --
-------------- ------------- ------------ ------------ ----------- ------------
Gross profit....................... 4,216,810 12,925,095 -- 17,141,905 1,886,595 --
Selling, general and administrative
expenses......................... 2,197,704 11,598,705 -- 13,796,409 3,329,452 --
Amortization of intangible
assets........................... -- -- 1,006,761(l) 1,006,761 -- 240,000(l)
-------------- ------------- ------------ ------------ ----------- ------------
Income (loss) from operations...... 2,019,106 1,326,390 (1,006,761) 2,338,735 (1,442,857) (240,000)
Other income (expense):
Interest income.................. 109,877 31,359 -- 141,236 88,687 --
Interest expense................. (11,813) (593,012) -- (604,825) (215,053) --
Miscellaneous, net............... -- (1,109) -- (1,109) (31,150) --
Loss on property and equipment... -- -- -- -- (182,338) --
-------------- ------------- ------------ ------------ ----------- ------------
Net income (loss) before income
taxes............................ 2,117,170 763,628 (1,006,761) 1,874,037 (1,782,711) (240,000)
Provision for (benefit from) income
taxes............................ 794,870 (417,447) -- 377,423 -- --
-------------- ------------- ------------ ------------ ----------- ------------
Income (loss) before extraordinary
item............................. 1,322,300 1,181,075 (1,006,761) 1,496,614 (1,782,711) (240,000)
Extraordinary gain on debt
settlement....................... -- -- -- -- 359,716 --
-------------- ------------- ------------ ------------ ----------- ------------
Net income (loss).................. $ 1,322,300 $ 1,181,075 $(1,006,761) $1,496,614 $(1,422,995) $ (240,000)
-------------- ------------- ------------ ------------ ----------- ------------
-------------- ------------- ------------ ------------ ----------- ------------
EARNINGS PER COMMON SHARE:(P)
Income (loss) before extraordinary
item............................. $ 0.29
Extraordinary gain on debt
settlement....................... --
--------------
Net income per common share........ $ 0.29
--------------
--------------
EARNINGS PER COMMON SHARE--
ASSUMING DILUTION(P):
Income (loss) before extraordinary
item............................. $ 0.28
Extraordinary gain on debt
settlement....................... --
--------------
Net income per common share--
assuming dilution................ $ 0.28
--------------
--------------
<CAPTION>
PRO FORMA
COMBINED
-------------
<S> <C>
Net revenues....................... $ 109,106,308
Costs of revenues.................. 90,077,808
-------------
Gross profit....................... 19,028,500
Selling, general and administrative
expenses......................... 17,125,861
Amortization of intangible
assets........................... 1,246,761
-------------
Income (loss) from operations...... 655,878
Other income (expense):
Interest income.................. 229,923
Interest expense................. (819,878)
Miscellaneous, net............... (32,259)
Loss on property and equipment... (182,338)
-------------
Net income (loss) before income
taxes............................ (148,674)
Provision for (benefit from) income
taxes............................ 377,423
-------------
Income (loss) before extraordinary
item............................. (526,097)
Extraordinary gain on debt
settlement....................... 359,716
-------------
Net income (loss).................. $ (166,381)
-------------
-------------
EARNINGS PER COMMON SHARE:(P)
Income (loss) before extraordinary
item............................. $ (0.07)
Extraordinary gain on debt
settlement....................... 0.05
-------------
Net income per common share........ $ (0.02)
-------------
-------------
EARNINGS PER COMMON SHARE--
ASSUMING DILUTION(P):
Income (loss) before extraordinary
item............................. (0.07)
Extraordinary gain on debt
settlement....................... 0.05
-------------
Net income per common share--
assuming dilution................ $ 0.02
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
FIRST QUARTER OF FISCAL YEAR 1998
----------------------------------------------------------
<S> <C> <C> <C> <C>
IDP
HISTORICAL HISTORICAL ACQUISITION PRO FORMA
DUNN(M) IDP(N) ADJUSTMENTS COMBINED
--------------- ----------- -------------- ------------
Net revenues....................................................... $ 10,429,168 $25,200,523 $ -- $ 35,629,691
Costs of revenues.................................................. 7,989,879 21,100,060 -- 29,089,939
--------------- ----------- -------------- ------------
Gross profit....................................................... 2,439,289 4,100,463 -- 6,539,752
Selling, general and administrative expenses....................... 1,235,845 3,694,449 -- 4,930,294
Amortization of intangible assets.................................. 54,326 -- 251,690(o) 306,016
--------------- ----------- -------------- ------------
Income from operations............................................. 1,149,118 406,014 (251,690) 1,303,442
Other income (expense):
Interest income.................................................. -- 1,504 -- 1,504
Interest expense................................................. (37,618) (224,536) -- (262,154)
Miscellaneous, net............................................... (5,132) 4,544 -- (588)
--------------- ----------- -------------- ------------
Net income (loss) before income taxes.............................. 1,106,368 187,526 (251,690) 1,042,204
Provision for (benefit from) income taxes.......................... 417,662 53,718 -- 471,380
--------------- ----------- -------------- ------------
Net income (loss).................................................. $ 688,706 $ 133,808 $ (251,690) $ 570,824
--------------- ----------- -------------- ------------
--------------- ----------- -------------- ------------
Earnings per share................................................. $ 0.13 $ 0.07
--------------- ------------
--------------- ------------
Earnings per share--assuming dilution.............................. $ 0.12 $ 0.06
--------------- ------------
--------------- ------------
</TABLE>
19
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
- ------------------------
(a) Consolidated Balance Sheet of Dunn as of January 31, 1998.
(b) Combined Balance Sheet of IDP as of December 31, 1997.
(c) Represents adjustments for the IDP Acquisition based on a purchase price of
approximately $14.9 million in cash and an aggregate of 750,000 shares of
Common Stock. The 750,000 shares of the Company's Common Stock were valued
at a price per share of $9.38, which represents the closing market price of
Dunn's Common Stock on January 31, 1998, the assumed date of acquisition for
pro forma presentation. The purchase price has been allocated on a
preliminary basis to the assets and liabilities acquired based on fair
values of such assets and liabilities which are estimated to approximate
their book value.
(d) Represents certain intangible assets of IDP as determined by the Company.
The amounts allocated to intangible assets were as follows: $1,000,000 to
work force and $16,492,366 to goodwill and trademarks. All of the intangible
assets will be amortized on a straight-line basis over lives ranging from
five to twenty years.
(e) Represents $800,000 in estimated investment banking, legal, accounting and
printing expenses related to the IDP Acquisition.
(f) Represents elimination of IDP's stockholders' equity accounts, and issuance
of 750,000 shares of the Company's Common Stock valued at a price of $9.38
per share.
(g) Gives effect to the sale of 3,250,000 shares of Common Stock offered by the
Company in the Offering (at an assumed price to the public of $9.44 per
share) and the application of the net proceeds therefrom.
(h) Consolidated Statement of Operations for Dunn for the fiscal year ended
October 31, 1997.
(i) Combined Statement of Operations for IDP for the fiscal year ended
September 30, 1997.
(j) The Company has presented the combined statement of operations for Dunn and
IDP as the Company believes that this presentation is necessary for a
reader's understanding of the pro forma results of the combined entity. The
Company believes that STMS' statement of operations for the period from
November 1, 1996 to August 31, 1997 (effective date of the STMS Acquisition)
includes certain non-recurring charges that distort the overall pro forma
presentation. Futhermore, the Company believes that STMS will not operate in
the future at similar net loss levels.
(k) Statement of Operations for STMS from November 1, 1996 to August 31, 1997
(effective date of STMS Acquisition).
(l) Represents amortization expense of $1,006,761 and $240,000 related to the
intangible assets acquired in the IDP and STMS Acquisitions, respectively.
(m) Consolidated Statement of Operations for Dunn for the three months ended
January 31, 1998.
(n) Combined Statement of Operations for IDP for the three months ended December
31, 1997.
(o) Represents amortization expense of $251,690 related to the intangible assets
acquired in the IDP Acquisition.
(p) In 1997, the Financial Accounting Standards Board issued Statement No 128,
EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and warrants. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirement.
20
<PAGE>
SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA
The following comparative per share data sets forth for the periods
presented Dunn, on an historical basis, and the Company, on a pro forma basis,
giving effect to Merger and the IDP Acquisition. Neither Dunn nor the Company
has ever paid cash dividends on its common stock. The data set forth below
should be read in conjunction with the audited and unaudited consolidated
financial statements of Dunn, including notes thereto, which are included in
this Proxy Statement/Prospectus. The data should also be read in conjunction
with the unaudited consolidated financial statements of Dunn as of and for the
three months ended January 31, 1998 and the summary unaudited pro forma combined
financial data, including notes thereto, included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
OCTOBER 31, 1997 JANUARY 31, 1998
----------------- -----------------
<S> <C> <C>
Dunn Historical:
Income from continuing operations............................................ $ 0.44 $ 0.22
Income from continuing operations--assuming dilution......................... $ 0.43 $ 0.20
Book value per share(1)...................................................... $ 1.60 $ 1.73
Company Pro Forma:
Earnings per share........................................................... $ 0.12 $ 0.22
Earnings per share--assuming dilution........................................ $ 0.12 $ 0.20
Book value per share(2)...................................................... $ -- $ 2.71
Pro Forma Equivalent(3):
Earnings per share........................................................... $ 0.12 $ 0.22
Earnings per share--assuming dilution........................................ $ 0.12 $ 0.20
Book value equivalent........................................................ $ -- $ 2.71
</TABLE>
- ------------------------------
(1) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at the end of
each period.
(2) The pro forma combined book value per share is computed by dividing pro
forma stockholders' equity by the pro forma number of shares outstanding at
the end of each period.
(3) The pro forma equivalent combined share amounts are calculated by
multiplying the combined pro forma per share amounts by the exchange ratio
of one share of Dunn common stock for each share of Company Common Stock.
21
<PAGE>
PRICE RANGE OF DUNN'S COMMON STOCK
Since April 1997, Dunn's common stock has been traded in the
over-the-counter market and prices are quoted on the Nasdaq National Market
under the symbol DNCC. The following table sets forth the high and low selling
prices for Dunn's common stock as reported by the Nasdaq National Market. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------
HIGH LOW
------- --------
<S> <C> <C>
FISCAL 1997
First Quarter............... not public
Second Quarter.............. $ 7 1/8 $ 5
Third Quarter............... $ 7 1/4 $ 5 5/8
Fourth Quarter.............. $ 7 5/16 $ 5 1/2
FISCAL 1998
First Quarter............... $10 5/16 $ 6 21/32
Second Quarter (through
March 31, 1998)........... $10 $ 8 1/4
February 6, 1998(1)......... $ 9 1/8 $ 8 15/16
March 6, 1998(2)............ $ 8 3/4 $ 8 11/16
</TABLE>
- ------------------------------
(1) Last trading date preceding the public announcement of the IDP Acquisition.
(2) Last trading date prior to the execution of the Acquisition Agreement, which
includes the form of Merger Agreement.
On April 1, 1998, the closing price of Dunn's common stock as reported by
the Nasdaq National Market was $9 13/16 per share. There were approximately
1,000 beneficial holders of Dunn's common stock as of such date.
The Company's Common Stock has no trading history. The Common Stock will be
quoted on the Nasdaq National Market under the same symbol, DNCC, which has
previously been the symbol for Dunn's common stock.
DIVIDEND POLICY
Neither Dunn nor the Company has ever paid or declared a dividend. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business. See "Risk Factors--No Dividends."
22
<PAGE>
THE MERGER AND THE IDP ACQUISITION
(ITEM 1 OF PROXY CARD)
THE FOLLOWING INFORMATION RELATING TO THE MERGER AGREEMENT AND THE
ACQUISITION AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THESE
AGREEMENTS WHICH ARE ATTACHED AS APPENDICES HERETO AND INCORPORATED HEREIN BY
REFERENCE. PLEASE READ THESE AGREEMENTS IN FULL.
GENERAL DESCRIPTION OF THE MERGER AND IDP ACQUISITION
Under the Merger Agreement, Dunn will be acquired by and become a
wholly-owned subsidiary of the Company. The Company is a new corporate entity
organized by Dunn for the purpose of effecting the IDP Acquisition. In
connection with the Merger, each outstanding share of Dunn common stock (other
than shares held in Dunn's treasury) will be converted into the right to receive
one share of Company Common Stock. The Merger Agreement provides that, upon the
terms and subject to the conditions set forth in the Merger Agreement and in
accordance with Delaware law, Merger Sub (a wholly owned subsidiary of the
Company) will merge with and into Dunn, the separate existence of Merger Sub
will cease, and Dunn will be the surviving corporation and will continue as a
wholly-owned subsidiary of the Company.
Under the Acquisition Agreement, Dunn and the Company have agreed to pay the
IDP Sellers approximately $14.9 million in cash (the "Cash Portion") and 750,000
shares of Company Common Stock, subject to adjustment (the "Share Portion") to
acquire all of the outstanding capital stock of IDP Co. and, through a
newly-formed subsidiary, to acquire substantially all of the net assets of
PRIMO. In connection with the Share Portion, the Company will grant certain of
the IDP Sellers piggy-back registration rights and under certain conditions
demand registration rights. The Company intends to finance the Cash Portion of
the IDP Acquisition with part of the proceeds from the Offering of 3,250,000
shares of the Company's Common Stock. Upon completion of the IDP Acquisition,
the Merger and the Offering, the IDP Sellers, in the aggregate, will own
approximately 8.2% of the Company's outstanding Common Stock (or 8.0% if an over
allotment option issued to the underwriters of the Offering is exercised in
full).
Consummation of the Merger will occur upon the filing of a certificate of
merger, together with any required certificates, with the Delaware Secretary of
State. The certificate of merger will be filed concurrently with the closing of
the IDP Acquisition, which will occur if and when the conditions to the IDP
Acquisition have been satisfied or waived, and upon the completion of the
Offering. Upon completion of the Merger and the IDP Acquisition, the Company
will become a holding company owning, either directly or through subsidiaries,
100% of the shares of Dunn and IDP Co. and substantially all of the net assets
of PRIMO. The reorganization effected by the Merger is a necessary step towards
completion of the IDP Acquisition. THE MERGER WILL OCCUR ONLY CONTEMPORANEOUSLY
WITH THE SUCCESSFUL CONSUMMATION OF THE IDP ACQUISITION AND THE OFFERING.
RECOMMENDATION OF THE BOARD OF DIRECTORS; DUNN'S REASONS FOR THE IDP ACQUISITION
DUNN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE ACQUISITION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND HAS DETERMINED THAT THE MERGER AND THE IDP ACQUISITION ARE FAIR AND
IN THE BEST INTERESTS OF DUNN AND ITS STOCKHOLDERS. ACCORDINGLY, DUNN'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE MERGER AGREEMENT.
Through the IDP Acquisition, Dunn will acquire a leading manufacturer in the
Government market of portable and desktop computer systems and network servers
and a provider of repair and warranty services. IDP manufactures its products in
its ISO 9000 certified facility in Gaithersburg, Maryland and in its facility in
Guayama, Puerto Rico. Additionally, IDP has spent the last four years developing
a proprietary management system that enables it to provide build-to-order
systems to the federal Government.
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According to estimates of an IT industry research group, IDP was the second
leading supplier of notebook computers ahead of International Business Machine
Corporation ("IBM"), Compaq Computer Corporation ("Compaq") and Dell Computer
Corporation ("Dell") and was the ninth largest supplier of desktop systems to
the federal Government in its fiscal 1996. IDP's customers include the agencies
within the Department of Defense, Department of Justice and Social Security
Administration. IDP had total revenues of approximately $71.9 million for fiscal
1997 and after giving effect to the IDP Acquisition and the STMS Acquisition,
the Company's pro forma combined revenue for fiscal 1997 was $109.1 million.
Dunn's management considers the IDP Acquisition to be consistent with Dunn's
growth strategy and believes that the IDP Acquisition will result in the
benefits set forth below, among others.
DOUBLE EXISTING GOVERNMENT CUSTOMER BASE. Dunn believes the increase in the
Company's Government customer base is the most important element of the IDP
Acquisition. Dunn's customer base as of January 31, 1998 was over 450. As of the
Closing, the Company's Government customer base will be more than 950. IDP
estimates that it has sold more than 54,000 portable computers and 47,000
desktop computers to the federal Government and actively maintains over 30,000
systems. The changes in the procurement regulations of the Government have
enabled Government purchasers to buy from an expanding array of vendors. Dunn
believes that the vast majority of these customers will continue to purchase
their computer hardware and technical services needs from those vendors with
whom they have a satisfactory working relationship. By doubling its customer
base early in the new procurement landscape, management believes it will obtain
a competitive advantage by developing a large network of loyal and satisfied
customers.
EXPAND THE COMPANY'S PORTABLE COMPUTER PRODUCT LINE. IDP has a full line of
portable notebook computers and provides the customer support organization
required to further penetrate both the Government and commercial markets.
Portable computers, which represent the fastest growing segment of the computer
hardware market, accounted for approximately 40% of revenues in IDP's fiscal
1997. Prior to the IDP Acquisition, Dunn has not had a full line of portables,
and has not had the required support organization. With the IDP Acquisition,
Dunn is positioned to meet the portable computer needs of its Government and
commercial customers.
PROVIDE COST SAVINGS AND ECONOMIES OF SCALE. Dunn expects significant
consolidated cost savings to result from the IDP Acquisition. For example, Dunn
expects the IDP Acquisition to: (i) result in greater volume discounts on
purchased part inventory; (ii) reduce overhead expense through the elimination
of duplicative operations and centralization of certain general and
administrative functions; (iii) create economies of scale from combined
utilization of facilities and production lines; (iv) reduce outside professional
fees; and (v) reduce costs from the integration of benefit plans.
PURCHASE PRICE FOR THE IDP ACQUISITION
Dunn and the Company have agreed to pay the IDP Sellers $14.9 million in
cash and 750,000 shares of Company stock to acquire all of the shares of IDP Co.
and substantially all of the net assets of PRIMO. The Acquisition Agreement
provides that this purchase price is subject to adjustment as described below.
ADJUSTMENT TO SHARE PORTION. If the Average Closing Price (as defined
below) for a share of Dunn common stock is less than $7.50, the Share Portion
shall be adjusted upward to that number of shares which multiplied by the
Average Closing Price equals $5,625,000. "Average Closing Price" shall be the
average of the mean between the closing high bid and asked prices for a share of
Dunn common stock as reported on the Nasdaq National Market for the twenty
consecutive trading days immediately preceding the date two business days before
the closing of the IDP Acquisition. If Dunn declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of the Acquisition Agreement and
the closing of the IDP Acquisition, the Share Portion shall be appropriately
adjusted to account therefor.
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ADJUSTMENT TO CASH PORTION. The purchase price shall be adjusted downward
if and to the extent that the combined balance sheet of IDP Co. and PRIMO as of
the Closing reflects a net asset value (net worth) of IDP Co. and PRIMO on a
combined basis of less than $5,108,826 at Closing (any such difference, the
"Shortfall Amount"). The IDP Sellers shall pay to the Company the Shortfall
Amount in cash or shares of Company Common Stock (valued for this purpose at
$8.50 per share), or a combination thereof, as the IDP Sellers shall elect,
within ten days of written acceptance by the Company of the closing balance
sheet.
The purchase price shall be adjusted upward if the combined balance sheet of
IDP Co. and PRIMO as of the Closing reflects a net worth of IDP Co. and PRIMO on
a combined basis of more than $5,242,634 at Closing (any such difference, the
"Excess Amount"); such adjustment shall be the amount of the Excess Amount up to
a maximum adjustment of $500,000. For purposes of this calculation, certain
expenses relating to the entering into of the Acquisition Agreement and the
Offering are to be deducted from the liabilities of IDP Co. and PRIMO on the
closing balance sheet.
MERGER CONSIDERATION
Upon consummation of the Merger each share of Dunn common stock shall be
converted into the right to receive one share of the Company's Common Stock
When the Merger is effective, all shares of Dunn common stock outstanding
immediately prior to the Merger will automatically be canceled and retired and
will cease to exist, and each certificate previously representing any such
shares will thereafter represent only the right to receive the same number of
shares of the Company's Common Stock. Upon the effectiveness of the Merger, the
Company will be the sole stockholder of Dunn.
TREATMENT OF DUNN STOCK OPTIONS AND WARRANTS
As of March 31, 1998, there were options and warrants outstanding to acquire
2,032,000 shares of Dunn common stock, including (i) 1,832,000 options
outstanding under Dunn's 1997 Stock Option Plan (the "1997 Stock Option Plan"),
(ii) warrants to purchase 100,000 shares of Dunn common stock issued to JDK &
Associates, Inc., as part of the consideration for consulting services provided
to Dunn, and (iii) warrants to purchase, in the aggregate, 100,000 shares of
Dunn common stock issued to certain underwriters in connection with Dunn's
initial public offering in April 1997. Each option and warrant that is
outstanding as of the effective time of the Merger will be converted into an
option or warrant, as the case may be, to purchase the same number of shares of
the Company's Common Stock at the same exercise price; provided, however, that
in the case of any incentive stock option issued pursuant to section 422 of the
Code, the option price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option shall be further
adjusted to the extent necessary to maintain incentive stock option status of
the option. Any unvested options and warrants so converted will retain the same
vesting schedule. Each Dunn option and warrant that is converted into an option
or warrant to acquire the Company's Common Stock will be on terms and conditions
substantially the same as those applicable to such Dunn option or warrant prior
to the Merger. As soon as practicable after the Merger, the Company will deliver
to each holder of an outstanding option and warrant an appropriate notice
setting forth such holder's rights pursuant thereto. The shares of the Company's
Common Stock underlying the Dunn options issued under the 1997 Stock Option Plan
and converted into the Company's options will be issued under a registration
statement on Form S-8.
EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. At the closing of the Merger, the Company will deposit with
an exchange agent designated by the Company and reasonably acceptable to Dunn
certificates evidencing the shares of the Company's Common Stock issuable in
exchange for shares of Dunn common stock and new option and warrant agreements
representing the right to purchase shares of the Company's Common Stock. The
Company will also make available to the exchange agent from time to time as
needed, any additional cash
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required to pay any dividends or distributions subsequent to the Merger with
respect to certificates for shares of the Company's Common Stock held by the
exchange agent.
EXCHANGE PROCEDURES, NO FURTHER RIGHTS IN DUNN COMMON STOCK. Following
Closing, the Company will instruct the exchange agent to mail to each holder of
record of Dunn common stock, stock options and warrants a letter of transmittal
and instructions to effect the surrender of the certificates representing Dunn
common stock or the option or warrant agreement in exchange for certificates
evidencing the Company's Common Stock or a new option or warrant agreement, as
the case may be. Upon surrender thereof with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to such
instructions, the holder of such certificate or stock option or warrant will
receive in exchange therefor the certificate or certificates of shares of the
Company's Common Stock, or a new option or warrant agreement, that such holder
is entitled to receive as a result of the Merger. The certificate representing
Dunn common stock so surrendered will forthwith be canceled. Until so
surrendered, each outstanding certificate that previously represented shares of
Dunn common stock will be deemed to evidence only the right to receive upon such
surrender the same number of shares of the Company's Common Stock.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
DUNN STOCKHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME OF THE MERGER AS TO THE
METHOD OF EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF DUNN COMMON
STOCK. DUNN STOCKHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES
TO THE EXCHANGE AGENT OR DUNN PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED DUNN SHARES. No dividends or
other distributions declared or made with respect to the Company's Common Stock
with a record date after the effective time of the Merger will be paid to the
holder of any unsurrendered Dunn stock certificate with respect to the shares of
the Company's Common Stock such holder is entitled to receive pursuant to the
Merger Agreement until such holder shall surrender such certificate. Subject to
applicable law and the provisions of the Merger Agreement, following the
surrender of any such certificate there will be paid to the record holder of the
shares of the Company's Common Stock issued in exchange for such certificate,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Merger theretofore paid with
respect to such shares of the Company's Common Stock.
TRANSFERS OF OWNERSHIP. If any certificate for shares or the Company's
Common Stock is requested to be issued in a name other than that in which the
certificate representing shares of Dunn common stock surrendered in exchange
therefore is registered, it will be a condition of the issuance that the
certificate surrendered will be properly endorsed and otherwise in proper form
for transfer. Also, the person requesting such exchange will have to pay the
Company or any designated agent any transfer or other taxes required by reason
of the issuance of a certificate for shares of the Company's Common Stock in any
name other than that of the registered holder of the certificate surrendered.
TERMINATION OF EXCHANGE FUND, NO LIABILITY, AND WITHHOLDING RIGHTS. At any
time following six months after the effective date of the Merger, the Company
will be entitled to require the exchange agent to deliver to the Company all
stock certificates, and any cash for the payment of dividends or distributions
subsequent to the Merger, that have been made available to the exchange agent by
the Company and that have not been delivered to holders of certificates
representing shares of Dunn common stock. Thereafter, such holders will be
entitled to look only to the Company as general creditors thereof with respect
to the stock certificates and any such cash to which they are entitled. However,
neither the Company, Merger Sub nor Dunn will be liable to any holder of Dunn
common stock for any stock certificates or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. The
Company or the exchange agent will be entitled to deduct and withhold from any
dividends or distributions otherwise payable to any Dunn stockholder such
amounts as the Company or the exchange agent is required to
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deduct and withhold with respect to the making of such payment under any
provisions of federal, state, local or foreign tax law.
LOST, STOLEN OR DESTROYED CERTIFICATES. No one will receive a certificate
for shares of the Company's Common Stock in exchange for a certificate for
shares of Dunn common stock that has been lost, stolen or destroyed without
first delivering an affidavit and an indemnity bond.
ANTICIPATED ACCOUNTING TREATMENT
The IDP Acquisition will be accounted for as a "purchase" as such term is
used under generally accepted accounting principles. Accordingly, from and after
the Merger, IDP's combined results of operations will be included with Dunn's in
the Company's consolidated results of operations. For purposes of preparing
consolidated financial statements, the Company will establish a new accounting
basis for IDP's assets and liabilities based upon the fair market values thereof
and the Company's purchase price, including the fees and other costs associated
with the IDP Acquisition at the date of consummation. Accordingly, the purchase
accounting adjustments made in connection with the development of the pro forma
combined financial information appearing elsewhere in this Proxy
Statement/Prospectus are preliminary and have been made solely for purposes of
developing such pro forma combined financial information to comply with the
disclosure requirements of the Securities and Exchange Commission. Although the
final allocation of the purchase price to the fair values of IDP's assets and
liabilities may differ, the pro forma combined financial information reflects
management's best estimate based upon currently available information. See
"Summary Unaudited Pro Forma Combined Financial Data."
In connection with the Merger, Dunn's historical financial statements will
be included in the Company's consolidated financial statements based on
historical carrying amounts.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences
applicable as a result of the Merger and the IDP Acquisition to holders of Dunn
common stock, Dunn and the Company. This summary is based upon the provisions of
the Code, applicable Treasury Regulations thereunder, judicial decisions, and
current administrative rulings.
Jones, Day, Reavis & Pogue, counsel for Dunn, is delivering an opinion to
Dunn to the effect that the description of the federal income tax consequences
to holders of Dunn common stock, Dunn and the Company contained under the
heading "--Treatment of Holders of Dunn Common Stock, Dunn and the Company"
below correctly sets forth the material federal income tax consequences of the
Merger and the IDP Acquisition for such persons. This opinion is based upon,
among other things, a representation letter provided by Dunn to counsel
containing customary statements relating to planned dispositions of Company
stock by certain holders of Dunn stock, plans on the part of the Company to
undertake or cause Dunn to undertake transactions outside of the ordinary course
of business, and certain other technical requirements under the Code.
No rulings have been or will be requested from the Internal Revenue Service
(the "IRS") with respect to any of the matters discussed herein, and the opinion
of counsel described above is not binding on the IRS. There can be no assurance
that future legislation, regulations, administrative rulings, or court decisions
will not adversely affect the accuracy of the statements contained herein.
TREATMENT OF HOLDERS OF DUNN COMMON STOCK, DUNN AND THE COMPANY
The following discussion does not address all aspects of federal income
taxation that may be important to particular taxpayers in light of their
personal investment circumstances or to taxpayers subject to special treatment
under the federal income tax laws (including life insurance companies, foreign
persons, tax-exempt entities, and holders who acquired their Dunn common stock
pursuant to the exercise of employee stock options or otherwise as compensation)
and does not address any aspect of state, local, or
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foreign taxation. This summary also assumes that the Dunn common stock will be
held as capital assets at the effective time of the Merger.
The Merger will be treated for federal income tax purposes as a
reorganization described in section 368(a) of the Code and/or a transfer of
property by the Dunn stockholders to the Company described in section 351 of the
Code. Accordingly, a holder of Dunn common stock who, pursuant to the Merger,
exchanges such stock for the Company's Common Stock will not recognize gain or
loss upon such exchange. The tax basis of the Company's Common Stock received in
the Merger by such holder will be equal to the tax basis of the Dunn common
stock surrendered and the holding period of the Company's Common Stock will
include the holding period of such Dunn common stock surrendered. Neither Dunn
nor the Company will recognize gain or loss as a result of the Merger.
Neither the Dunn Stockholders, Dunn nor the Company will recognize gain or
loss as a result of the IDP Acquisition.
STOCK EXCHANGE LISTING
It is a condition to the consummation of the Merger that the shares of the
Company's Common Stock to be issued in connection with the Merger be approved
for listing on the Nasdaq National Market, subject to official notice of
issuance. It is expected that the Company's Common Stock will trade after the
Closing on the Nasdaq National Market under the symbol "DNCC," the symbol used
by Dunn prior to the Closing.
RESTRICTIONS ON RESALE FOR AFFILIATES
The Company's Common Stock issuable in the Merger has been registered under
the Securities Act, but this registration does not cover resales by those
stockholders of Dunn or the Company who are deemed to control, be controlled by,
or be under common control with Dunn or the Company, respectively, within the
meaning of the Securities Act ("affiliates"). Affiliates may not sell their
shares of the Company's Common Stock acquired in the Merger except pursuant to
an effective registration statement under the Securities Act covering the resale
of such shares, or in compliance with the resale provisions of Rule 145 under
the Securities Act or another applicable exemption from the registration
requirements of the Securities Act.
In addition, all of the Company's directors, executive officers and certain
security holders (who will hold securities relating to an aggregate 4,676,939
shares of the Company's Common Stock), have agreed not to sell or offer to sell
or otherwise dispose of any shares of the Company's Common Stock or any
securities exchangeable, convertible or exercisable into shares of Common Stock
until 180 days from the date of the prospectus for the Offering without the
prior approval of a representative for the underwriters of the Offering, except
pursuant to gifts or pledges in which the donee or pledgee agrees to be bound by
such restrictions, without the prior written consent of the underwriter of the
Offering. These agreements are enforceable only by the parties thereto, and are
subject to rescission or amendment at any time without approval of other
stockholders.
DISSENTERS' RIGHTS
Section 262 of the General Corporation Law of the State of Delaware (the
"DGCL") provides appraisal rights (also referred to as "dissenters' rights") to
stockholders of a Delaware corporation in certain situations. However, section
262 appraisal rights are not available for shares of a corporation in a merger
if the corporation's shares are listed on a national securities exchange or
included on the Nasdaq National Market and if, in consideration for those
shares, the stockholder receives shares of the corporation surviving or
resulting from the merger and such surviving corporation's shares are also
listed on a national securities exchange or included on the Nasdaq National
Market. Since the Merger is being effected pursuant to the above provisions of
the DGCL, appraisal rights will not be available to Dunn stockholders in
connection with the Merger.
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IDP ACQUISITION REPRESENTATIONS AND WARRANTIES
The Acquisition Agreement contains, subject to certain exceptions, similar
representations concerning IDP Co. and PRIMO (made by the IDP Sellers) and
concerning Dunn and the Company as to, among other things: due organization and
good standing; corporate authorization to enter into the contemplated
transactions; approvals required in connection with the contemplated
transactions; absence of any breach of organizational documents and contracts
and other agreements as a result of the contemplated transactions;
capitalization; ownership of shares; financial statements; status of agreements;
government contracts; absence of material changes (including changes which would
have a material adverse effect); absence of undisclosed material liabilities;
compliance with laws and court orders; litigation; tax matters; employee
matters; environmental matters; and patents and other proprietary rights.
The IDP Sellers have agreed to indemnify the Company and the Company has
agreed to indemnify the IDP Sellers until the second anniversary of the Closing
of the IDP Acquisition for losses resulting from breaches of certain
representations and warranties. Neither the Company nor the IDP Sellers are
required to indemnify the other unless and until the aggregate amount of such
losses exceeds $500,000, whereupon the Company or the IDP Sellers, as the case
may be, are entitled to receive indemnity payments to the full extent of the
aggregate amount of losses not to exceed $10.0 million.
CONDITIONS PRECEDENT TO THE IDP ACQUISITION
The obligations of Dunn to consummate the IDP Acquisition are subject to the
following conditions, any one or more of which may be waived by Dunn:
(1) the representations and warranties with respect to IDP Co. and PRIMO
must be true and correct in all material respects on and as of the Closing of
the IDP Acquisition with the same effect as though such representations and
warranties were made on and as of such date; the covenants required to be
performed by the IDP Sellers must have been performed in all material respects;
and no material adverse change shall have occurred with respect to the financial
condition, assets or business of IDP Co. and PRIMO;
(2) certain third-party consents shall have been obtained and there shall
not have been entered a preliminary or permanent injunction, restraining order
or other judicial or administrative order the effect of which would prohibit the
IDP Acquisition;
(3) IDP Co. and PRIMO shall have entered into employment agreements with two
of the IDP Sellers, George D. Fuster and D. Oscar Fuster, who respectively are
the President and Executive Vice President of IDP Co. and the Vice President and
President of PRIMO, in the forms attached to the Acquisition Agreement pursuant
to which, among other things each executive will be entitled to stock options to
purchase up to 300,000 shares of the Company's Common Stock (subject to
adjustment to 400,000 shares of Common Stock if the price per share for which
the Company's Common Stock is sold in the Offering exceeds $10);
(4) certain indebtedness of IDP Co. running to the IDP Sellers and certain
of their relatives in the principal amount of $1,557,057 shall have been
refinanced;
(5) the prior spin-off of certain assets and liabilities of IDP Co.
(described in Exhibit G to the Acquisition Agreement attached hereto) to F
Squared Engineering, Corp., the outstanding stock of which will be owned by the
IDP Sellers;
(6) there shall have been furnished to Dunn a favorable opinion of Thacher
Proffitt & Wood in the form attached to the Acquisition Agreement; and
(7) the Offering shall have occurred, the net proceeds of which are at least
equal to $14.9 million, the Cash Portion of the purchase price; and at the
effective date of the Merger, the Company's Common Stock to be issued in
connection with the Merger and the Offering shall be approved for listing on the
Nasdaq National Market.
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The obligations of the IDP Sellers to consummate the IDP Acquisition are
subject to the following conditions, any one or more of which may be waived by
the IDP Sellers:
(1) the Company shall have delivered to the IDP Sellers both the Cash
Portion and the Share Portion of the purchase price for the IDP Acquisition;
(2) the representations and warranties with respect to Dunn and the Company
must be true and correct in all material respects on and as of the closing of
the IDP Acquisition with the same effect as though such representations and
warranties were made on and as of such date; the covenants required to be
performed by Dunn and the Company must have been performed in all material
respects; and no material adverse change shall have occurred with respect to the
financial condition, assets or business of Dunn;
(3) there shall not have been entered a preliminary or permanent injunction,
restraining order or other judicial or administrative order the effect of which
would prohibit the IDP Acquisition;
(4) IDP Co. and PRIMO shall have entered into employment agreements with two
executives of IDP Co. referred to above; the Company shall have entered into a
registration rights agreement with the IDP Sellers in the form attached to the
Acquisition Agreement; and certain IDP Sellers shall have been duly appointed to
the Board of Directors of the Company;
(5) there shall have been furnished to the IDP Sellers a favorable opinion
of Jones, Day, Reavis & Pogue in the form attached to the Acquisition Agreement;
and
(6) the Offering shall have occurred, the net proceeds of which are at least
equal to $14.9 million, the Cash Portion of the purchase price.
CONDUCT OF BUSINESS PENDING THE IDP ACQUISITION
COVENANTS OF IDP. The Acquisition Agreement provides that unless otherwise
consented to by Dunn, prior to the Closing of the IDP Acquisition the IDP
Sellers will cause IDP to: (i) use reasonable efforts to keep the business of
IDP intact and not take or knowingly permit to be taken actions other than in
the ordinary course of business as the same is presently being conducted, and to
maintain the goodwill and reputation associated with their business; (ii)
continue their existing practices relating to the maintenance of assets used in
their business; (iii) not purchase, sell, lease or dispose of, or make any
contract for the purchase, sale, lease or disposition of, or subject to any
lien, any assets other than in the ordinary course of their business; (iv)
except as specifically provided for in the Acquisition Agreement, not increase
the rates of compensation of any employee except for normal salary increases in
the ordinary course of business consistent with past practice; and (v) not amend
their governing documents or make any change in their capital stock or grant any
option, warrant or other right to purchase or to convert any obligation into
shares of capital stock.
COVENANTS OF DUNN. The Acquisition Agreement further provides that unless
otherwise consented to by the IDP Sellers, prior to the closing of the IDP
Acquisition Dunn and the Company will: (i) use reasonable efforts to keep the
business of Dunn intact and not take or not permit to be taken actions other
than in the ordinary course of business as the same is presently being
conducted, and to maintain the goodwill and reputation associated with the
business of Dunn; (ii) continue its existing practices relating to the
maintenance of assets used in its business; and (iii) not amend its governing
documents, or make any change in its capital stock or, except pursuant to the
Plan, grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock.
JOINT COVENANTS OF DUNN AND IDP. Dunn and the IDP Sellers shall, together,
use reasonable efforts to seek to have the governmental counterparties to
certain IDP Co. contracts awarded under the SBA's 8(a) Program obtain waivers
from the SBA for the change in ownership of IDP Co., as required for the
continuation of such contracts. See "Risk Factors--Risks Related to the IDP
Acquisition and Future Acquisitions."
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ACQUISITION AGREEMENT TERMINATION AND AMENDMENT
TERMINATION. The Acquisition Agreement may be terminated under certain
circumstances, including (i) by the mutual consent of the Board of Directors of
Dunn and the IDP Sellers; (ii) if the Offering and the IDP Acquisition are not
consummated by June 30, 1998; or (iii) there shall have been entered a final
non-appealable order or injunction of any court or government authority
restraining or prohibiting the consummation of the transactions contemplated by
the Acquisition Agreement. There can be no assurance that the conditions to the
closing of the IDP Acquisition will be satisfied or waived or that the
Acquisition Agreement will not be terminated prior to closing.
AMENDMENT. The Acquisition Agreement may be amended at any time prior to
the consummation of the IDP Acquisition by the written consent of the parties.
IDP ACQUISITION FEES AND EXPENSES
Each of IDP and the IDP Sellers will pay one-half of the fees and expenses
of IDP and the IDP Sellers in connection the Acquisition Agreement and the
consummation of the transactions contemplated thereby (except that to the extent
that payments to Gruntal & Co. for their advice and services to the IDP Sellers
exceed $600,000, the excess will be solely the responsibility of the IDP
Sellers). Dunn will pay its own expenses in connection with the Acquisition
Agreement and the consummation of the transactions contemplated thereby.
The Acquisition Agreement also provides that if the Acquisition Agreement is
terminated because the Closing has not occurred before June 30, 1998, Dunn shall
pay to the IDP Sellers a termination fee in the amount of $500,000, provided
that if the Closing does not occur on or before June 30, 1998 because (i) the
conditions precedent to the obligations of Dunn to consummate the IDP
Acquisition were not met, or (ii) the Offering is postponed or terminated
because of general market conditions on the basis of a joint decision of Ferris
Baker Watts and Gruntal & Co., investment advisors to Dunn and IDP, respectively
(or if such firms do not agree, upon the decision of a third investment banking
firm chosen by Ferris Baker Watts and Gruntal & Co.), then no termination fee
shall be paid.
DESCRIPTION OF THE COMPANY'S COMMON STOCK
The following is a description of all material terms and features of the
securities of the Company, but does not purport to be complete and is subject in
all respects to applicable Virginia law and to the provisions of the Company's
Certificate of Incorporation and Bylaws, copies of which have been filed with
the Commission as Exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part. See also "Comparative Rights of Stockholders"
for a description of various differences between the rights of stockholders of
Dunn and the rights of shareholders of the Company.
GENERAL
The Company is authorized by its Articles of Incorporation to issue an
aggregate of 20,000,000 shares of Common Stock, $.001 par value per share, and
2,000,000 shares, $.001 par value per share, of preferred stock (the "Preferred
Stock"). At the Closing, 5,097,743 shares of Common Stock will be issued in
exchange for the outstanding common stock of Dunn in the Merger. See "The Merger
and the IDP Acquisition." No shares of the authorized Preferred Stock are issued
and outstanding. All shares of Common Stock are of the same class and have equal
rights and attributes.
PREFERRED STOCK
The Company is authorized by its Articles of Incorporation to issue a
maximum of 2,000,000 shares of Preferred Stock, in one or more series and
containing such rights, privileges and limitations, including voting rights,
dividend rates, conversion privileges, redemption rights and terms, redemption
prices and
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liquidation preferences, as the Board of Directors of the Company may, from time
to time, fix by amendment of the Articles of Incorporation. No shares of the
Preferred Stock have been issued, and the Company has no present plans to issue
any Preferred Stock.
The issuance of shares of Preferred Stock pursuant to the Board's authority
described above could decrease the amount of earnings and assets available for
distribution to holders of Common Stock, and, coupled with special voting rights
could otherwise materially and adversely affect the rights and powers, including
voting rights, of such holders and may have the effect of delaying, deferring or
preventing a change in control of the Company. The Board of Directors does not
currently intend to seek stockholder approval prior to any issuance of
authorized but unissued Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders of the Company. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the payment of preferential dividends with
respect to any shares of Preferred Stock that may be outstanding from time to
time. In the event of the dissolution, liquidation or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of all liabilities of the Company, subject to the prior
distribution rights of the holders of any Preferred Stock that may be
outstanding at that time. All outstanding shares of Common Stock are, and the
shares of Common Stock offered in the Offering when issued will be, fully paid
and nonassessable.
The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to issue additional shares of Common Stock, current Company
shareholders would have no right to purchase additional shares and, as a result,
their percentage equity interest in the Company would be reduced.
The holders of Common Stock do not have cumulative voting rights.
Accordingly, all directors will be elected by the affirmative vote of the
holders of a majority of the Company's outstanding Common Stock. The Board is
empowered to fill any vacancies on the Board created by the resignation, death
or removal of directors.
Upon completion of the Offering (but without giving effect to the exercise
of the over-allotment option issued in connection with the Offering, or any
outstanding stock options or warrants), the Company's executive officers and
directors will beneficially own approximately 49.9% of the outstanding shares of
Common Stock, and will be in a position to control the voting results of certain
actions required or permitted to be taken by stockholders of the Company,
including the election of directors. However, as no voting agreement exists
among these executive officers and directors, each is able to vote as he or she
may desire on any issue affecting the Company.
VIRGINIA ANTI-TAKEOVER LAW
Under the Virginia Control Share Acquisition statute (Section 13.1-728 et
seq. of the Virginia Stock Corporation Act ("VSCA")), a person ( the "acquiror")
who makes a bona fide offer to acquire, or acquires, shares of stock of a
Virginia corporation that when combined with shares already owned, would
increase the acquiror's ownership to at least 20%, 33 1/3%, or a majority of the
voting stock of the corporation, must obtain the approval of a majority in
interest of the shares held by all shareholders (except the acquiror and
officers and inside directors of the corporation) in order to vote the shares
acquired. The statute does not apply to mergers pursuant to a merger or plan of
share exchange effected in compliance with the relevant provision of the VSCA.
The Control Share Acquisition statute permits a Virginia corporation to elect
not to be governed by these provisions by including such an election in its
articles of incorporation or bylaws, and does not apply to companies with less
than 300 shareholders. The
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Company has elected not to be governed by the Control Share Acquisition statute
in its Articles of Incorporation.
Virginia's Affiliated Transactions statute (Section 13.1-725 et seq. of the
VSCA) provides that if a person acquires 10% or more of the stock of a Virginia
corporation without the approval of its board of directors (an "interested
shareholder"), such person may not engage in certain transactions with the
corporation (including a merger and purchase or sale of greater than 5% of the
corporation's assets or voting stock) for a period of three years, and then only
with the specified supermajority shareholder vote, disinterested director
approval or fair price and procedural protections. Virginia's statute includes
certain exceptions to this prohibition; for example, if a majority of
disinterested directors approves the acquisition of stock or the transaction
prior to the time that the person became an interested shareholder, or if the
transaction is approved by the board of directors and by the affirmative vote of
two-thirds of the outstanding voting stock which is not owned by the interested
shareholder, the prohibition does not apply.
The VSCA contains provisions which permit a corporation to take the steps
necessary to implement a shareholder rights plan, sometimes referred to as a
"poison pill," whereby all shareholders, except for the acquiror, have certain
economically powerful rights that are activated upon an acquiror obtaining a 20%
(or other percentage) stock ownership position. The Company has not implemented
a "poison pill." The Company's Articles of Incorporation do provide for
preferred stock as to which the board of directors has authority to determine
the terms of such stock, which is generally a prerequisite to implementing a
"poison pill."
PERSONAL LIABILITY OF DIRECTORS
Under the VSCA, the liability of an officer or director for a single
transaction in a proceeding brought by or in the right of a corporation or on
behalf of shareholders is limited to damages not exceeding the lesser of (i) the
monetary amount, including the elimination of liability, specified in the
articles of incorporation or, if approved by the shareholders, in the bylaws, as
a limitation on or elimination of the liability of the officer or director; or
(ii) the greater of $100,000 or the amount of cash compensation received by the
officer or director from the corporation during the 12 months immediately
preceding the act or omission for which liability was imposed. The liability of
an officer or director may not be so limited if the officer or director engaged
in willful misconduct or a knowing violation of the criminal law or of any
federal or state securities law, including, without limitation, any claim of
federal or state securities law, including, without limitation, any claim of
unlawful insider trading or manipulation of the market for any security.
The Company's Articles of Incorporation include a provision eliminating, to
the fullest extent permitted by law, the personal liability of directors.
The Articles of Incorporation provide for the indemnification of, and
advancement of litigation expenses to, the directors and officers of the Company
to the fullest extent permitted by Virginia law. Furthermore, the Company may
enter into indemnification agreements with its directors and officers for the
indemnification of and advancing of expenses to such person to the fullest
extent permitted by law.
Dunn has directors' and officers' liability insurance in the amount of $1.0
million.
TRANSFER AGENT
The Transfer Agent for the Common Stock of the Company is Continental Stock
Transfer & Trust Company.
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COMPARATIVE RIGHTS OF STOCKHOLDERS
At the effective time of the Merger, each share of Dunn common stock will be
converted into one share of the Company's Common Stock, and holders of Dunn
common stock will become shareholders of the Company, a Virginia corporation. As
a result, their rights as shareholders of the Company will be governed by the
VSCA and the Articles of Incorporation and Bylaws of the Company, and will no
longer be governed by the DGCL or the Certificate of Incorporation or Bylaws of
Dunn. The following summary of certain differences which may affect the rights
and interests of Dunn stockholders does not purport to be a complete discussion
of such differences, but should give some basis for Dunn stockholders to
evaluate their rights as shareholders of the Company upon receipt of the
Company's Common Stock. References to the VSCA and DGCL below describe Virginia
and Delaware law, respectively, as it is currently in effect.
BOARD OF DIRECTORS
NUMBER. Dunn's Bylaws currently provide that the number of directors
constituting the entire Board of Directors shall consist of not less than three
(3) nor more than seven (7) members, as may be determined by the stockholders
from time to time. The Company's Articles of Incorporation provide that the
number of directors shall consist of not less than five (5) not more than
fifteen (15) directors, as may be determined or changed by the Board of
Directors or by the affirmative vote of not less than 66 2/3% of the voting
shareholders. Currently, the Company has 7 directors.
REMOVAL. The DGCL provides that directors may be removed with or without
cause by the vote of holders of a majority of shares entitled to vote for the
election of directors. Although the VSCA also provides that directors may be
removed by shareholders with or without cause unless the articles of
incorporation provide otherwise, the Articles of Incorporation of the Company
provide that directors may be removed only for cause and only by an affirmative
vote of the holders of at least 66 2/3% of the outstanding shares of the Company
then entitled to vote on the election of the directors.
VACANCIES. In accordance with the DGCL, Dunn's Bylaws provide that
vacancies may be filled by the directors then in office (other than vacancies
occurring from the removal of a director by the stockholders). Pursuant to the
VSCA, unless the articles of incorporation provide otherwise, if a vacancy
occurs on the board of directors, including a vacancy resulting from an increase
in the number of directors, such vacancy may be filled by the shareholders, the
board of directors, or if the directors remaining in office constitute fewer
than a quorum, the vacancy may be filled by the affirmative majority vote of
such remaining directors. The Company's Articles of Incorporation provide that
any vacancy in the Board of Directors (including by removal or an increase in
the number of directors) may be filled by a majority vote of the remaining
directors, even if less than a quorum.
CUMULATIVE VOTING. Under the DGCL, cumulative voting in the election of
directors is not mandatory. The Dunn Certificate of Incorporation does not
provide for cumulative voting. Similarly, under the VSCA, shareholders do not
have a right to cumulative voting unless the articles of incorporation so
provide. The Articles of Incorporation of the Company do not provide for
cumulative voting.
CLASSIFIED BOARD. The DGCL allows a corporation to adopt a classified board
of directors consisting of as many as three classes, without specifying any
minimum number required in each class. The Dunn Certificate of Incorporation or
Bylaws do not provide for a classified Board of Directors. The VSCA similarly
allows a corporation's articles of incorporation to provide for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The terms
of directors in the first group expire at the first annual shareholders' meeting
after their election, the terms of the second group expire at the second annual
shareholders' meeting after their election, and the terms of the third, if any,
expire at the third annual shareholders' meeting after their election. At each
annual meeting of shareholders held thereafter, the successors to the class of
directors whose term expires shall be elected to hold office for a three-year
term. The Company's
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Board of Directors is divided into three classes of directors and, in accordance
with the VSCA, Class I, II and III directors shall hold office for a term
expiring at the 1999, 2000, 2001 annual shareholders meeting, respectively.
Thereafter, the successors to the class of directors whose term expires shall
serve for three-year terms.
SPECIAL MEETING OF STOCKHOLDERS
The DGCL provides that a special meeting of stockholders may be called by a
corporation's board of directors or by such person or persons as may be
authorized by its certificate of incorporation or bylaws. The DGCL does not
provide stockholders with the right to call special meetings unless otherwise
set forth in the certificate of incorporation or bylaws. In that regard, Dunn's
Bylaws provide that a special meeting of stockholders may be called by the
President, at the written request of 25% of the stockholders or at the written
request of a majority of the Board of Directors.
The VSCA provides that a special meeting of the shareholders may be called
by the chairman of the board of directors, the board of directors or the person
or persons authorized by the articles of incorporation or bylaws. The Company's
bylaws provide that special meetings of shareholders may be called as provided
in the Company's Articles of Incorporation. The Company's Articles of
Incorporation incorporate the above VSCA provisions as well as the right of the
President and a majority of the Board of Directors, even if less than a quorum,
to call such a meeting. Furthermore, the Company's Articles of Incorporation
provide that the holders of more than 50% of the Company's voting shares may
call a special meeting; if an annual shareholder's meeting is not held within 15
months after the last annual shareholders' meeting, a special meeting may be
called by the holders of 20% or more of the Company's voting shares.
STOCKHOLDER ACTION IN LIEU OF MEETING
The DGCL provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken at an
annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action that would be taken, is signed by holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting.
The VSCA permits shareholders to act without meeting only by unanimous
written consent by all shareholders entitled to vote on the action.
BYLAW AMENDMENTS BY DIRECTORS
Under the DGCL, the power to adopt, amend, or repeal bylaws is vested
exclusively in the stockholders entitled to vote, unless the certificate of
incorporation confers such power upon the board of directors as well. The Dunn
Certificate of Incorporation provides that the Board of Directors is expressly
authorized to make, alter or repeal Dunn's Bylaws.
The VSCA provides generally that a corporation's board of directors may
amend or repeal the corporation's bylaws except (i) to the extent such power is
reserved to the shareholders by the articles of incorporation or the VSCA, (ii)
to the extent the shareholders in adopting or amending particular bylaws provide
expressly that the board of directors may not amend or repeal that bylaw, and
(iii) the corporation's shareholders may amend or repeal bylaws even though the
bylaws may be amended or repealed by the board of directors. The Company's
Articles of Incorporation provides that the Company's bylaws may be amended only
by the Board of Directors or the affirmative vote of not less than 66 2/3% of
the total number of votes of the then outstanding shares entitled to vote,
voting together as a single class.
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AMENDMENT OF THE CERTIFICATE OR ARTICLES OF INCORPORATION
Under the DGCL, the affirmative vote of a majority of the outstanding stock
entitled to vote is required to amend the certificate of incorporation.
Under the VSCA, amendments to a corporation's articles of incorporation
generally require the vote of at least two-thirds of each class outstanding and
entitled to vote thereon or, if the articles of incorporation so provide, a
greater or lesser proportion, but not less than a majority of the outstanding
shares of each class. The Company's Articles of Incorporation does not alter the
two-thirds rule.
PAYMENT OF DIVIDENDS; SHARE REPURCHASES
Under the DGCL, a corporation may declare and pay dividends either out of
its surplus or, if there is no surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year.
The DGCL permits a corporation to purchase or redeem shares of its own stock
when its capital is not impaired and such purchase or redemption would not cause
any impairment of the capital of the corporation, except that a corporation may
purchase or redeem out of capital any of its preferred shares if such shares
will be retired upon their acquisition and the capital of the corporation will
be reduced in accordance to the DGCL.
Under the DGCL, a corporation may not purchase any of its redeemable shares
for more than the price at which they may then be redeemed.
Under the VSCA, a board of directors may authorize and the corporation may
make distributions to its shareholders (including dividends and share
repurchases) except that no distribution may be made if, after giving it effect,
the corporation would not be able to pay its debts as they become due in the
usual course of its business or the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were dissolved, to satisfy the preferential rights of holders of
securities with rights superior to the corporation's common stock. The directors
of a Virginia corporation may be personally liable to the corporation and its
creditors to the extent that a dividend authorized by the directors exceeds such
permissible amounts and is not repaid to the corporation, but may seek
contribution from other directors voting in favor of the distribution and from
the shareholders receiving the distribution.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote; the Dunn Certificate of
Incorporation does not so provide.
Under the VSCA, a sale, lease, exchange or other disposal of all or
substantially all of the property of a corporation other than in the usual or
regular course of business, requires the approval by the holders of more than
two-thirds of all the votes entitled to be cast on the transaction (unless the
board of directors requires a higher vote or the articles of incorporation
provide for a greater or lesser vote so long as the vote provided for is not
less than a majority of all the votes cast on the transaction by each voting
group entitled to vote on the transaction at a meeting at which a quorum
exists). Also under the VSCA, a plan of merger or share exchange generally must
be approved by each voting group entitled to vote on the plan by more than
two-thirds of all the votes entitled to be cast by that voting group (unless the
board of directors requires a higher vote or the articles of incorporation
provide for a greater or lesser vote so long as the vote provided for is not
less than a majority of all the votes cast on the plan by each voting group
entitled to vote on the transaction at a meeting at which a quorum exists). The
Company's Articles of Incorporation do not alter the shareholder vote
requirement relating to such transactions.
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POSSIBLE ANTI-TAKEOVER EFFECTS
Subject to certain exceptions set forth below, the DGCL provides that a
corporation may not engage in any business combination with any "interested
stockholder" for a three-year period following the time that such stockholder
becomes an interested stockholder unless: (i) prior to such time, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares); or (iii) at or subsequent to
such time, the business combination is approved by the board of directors of the
corporation and by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. An interested
stockholder is defined to include any person that is the owner of 15% or more of
the outstanding voting stock of the corporation, or is an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within three years immediately prior to
the relevant date, and the affiliates and associates of such person. Under
certain circumstances, Section 203 of the DGCL makes it more difficult for an
"interested stockholder" to effect various business combinations with a
corporation for a three-year period.
As a Virginia corporation, the Company is subject to Virginia's Affiliated
Transactions statute which provides that if a person acquires 10% or more of the
stock of a Virginia corporation without the approval of its board of directors
(an "interested shareholder"), such person may not engage in certain
transactions with the corporation (including a merger and purchase or sale of
greater than 5% of the corporation's assets or voting stock) for a period of
three years, and then only with the specified supermajority shareholder vote,
disinterested director approval or fair price and procedural protections.
Virginia's statute includes certain exceptions to this prohibition; for example,
if a majority of disinterested directors approves the acquisition of stock or
the transaction prior to the time that the person became an interested
shareholder, or if the transaction is approved by the board of directors and by
the affirmative vote of two-thirds of the outstanding voting stock which is not
owned by the interested shareholder, the prohibition does not apply.
In addition, under the Virginia Control Share Acquisition statute, a person
(the "acquiror") who makes a bona fide offer to acquire, or acquires, shares of
stock of a Virginia corporation that when combined with shares already owned,
would increase the acquiror's ownership to at least 20%, 33 1/3%, or a majority
of the voting stock of the corporation, must obtain the approval of a majority
in interest of the shares held by all shareholders (except the acquiror and
officers and inside directors of the corporation) in order to vote the shares
acquired. The statute does not apply to mergers pursuant to a merger or plan of
share exchange effected in compliance with the relevant provision of the VSCA.
The Control Share Acquisition statute permits a Virginia corporation to elect
not to be governed by these provisions by including such an election in its
articles of incorporation or bylaws, and does not apply to companies with less
than 300 shareholders. The Company has elected out of the Control Share
Acquisition statute in its Articles of Incorporation.
The VSCA contains provisions which permit a corporation to take the steps
necessary to implement a shareholder rights plan, sometimes referred to as a
"poison pill," whereby all shareholders, except for the acquiror, have certain
economically powerful rights that are activated upon an acquiror obtaining a 20%
(or other percentage) stock ownership position. The Company has not implemented
a "poison pill." The Company's Articles of Incorporation do provide for
preferred stock as to which the board of directors has authority to determine
the terms of such stock, which is generally a prerequisite to implementing a
"poison pill." See "Description of the Company's Common Stock."
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DIRECTOR LIABILITY; RELIANCE; INDEMNIFICATION
The DGCL and the VSCA are substantially identical with regard to limitations
on director liability. The DGCL and the VSCA permit a corporation to include in
its certificate or articles of incorporation, as the case may be, a provision
eliminating or limiting a director's liability to the corporation or its
shareholders for monetary damages for breaches of fiduciary duty, including
conduct which could be characterized as negligence or gross negligence. The DGCL
and the VSCA expressly provide, however, that liability for breaches of the duty
of loyalty, acts or omissions not in good faith or involving intentional
misconduct or knowing violations of the law, the unlawful purchase or redemption
of stock or payment of unlawful dividends or the receipt of improper personal
benefits cannot be eliminated or limited in this manner. Both statutes further
provide that no such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective. The Dunn Certificate of Incorporation contains provisions
which eliminate the personal liability of the directors of Dunn in certain
circumstances. The Company's Articles of Incorporation contain similar
provisions.
Under the DGCL, a member of the board of directors of a corporation or a
member of any committee designated by the board of directors will, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the corporation and upon such information, opinions, reports, or
statements presented to the corporation by any of the corporation's officers or
employees, or committees of the board of directors, or by any other person as to
matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the corporation. The VSCA does not contain a similar
provision.
Both the DGCL and the VSCA provide that a corporation may purchase and
maintain insurance on behalf of any individual who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in such capacity, whether or
not the corporation would have the power to indemnify him against such
liability.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Dunn or the
Company pursuant to the foregoing provisions, Dunn and the Company have been
informed 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.
PREEMPTIVE RIGHTS
None of the stockholders of Dunn or the Company have any preemptive rights.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
THE FOLLOWING DISCUSSION IS OF THE COMPANY AS IT WILL EXIST UPON
CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION.
The Company manufactures and markets build-to-order computer systems and
provides related services to the Government and selected businesses. The Company
provides its customers with single-source solutions by manufacturing its own
brand of desktop and portable computers and high performance network client
servers and by offering services, which include network consulting, project
implementation, and technical support. The Company currently derives most of its
revenue from hardware sales to the Government, but also provides hardware and
services to medium and large businesses. The Company sells its products and
services to more than 950 customers.
Dunn was founded in 1987 and initially resold third party computers to the
Government. In 1991, Dunn began to manufacture and market its own line of
computers to better serve the rapidly changing Government market. Dunn completed
its initial public offering in April 1997. In September 1997, Dunn completed the
STMS Acquisition. The STMS Acquisition expanded Dunn's capabilities to provide a
wide variety of services including network consulting, project implementation
and technical support and provided new opportunities to sell computer hardware
into the commercial marketplace as part of a total network solution. By
manufacturing its own computer systems, the cost of which represents a
significant portion of the cost of a total solution, the Company believes it has
a sustainable competitive advantage over other network service providers and
computer resellers.
On March 9, 1998, Dunn entered into an agreement to acquire IDP, the second
largest supplier of portable computers and the ninth largest supplier of desktop
computers to the federal Government in 1996, according to industry sources. IDP
has two state-of-the-art manufacturing facilities located in Gaithersburg,
Maryland, and Guayama, Puerto Rico. The Gaithersburg facility is ISO 9000
certified and the Guayama facility is currently in the process of becoming ISO
9000 certified. Additionally, IDP has spent the last four years developing a
proprietary management information system that enables it to provide
build-to-order systems and world-wide customer support to the federal
Government. With the IDP Acquisition, the Company believes it has enhanced its
market position as a major supplier of computer systems and services to the
federal Government and to selected businesses.
Over 90% of the Company's revenues, on a pro forma basis, are generated from
the sale of hardware. Sales to customers within the U.S. Government accounted
for 70% of Dunn's revenues and 99% of IDP's revenues in their respective 1997
fiscal years. The Company's operating results are characterized by a number of
factors resulting from its emphasis on the Government market. For example, both
Dunn and IDP have historically experienced fluctuating quarterly results due to
uneven purchasing patterns of Government customers relating to the Government's
budgetary cycle. Consequently, sales for the first and fourth quarters typically
account for the greatest proportions of revenues each year. In addition, the
Company's Government contracts, which frequently provide for fixed prices, often
have initially low gross margins which will increase over the term of a contract
due to cost savings from technological improvements and shorter component life
cycles. Since most of the Company's Government contracts have 30-day delivery
terms, the Company is able to limit its inventory risks by purchasing components
to fill firm fixed-price contracts. Further, the Government is a reliable payor,
enabling the Company to predict cash flows and avoid losses from the bad debt.
The Company's most significant costs are components used in the manufacture
of desktop, portable and server systems. By manufacturing its own computer
systems instead of reselling third party products, the Company believes its
gross margin improves by at least 15%, which gives the Company a significant
advantage over computer resellers. The Company believes the combination of Dunn
and IDP will result in lower component costs because of increased volume
discounts.
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The historical results of operation of IDP reflect a number of benefits
resulting from PRIMO being incorporated and located in Puerto Rico. For example,
the Puerto Rican government has granted PRIMO an exemption for 20 years from
property taxes and 90% of Puerto Rican income taxes. In addition, the Puerto
Rican government subsidizes the employment and training of certain employees.
The government leases space to PRIMO for $2.20 per square foot. The Company
plans to apply to the government to receive similar benefits after the IDP
Acquisition and has already received positive indications that they will be
granted, but there can be no assurance in this regard.
RESULTS OF OPERATIONS OF DUNN
The following table sets forth for the fiscal years ended October 31, 1995,
1996 and 1997, and the three months ended January 31, 1997 and 1998, certain
income and expense items of Dunn as a percentage of net revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 80.7% 77.9% 80.6% 76.3% 76.6%
--------- --------- --------- --------- ---------
Gross profit............................ 19.3% 22.1% 19.4% 23.7% 23.4%
Selling and marketing................... 2.1% 2.6% 3.9% 3.3% 5.3%
General and administrative.............. 10.8% 8.3% 6.2% 4.6% 7.1%
--------- --------- --------- --------- ---------
Income from operations.................. 6.4% 11.2% 9.3% 15.8% 11.0%
Other income (expense).................. 0.1% (0.1%) 0.4% 0.2% (0.4%)
--------- --------- --------- --------- ---------
Net income before income taxes.......... 6.5% 11.1% 9.7% 16.0% 10.6%
Provision for income taxes.............. 3.3% 4.3% 3.6% 6.1% 4.0%
--------- --------- --------- --------- ---------
Net income.............................. 3.2% 6.8% 6.1% 9.9% 6.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1997
Net revenues of Dunn for the first quarter ended January 31, 1998 ("first
quarter 1998") increased 89.4% to $10.4 million from $5.5 million for the first
quarter ended January 31, 1997 ("first quarter 1997"). This increase was
primarily due to additional revenue from STMS, which was acquired in the fourth
quarter of 1997, and increased revenues from certain Government contracts.
Gross profit of Dunn for the first quarter 1998 increased 86.8% to $2.4
million from $1.3 million for the first quarter 1997. However, the gross profit
as a percentage of net revenues during the same periods decreased to 23.4% from
23.7%. The decrease in gross profit margin is a result of an increase in the
percentage of lower margin third party hardware sales associated with the
network services business.
Selling and marketing expense of Dunn increased for the first quarter 1998
by 204.1% to $552,000 from $182,000 for the first quarter 1997. During the same
periods, as a percentage of net revenues, selling and marketing expenses
increased to 5.3% from 3.3%. The increase was primarily attributable to
increased sales and marketing expenses related to its network service products.
General and administrative expenses of Dunn for the first quarter 1998
increased 192.8% to $738,000 from $252,000 for the first quarter 1997. As a
percentage of net revenues, general and administrative expense increased to 7.1%
for the first quarter 1998 from 4.6% for the first quarter 1997. This increase
was primarily the result of additional administrative costs associated with
personnel retained in the STMS Acquisition.
Other income (expense) for the first quarter 1998 decreased to an expense of
$43,000 from income of $8,000 for the first quarter 1997. The increase in cost
is attributable to increased interest expense. The effective tax rate decreased
to 37.8% for the first quarter 1998 from 38.0% for the first quarter 1997. The
Company's net income increased by 26.2% for the first quarter 1998 to $689,000
from $546,000 for the first
40
<PAGE>
quarter 1997. Net income as a percentage of net revenues during the same periods
declined to 6.6% from 9.9%.
FISCAL YEAR ENDED OCTOBER 31, 1997 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1996
Net revenues of Dunn for the fiscal year ended October 31, 1997 ("fiscal
1997") increased 20.3% to $21.8 million from $18.1 million for fiscal year ended
October 31, 1996 ("fiscal 1996"). This increase was primarily due to additional
revenue resulting from the fourth quarter acquisition of STMS and increased
revenues from Government contracts.
Gross profit of Dunn for fiscal 1997 increased 5.5% to $4.2 million from
$4.0 million for fiscal 1996. However, the gross profit as a percentage of net
revenues during the same periods decreased to 19.4% from 22.1%. The decrease in
gross profit margin is a result of an increase in the percentage of lower margin
third party hardware sales, initial lower margins realized on two new contracts
and increased production costs.
Selling and marketing expense of Dunn increased for fiscal 1997 by 77.2% to
$842,000 from $475,000 for fiscal 1996. During the same periods, as a percentage
of net revenue, selling and marketing expenses increased to 3.9% from 2.6%. The
increase was primarily attributable to increased advertising in selected
publications, increased attendance at trade shows and the development of a
marketing campaign aimed at selected businesses.
General and administrative expense of Dunn for fiscal 1997 declined 9.5% to
$1.4 million from $1.5 million for fiscal 1996. As a percentage of net revenue,
general and administrative expense declined to 6.2% for fiscal 1997 from 8.3%
for fiscal 1996. Although Dunn increased its costs in almost all aspects of
general and administrative expenses, the increased costs were offset by a
decline in executive officers' incentive compensation.
Other income (expense) for fiscal 1997 increased to income of $98,000 from
an expense of $9,000 for fiscal 1996. The increase was a result of use of
proceeds from Dunn's initial public offering in April 1997 to reduce debt
obligations and to invest in tax-exempt securities. Dunn's effective tax rate
declined to 37.5% for fiscal 1997 from 38.5% for fiscal 1996 as a result of the
non-taxable interest income. Dunn's net income grew by 6.7% for fiscal 1997 to
$1.3 million from $1.2 million for fiscal 1996. Net income as a percentage of
revenue during the same periods declined to 6.1% from 6.8%.
FISCAL YEAR ENDED OCTOBER 31, 1996 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1995
Net revenues of Dunn for fiscal 1996 increased 141.6% to $18.1 million from
$7.5 million for fiscal year ended October 31, 1995 ("fiscal 1995"). The
increase was due to four new contracts. Three of such contracts were with
commercial customers that sell to the federal Government. Net revenues in fiscal
1996 from each of these contracts were $1.6 million, $2.9 million, $3.1 million,
and $2.4 million.
Gross profit of Dunn for fiscal 1996 increased 176.6% to $4.0 million from
$1.4 million for fiscal 1995. The increase was a result of increased sales and
an increase in gross profit as a percentage of sales. The gross profit as a
percentage of net revenues during the same periods increased to 22.1% from
19.3%. The increase in gross profit margins resulted from an increase in volume
discounts for computer components and a reduction in warranty expense.
Selling and marketing expense of Dunn for fiscal 1996 increased by 208.5% to
$475,000 from $154,000 for fiscal 1995. During the same periods, as a percentage
of net revenues, selling and marketing expenses increased to 2.6% from 2.1%. The
increase was primarily attributable to increased sales personnel and
advertising.
General and administrative expense of Dunn for fiscal 1996 increased 84.3%
to $1.5 million from $812,000 for fiscal 1995. As a percentage of net revenues,
general and administrative expense declined to 8.3% for fiscal 1996 from 10.8%
for fiscal 1995. The increase in expense was attributable to increased incentive
compensation for executive officers.
41
<PAGE>
Other income (expense) for fiscal 1996 declined to an expense of $9,000 from
an income of $8,000 for fiscal 1995 as a result of increased interest expense.
Dunn's effective tax rate declined to 38.5% for fiscal 1996 from 50.1% for
fiscal 1995. Dunn's net income grew by 409.8% for fiscal 1996 to $1.2 million
from $243,000 for fiscal 1995. Net income as a percentage of revenue during the
same periods increased to 6.8% from 3.2%.
RESULTS OF OPERATIONS OF IDP
The following table sets forth for the fiscal years ended September 30,
1995, 1996 and 1997 and the three months ended December 31, 1996 and 1997,
certain income and expense items of IDP as a percentage of net revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 85.8% 85.3% 82.0% 85.7% 83.7%
--------- --------- --------- --------- ---------
Gross profit.......................... 14.2% 14.7% 18.0% 14.3% 16.3%
Operating expense..................... 10.8% 13.3% 16.1% 10.1% 14.7%
--------- --------- --------- --------- ---------
Income from operations................ 3.4% 1.4% 1.9% 4.2% 1.6%
Other income (expense)................ (0.6%) -- (0.8%) (0.5%) (0.9%)
--------- --------- --------- --------- ---------
Income before income taxes............ 2.8% 1.4% 1.1% 3.7% 0.7%
Income tax expense (benefit).......... 0.4% -- (0.5%) 0.8% 0.2%
--------- --------- --------- --------- ---------
Net income............................ 2.4% 1.4% 1.6% 2.9% 0.5%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1996
Net revenues of IDP for the three months ended December 31, 1997 decreased
30.0% to $25.2 million from $36.0 million for the three months ended December
31, 1996. The decrease was primarily attributable to the expiration of a large
agency-specific IDIQ contract in January 1997. This contract accounted for $9.3
million of revenues for the three month period ended December 31, 1996.
Gross profit for IDP's three months ended December 31, 1997 decreased 20.6%
to $4.1 million from $5.2 million for the three months ended December 31, 1996.
Gross profit as a percentage of revenues during the same periods increased to
16.3% from 14.3%. The decrease in gross profit dollars is a result of lower
revenues. The increase in gross profit as a percentage of revenues is a result
of lower component costs due to better negotiated supply contracts.
Operating expense for IDP's three months ended December 31, 1997 and
December 31, 1996 held flat as a gross dollar amount at $3.7 million. As a
percentage of revenues for the same periods, the operating expenses increased to
14.7% from 10.1%. This increase is a result of lower revenues and having kept
the infrastructure intact in order to perform on the Desktop V contract.
An income tax expense of $54,000 was recorded for the three month period
ending December 31, 1997, as compared to $290,000 for the three months ended
December 31, 1996. This decrease was a result of IDP (excluding PRIMO) having a
loss before income taxes of $1.2 million for the three months ended December 31,
1997 compared to income before income taxes of $618,000 for the three months
ended December 31, 1996. An income tax benefit was not recorded for the IDP
loss. PRIMO has a 90% exemption from Puerto Rico income taxes under the Puerto
Rico Tax Incentives Act of 1987, as amended.
FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1996
Net revenues of IDP for the fiscal year ended September 30, 1997 ("IDP's
fiscal 1997") decreased 14.7% to $71.9 million from $84.3 million for fiscal
year ended September 30, 1996 ("IDP's fiscal 1996"). The decrease was
attributable to the expiration of two large agency-specific IDIQ contracts, a
decline in
42
<PAGE>
revenue from its GSA Schedule and an extraordinary delay in sales caused by a
third party protest of the Desktop V contract protest. See
"Business--Contracts."
Gross profit for IDP's fiscal 1997 increased 4.2% to $12.9 million from
$12.4 million for IDP's fiscal 1996. Gross profit as a percentage of net
revenues during the same periods increased to 18.0% from 14.7%. The increase was
primarily attributable to higher margins achieved in connection with certain
service and warranty revenue.
Operating expense for IDP's fiscal 1997 increased by 3.3% to $11.6 million
from $11.2 million for IDP's fiscal 1996. During the same periods, as a
percentage of net revenues, operating expenses increased to 16.1% from 13.3%.
This increase was primarily related to an increase in the number of technical
personnel in the customer service and sales departments.
Other income for IDP's fiscal 1997 decreased by 96.4% to $31,000 from
$870,000 for IDP's fiscal 1996. This decrease was a result of a one time bid
protest settlement payment of $750,000 that was received in IDP's fiscal 1996.
Other expenses for IDP's fiscal 1997 decreased by 32.4% to $594,000 from
$879,000 for IDP's fiscal 1996. The decrease was largely attributable to reduced
interest expense resulting from improved inventory management and an increased
cash position.
Income tax benefit for IDP's fiscal 1997 increased to $417,000 from $18,000
for IDP's fiscal 1996 as a result of IDP (excluding PRIMO) having a loss before
income taxes of $1.8 million in 1997 compared to a loss before income taxes of
$222,000 in 1996. Income earned by PRIMO is not subject to federal income taxes
(unless and until repatriated into the U.S.). PRIMO has been granted a 90%
exemption from Puerto Rico income taxes under the Puerto Rico Tax Incentives Act
of 1987, as amended. As a result of the IDP Acquisition, a significant portion
of the federal tax benefits that have accrued to PRIMO will not accrue to the
Company.
On January 9, 1998, IDP sold its partnership interest in the Maryland
general partnership known as the Justice Technology Partners ("Partnership"),
for the amount of approximately $758,000. The original investment of $31,200
made in fiscal year ended September 30, 1994 ("IDP's fiscal 1994"), equated to a
24.0% ownership. This amount will be distributed to the IDP Sellers as a
performance bonus prior to the Closing.
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995
Net revenue for IDP's fiscal 1996 increased by 4.8% to $84.3 million from
$80.4 million for the fiscal year ended September 30, 1995 ("IDP's fiscal
1995"). This growth was primarily attributable to increased sales from
agency-specific contracts and its GSA Schedule.
Gross profit for IDP's fiscal 1996 increased by 8.7% to $12.4 million from
$11.4 million for IDP's fiscal 1995. Gross margin as a percentage of net revenue
increased to 14.7% from 14.2% during the same period, as a result of lower
component prices due to increased volume and industry-wide price reductions.
Operating expense for IDP's fiscal 1996 increased by 29.0% to $11.2 million
from $8.7 million for IDP's fiscal 1995. Operating expense as percentage of net
revenue increased to 13.3% from 10.8% during the same period primarily as a
result of increased staffing and larger facilities in anticipation of securing
the Desktop V contract, increased professional fees, a write-off on repair
service parts and increased depreciation.
Other income for IDP's fiscal 1996 increased to $870,000 from $37,000 for
IDP's fiscal 1995. The increase was substantially related to a bid protest
settlement of $750,000 received in IDP's fiscal 1996. Other expenses for IDP's
fiscal 1996 increased by 69.1% to $879,000 from $520,000 for IDP's fiscal 1995.
This increase was largely attributable to an increase in interest expense.
Income tax benefit was $17,000 for IDP's fiscal 1996 versus an income tax
expense of $278,000 from IDP's fiscal 1995 as a result of IDP (excluding PRIMO)
having a loss before income taxes in 1996 of $222,000 compared to income before
taxes of $355,000 in 1995.
43
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter 1998, Dunn used net cash of $3.0 million for its
operating activities. Although Dunn generated net income of $689,000 Dunn used
$7.1 million in cash to reduce its accounts payable balance, which was primarily
funded by increases in its line of credit facilities. For IDP, for the quarter
ended December 31, 1997, net cash used in operating activities was approximately
$5.7 million, which was attributable mainly to period end sales resulting in
increased accounts receivable of $8.9 million, partially offset by increases in
accounts payable of $4.7 million. The net cash used in operating activities was
primarily financed through net drawdowns on the IDP line of credit of $5.7
million.
In fiscal 1997 Dunn used $3.5 million in its operations. Although Dunn
generated cash from its net income of $1.3 million, the increase in accounts
receivable and inventories of $8.2 million was the principal use of funds. The
increase in revenue for fiscal 1997 from fiscal 1996 resulted in the increase in
accounts receivable in the fourth quarter. The $2.9 million increase in
inventory reflects the increased requirement for components to fill orders in
the first quarter of the fiscal year ended October 31, 1998 ("fiscal 1998"). The
use of funds was partially offset by the increase in accounts payable of $3.9
million. The Company used $1.0 million in its investing activities, of which
$900,000 was used in the STMS Acquisition and the balance used for property and
equipment.
IDP has historically met its cash flow needs through cash generated by
operations and its bank credit arrangements. In IDP's fiscal 1997, IDP generated
positive cash flow from operations of $3.1 million. The principal source of cash
was from a decrease in accounts receivable of $912,000 and an increase in
accounts payable of $1.2 million. In IDP's fiscal 1996, IDP generated positive
cash flow from operations of $440,000. The principal source of cash was a
decrease in accounts receivable of $9.2 million, an increase in inventory of
$6.4 million and a decrease in accounts payable of $3.2 million.
Dunn received $3.9 million in net proceeds from its initial public offering
in April 1997. Other significant financing activities were provided by Dunn's
bank line of credit with First Union Bank (formerly Signet Bank). In December
1997, the bank agreed to increase the line from $2.0 to $4.0 million. The line
of credit expires on May 31, 1998 and currently bears interest at prime. As of
March 25, 1998, Dunn had no outstanding balance on the line of credit.
IDP has borrowing agreements with Deutsche Financial Services for an
aggregate of $25.0 million, of which $15.0 million is secured by IDP's inventory
and $10.0 million is secured by IDP's accounts receivable. Each of these
facilities bears an annual interest rate of prime. Under the inventory financing
facility, IDP normally receives 30 days free of interest when purchases are made
from distributors, and 45 days free of interest when purchases are made from
manufacturers. Under the accounts receivable financing facility, IDP can borrow
against up to 85% of eligible receivables and is subject to various financial
covenants. There is no formal expiration date on these facilities, although it
is subject to annual re-evaluation. As of March 27, 1998 IDP had $9,736,200
outstanding on its line of credit.
IDP also maintains a banking relationship with Damascus Community Bank where
it holds a checking account, and has received demand loans, secured by the
checking account. As of December 31, 1997, IDP had notes payable to related
parties of $1.6 million bearing annual interest at rates ranging from 8.0% to
11.0% and are payable upon demand. The Company will assume $1.6 million of these
notes at Closing bearing annual interest rates from 8.0% to 11.0%, and
maturities from one to three years.
On October 31, 1997, Dunn had working capital of $4.3 million. The Company
believes the net proceeds from the Offering, the existing IDP and Dunn bank
facilities, together with cash on hand and the cash generated from operations,
will provide sufficient financial resources to finance the current operations of
the Company through fiscal 1998.
Dunn is the guarantor on $1.0 million of mortgage debt for a partnership
owned and controlled by the President and Vice President of the Company. The
mortgage debt is for the facilities currently occupied by Dunn in Sterling,
Virginia. See "Business--Facilities." In addition, Dunn has obligations under
its operating lease commitments of approximately $500,000 and obligations under
its existing employment contracts of approximately $1.0 million for fiscal 1998.
IDP has lease commitments of approximately
44
<PAGE>
$634,000 through December 31, 1998. With the IDP Acquisition, the Company will
assume annual obligations pursuant to employment agreements of approximately
$420,000.
From time to time, the Company may pursue strategic acquisitions or mergers
which may require significant additional capital and, in such event, the Company
may seek additional financing of debt and/or equity.
Recently, national attention has focused on the potential problems and costs
resulting from computer programs being written using two digits rather than four
to define the applicable year. Any computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. While the Company believes that its internal software applications
and the software in the systems it sells are Year 2000 compliant, there can be
no assurance until the year 2000 that all systems will function adequately.
Further, if the software applications of others on whose services the Company
depends are not Year 2000 compliant, such noncompliance could have a material
adverse effect on the Company. The Year 2000 problem can be corrected either
through software programming or the application can be ported to a client/server
network. The Company believes with its technical services and its client/server
hardware product line, it provides Year 2000 solutions. See "Risk Factors--Year
2000 Uncertainties."
The Desktop V contract was awarded to IDP in 1996 pursuant to the 8(a)
Program and therefore contains a "termination for convenience" clause if the
program-eligible owner(s) relinquish ownership of the firm, unless the procuring
agency requests a waiver from the SBA. The Air Force has been advised of the
pending change in ownership of IDP, and has requested a waiver. The Company
expects that the SBA will not oppose the waiver. A protestor has asserted that
IDP is bound by a settlement agreement that calls for payment of 1.8% of IDP's
revenues derived from the Desktop V contract. IDP contests the assertion. See
"Business--Contracts."
RECENT PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "COMPREHENSIVE INCOME,"
which is required to be adopted in the year ended October 31, 1998 consolidated
financial statements. SFAS 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in the financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the Statement of
Stockholders' Equity. The Company does not expect the adoption of SFAS 130 to be
material to its financial condition and results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION," which is required to be adopted in
the year ended October 31, 1998 consolidated financial statements. SFAS 131
changes the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports to stockholders. The disclosures for
segment information in the consolidated financial statements is not expected to
be material to its financial condition and results of operations.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting No. 132 ("SFAS 132"), "EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS," which is required to be adopted in
the October 31, 1999 consolidated financial statements. SFAS 132 eliminates
certain existing disclosure requirements, but at the same time adds new
disclosures. The Company does not expect any significant impact on its financial
condition and results of its operations as a result of adoption of SFAS 132.
45
<PAGE>
BUSINESS
THE FOLLOWING IS A DISCUSSION OF THE BUSINESS OF THE COMPANY AS IT WILL
EXIST UPON CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION.
GENERAL
The Company manufactures and markets build-to-order computer systems and
provides related services to the Government and selected businesses. The Company
provides its customers with single-source solutions by manufacturing its own
brand of desktop and portable computers and high performance network client
servers and by offering services, which include network consulting, project
implementation, and technical support. The Company currently derives most of its
revenue from hardware sales to the Government, but also provides hardware and
services to medium and large businesses. The Company sells its products and
services to more than 950 customers, including customers from agencies within
the Department of Defense, Department of Justice, Administrative Office of the
U.S. Courts ("U.S. Courts"), Social Security Administration, Lockheed Martin
Corporation ("Lockheed"), Blue Cross and Blue Shield Association and Inova
Health Care Systems, Inc.
The Company believes that the rapid technological change and increased
complexity of the computer industry will result in an increasing number of
entities outsourcing total network solutions to third party providers. To
position the Company as a total network solution provider, Dunn completed the
STMS Acquisition in September 1997. This acquisition expanded Dunn's
capabilities to provide a wide variety of services including network consulting,
project implementation and technical support and provided Dunn with new
opportunities to sell computer hardware into the commercial marketplace as part
of a total network solution. By manufacturing its own computer systems, the cost
of which represents a significant portion of the cost of a total solution, the
Company believes it has a sustainable competitive advantage over other network
service providers and computer resellers.
The Company seeks to establish itself as a leading provider of network
solutions to the Government and to increase sales of its hardware and services
to the commercial market. One of the key elements of this strategy is
integrating the Company's hardware and network services into a total solution
for its Government customers, which management believes will increase revenues
and improve margins. In the commercial market, management plans to leverage the
Company's customer relationships developed through sales of its network services
to expand sales of its hardware products. The Company will continue to focus on
quality to attract and retain customers, increase efficiency and reduce costs.
Consistent with its overall strategy, the Company intends to pursue strategic
acquisitions that will complement its product or service capabilities and
increase its overall value.
MARKET
According to an industry research firm, sales in the worldwide market for
computer hardware was projected to total approximately $117 billion in 1996 and
to grow to approximately $149 billion by 1999. Sales in the U.S. computer
hardware market totaled $49 billion in 1996 and is projected to grow to
approximately $63 billion by 1999.
Based upon industry projections, worldwide computer hardware shipments are
expected to grow at an annual compounded growth rate of 14.4% from 1996 through
1999. Shipments of portable computers are estimated to grow at an annual
compound rate of 20.3%, from approximately 11.7 million units in 1996 to
approximately 20.4 million units in 1999. Desktop shipments are estimated to
grow at an annual compound rate of 12.9%, from approximately 54.6 million units
in 1996 to 78.5 million units in 1999. Shipments in the client server network
market is estimated to grow at an annual compound growth rate of 20.3%, from 1.1
million units in 1996 to 1.9 million units in 1999.
46
<PAGE>
An industry source estimates that sales in the worldwide systems integration
market increased 9.4% in 1996 to $35.3 billion and is estimated to grow at a
compound annual growth rate of 11.3% over the next five years. Aggregate sales
in the U.S. systems integration market, which accounts for 49.7% of the
worldwide market, increased 13.0% in 1996 to $17.6 billion and is estimated to
grow at a compound annual growth rate of 12.2% over the next five years.
GOVERNMENT MARKET
The Office of Management and Budget ("OMB") submitted to Congress a
Government IT budget, which includes funding for hardware and services, of $29.5
billion for fiscal 1998. According to market researcher, Input, Inc., the IT
budget is expected to grow from 3% in 1999 to 6% in 2002, to approximately $35.0
billion. These figures do not include expenditures by the intelligence community
which are estimated to be significant. In addition, the Electronic Industries
Association, a major industry trade association, estimated that an additional
$20.0 billion would be spent in 1997 by the intelligence community, which is not
required to disclose such expenditures. The Company believes that while
Government down-sizing has decreased the number of federal employees, there has
been a corresponding increase in the demand for productivity tools such as
computers. Moreover, the Company believes the current trend toward outsourcing
both products and services is expected to continue to escalate in coming years.
Accordingly, the Company believes that demand for IT products and services in
the Government market will continue to increase.
The Information Technology Management Reform Act (the "ITMRA"), which took
effect on August 8, 1996, has had a profound effect on the way Government
procures computers and related products and services. The changes were made in
an effort to reduce costs and expedite the IT procurement process. The most
sweeping changes were the repeal of the Brooks Act that had granted sole
authority for IT purchases to the GSA and the change in the GSA Schedule from a
single year small purchase contracting program to a multi-year IDIQ contract
with no limit on the value of purchases. Because all federal Government agencies
may purchase IT products from vendors on the GSA Schedule, the transformation of
the GSA Schedule to an IDIQ contract will permit the Company to sell an
unlimited amount of products and services through the GSA Schedule to Government
entities.
Recently national attention has been focused upon the Year 2000 issue. The
Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. OMB has notified all Government agencies that
the funds required to correct the Year 2000 programming problem must come from
existing funding. In addition, the Director of OMB recently stated that no
additional IT funding would be authorized until each agency adequately addressed
any potential Year 2000 problem. Progress includes establishing good management
plans and establishing management structures to address and solve the Year 2000
issues. The Year 2000 problem can be solved either by software programming
corrections or replacement of main frame computers with client server networks.
The Company believes it will be able to increase its sales of client server
equipment and network services to help solve this problem in the Government.
COMMERCIAL MARKET
Heightened competition, deregulation, globalization and rapid technological
advances are forcing organizations to make fundamental changes in their business
processes. These pressures have compelled organizations to improve the quality
of products and services, shorten time to market, reduce costs and strengthen
client relationships. Organizations are addressing these issues by utilizing IT
solutions that facilitate the rapid and flexible collection, analysis and
dissemination of information. Accordingly, an organization's ability to
integrate and deploy new information technologies in a cost-effective manner has
become critical to competing successfully in today's rapidly changing business
environment.
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At the same time, rapid technological change is challenging the capabilities
of management information system departments within these organizations. The
pace of this change quickly renders existing IT infrastructure obsolete and
makes it more difficult for organizations to maintain the requisite internal
expertise needed to evaluate, develop and integrate new technologies. The use of
complex networks involving a variety of manufacturers' equipment, operating
systems and applications software has made it increasingly difficult to diagnose
problems and maintain the technical knowledge and repair parts necessary to
provide support services. As a result, organizations are increasingly turning to
third-party IT service providers to help them develop and support complex
systems.
Organizations seeking computer products increasingly require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available proficient service expertise to assist them in product selection,
system design, installation and post-installation support and service. The
Company believes that the ability to offer customers a single-source solution to
their IT needs, including the ability to work within customers' corporate
environments as integral members of their management information system staff,
are increasingly important in the commercial marketplace. Because the Company
offers total network solutions which includes experienced technical expertise
together with its own computer hardware, management believes it is well
positioned to meet the growing demand for business solutions and,
simultaneously, to expand its sales of desktops, portables and servers.
STRATEGY
The Company seeks to increase revenues and profits by further penetrating
the Government market and selected businesses with its own build-to-order
computer systems and network services. To pursue this strategy, the Company
will:
LEVERAGE GOVERNMENT CUSTOMER BASE. The Company believes that the Government
market is both quality and cost sensitive and that the ability to manufacture
its own brand products provides significant cost advantages over equipment
resellers. Through targeted marketing programs, the Company intends to leverage
its existing relationships with customers to increase sales of its hardware and
network services.
TARGET THE COMMERCIAL MARKET. Management believes that opportunities for
computer hardware sales in the commercial market are directly linked to the
Company's ability to provide consulting, implementation and support services
that meet the customer's IT needs. It is the Company's experience that computer
hardware represents approximately 80% of the cost of a customer's total
solution. The Company intends to leverage its service capabilities to expand the
sales of its own brand-name computer systems as part of a total network
solution. By manufacturing its own computer systems, the Company believes it has
a sustainable competitive advantage over other network service providers and
computer resellers.
FOCUS ON QUALITY. The Company believes that continued commitment to quality
will attract and retain customers, increase efficiency and reduce costs. This
commitment is evidenced by the fact that the Company's Gaithersburg facility is
ISO 9000 certified, and its Sterling and Guayama facilities are in the process
of becoming ISO 9000 certified and are expected to receive certification within
the next 12 months. The Company also intends to obtain ISO 9000 certification
for all of its technical service operations.
PURSUE STRATEGIC ACQUISITIONS. The Company seeks acquisitions that
complement its core skills and that have the potential to increase the overall
value of the Company. Examples of such companies would include those that
broaden the Company's product line, service capabilities or customer base.
PRODUCTS
The Company manufactures, markets, sells and supports a wide range of high
performance desktop and notebook computer systems and network servers under Dunn
and IDP's respective brand names. These systems primarily use Pentium, Pentium
Pro and Pentium II microprocessors manufactured by Intel Corporation ("Intel")
and are assembled according to customer specifications using various memory,
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storage, operating system, and application software configurations. The Company
also offers a variety of other system components with their computer systems and
network servers, including monitors, modems, graphics cards, disk arrays,
network cards and CD-ROM drives. All computer systems are assembled and
configured in the U.S. or Puerto Rico. In addition, the Company provides
services, including network consulting, project implementation, and technical
support. The Company's product line includes the following:
DESKTOPS. The Company produces a complete line of state-of-the-art desktop
computer systems which combine single or dual microprocessors with clock speeds
of up to 300MHz. Typical features include a 17 inch monitor, a 32 MB RAM, a 24x
CD-ROM, a 3.2 GB hard drive, a 3 1/2 inch floppy drive and Microsoft Windows '95
software. The systems can be expanded to 21-inch high resolution monitors, 128
MB of memory and up to 9 GB hard drives. The standard warranty for a desktop is
at least one year but can be increased to up to five years for an additional
fee. The desktops are priced between $1,200 and $6,500.
SERVERS. The Company manufactures a complete line of powerful network
servers. The servers can be configured with up to four microprocessors, two GB
of memory, redundant disk subsystems, redundant hot swappable power supplies and
Microsoft Windows NT software. The Company believes that their servers offer the
latest or "best of breed" component technology with a price-performance
advantage over major competition such as Hewlett Packard Company ("HP") and
Compaq. Due to a higher level of required support, the Company believes that the
server market provides opportunities for higher profit margins compared to other
segments in the computer hardware industry. The typical system retails for
approximately $20,000 and includes a three-year on-site manufacturer's warranty.
PORTABLES. With the IDP Acquisition, the Company will offer its customers a
complete line of portable computer systems and services. The notebooks typically
utilize a modular design that allows the user to carry only those devices
required for the specific task and generally include an Intel Pentium processor,
a removable 20x CD-ROM, a removable 2.1 GB hard drive, a removable floppy drive,
a 56 KB modem and Microsoft Windows '95 software. All units carry a warranty of
at least two years and are priced between $1,500 and $4,500.
NETWORK CONSULTING. The Company provides network consulting services
including requirements analysis, network audits, security audits, security
policy planning, network capacity planning, server capacity planning, and
technology and feasibility studies. These services are generally provided on a
fixed hourly fee basis.
PROJECT IMPLEMENTATION. The Company works closely with its clients to
design, install, implement, test and monitor systems that meet their specific
needs. As part of its strategy, the systems will incorporate the Company's own
hardware in many cases, as well as a variety of third-party network products,
including those manufactured by 3COM Corporation ("3COM"), Banyan Systems
Incorporated, Cisco Systems, Inc. ("Cisco") and Novell Inc., among others.
SUPPORT SERVICES. The Company provides a wide range of support options that
can be customized to each client's specific needs. Clients may purchase blocks
of the Company's technical personnel hours over a period of up to three years
from the purchase date, allowing clients to plan ahead and take advantage of
prepaid discounts. The Company also provides full service, term maintenance
contracts on third-party server and networking equipment which are based on a
fixed price and include all parts and labor. Alternatively, clients may opt for
a labor-only program providing standard technical resources on a one-time or
recurring regular basis.
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CONTRACTS
In fiscal 1997, Dunn and IDP derived approximately 70% and 99%,
respectively, of their net revenues from sales of hardware and services to the
federal Government pursuant to contracts with the GSA or other agencies. Most of
these contracts are IDIQ contracts with a specified estimated value. The
"Estimated Value" of a specified contract is derived from the Company's prices
set forth on its bid submission and the Government agency's own estimate of the
quantities that are likely to be purchased pursuant to the contract over the
term of the contract. Generally, the Government has no significant obligation to
purchase any particular amount of any contract and sometimes awards contracts to
several vendors who compete to supply all of the needs of the Government
agencies purchasing pursuant to each contract. Furthermore, each Government
purchaser is constrained by the amount of its funded budget allotted for IT
products each year. Thus, actual amounts sold under the contract may be
significantly more or less than the Estimated Value. There can be no assurance
that the Company will actually realize revenues in the amount set forth as the
Estimated Value of such contract. Furthermore, such Government contracts are
subject to termination by the Government at its convenience and may or may not
be renewed to the full extent contemplated by the Government. See "Risk
Factors-- Government Contracting Risks."
Since the repeal of the Brooks Act in August of 1996, the GSA Schedule
became an important vehicle for Dunn and IDP to increase their sales of products
and services to the federal Government. The GSA Schedule enables all Government
IT purchasers to fulfill their requirements from any vendor holding a GSA
Schedule. Dunn's and IDP's contracts were awarded in April of 1996 and both are
valid through March 1999. On a pro forma combined basis, for the two fiscal
years ended October 31, 1997, the Company generated GSA Schedule revenues of
approximately $21.3 million, as compared to less than $5.0 million for the two
years ended October 31, 1995. The Company believes that the GSA Schedule will be
the most important contract vehicle for selling products and services to the
federal Government and expects to generate significant revenue from its GSA
Schedules in the future.
In fiscal 1997, Dunn generated revenues of $2.4 million under its contract
with Lockheed to provide computer network servers for the Department of
Defense's Worldwide Defense Messaging System ("DMS"). Lockheed is the prime
contractor on the DMS contract, which is expected to be the largest private
messaging network in the world, supporting approximately 2 million users. The
contract is a year-to-year contract which has been renewed twice and can be
renewed for up to three additional years. Over the expected life of the contract
Dunn estimates the total value to be approximately $33 million based upon
initial requirements and terms described in the contract. As of October 31,
1997, Dunn had received an aggregate of $5.5 million from the Lockheed contract.
In fiscal 1997, Dunn generated revenues of $4.6 million under its contract
with the U.S. Courts. Pursuant to this contract, Dunn provides desktop computer
systems and components, operating system software and peripheral devices and
interfaces. The U.S. Courts contract has a term of three years, and expires in
September 1998. The initial Estimated Value on the contract was in excess of
$15.0 million and as of October 31, 1997, Dunn had earned an aggregate revenue
of $10.9 million from the U.S. Courts contract.
In fiscal 1997, Dunn generated revenues of $1.0 million under its contract
with an agency of the Government responsible for certain intelligence
activities. Pursuant to this contract, Dunn provides a wide array of computer
equipment. This contract, which has a term of two years and expires in May 1999,
has an initial Estimated Value of $24.0 million.
In connection with this contract, Dunn's Sterling facility and certain
employees obtained the necessary security clearances to perform the contract.
During IDP's fiscal 1997, IDP derived $20.6 million, $19.4 million and $15.4
million from the Department of Justice, the Department of the Army and the
Federal Bureau of Investigation contracts, respectively, which have since
expired. Since expiration, IDP has continued to receive orders from the
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Department of Justice and the Department of the Army pursuant to its other
contract vehicles such as the GSA Schedule and expects such orders to continue.
In May 1997, IDP was awarded a contract by the U.S. Air Force to provide
high performance desktop computers, portable computers and network servers (the
"Desktop V contract"). The contract has a term of five years and expires in May
2002; however, the period for ordering computer systems is the first three
years. The Desktop V contract is a government-wide acquisition contract that is
open to all departments and agencies of the federal Government except for the
Department of the Army and the Department of the Navy. As of January 31, 1998,
IDP has received orders totalling approximately $8.7 million, of which $7.6
million has been recognized as revenues. In connection with the Desktop V
contract, a protestor has asserted that IDP is bound by a settlement agreement
that calls for payments of 1.8% of its revenues derived from such contract. IDP
contests the assertion. However, there can be no assurance that, should this
matter be litigated, a court will not agree with the protestor's assertion and
will not require IDP to make such payments. The Desktop V contract was awarded
pursuant to the 8(a) program and therefore contains a "termination for
convenience" clause in the event the program-eligible owners relinquish
ownership of the firm, unless the procuring agency requests a waiver from the
SBA. The Air Force has been advised of the pending change in ownership of IDP
and has requested a waiver. The Company expects that the SBA will not oppose the
waiver. Over the life of the Desktop V contract, IDP estimates the total value
to be approximately $100.0 million. See "Risk Factors--Risks Related to the IDP
Acquisition and Future Acquisitions" and "Risk Factors--Bid Protests and
Settlements."
In January 1998, IDP was awarded a desktop management contract by the
Department of the Navy. This contract provides the Department of the Navy with
desktop, notebook and networking systems to modernize ship and shore-based IT
systems. The contract, which has a term of five years and expires in January
2003, has an Estimated Value of $21.0 million. The contract provides that the
Department of the Navy will acquire all IDP equipment under a leasing program
that includes technology upgrades and complete technical support. The initial
order under this contract provides for approximately $12.9 million in lease
payments to be received monthly over a five-year period.
SALES AND MARKETING
The Company sells its products and services primarily through an in-house
sales force, program managers and independent representatives. Historically,
sales efforts have been concentrated in the Washington D.C. metropolitan area
(D.C., Northern Virginia and Maryland), which accounts for approximately 60% of
all Government computers procured. Currently, however, IDP receives significant
revenue from its sales efforts outside the Washington, D.C. metropolitan area.
The Company's government sales are the result of prime contracts, sub-contracts
or agency-specific contracts and direct selling of products from the Company's
GSA Schedules or other Government-wide acquisition contracts. The Company also
utilizes its direct sales force to sell its products and services to selected
businesses.
The Company receives qualified network services leads through its marketing
efforts and referrals from suppliers such as Microsoft Corporation
("Microsoft"), Cisco and 3COM. These leads are referred to Dunn's dedicated
sales group, whose background includes both technical and sales experience. This
sales group is responsible for identifying clients' needs and promoting Dunn's
services to potential clients. Once potential clients are further qualified by
the sales group, Dunn assembles a team consisting of sales group members, the
appropriate business unit manager and a project delivery manager. This team
makes the client sales call and is ultimately responsible for closing the sale.
The Company runs major brand recognition marketing campaigns using direct
mail, public relations, radio, seminars, the Internet and selective print
advertising and trade shows. The campaigns promote "best value," single-source
solutions, commitment to customers and "best of breed" component technology. The
Company maintains several web sites wherein its GSA and other contract catalogs
and products can be
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referenced. The Company also has an interactive web site which permits its
customers to purchase goods and services electronically.
CUSTOMER SERVICE
The Company has dedicated substantial resources to building a customer
service and sales support group that currently employs 43 technical support
personnel in three shifts to provide timely response to customers' requests. The
Company strives to minimize callers' waiting time and to make extensive use of
the Company's web site to provide on-line technical support. IDP has recently
installed, and the Company intends to utilize, a knowledge-based problem solving
system that builds on the customer support group's cumulative experience and
allows an engineer to duplicate the customer's specific setup and provide
guidance over the telephone. If the customer's issue cannot be resolved either
on-line or over the telephone, the Company guarantees a 24-hour turnaround for
most services performed in-house and a 48-hour turnaround on all field repairs.
COMPETITION
The computer industry is highly competitive and has been characterized by
intense pricing pressure, declining gross margins, rapid technological advances
in hardware and software, frequent introduction of new products, and rapidly
declining component costs. Competition in the computer industry is based
primarily upon performance, price, reliability, service and support. As a result
of industry standardization, the Company uses many of the same components as its
competitors, typically from the same set of suppliers, which limits its ability
to technologically and functionally differentiate its products. The Company uses
its quality focus and customer services to differentiate itself from its
competitors.
GOVERNMENT MARKET
Since the passage of the ITMRA, the Government has increased the amount of
IT products acquired through the GSA Schedule. Although the Company believes it
has benefited from this reform, the emergence of the GSA Schedule as a
significant procurement vehicle has encouraged traditional mass market
commercial computer companies such as Dell, Gateway 2000, Inc. ("Gateway") and
Micron Electronics, Inc. to pursue the Government market.
However, the Government continues to rely on agency-specific contracts for
its more complex computer requirements. The Company believes that national brand
companies often are dissuaded from bidding for these agency-specific contracts
due to their complex terms and conditions and technical specifications. The
Company principally competes against large regional manufacturers and system
integrators such as Government Technology Solutions, Inc., Win Laboratories,
Inc. and Vanstar (formerly Sysorex Information Systems, Inc.) for these
agency-specific contracts. The Company believes that the Government's criteria
for vendor selection include price, quality, past performance, size and
financial responsibility.
COMMERCIAL MARKET
The Company competes in the Mid-Atlantic region with hundreds of IT service
companies. These companies typically service a small geographic area and resell
national brand computer hardware. By contrast, the Company manufactures its own
brand name computer systems, which it intends to install as part of a total
network solution.
The Company competes with a number of computer hardware manufacturers,
including Dell, Gateway, Compaq, HP, IBM and Toshiba Corporation, among others,
that traditionally have sold their products through distributors, dealers and
value-added resellers, retail stores and direct sales forces.
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Many of the Company's competitors offer broader product lines, have
substantially greater financial, technical, marketing and other resources than
the Company and may benefit from component volume purchasing and product and
process technology license arrangements that are more favorable in terms of
pricing and availability than the Company's arrangements. There can be no
assurance that the Company will be able to compete effectively against existing
competitors in the future, especially companies that have historically focused
their energies on the commercial market or have greater financial resources. See
"Risk Factors--Competition."
SUPPLIERS
The Company devotes significant resources to establishing and maintaining
relationships with its suppliers. The Company, where possible, purchases
directly from component manufacturers such as Intel, Microsoft, Hitachi-Nissei
Sanyo America, Ltd., Sony Electronics Corporation and Clevo Corporation
("Clevo"). The Company also purchases multiple products directly from large
national and regional distributors such as TechData Corporation, Ingram Micro
Incorporated and Decision Support Systems, Incorporated ("DSS").
Suppliers provide the Company with incentives in the form of discounts,
rebates, credits, cooperative advertising and market development funds. In
accordance with the terms of certain of the Company's Government contracts, the
Company provides periodic reporting of pertinent supplier contract terms and
conditions to contracting officials.
As a product reseller, the Company must continue to obtain products at
competitive prices from leading suppliers in order to provide competitively
priced products for its customers. During fiscal 1997, Dunn purchased
approximately 13% of its components from DSS and PRIMO purchased approximately
50% of its components from Clevo. In the event that the Company is unable to
continue to purchase components from these suppliers, the Company believes that
alternative suppliers are readily available. The Company believes its
relationships with its key suppliers to be good and believes that generally
there are multiple sources of supply available should the need arise.
EMPLOYEES
As of October 31, 1997, Dunn employed 85 persons on a full-time basis. Of
such persons, three were employed in executive capacities, 20 in sales and
marketing, 13 in administrative capacities, 23 in technical services and 26 in
operations. As of January 31, 1998, IDP employed 228 persons on a full-time
basis, including 58 in Puerto Rico. Of such persons, 49 are engaged in sales and
marketing, 44 in administrative capacities, 37 in technical services and 98 in
operations. Neither Dunn's nor IDP's employees are covered by a collective
bargaining agreement. Dunn and IDP consider their relationships with their
employees to be good.
FACILITIES
The Company leases approximately 19,000 square feet of office space in
Reston, Virginia which it uses primarily for sales, marketing and technical
services, and approximately 20,000 square foot facility in Sterling, Virginia
used primarily for manufacturing and administrative services. The Reston
facility's lease expires in 2003 and the Sterling facility lease expires in
1999. The Company has an option to renew the Sterling lease for a period of five
years. The Sterling facility is subject to a mortgage due 2019, for which the
Company is a guarantor. See "Certain Transactions." In addition, the Company is
presently seeking ISO 9000 certification for its Sterling facility. The Sterling
facility has obtained a top secret security clearance in connection with its
performance of one of its government contracts.
The Company also leases an approximately 55,000 square-foot facility in
Gaithersburg, Maryland, which it uses for sales, marketing, customer service,
manufacturing, and administrative functions, and an approximately 34,000
square-foot facility in Guayama, Puerto Rico, which is used for manufacturing,
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technical support, and personal computer board level repair. The Gaithersburg
facility lease expires in 2000 and the Guayama facility lease expires in 1999.
Concurrently with the Closing of this transaction, the Company intends to enter
into a new lease with the Puerto Rican government under substantially the same
terms as PRIMO's current lease. The Gaithersburg facility is ISO 9000 certified,
and the Company is in the process of obtaining ISO 9000 certification for its
Guayama facility.
PATENTS, TRADEMARKS AND LICENSES
The Company does not maintain a traditional research and development group,
but works closely with computer product suppliers and other technology
developers to stay abreast of the latest developments in computer technology.
While the Company does not believe that its continued success will depend upon
the rights to a patent portfolio, there can be no assurance that the Company
will continue to have access to existing or new technology for use in its
products.
The Company will conduct its business under the trademarks and service marks
of "Dunn," "Dunn Computer Corporation," "International Data Products," "IDP" and
"Vaquero." The Company believes its trademarks and service marks have
significant value and are an important factor in the marketing of its products.
Because most software used on the Company's computers is not owned by the
Company, the Company has entered into software licensing arrangements with
several software manufacturers, including Microsoft.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding other than
routine litigation that is incidental to its business.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, with respect to the
common stock of Dunn as of March 25, 1998, and with respect to the Common Stock
of the Company, as adjusted to give effect to the Offering, the Merger and the
IDP Acquisition, with respect to the beneficial ownership of each beneficial
owner of more than 5% of the outstanding shares thereof, by each director, each
nominee to become a director and each executive officer named in the Summary
Compensation Table and by all executive officers, directors and nominees to
become directors of the Company as a group both before and after giving effect
to the Offering.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY
PRIOR TO OWNED AFTER
OFFERING(4) OFFERING(7)
------------------ ------------------
NAME AND ADDRESS OF NUMBER OF NUMBER OF
BENEFICIAL OWNER(1) SHARES PERCENT SHARES PERCENT
- -------------------------------------------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Thomas P. Dunne (2)............................................................. 2,645,000(5) 51.9% 2,645,000 29.1%(8)
John D. Vazzana (2)............................................................. 1,145,000 22.5% 1,145,000 12.6%(8)
Claudia N. Dunne (2)............................................................ 2,645,000(6) 51.9% 2,645,000 29.1%
VADM E. A. Burkhalter USN (Ret.) (2)............................................ 10,000(1) * 10,000 *
Daniel Sinnott (2).............................................................. 10,000(1) * 10,000 *
George D. Fuster (3)............................................................ -0- -0- 375,000 4.1%(9)
D. Oscar Fuster (3)............................................................. -0- -0- 375,000 4.1%(9)
All Executive Officers and Directors
as a Group before Closing (5 persons)......................................... 3,790,000 74.3%
as a Group after Closing (7 persons).......................................... -- -- 4,540,000 49.9%
</TABLE>
- ------------------------
* Beneficial ownership is less than 1%
(1) Under the rules of the Commission, a person is deemed to be a beneficial
owner of a security if he or she has or shares the power to vote or direct
the voting of such security or the power to dispose or direct the
disposition of such security. Accordingly, more than one person may be
deemed to be a beneficial owner of the same securities. Unless otherwise
indicated by footnote, the persons named in the table have sole voting and
investment power with respect to the shares of Common Stock beneficially
owned. A person is also deemed to be a beneficial owner of any securities of
which that person has the right to acquire beneficial ownership within 60
days. Accordingly, the beneficial ownership amounts include shares of stock
that may be acquired pursuant to stock options exercisable within 60 days
from March 25, 1998 by VADM E. A. Burkhalter USN (Ret.) (10,000 shares) and
by Daniel Sinnott (10,000 shares) and all directors and executive officers
as a group (20,000 shares).
(2) The address of each such individual is: c/o Dunn Computer Corporation, 1306
Squire Court, Sterling, Virginia 20166.
(3) The address of each such individual is: c/o International Data Products,
Corp., 20 Firstfield Road, Gaithersburg, Maryland 20878.
(4) Calculated based upon 5,097,743 shares outstanding prior to the Closing and
does not give effect to: (a) an aggregate of 2,200,000 shares of Dunn common
stock reserved for issuance pursuant to Dunn's 1997 Stock Option Plan of
which options to purchase 1,832,000 shares have been granted; (b) an
aggregate of up to 800,000 shares of Common Stock reserved for issuance
pursuant to employment agreements with George D. Fuster and D. Oscar Fuster;
or (c) 200,000 shares of common stock issuable upon the exercise of certain
warrants.
(5) Includes 560,000 shares of stock held by Claudia N. Dunne, the Company's
Vice President, and Mr. Dunne's wife, of which Mr. Dunne disclaims
beneficial ownership.
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(6) Includes 2,085,000 shares of stock held by Thomas P. Dunne, the Company's
Chairman, Chief Executive Officer and President, and Ms. Dunne's husband, of
which Ms. Dunne disclaims beneficial ownership.
(7) Assumes 9,097,743 shares outstanding after the Closing giving effect to the
issuance of 750,000 shares of Common Stock of the Company in the IDP
Acquisition and 3,250,000 shares of Common Stock to be issued in the
Offering and not giving effect to: (a) the exercise of an over-allotment
option issued in connection with the Offering (b) an aggregate of 2,200,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan of which options to acquire 1,832,000 have been granted; (c) an
aggregate of up to 800,000 shares of Common Stock of the Company reserved
for issuance pursuant to employment agreements with George D. Fuster and D.
Oscar Fuster or (d) 200,000 shares of common stock issuable upon the
exercise of certain warrants.
(8) If the over-allotment option issued in connection with the Offering is
exercised in full, Thomas P. Dunne will sell 170,625 shares and will
beneficially own 2,474,375 shares representing 26.5% of the Common Stock
outstanding after the Closing, and John D. Vazzana will sell 73,125 shares
and will beneficially own 1,071,875 shares representing 11.5% of the Common
Stock outstanding after the Closing.
(9) Represents 375,000 shares of Common Stock of the Company to be issued
pursuant to the IDP Acquisition to each of D. Oscar Fuster and George D.
Fuster.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires Dunn's officers and directors, and persons who own more than 10% of a
registered class of Dunn's equity securities ("insiders"), to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Insiders are required by Commission regulation to furnish
Dunn with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms furnished to Dunn, the Section 16(a) filing
requirements were complied with for the fiscal year ended October 31, 1997,
except that John D. Vazzana, Thomas P. Dunne, Claudia N. Dunne, VADM. E. A.
Burkhalter, Jr. USN. and Daniel Sinnott inadvertently failed to timely file a
Form 3, Initial Statement of Beneficial Ownership of Securities. In addition,
John D. Vazzana and Thomas P. Dunne inadvertently failed to file a Form 4,
Statement of Changes in Beneficial Ownership, each with respect to one
transaction in Dunn's shares.
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ELECTION OF DIRECTORS
(ITEM 2 OF PROXY CARD)
Pursuant to Dunn's Certificate of Incorporation and Bylaws, Dunn's Board of
Directors consists of five directors, each elected for a term of one year. The
Board of Directors proposes that the nominees described below, all of whom are
current directors of Dunn, be re-elected for a new one year term and until their
successors are duly elected and qualified.
Each of the nominees has consented to serve as a director of Dunn. Should
any one or more of these nominees become unavailable to serve as a director, it
is intended that the shares of common stock represented by the proxies will be
voted for a nominee who would be designated by the Board of Directors, unless
the Board instead reduces the number of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR
BELOW.
THOMAS P. DUNNE has been Chairman, Chief Executive Officer and President of
Dunn since he founded the company in 1987. From 1982 to 1987, Mr. Dunne was the
Director of Sales of Syntrex Inc., a corporation that supplies computer hardware
and software to the legal profession. Prior thereto, Mr. Dunne spent 12 years
with the computer division of Perkin Elmer Corporation, where he held several
positions, including Director of North American Sales. Mr. Dunne also served in
the United States Army for two years where he was a Senior Instructor with the
Army Electronics Command. Mr. Dunne is married to Ms. Claudia N. Dunne, the Vice
President of the Company.
JOHN D. VAZZANA has been the Executive Vice President, Chief Financial
Officer and a director of Dunn since 1994. From 1992 to 1994, Mr. Vazzana was
the Chief Executive Officer of Hitchler Industry, a manufacturer of plastic
lumber made from recycled plastic. From 1986 to 1992, Mr. Vazzana was founder
and Chief Executive Officer of NRM Steelastic, a company engaged in the
manufacture of capital equipment for the tire industry. Prior thereto, Mr.
Vazzana was Executive Vice President for C3, Inc., a federal computer systems
integrating company, which he joined in 1974.
CLAUDIA N. DUNNE, a co-founder of Dunn, has been Vice President and a
director of Dunn since its inception. From 1985 to 1987, Ms. Dunne was Federal
Proposal Manager for Syntrex, Inc. From 1983 to 1985, Ms. Dunne was Proposal
Manager for Harris & Paulson, which also sold minicomputers and proprietary time
and accounting software for law firms. Ms. Dunne is married to Mr. Thomas P.
Dunne, the President of the Company.
VICE ADMIRAL E. A. BURKHALTER, JR., USN (RET.) has been a director of Dunn
since January 1997. Mr. Burkhalter is currently the President of Burkhalter
Associates, Inc., a consulting firm providing services in the areas of
international and domestic strategy, management policy and technology
applications, for both government and industry. Mr. Burkhalter spent 40 years as
a member of the United States Navy, during which time he held several positions,
including Director of Strategic Operations for the Chairman of the Joint Chiefs
of Staff. He is currently the Chairman of the Attorney General's Policy Advisory
Panel for Law Enforcement Technology, a member of the Director of Central
Intelligence (DCI) Military Advisory Panel and an advisor to the Defense
Intelligence Agency. He is also an officer and director of the Navy Submarine
League.
DANIEL SINNOTT has been a director of Dunn since January 1997. Mr. Sinnott
is currently a consultant with Worldwide Internet Solutions Network, Inc.
("WIZnet"). WIZnet provides electronic catalogs and adaptive recognition search
technology and facilitates electronic commerce linking buyers and sellers via
secure mail. From 1995 until March 1998, Mr. Sinnott was Chief Executive Officer
of WIZnet. In 1991 Mr. Sinnott was a founder of Sinnott Bruno & Company
("SB&C"). SB&C is a management consulting firm providing advisory services to
executive and management organizations that are in the emerging transition
stages of development. Mr. Sinnott worked full time with SB&C from 1991 until
joining WIZnet
57
<PAGE>
in 1995. In 1996, Dunn purchased shares of Common Stock of WIZnet for an
aggregate of $150,000. See "Certain Transactions."
In connection with Dunn's initial public offering in April 1997, Dunn
granted the underwriter, Network 1 Financial, for a three year period from the
effective date of the initial public offering, the right to designate one
director to serve as a member of Dunn's Board of Directors. As of the date of
this Proxy Statement/Prospectus, Network 1 Financial has not named a nominee for
election to board membership.
DUNN'S BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION
THE BOARD OF DIRECTORS
The Board of Directors of Dunn held four meetings during the 1997 fiscal
year. The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. Dunn does not have a standing committee on
nominations, but rather the full Board nominates candidates for Director. All
Directors attended at least seventy-five percent of the meetings of the Board of
Directors and the committees on which such Directors served.
COMMITTEES OF DUNN'S BOARD
The Compensation Committee presently consists of VADM E.A. Burkhalter, Jr.,
USN (Ret.), Daniel Sinnott and Thomas P. Dunne. The Compensation Committee held
one meeting during the 1997 fiscal year during which it reviewed employment
agreements with Dunn's executive officers.
The Audit Committee presently consists of VADM Burkhalter and Mr. Sinnott.
The Audit Committee held one meeting during the 1997 fiscal year during which it
met with Dunn's independent auditors to review preparations for the annual audit
of Dunn.
COMPENSATION OF DIRECTORS
Dunn has not paid, and the Company does not presently propose to pay,
compensation to any director for acting in such capacity, except for nominal
sums for attending Board of Directors meetings and reimbursement for reasonable
expenses in attending those meetings. In January 1997, Dunn granted each of its
two outside directors a stock option to purchase 20,000 shares of Dunn's common
stock at an exercise price of $4.15 per share. Dunn believes the exercise price
of $4.15 per share was the fair market value at the time of the grants.
THE COMPANY'S BOARD OF DIRECTORS
The five current directors of Dunn also serve as the initial directors of
the Company. Upon the Closing of the Merger and the IDP Acquisition the number
of directors of the Company will be raised from five to seven and the
appointment of George D. Fuster and D. Oscar Fuster, two of the IDP Sellers, as
directors of the Company will become effective.
The directors of the Company are divided into three classes with staggered
terms. The current term of John D. Vazzana and Claudia N. Dunne is until the
first annual meeting of shareholders after the Closing, the current term of VADM
E. A. Burkhalter, Jr., USN (Ret.) and Daniel Sinnott is until the second annual
meeting after the Closing, and the current term of Thomas P. Dunne is, and the
term of George D. Fuster and D. Oscar Fuster will be, until the third annual
meeting after the Closing. Directors elected after the Closing will be elected
to three-year terms.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers, directors and director nominees of Dunn and the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Thomas P. Dunne...................................... 55 Chairman, Chief Executive Officer, and President
John D. Vazzana...................................... 54 Executive Vice President, Chief Financial Officer,
Director
Claudia N. Dunne..................................... 38 Vice President, Director
George D. Fuster..................................... 38 President of IDP, Director Nominee *
D. Oscar Fuster...................................... 40 Executive Vice President of IDP, Director Nominee*
VADM E. A. Burkhalter, Jr., USN (Ret.)............... 69 Director
Daniel Sinnott....................................... 63 Director
</TABLE>
- ------------------------
* Will be elected as director of the Company by its sole shareholder prior to
the Closing.
Each director holds office until the annual meeting at which his term
expires or until a successor is elected and qualified unless the director dies,
resigns, or is removed from office. Executive officers hold office until their
successors are chosen and qualified, subject to earlier removal by the Board of
Directors. Biographical descriptions of the current directors and executive
officers are included under the caption "Election of Directors." Set forth below
is a description of the two IDP Sellers who will become executive officers and
directors of the Company on the date of the Closing of the Merger and the IDP
Acquisition.
GEORGE D. FUSTER founded IDP in 1984 and has been the President since 1987.
From 1983 to 1984, he was Eastern Regional Manager for Sales Support Engineering
at Fujitsu Microelectronics Corporation, where his responsibilities included
coordinating third party hardware and software relationships between the
regional offices and the corporate office. Prior thereto, George D. Fuster
served as a Systems Engineer for Advanced Technology Corporation, where he
helped develop financial models for the U.S. Navy Marine Gas Turbines Program.
The principal stockholders of Dunn have agreed to elect George D. Fuster as a
director of the Company immediately preceding the Offering. George D. Fuster is
a brother of D. Oscar Fuster, the Executive Vice President of IDP.
D. OSCAR FUSTER has been Executive Vice President of IDP since 1986, where
his primary responsibility is for the overall operations of the company. Prior
to joining IDP, he was Vice President of Marketing for SMS Data Products,
Financial Analyst for Electronic Data Systems, Incorporated and Accounting
Manager for Genasys Corporation. The principal stockholders of Dunn have agreed
to elect D. Oscar Fuster as a director of the Company immediately preceding the
Offering. D. Oscar Fuster is a brother of George D. Fuster, the President and
founder of IDP.
59
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by Dunn during each of the last three fiscal years to the Chief Executive
Officer and the executive officers of Dunn who earned in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
NAME AND PRINCIPAL POSITION* YEAR SALARY BONUS
- ------------------------------------------------------------------------------ --------- ------------ ------------
<S> <C> <C> <C>
Thomas P. Dunne............................................................... 1997 $ 240,000 0
Chairman, Chief Executive Officer 1996 $ 240,000 $ 275,000
and President 1995 $ 240,000 0
John D. Vazzana............................................................... 1997 $ 240,000 0
Executive Vice President, Chief 1996 $ 240,000 $ 275,000
Financial Officer, Director 1995 $ 240,000 0
</TABLE>
- ------------------------
* George D. Fuster and D. Oscar Fuster have served, respectively, as President
of IDP and Executive Vice President of IDP during each of the last three
fiscal years. Each of them received compensation from IDP in excess of
$100,000 during each of these three years.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Thomas P. Dunne and John D.
Vazzana, and will have employment agreements with George D. Fuster and D. Oscar
Fuster. The agreements for Mr. Vazzana and Mr. Dunne run for a term of three
years effective April 1997 and automatically renew for additional one year terms
unless terminated by either Dunn or the employee. Both agreements provide for a
$240,000 annual salary and a bonus at the discretion of Dunn's Board of
Directors. The bonus may not exceed the lesser of 5% of the Company's pre-tax
income for the preceding fiscal year or $250,000.
The employment agreements with George D. Fuster and D. Oscar Fuster, which
will be effective at Closing, have a term of three years, unless renewed,
provide for a $200,000 annual salary, an annual bonus, and a stock option (the
"Option") to purchase up to 300,000 shares, under certain conditions, of the
Common Stock, at a price per share to be determined based upon the Nasdaq price
as of the Closing, to be exercisable as to 50% of the shares subject to the
Option six months from the effective date of the employment contract, and as to
the remaining 50% of the shares within one year of such date. Each of the
Options to be granted to the Fusters will be adjusted to cover 400,000 shares of
the Company's Common Stock if the price per share for which the Common Stock is
sold in the Offering exceeds $10.
All employment contracts contain confidentiality provisions and covenants
not to compete with the Company during the term of the employment and for a
period of one year following the termination of the agreements.
STOCK OPTION PLAN
Under Dunn's 1997 Stock Option Plan, options to purchase a maximum of
2,200,000 shares of common stock of Dunn (subject to the approval by Dunn's
stockholders of the increase from 600,000 to 2,200,000 shares and further
subject to adjustments in the event of stock splits, stock dividends,
recapitalizations and other capital adjustments) may be granted to employees,
officers and directors of Dunn and other persons who provide services to Dunn.
As of the date of this Proxy Statement/Prospectus, options relating to 1,832,000
shares were previously granted under Dunn's 1997 Stock Option Plan at a weighted
average exercise price of $6.18 per share. As of April 1, 1998, options relating
to 66,250 shares are
60
<PAGE>
exercisable, and none of the options have been exercised. In the Merger, each
outstanding option under Dunn's 1997 Stock Option Plan will be converted into an
option to purchase, at the same exercise price, the same number of shares of
Common Stock of the Company under a stock option plan of the Company under which
options to purchase a total of 2,200,000 shares of common stock will be
authorized (subject to the approval of Dunn's stockholders and further subject
to adjustments in the event of stock splits, stock dividends, recapitalizations
and other capital adjustments). See "The Merger and the IDP Acquisition--
Treatment of Dunn Stock Options and Warrants."
The options to be granted under the Company's stock option plan may be
designated as incentive stock options or non-incentive stock options by the
Board of Directors, which also has discretion as to the persons to be granted
options, the number of shares subject to the options and the terms of the option
agreements. Only employees, including officers and part time employees of the
Company, may be granted incentive stock options.
RETIREMENT PLANS
Dunn established a discretionary contribution plan effective November 1,
1995 (the "401(k) Plan") for its employees who have completed one month of
service with Dunn. The 401(k) Plan is administered by Benefit Plan Services,
Inc. and permits pre-tax contributions by participants pursuant to Section
401(k) of the Code, up to the maximum allowable contributions as determined by
the Code. Dunn may match participants' contributions on a discretionary basis.
In fiscal 1995 and 1996 Dunn contributed $.25 for each $1.00 contributed by the
employees.
IDP established a discretionary contribution plan in 1993 (the "IDP 401(k)
Plan") for its employees who have completed one half year of service with IDP.
The IDP 401(k) Plan is administered by IDP and permits pre-tax contributions by
participants pursuant to Section 401(k) of the Code up to the maximum allowable
contributions as determined by the Code. IDP may match a participant's
contributions, on a discretionary basis. In fiscal 1997 and 1996, IDP
contributed an aggregate of $261,000 and $210,000, respectively, matching $1.00
for each $1.00 contributed by its employees.
Effective November 1, 1995, Dunn established a defined benefit plan covering
substantially all salaried employees who have completed twelve months of service
with Dunn (the "Pension Plan"). The Pension Plan benefits are based on the years
of service and the employee's compensation. Dunn contributes, on an annual
basis, amounts sufficient to meet the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions are
intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future. The assets of the Pension
Plan are invested in money markets and investment-grade corporate debt and
equity instruments. Dunn contributed an aggregate of approximately $135,000 for
the Pension Plan years ending October 31, 1995 and 1996, which amount met the
minimum funding requirements under ERISA. Dunn has accrued, but not yet paid,
$51,450, which amount represents its minimum funding requirements under ERISA
for fiscal 1997.
A participant's benefit under the Pension Plan is calculated as the lesser
of (i) the average of such participant's last three years' salary multiplied by
40 percent, or (ii) $60,000. The estimated annual benefits under the Pension
Plan payable upon retirement at normal retirement age for each of Dunn's
executive officers is $60,000.
61
<PAGE>
CERTAIN TRANSACTIONS
At Closing, (i) Merger Sub, a subsidiary of the Company, will merge into
Dunn which will be the surviving corporation and will thereby become a
wholly-owned subsidiary of the Company, and (ii) the Company will acquire all
the issued and outstanding capital stock of IDP Co. and a newly-formed
subsidiary of the Company will acquire substantially all of the net assets of
PRIMO. The aggregate consideration that will be paid for IDP Co. and PRIMO
consists of $14.9 million in cash and 750,000 shares of Common Stock of the
Company, each of which is subject to adjustment, which will be paid to George D.
Fuster, President of IDP Co. and director nominee of the Company, D. Oscar
Fuster, Executive Vice President of IDP Co. and director nominee of the Company
and to PRIMO, which is owned by the wives of George D. Fuster and D. Oscar
Fuster.
Prior to the IDP Acquisition and the Offering, substantially all of the net
assets of F Squared Engineering Corp. which, as of January 31, 1998, had an
aggregate value of approximately $198,000, will be transferred from IDP Co. to F
Squared Engineering, Corp. and will be distributed to the individual IDP Sellers
in partial redemption of their IDP Co. shares.
At Closing, certain IDP Co. notes in the aggregate amount of $1.6 million
payable to the IDP Sellers and certain related parties will be assumed by the
Company. The notes will have terms of one to three years and bear interest at
the annual rate of 8.0% to 11.0%.
In connection with the IDP Acquisition, George D. Fuster and D. Oscar Fuster
will enter employment agreements, pursuant to which each will be granted options
to acquire 300,000 shares, subject to adjustment to 400,000 shares under certain
conditions, of the Company's Common Stock at a price per share to be determined
based upon the Nasdaq price as of the Closing. See "Management--Employment
Agreements."
In March 1998, Dunn repurchased 50,000 shares of its common stock and an
option to acquire 25,000 shares of its common stock for $457,500 and $75,750,
respectively, pursuant to contractual arrangements with two of the persons from
whom Dunn purchased STMS in September 1997.
On January 6, 1997, Dunn entered into a share exchange agreement (the "Share
Exchange Agreement") with Dunn Computer Corporation (now named Dunn Computer
Operating Company), a Virginia corporation incorporated in 1987, and Thomas P.
Dunne, John D. Vazzana and Claudia N. Dunne, whereby such Virginia corporation
became a wholly-owned subsidiary of Dunn. Pursuant to the Share Exchange
Agreement, Dunn exchanged its stock on a 2,799.160251 for 1 basis with the
holders of stock of the Virginia corporation.
In November 1997, Dunn reaquired 2,257 shares of its common stock in
connection with a loan forgiveness of approximately $63,000.
In May 1996, Dunn entered into a line of credit agreement with a bank that
was personally guaranteed by the principal stockholders of Dunn. In June 1997,
the loan agreement was amended to cancel the personal guarantees of the
principal stockholders of Dunn.
The Company leases its Sterling facility from C&T Partnerships, an entity
owned and controlled by Thomas and Claudia Dunne, both affiliates of the
Company. The lease agreement terminates in October 1999, but provides for a five
year renewal at Dunn's option. Rent expense under this lease was $154,000 for
each of the years ended October 31, 1996 and 1997, respectively. In addition,
the mortgage on the facility of approximately $1,000,000, which has a 25 year
term and bears interest at 2% over prime, is guaranteed by the Company. The
Company has been advised that all payments with respect to the mortgage are
current. For additional terms of the lease and a description of the facility,
see "Business-- Facilities."
In 1996, Dunn made a stock investment of $150,000 in WIZnet, an
Internet-related company. Daniel Sinnott, a director of the Company, is the
President and Chief Executive Officer of WIZnet. Mr. Sinnott was not a director
of Dunn at the time of the investment. The Company believes that the transaction
was fair and reasonable.
62
<PAGE>
PROPOSAL TO AMEND THE 1997 STOCK OPTION PLAN OF DUNN
AND AUTHORIZE THE STOCK OPTION PLAN OF THE COMPANY
(ITEM 3 OF PROXY CARD)
1997 STOCK OPTION PLAN
On January 6, 1997 the Board of Directors and the stockholders of Dunn first
adopted the Dunn Computer Corporation 1997 Stock Option Plan (the "1997 Stock
Option Plan"). The 1997 Stock Option Plan provides for the granting of stock
options to officers and other employees of Dunn and its subsidiaries and to
non-employee directors, consultants, advisors and other persons who may perform
significant services for or on behalf of Dunn. The Board of Directors believes
that the 1997 Stock Option Plan assists Dunn in attracting and retaining
personnel of high quality and ability by providing such persons incentives and
rewards for superior performance.
In September 1997 the Board of Directors increased the aggregate number of
shares of Dunn common stock subject to issuance under the 1997 Stock Option Plan
from a maximum of 600,000 to 2,200,000 shares (subject to adjustments in the
event of stock splits, stock dividends, recapitalizations and other capital
adjustments). That increase is subject to the approval of Dunn's stockholders.
The Board of Directors believes that it is in the best interests of Dunn to
continue the 1997 Stock Option Plan and recommends that the stockholders approve
an amendment to the 1997 Stock Option Plan to increase the cumulative aggregate
number of shares of common stock subject to issuance thereunder from a maximum
of 600,000 to 2,200,000.
CONTINUING STOCK OPTION PLAN
Dunn proposes to cause the Company, which prior to the Merger is a
wholly-owned subsidiary of Dunn, to adopt a stock option plan (the "Continuing
Stock Option Plan"). In the Merger, each outstanding option to purchase shares
of common stock of Dunn under the 1997 Stock Option Plan will be converted into
an option to purchase, at the same exercise price, the same number of shares of
Common Stock of the Company under the Continuing Stock Option Plan. See "The
Merger and the IDP Acquisition--Treatment of Dunn Stock Options and Warrants."
No options will be granted under the Continuing Stock Option Plan if the Merger
does not occur.
The terms of the Continuing Stock Option Plan will be substantially the same
as the terms of the 1997 Stock Option Plan, and will provide for the granting of
stock options to officers and other employees of the Company and its
subsidiaries and to non-employee directors, consultants, advisors and other
persons who may perform significant services for or on behalf of the Company.
A cumulative aggregate of 2,200,000 shares of Common Stock will be subject
to issuance under the Continuing Stock Option Plan (subject to adjustments in
the event of stock splits, stock dividends, recapitalizations and other capital
adjustments).
VOTES REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the outstanding shares
of Dunn common stock present in person or by proxy at the annual meeting will be
required to approve the amendment of the 1997 Stock Option Plan and to approve
the adoption of the Continuing Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
1997 STOCK OPTION PLAN AND TO ADOPT THE CONTINUING STOCK OPTION PLAN.
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<PAGE>
STOCK OPTION PLAN SUMMARY
The following is a brief description of material features of the 1997 Stock
Option Plan of Dunn and the proposed Continuing Stock Option Plan of the
Company. As used herein, the term "Plan" shall refer to both the 1997 Stock
Option Plan and the Continuing Stock Option Plan. The following summary of the
Plan is qualified in its entirety by reference to the Plan which is attached as
Appendix C hereto and incorporated herein by reference.
ADMINISTRATION
The Plan provides that it is to be administered by the Board of Directors,
if each member is a "non-employee director" within the meaning of Rule 16b-3
promulgated by the Commission pursuant to the Exchange Act, or a committee of
two or more directors, each of whom is such a non-employee director (the "Plan
Committee"). To date, all actions with respect to the 1997 Stock Option Plan
have been taken by the full Board of Directors of Dunn.
OPTIONS AUTHORIZED
The Plan authorizes the grant of both incentive stock options ("Incentive
Stock Options") within the meaning of Section 422 of the Code, and stock options
that do not qualify for treatment as Incentive Stock Options ("Non-qualified
Options"). The exercise price of each Incentive Stock Option granted under the
Plan is to be not less than 100% of the fair market value of the stock subject
to the option on the date the option is granted (or 110% in the case of an
Incentive Stock Option granted to an employee owning more than 10% of the voting
stock of the company granting the option). The exercise price of each Non-
qualified Option granted under the Plan is to be not less than 85% of the fair
market value of the stock subject to the option on the date the option is
granted.
Each option granted under the Plan is to be evidenced by a written stock
option agreement between the company granting the option and the option holder.
Each stock option agreement is to set forth, among other terms not inconsistent
with the Plan, when the option subject thereto is to be exercisable and when it
will expire. An Incentive Stock Option granted under the Plan may not be
exercisable after the expiration of ten years after the date such option is
granted. Each option granted under the Plan must become exercisable in full no
later than ten years after such option is granted, and each option must become
exercisable as to at least 10% of the shares covered thereby on each anniversary
of the date such option is granted.
If the shares covered by the Plan are changed into, or exchanged for, cash
or a different number or kind of shares or securities of any corporation through
a reorganization, merger, recapitalization, reclassification, stock split-up,
reverse stock split, stock dividend, stock consolidation, stock combination,
stock reclassification or similar transaction, an appropriate adjustment shall
be made by the Committee in the number and kind of shares as to which options
may be granted.
In the discretion of the Board of Directors or the Plan Committee at the
time an option granted under the Plan is exercised, the exercise price may be
paid in full (1) in cash or by check, (2) by interest-bearing promissory note of
the option holder (subject to any limitations of applicable state corporations
law) delivered at the time of exercise, or (3) subject to certain limitations,
by delivery of shares of the company's stock or other property. The Board of
Directors or the Plan Committee may permit, subject to certain regulatory
limitations, so-called cashless exercises, which involve the payment of the
exercise price from the proceeds of the contemporaneous sale of the shares being
issued pursuant to the exercise of the option.
The Board of Directors or the Plan Committee may at any time suspend, amend
or terminate the Plan, except that without approval of the stockholders given
within twelve months before or after such action, no action of the Board of
Directors or the Plan Committee may materially increase the benefits
64
<PAGE>
accruing to participants under the Plan, materially increase the number of
securities that may be issued under the Plan, or materially modify the
requirements as to eligibility for participation in the Plan.
ELIGIBILITY
Officers and other employees of Dunn (currently approximately 85),
non-employee directors (currently 2), consultants and advisors and other persons
who may perform significant services on behalf of Dunn (currently approximately
3) are eligible to be granted options under the 1997 Stock Option Plan. Officers
and other employees of the Company (projected to be approximately 300 upon the
Merger), non-employee directors (projected to be 2 upon the Merger), consultants
and advisors and other persons who may perform significant services on behalf of
the Company (projected to be approximately 3 upon the Merger) are eligible to be
granted options under the Continuing Stock Option Plan. Incentive Stock Options
may be granted only to persons who are "employees" within the meaning of Section
3401(c) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences to individuals receiving grants of awards under the Plan. The
following summary is based upon federal income tax laws in effect on January 1,
1998 and is not intended to be complete or describe any state or local tax
consequences.
NON-QUALIFIED STOCK OPTIONS. In general, (i) no income will be recognized
by an optionee at the time a non-qualified stock option is granted; (ii) at
exercise, ordinary income will be recognized by the optionee in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares, if unrestricted, on the date of exercise; and (iii)
at sale, appreciation (or depreciation) after the date of exercise will be
treated as a capital gain (or loss).
INCENTIVE STOCK OPTIONS. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If shares of
common stock are issued to the optionee pursuant to the exercise of an Incentive
Stock Option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one year after the
transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If shares of common stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of such shares at the time of exercise (or, if less, the amount realized
on the disposition of such shares if a sale or exchange) over the option price
paid for such shares. Any further gain (or loss) realized by the optionee
generally will be treated as a capital gain (or loss).
TAX CONSEQUENCES TO THE COMPANY. To the extent that a participant
recognizes ordinary income in the circumstances described above, the
participant's employer should be entitled to a corresponding deduction,
provided, among other things, such income meets the test of reasonableness, is
an ordinary and necessary business expense, is not an "excess parachute payment"
within the meaning of Section 280G of the Code and is not disallowed by the $1
million limitation on certain executive compensation.
65
<PAGE>
PLAN BENEFITS
The following table sets forth the stock options granted under the 1997
Stock Option Plan, and to be granted under the Continuing Stock Option Plan as
of the effectiveness of the Merger, to each of the following persons or groups.
PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF DOLLAR
NAME AND POSITION STOCK OPTIONS VALUE
- ------------------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Thomas P. Dunne............................................................................ 0 0
(Chairman, Chief Executive Officer and President)
John D. Vazzana............................................................................ 0 0
(Executive Vice President, Chief Financial Officer, Director)
Claudia N. Dunne........................................................................... 0 0
(Vice President, Director)
George D. Fuster........................................................................... 0 0
(President of IDP, Director Nominee)
D. Oscar Fuster............................................................................ 0 0
(Executive Vice President of IDP, Director Nominee)
EXECUTIVE GROUP
VADM E.A. Burkhalter, Jr. USN (Ret.)....................................................... 20,000 (1)
(Director)
Daniel Sinnott............................................................................. 20,000 (1)
(Director)
Non-Executive Director Group............................................................... 40,000 (1)
Non-Executive Officer Employee Group and Consultants....................................... 1,792,000 (1)
</TABLE>
- ------------------------
(1) Stock options granted under the Plan at exercise prices equal to or
exceeding the fair market value of the common stock subject to the option on
the date of grant. The actual value, if any, a person may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. The weighted average exercise price of the
1,832,000 stock options granted to directors, non-executive officer
employees and consultants as set forth above is $6.18 per share. On April 1,
1998, the last reported closing price of the Common Stock on the Nasdaq
National Market was $9 13/16.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities offered
hereby and the Merger will passed upon for Dunn and the Company by Jones, Day,
Reavis & Pogue.
INDEPENDENT AUDITORS
Ernst & Young LLP served as the independent auditors of Dunn for the fiscal
year ended October 31, 1997 and has been selected by the Board of Directors to
serve as Dunn's independent auditors for the fiscal year ending October 31, 1998
and, upon completion of the Merger, as the independent auditors of the Company.
Representatives of the firm of Ernst & Young LLP are expected to be present at
the meeting with the opportunity to make a statement, if they desire to do so,
and to be available to respond to appropriate questions.
66
<PAGE>
EXPERTS
The consolidated financial statements of Dunn Computer Corporation, a
Delaware corporation, at October 31, 1996 and 1997, and for each of the three
years in the period ended October 31, 1997, appearing in this Proxy
Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of STMS at December 31, 1995 and 1996 and for each
of the two years in the period ended December 31, 1996, appearing in this Proxy
Statement/Prospectus have been audited by Davis, Sita & Company, P.A.,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The combined financial statements of International Data Products, Corp. and
combined company, at September 30, 1996 and 1997, and for each of the three
years in the period ended September 30, 1997, have been included herein and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein and upon
the authority of said firm as experts in accounting and auditing.
The balance sheet of Dunn Computer Corporation, a Virginia corporation, at
February 26, 1998, appearing in this Proxy Statement/Prospectus has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
OTHER MATTERS
Dunn will bear the cost of preparing and mailing the Proxy
Statement/Prospectus, form of proxy and other material that may be sent to
stockholders in connection with this solicitation. In addition to solicitations
by mail, officers and other employees of Dunn may solicit proxies personally or
by telephone or facsimile.
The Board of Directors does not intend to present and knows of no others who
intend to present at the meeting any matter of business other than those matters
set forth in the accompanying Notice of Annual Meeting of Stockholders. However,
if other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the proxy in accordance with
their best judgment.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder who intends to submit a proposal for inclusion in the proxy
materials for the 1999 annual meeting of Dunn (or the Company upon completion of
the Merger) must submit such proposal to the Secretary of Dunn (or the Company)
by December 9, 1998. Commission rules set forth standards as to what stockholder
proposals are required to be included in a proxy statement for an annual
meeting.
ADDITIONAL INFORMATION
A Registration Statement on Form S-4, including amendments thereto, relating
to the shares of the Company's Common Stock to be issuable in connection with
the Merger, of which this Proxy Statement/ Prospectus forms a part, has been
filed by the Company with the Commission. This Proxy Statement/ Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Proxy
Statement/Prospectus as to the contents of any
67
<PAGE>
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office located at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, the Northeast Regional Office located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and the Midwest Regional Office located at
Citicorp Center, 500 West Madison Street, 14th floor, Chicago, Illinois
60661-2511, and copies of all or any part thereof may be obtained from the
Public Reference Branch of the Commission upon the payment of certain fees
prescribed by the Commission. In addition, the Registration Statement may be
accessed electronically at the Commission's site on the World Wide Web located
at http://www.sec.gov.
The Company currently is not a reporting company. The Company intends to
furnish to its shareholders annual reports containing audited financial
statements and quarterly reports containing unaudited interim financial
information for each of the first three quarters of each fiscal year of the
Company.
Until the Merger, Dunn is subject to the informational requirements of the
Exchange Act, and in accordance therewith files annual, quarterly and special
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed may be inspected without
charge and copies may be had at the prescribed fees at the Commission's
addresses set forth above and at the Commission's website. Dunn common stock is
listed on the Nasdaq National Market under the symbol "DNCC", and material filed
by Dunn can also be inspected at the offices of the Nasdaq National Market, 1735
K Street, Washington, D.C. 20006.
A COPY OF DUNN'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1997, AS FILED BY DUNN WITH THE COMMISSION, IS AVAILABLE WITHOUT
CHARGE TO EACH STOCKHOLDER UPON WRITTEN REQUEST TO JOHN D. VAZZANA, EXECUTIVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, DUNN COMPUTER CORPORATION, 1306
SQUIRE COURT, STERLING, VIRGINIA 20166.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
DUNN COMPUTER CORPORATION (A DELAWARE CORPORATION)
Report of Ernst & Young LLP, Independent Auditors.................................... F-2
Consolidated Balance Sheets as of October 31, 1996 and 1997 and as of January 31,
1998 (unaudited)................................................................... F-3
Consolidated Statements of Income for the three years in the period ended October 31,
1997 and for the three months ended January 31, 1997 and 1998 (unaudited).......... F-4
Consolidated Statements of Stockholders' Equity for the three years in the period
ended October 31, 1997 and for the three months ended January 31, 1998
(unaudited)........................................................................ F-5
Consolidated Statements of Cash Flows for the three years in the period ended
October 31, 1997 and for the three months ended January 31, 1997 and 1998
(unaudited)........................................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7
STMS, INC.
Report of Davis, Sita & Company, P.A., Independent Auditors ......................... F-18
Balance Sheets as of December 31, 1995 and 1996...................................... F-19
Statements of Operations for the years ended December 31, 1995 and 1996.............. F-20
Statements of Stockholders' Deficit for the years ended December 31, 1995 and 1996... F-21
Statements of Cash Flows for the years ended December 31, 1995 and 1996.............. F-22
Notes to Financial Statements........................................................ F-23
Balance Sheet as of June 30, 1997 (unaudited)........................................ F-29
Statements of Operations for the six months ended June 30, 1996 and 1997
(unaudited)........................................................................ F-30
Statements of Cash Flows for the six months ended June 30, 1996 and 1997
(unaudited)........................................................................ F-31
Notes to Financial Statements (unaudited)............................................ F-32
DUNN COMPUTER CORPORATION (A VIRGINIA CORPORATION)
Report of Ernst & Young LLP, Independent Auditors.................................... F-33
Balance Sheet as of February 26, 1998................................................ F-34
Note to Financial Statement.......................................................... F-35
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY..............................
Report of KPMG Peat Marwick LLP, Independent Auditors................................ F-36
Combined Balance Sheets as of September 30, 1996 and 1997 and as of December 31, 1997
(unaudited)........................................................................ F-37
Combined Statements of Income and Retained Earnings for the three years in the period
ended
September 30, 1997 and for the three months ended December 31, 1996 and 1997
(unaudited)........................................................................ F-38
Combined Statements of Cash Flows for the three years in the period ended September
30, 1997 and for the three months ended December 31, 1996 and 1997 (unaudited)..... F-39
Notes to Combined Financial Statements............................................... F-40
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
We have audited the accompanying consolidated balance sheets of Dunn
Computer Corporation (a Delaware corporation) as of October 31, 1996 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for the three years in the period ended October 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 referred to above
present fairly, in all material respects, the consolidated financial position of
Dunn Computer Corporation as of October 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for the three years in the period
ended October 31, 1997 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Vienna, Virginia
January 7, 1998, except for Notes
2 and 11, with respect to the
earnings per share calculations, as
to which the date is March 5, 1998
F-2
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------------- -------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 897,664 $ 341,966 $ 162,359
Accounts receivable, net.......................................... 3,174,060 9,712,010 8,373,278
Inventory, net.................................................... 985,603 4,487,301 2,882,118
Prepaid expenses and other assets................................. -- 87,457 120,052
------------- ------------- -------------
Total current assets................................................ 5,057,327 14,628,734 11,537,807
Property and equipment, net......................................... 63,763 633,428 598,257
Goodwill and other intangible assets, net........................... -- 2,974,840 2,920,514
Investments......................................................... 150,000 275,000 275,000
Other assets........................................................ 3,540 191,075 186,958
------------- ------------- -------------
Total assets........................................................ $ 5,274,630 $ 18,703,077 $ 15,518,536
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 2,452,161 $ 9,296,497 $ 2,153,011
Accrued expenses.................................................. 285,244 490,970 483,151
Income taxes payable.............................................. 519,308 -- 417,662
Deferred tax credit............................................... 11,086 -- --
Line-of-credit.................................................... -- -- 2,826,789
Notes payable--current portion.................................... -- 12,840 12,840
Obligations under capital leases-current portion.................. -- 66,294 54,319
Unearned revenue.................................................. 67,640 422,907 474,345
------------- ------------- -------------
Total current liabilities........................................... 3,335,439 10,289,508 6,422,117
Notes payable-long-term portion..................................... -- 49,952 47,105
Obligations under capital leases-long-term portion.................. -- 25,462 22,453
Deferred tax credit................................................. -- 100,000 100,000
Stockholders' equity:
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no
shares issued and outstanding................................... -- -- --
Common Stock, $.001 par value; 20,000,000 shares authorized,
4,000,000 and 5,150,000 and 5,150,000 shares issued and
outstanding at October 31, 1996 and 1997 and January 31, 1998,
respectively.................................................... 4,000 5,150 5,150
Additional paid-in capital........................................ 111,857 5,087,371 5,087,371
Retained earnings................................................. 1,823,334 3,145,634 3,834,340
------------- ------------- -------------
Total stockholders' equity.......................................... 1,939,191 8,238,155 8,926,861
------------- ------------- -------------
Total liabilities and stockholders' equity.......................... $ 5,274,630 $ 18,703,077 $ 15,518,536
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------- ------------- ------------- -------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues.......................... $ 7,491,452 $ 18,098,638 $ 21,766,465 $ 5,505,350 $ 10,429,168
Costs of revenues..................... 6,046,480 14,102,442 17,549,655 4,199,577 7,989,879
------------ ------------- ------------- ------------- -------------
Gross profit.......................... 1,444,972 3,996,196 4,216,810 1,305,773 2,439,289
Selling and marketing................. 154,110 475,471 842,281 181,507 551,881
General and administrative............ 812,046 1,496,979 1,355,423 252,119 738,290
------------ ------------- ------------- ------------- -------------
Income from operations................ 478,816 2,023,746 2,019,106 872,147 1,149,118
Other income (expense):
Other income (expense).............. 34,512 49,343 -- 7,668 (5,132)
Interest income..................... -- -- 109,877 -- --
Interest expense.................... (26,246) (57,925) (11,813) -- (37,618)
------------ ------------- ------------- ------------- -------------
Net income before income taxes........ 487,082 2,015,164 2,117,170 879,815 1,106,368
Provision for income taxes............ 244,000 776,000 794,870 334,000 417,662
------------ ------------- ------------- ------------- -------------
Net income............................ $ 243,082 $ 1,239,164 $ 1,322,300 $ 545,815 $ 688,706
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Earnings per share.................... $ 0.06 $ 0.31 $ 0.29 $ 0.14 $ 0.13
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Earnings per share--
assuming dilution................... $ 0.06 $ 0.31 $ 0.28 $ 0.13 $ 0.12
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- PAID-IN FROM RETAINED
SHARES AMOUNT CAPITAL STOCKHOLDER EARNINGS TOTAL
---------- --------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994................. 4,000,000 $ 4,000 $ 111,857 $(132,538) $ 341,088 $ 324,407
Cash receipts from Stockholder.............. -- -- -- 32,538 -- 32,538
Net Income.................................. -- -- -- -- 243,082 243,082
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31,1995.................. 4,000,000 4,000 111,857 (100,000) 584,170 600,027
Cash receipts from stockholder.............. -- -- -- 100,000 -- 100,000
Net income.................................. -- -- -- -- 1,239,164 1,239,164
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31, 1996................. 4,000,000 4,000 111,857 -- 1,823,334 1,939,191
Issuance of common stock, net of offering
expenses of $1,083,336.................... 1,000,000 1,000 3,916,664 -- -- 3,917,664
Issuance of stock related to acquisition of
STMS...................................... 150,000 150 974,850 -- -- 975,000
Issuance of options related to STMS
acquisition recorded at fair value........ -- -- 84,000 -- -- 84,000
Net income.................................. -- -- -- -- 1,322,300 1,322,300
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31, 1997................. 5,150,000 5,150 5,087,371 -- 3,145,634 8,238,155
Net income (unaudited)...................... -- -- -- -- 688,706 688,706
---------- --------- ------------ ----------- ------------ ------------
Balance at January 31, 1998 (unaudited)..... 5,150,000 $ 5,150 $ 5,087,371 $ -- $ 3,834,340 $ 8,926,861
---------- --------- ------------ ----------- ------------ ------------
---------- --------- ------------ ----------- ------------ ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
--------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- ---------- ---------- ----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 243,082 $1,239,164 $1,322,300 $ 545,815 $ 688,706
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and
equipment.............................................. 25,441 32,300 46,029 6,450 47,832
Amortization of goodwill and other intangible assets..... -- -- 22,448 -- 54,326
Changes in operating assets and liabilities:
Accounts receivable.................................... (734,660) (951,553) (5,354,279) 1,782,772 1,338,732
Inventory.............................................. (515,426) 211,763 (2,865,750) (339,822) 1,605,183
Prepaid expenses and other assets...................... (8,000) 9,460 (85,966) (88,039) (28,478)
Accounts payable....................................... 652,864 471,636 3,920,267 (344,813) (7,143,486)
Accrued expenses....................................... 309,471 (193,084) 51,930 35,823 (7,819)
Income taxes payable................................... 223,582 260,947 (519,308) (136,150) 417,662
Deferred tax credit.................................... 9,399 (66,276) 88,914 (8,850) --
Unearned revenue....................................... -- 67,640 (110,734) (67,640) 51,438
--------- ---------- ---------- ----------- -----------
Net cash provided by (used in) operating activities........ 205,753 1,081,997 (3,484,149) 1,385,546 (2,975,904)
INVESTING ACTIVITIES
Purchases of property and equipment........................ (15,617) (21,040) (93,389) -- (12,661)
Acquisition of STMS, net of cash acquired.................. -- -- (928,550) -- --
Purchase of investments.................................... -- (150,000) -- -- --
--------- ---------- ---------- ----------- -----------
Net cash used in investing activities...................... (15,617) (171,040) (1,021,939) -- (12,661)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock................. -- -- 3,917,664 -- --
Proceeds of loans for purchase of certain asset............ -- -- 64,226 -- --
Payments on notes payable.................................. -- -- (10,551) -- (2,847)
Proceeds from bank line of credit.......................... -- 2,122,245 -- 200,000 2,826,789
Payments on bank line of credit............................ (194,809) (2,374,476) -- (200,000) --
Repayment from stockholder................................. 32,538 100,000 -- -- --
Payments on capital leases................................. -- -- (20,949) -- (14,984)
--------- ---------- ---------- ----------- -----------
Net cash (used in) provided by financing activities........ (162,271) (152,231) 3,950,390 -- 2,808,958
Net increase (decrease) in cash and cash equivalents....... 27,865 758,726 (555,698) 1,385,546 (179,607)
Cash and cash equivalents at beginning of the period....... 111,073 138,938 897,664 897,664 341,966
--------- ---------- ---------- ----------- -----------
Cash and cash equivalents at end of the period............. $ 138,938 $ 897,664 $ 341,966 $2,283,210 $ 162,359
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.............................................. $ 26,246 $ 57,925 $ 11,813 $ -- $ 38,473
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
Income taxes paid.......................................... $ -- $ 581,000 $1,323,308 $ 479,000 $ --
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Dunn Computer Corporation (the "Corporation") was incorporated on July 27,
1987 under the laws of the Commonwealth of Virginia.
On January 3, 1997, Dunn Computer Corporation (the "Company"), a Delaware
corporation, was formed as a holding company for the stock of Dunn Computer
Corporation, the Virginia corporation. On January 6, 1997, the Board of
Directors and stockholders of the Corporation approved and effected a
2,799.160251 for 1 stock exchange with the Company whereby the holders of the
Corporation's Common Stock would receive 2,799.160251 shares of Common Stock in
the Company for each share of Common Stock in the Corporation. All references in
the accompanying consolidated financial statements as to the number of shares of
Common Stock and per-share amounts have been restated to reflect the stock
exchange. Also, the Company authorized 2,000,000 shares of Preferred Stock with
rights and preferences to be determined by the Board of Directors at a later
date.
The Company is engaged in the business of providing build-to-order computer
systems and related equipment to businesses and government agencies.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions eliminate upon consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
INVESTMENTS
At October 31, 1996 and 1997, investments consisted of shares of common
stock of a privately-held internet company, Worldwide Internet Solutions
Network, Inc. ("WIZnet"), with a cost basis of approximately $150,000. The
Company believes that this carrying amount represents the lower of cost or
market. The Company is accounting for this investment using the cost method
since the Company's investment represents less than 20% of the privately-held
internet company's outstanding stock. The President and Chief Executive Officer
of WIZnet is a member of the Company's Board of Directors.
In connection with the acquisition of STMS, the Company also purchased a 47%
interest in Glacier Corporation. This investment was recorded at its fair value
of $125,000 on the purchase date. The Company is accounting for this investment
using the equity method. The Company believes that the carrying amount
represents the lower of cost or market at October 31, 1997. During the period
from the
F-7
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
acquisition date (September 12, 1997) to October 31, 1997, the Company's portion
of net income (loss) related to the Glacier investment was immaterial to the
financial statements.
INVENTORY
Inventory is stated at the lower of cost or market as determined by the
first-in first-out (FIFO) method. The Company periodically evaluates its
inventory obsolescence reserve to ensure inventory is recorded at net realizable
amounts.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets (contracts), which resulted from the
Company's acquisition of STMS, Inc. ("STMS") in September 1997, are being
amortized on a straight-line basis over twenty and five years, respectively. At
October 31, 1997, intangible assets were comprised of:
<TABLE>
<S> <C>
Goodwill........................................................ $2,397,287
Contracts....................................................... 600,000
Less accumulated amortization................................... (22,447)
---------
$2,974,840
---------
---------
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
Each year, management determines whether any property and equipment or any
other assets have been impaired based on the criteria established in Statement
of Financial Accounting Standards No. 121, ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of." The
Company made no adjustments to the carrying values of the assets during the
years ended October 31, 1995, 1996 and 1997.
STOCK COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation" which is effective for the Company's fiscal 1997
consolidated financial statements. SFAS 123 allows companies to account for
stock-based compensation under either the new provisions of SFAS 123 or the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees," but requires pro forma disclosure in the
footnotes to the consolidated financial statements as if the measurement
provisions of SFAS 123 had been adopted. The Company intends to continue
accounting for its stock-based compensation in accordance with the provisions of
APB 25.
REVENUE RECOGNITION
The Company generally recognizes revenues based on shipment of products.
Revenues are earned principally pursuant to various contracts with agencies of
the Federal government and commercial customers. The Company generally does not
require collateral on such contracts. The length of the Company's contracts
generally range from one to three years.
F-8
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The products sold are generally covered by a warranty for periods ranging
from two to three years. The Company accrues a warranty reserve for revenues
recognized during the year to record estimated costs to provide warranty
services.
Unearned revenue relates to cash received from credit card sales as of year
end for which the related inventory was shipped subsequent to year end.
During the year ended October 31, 1995, the Company had revenues from two
agencies of the Federal government which represented 73% and 12% of total
revenues. During the year ended October 31, 1996, the Company had revenues from
two agencies of the Federal government which represented 22% and 14% of total
revenues. In addition, during 1996, the Company had revenues from one Federal
government contractor and one commercial customer which represented 17% and 16%
of total revenues, respectively. As of October 31, 1996, accounts receivable
from agencies of the Federal government represented 92% of total accounts
receivable. During the year ended October 31, 1997, the Company had revenues
from one agency of the Federal government and one Federal government contractor
which represented 21% and 11% of total revenues, respectively. As of October 31,
1997, accounts receivable from agencies of the Federal government represented
64% of total accounts receivable.
INCOME TAXES
The Company provides for income taxes in accordance with the liability
method.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash, investments and accounts receivable.
The cash is held by high credit quality financial institutions. For accounts
receivable, the Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. The Company
maintains reserves for credit losses, and such losses have been within
management's expectations. The concentration of credit risk is mitigated by the
diverse customer base and the amount of receivables due by the Federal
government. The carrying amount of the receivables approximates their fair
value.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
RECENT PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive Income",
which is required to be adopted in the year ended October 31, 1998 consolidated
financial statements. SFAS 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in the financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional
F-9
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
paid-in capital in the Statement of Stockholders' Equity. The Company will be
required to restate earlier periods provided for comparative purposes, but
doesn't believe that the adoption of SFAS 130 will be material to the Company's
financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information", which is required to be adopted in
the year ended October 31, 1998 consolidated financial statements. SFAS 131
changes the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports to stockholders. The disclosure for
segment information on the consolidated financial statements is not expected to
be material.
INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet, statements of income,
stockholders' equity and cash flows as of January 31, 1998 and for the three
months ended January 31, 1997 and 1998 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the interim period
are not necessarily indicative of the results that may be expected for any
future period, including the year ended October 31, 1998.
3. PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated at
cost. Property and equipment are depreciated and amortized using the
straight-line method over the estimated useful lives of five years. Leasehold
improvements are amortized over the lesser of the related lease term or the
useful life.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Computer and office equipment......................................... $ 69,626 $ 505,920
Furniture and fixtures................................................ 20,663 57,076
Leasehold improvements................................................ 27,424 96,326
Other................................................................. 78,742 143,060
---------- ----------
196,455 802,382
Less accumulated depreciation and amortization........................ (132,692) (168,954)
---------- ----------
$ 63,763 $ 633,428
---------- ----------
---------- ----------
</TABLE>
4. ACQUISITION OF STMS, INC.
On September 12, 1997, the Company acquired all of the outstanding stock of
STMS, Inc., a Virginia corporation ("STMS"), for 150,000 shares of the Company's
Common Stock, an option to purchase 25,000 shares of the Company's Common Stock,
and $1,044,500 in cash used specifically to repay certain debt of STMS. The
transaction was accounted for using the purchase method. The 150,000 shares of
Common
F-10
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITION OF STMS, INC. (CONTINUED)
Stock were valued at the market price of the Company's common stock or $975,000
on the date of transaction. The options to purchase 25,000 shares of Common
Stock were issued to a stockholder/creditor of STMS and was valued at fair value
of $84,000 using the Black-Scholes option-pricing model. The purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
values. In conjunction with the acquisition, the Company recorded goodwill in
the amount of $2,397,287 and other intangible assets (contracts) in the amount
of $600,000. The operations of STMS are included in the consolidated financial
statements of the Company as of and for the year ended October 31, 1997.
The Company granted options to purchase an aggregate of 1,330,000 shares of
the Company's Common Stock, at an exercise price equivalent to its fair market
value at the date of grant, to the former stockholders of STMS in conjunction
with their three-year employment agreements (see Note 7). The options vest over
a three-year period.
The selected pro forma information for the years ended October 31, 1996 and
1997 includes the operating results of STMS as if the Company acquired STMS on
November 1, 1995.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1997
------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Pro Forma net revenues............................................................. $ 38,348,000 $ 37,186,000
------------- -------------
------------- -------------
Pro Forma net income (loss)........................................................ $ 1,548,000 $ (101,000)
------------- -------------
------------- -------------
Pro Forma earnings per share....................................................... $ 0.37 $ (0.02)
------------- -------------
------------- -------------
Pro Forma earnings per share--assuming dilution.................................... $ 0.37 $ (0.02)
------------- -------------
------------- -------------
Pro Forma weighted average shares outstanding...................................... 4,150,000 4,681,507
------------- -------------
------------- -------------
Pro Forma weighted average shares outstanding--assuming dilution................... 4,150,000 4,808,295
------------- -------------
------------- -------------
</TABLE>
5. BANK LINES OF CREDIT AND NOTES PAYABLE
In April 1996, the Company entered into a line of credit agreement with a
bank whereby the Company could borrow up to $2,000,000. Outstanding borrowings
bear interest at the prime rate. As of October 31, 1997, there were no
outstanding borrowings under this line of credit facility. The Company pays a
commitment fee equivalent to a certain percentage (approximately . 3/8%) of the
unused borrowings under the line of credit facility. The line of credit is
secured by all assets of the Company. Under the line of credit agreement, the
Company is required to maintain a net worth of $1,250,000 as well as submit
periodic financial statements. For the years ended October 31, 1996 and 1997,
the Company is in compliance with these covenants. The line of credit agreement
expires May 31, 1998.
During July 1997, the Company obtained a certain asset in the amount of
$64,227 through loan proceeds bearing interest annually at 7.9%. The Company is
required to make monthly payments of $1,303 until July, 2004.
6. RELATED PARTY TRANSACTION
Thomas Dunne, the Company's President, and his wife, Claudia Dunne, the
Company's Vice President, acquired a building for the purpose of leasing office
space to the Company. In connection with
F-11
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTION (CONTINUED)
the acquisition of the building, the Company guaranteed the building's $1
million mortgage. The term of the mortgage is 25 years. The Company subsequently
executed a noncancelable operating lease with Mr. and Mrs. Dunne. The Company
believes that the lease agreement is on terms no less favorable to the Company
than could be obtained from unaffiliated third parties (see Note 7).
7. COMMITMENTS
OPERATING LEASES
The Company leases office space under a noncancelable operating lease
agreement with two stockholders (see Note 6). The lease agreement terminates in
October 1999, but provides for a five year renewal at the Company's option.
Additionally, the Company leases various office equipment under non-cancelable
operating leases. Rent expense under these leases was $144,000, $154,000 and
$175,000 for the years ended October 31, 1995, 1996, and 1997, respectively.
Future minimum lease payments under noncancelable operating leases,
including the lease assumed in the STMS purchase, at October 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998............................................................ $ 468,995
1999............................................................ 454,982
2000............................................................ 286,170
2001............................................................ 285,709
2002............................................................ 293,843
Thereafter...................................................... 225,304
---------
Total $2,015,003
---------
---------
</TABLE>
CAPITAL LEASES
In connection with the acquisition of STMS, the Company assumed certain
capital lease obligations. The capital leases are related to the use of certain
computer equipment, and are included in fixed assets and depreciated
accordingly. The total obligation under capital lease agreements at October 31,
1997 was $91,756, at an imputed interest rate of 8%. Future minimum lease
payments are $66,294 and $25,462 for the years ending October 31, 1998 and 1999,
respectively.
EMPLOYMENT AGREEMENTS
During the year ended October 31, 1997, the Company executed employment
agreements with certain key executives under which the Company is required to
pay the following base salaries annually over the next three years:
<TABLE>
<S> <C>
1998............................................................................ $1,005,000
1999............................................................................ 1,005,000
2000............................................................................ 637,501
---------
Total........................................................................... $2,647,501
---------
---------
</TABLE>
F-12
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY
EQUITY TRANSACTIONS
On April 21, 1997, the Company sold 1,000,000 shares of Common Stock in an
initial public offering for net proceeds of $3,917,664. In connection with the
offering, warrants were issued to the underwriter for 100,000 shares of Common
Stock at an exercise price of $6.00 per share. Beginning April 21, 1998, the
warrants are exercisable for a period of four years.
STOCK OPTION PLAN
On January 6, 1997, the Company adopted the 1997 Stock Option Plan (the
"Option Plan") which permits the Company to grant up to 600,000 options to
officers, directors and employees who contribute materially to the success of
the Company. In September 1997, the Company increased the number of options
available for grant under the plan to 2,200,000. Stock options are generally
granted at prices which the Company's Board of Directors believes approximates
the fair market value of its Common Stock at the date of grant. The options vest
over a stated period of time not to exceed four years. The contractual term of
the options is ten years.
Common stock option activity was as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------------
<S> <C> <C>
Outstanding at October 31, 1996.................................... -- $
Options granted.................................................... 1,927,000 6.11
Options exercised.................................................. -- --
Options canceled or expired........................................ 70,000 4.15
---------- -----
Outstanding at October 31, 1997.................................... 1,857,000 $ 6.18
---------- -----
Exercisable at October 31, 1997.................................... -- $ --
---------- -----
---------- -----
</TABLE>
As of October 31, 1997, there were 343,000 options available for future
grants under the Option Plan.
The following table summarizes information about fixed-price stock options
outstanding at October 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER AVERAGE WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE
EXERCISE OCTOBER 31, CONTRACTUAL EXERCISE
PRICES 1997 LIFE PRICE
- -------------- ------------------ ------------------- ---------------
$4.01--$6.00 275,000 4.20 $ 4.44
$6.01--$8.00 1,582,000 4.96 6.48
---------- --- -----
$4.01--$8.00 1,857,000 4.67 $ 6.18
---------- --- -----
---------- --- -----
</TABLE>
F-13
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
Had compensation expense related to the stock option plan been determined
based on the fair value at the grant date for options granted during the years
ended October 31, 1996 and 1997 consistent with the provisions of SFAS 123, the
Company's net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
Net income--pro forma............................................. $ 1,239,164 $ 1,098,900
------------ ------------
Earnings per share--pro forma..................................... $ 0.31 $ 0.24
------------ ------------
------------ ------------
Earnings per share--assuming dilution--pro forma.................. $ 0.31 $ 0.23
------------ ------------
------------ ------------
</TABLE>
The effect of applying SFAS 123 on pro forma net income as stated above is
not necessarily representative of the effects on reported net income for future
years due to, among other things, the vesting period of the stock options and
the fair value of additional stock options in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing fair value model with the following
weighted-average assumptions used for grants in 1997: dividend yield of 0%,
expected volatility of 46%; risk-free interest rate of 5.75%; and expected life
of the option term of 5 years. The weighted average fair values of the options
granted in 1997 with a stock price equal to the exercise price is $6.18.
9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Components of the Company's net deferred tax asset (credit) balance are as
follows:
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------
<S> <C> <C>
1996 1997
---------- -----------
Deferred tax assets:
Accrued expenses................................................... $ 50,037 $ 24,800
Net operating loss carryforwards................................... -- 454,000
Asset reserves..................................................... 14,000 14,000
---------- -----------
Total deferred assets................................................ 64,037 492,800
Deferred tax credit:
Acquisition of intangible assets................................... -- (100,000)
Change from cash to accrual method for tax purposes................ (75,123) (38,800)
Valuation allowance.................................................. -- (454,000)
---------- -----------
Net deferred tax asset (credit).................................... $ (11,086) $ (100,000)
---------- -----------
---------- -----------
</TABLE>
As of October 31, 1997, the Company had approximately $1,100,000 in net
operating loss carryforwards primarily related to STMS, which expire at varying
dates through 2012. These carryforwards may be significantly limited under
Section 382 of the Internal Revenue Service Code and the SRLY rules. The Company
has fully reserved the net deferred tax assets because realizability of such
assets is uncertain.
F-14
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ----------- -----------
Current tax expense:
Federal..................................................................... $ 188,242 $ 709,195 $ 671,070
State....................................................................... 35,340 133,081 125,900
---------- ----------- -----------
223,582 842,276 796,970
Deferred tax expense:
Federal..................................................................... 17,355 (55,800) (1,800)
State....................................................................... 3,063 (10,476) (300)
---------- ----------- -----------
20,418 (66,276) (2,100)
---------- ----------- -----------
Total provision for income taxes............................................ $ 244,000 $ 776,000 $ 794,870
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The reconciliation of income tax from the statutory rate of 34% is:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- -----------
Tax at statutory rates...................................................... $ 165,608 $ 685,156 $ 719,838
Non-deductible expenses..................................................... 58,675 9,610 8,291
State income tax net of federal benefit..................................... 19,717 81,234 66,741
---------- ---------- -----------
$ 244,000 $ 776,000 $ 794,870
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
10. RETIREMENT PLANS
401(K) PLAN
Effective April 1, 1995, the Company adopted a 401(k) Plan (the "Plan").
Employees are eligible to participate after completing six months of service and
attaining age 18. Employees can defer up to 15 percent of compensation. Employee
contributions are subject to Internal Revenue Service limitations. All employees
who contribute to the Plan are eligible to share in discretionary Company
matching contribution. During the years ended October 31, 1995, 1996 and 1997,
the Company contributed $4,469, $3,300 and $11,855, respectively, to the Plan.
DEFINED BENEFIT PLAN
During the fiscal year ended October 31, 1995, the Company implemented a
defined benefit plan (the "Pension Plan") covering substantially all salaried
employees. The Pension Plan benefits are based on years of service and the
employee's compensation. The Company's funding policy is to annually contribute
amounts sufficient to meet minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions are
intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future. The assets of the Pension
Plan are invested in money markets and corporate debt and equity instruments.
The Company contributed, in the aggregate, approximately $135,000, for the
Pension Plan years ending October 31, 1995 and 1996, which amount met the
minimum funding requirements under ERISA. Dunn has accrued, but not yet paid,
$51,450, which amount represents its minimum funding requirements under ERISA
for fiscal 1997.
F-15
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RETIREMENT PLANS (CONTINUED)
On January 6, 1997, the Company amended the Pension Plan to change the
benefits to be paid out after retirement from 100% to 40% of its initial
liability. This will result in a reduction of the projected benefit obligation
by $150,000.
The following table sets forth the Pension Plan's funded status as reported
on activity, and amounts recognized in the Company's consolidated financial
statements:
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------
<S> <C> <C>
1996 1997
----------- -----------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of ($238,619) and ($171,593)
at October 31, 1996 and 1997, respectively.......................................... $ (320,973) $ (321,599)
----------- -----------
----------- -----------
Projected benefit obligation............................................................ (320,973) (321,559)
Pension Plan assets at fair value....................................................... 168,336 147,041
----------- -----------
Funded status--projected benefit obligation in excess of fair value of Pension Plan
assets................................................................................ $ (152,637) $ (174,518)
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Net periodic pension cost:
Service cost..................................................................... $ 54,945 $ 59,066 $ 44,140
Interest cost.................................................................... 12,810 17,892 19,355
Actual return on assets.......................................................... -- (33,982) 21,295
Net amortization and deferral.................................................... 6,832 38,127 (33,340)
--------- --------- ---------
Total net periodic pension cost.................................................. $ 74,587 $ 81,103 $ 51,450
--------- --------- ---------
--------- --------- ---------
</TABLE>
Key assumptions used in the actuarial valuation were:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Weighted average discount note.................................................................... 7.5% 7.5%
Rate of return on assets:
Pre-retirement.................................................................................. 8.0% 8.0%
Post-retirement................................................................................. 8.0% 8.0%
</TABLE>
F-16
<PAGE>
DUNN COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income............................... $ 243,082 $ 1,239,164 $ 1,322,300 $ 545,815 $ 688,706
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Denominator:
Denominator for basic earnings per
share--weighted-average shares......... 4,000,000 4,000,000 4,552,055 4,000,000 5,150,000
Effect of dilutive securities:
Employee stock options............... -- -- 124,906 50,150 539,535
Warrants............................. -- -- 1,887 -- 25,373
------------ ------------ ------------ ------------ ------------
Dilutive potential common shares......... -- -- 126,793 50,150 564,908
Denominator for diluted earnings per
share--adjusted weighted-average
shares and assumed conversions..... 4,000,000 4,000,000 4,678,848 4,050,150 5,714,908
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Basic earnings per share................... $0.06 $0.31 $0.29 $0.14 $0.13
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted earnings per share................. $0.06 $0.31 $0.28 $0.13 $0.12
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
12. SUBSEQUENT EVENT
On December 10, 1997, the Company increased the amount available under the
current line-of-credit arrangement with a bank from $2,000,000 to $4,000,000.
F-17
<PAGE>
REPORT OF DAVIS, SITA & COMPANY, P.A., INDEPENDENT AUDITORS
The Board of Directors
STMS, Inc.
We have audited the accompanying balance sheets of STMS, Inc. as of December
31, 1995 and 1996, and the related statements of operations, stockholders'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of STMS, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Davis, Sita & Company, P.A.
Greenbelt, Maryland
August 25, 1997,
except for Note 9, as to which
the date is September 12, 1997
F-18
<PAGE>
STMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 178,167 $ 188,495
Trade accounts receivable, net of $21,744 and $22,363 at December 31, 1995 and 1996,
respectively...................................................................... 2,192,497 6,349,779
Inventory........................................................................... 698,091 263,108
Loans to stockholders............................................................... 89,274 158,402
Prepaid expenses and other current assets........................................... 7,232 76,115
Deposits............................................................................ 22,363 17,444
------------ ------------
Total current assets.................................................................. 3,187,624 7,053,343
Property and equipment:
Equipment........................................................................... 201,751 423,464
Furniture and fixtures.............................................................. 83,019 94,869
Equipment under capital leases...................................................... 46,695 61,928
Leasehold improvements.............................................................. 60,007 82,665
------------ ------------
Less accumulated depreciation and amortization........................................ (108,922) (190,731)
------------ ------------
282,550 472,195
Capitalized software development costs, net of accumulated amortization of $4,588 and
$22,941, at December 31, 1995 and 1996, respectively................................ 148,369 101,438
------------ ------------
Total assets.......................................................................... $ 3,618,543 $ 7,626,976
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses............................................... $ 2,281,644 $ 6,190,597
Current portion of notes payable.................................................... 971,030 54,895
Current portion of capital lease obligations........................................ 16,761 22,020
Deferred revenue.................................................................... 323,222 382,176
------------ ------------
Total current liabilities............................................................. 3,592,657 6,649,688
Notes payable, less current portion................................................. 58,465 4,569
Capital lease obligations, less current portion..................................... 5,395 19,012
Deferred revenue.................................................................... 246,521 --
Commitments
Redeemable convertible Preferred Stock, 18% cumulative, $1,000 par value; 1,235 shares
authorized, issued and outstanding at December 31, 1996............................. -- 1,235,000
Stockholders' deficit:
Class A Common Stock, no par value; 10,000,000 shares authorized, 8,065,600 shares
issued and outstanding............................................................ 1,000 1,000
Class B Common Stock, $1 par value; 100 shares authorized, issued and outstanding at
December 31, 1996................................................................. -- 100
Additional paid-in capital.......................................................... -- 9,900
Accumulated deficit................................................................. (285,495) (292,293)
------------ ------------
Total stockholders' deficit........................................................... (284,495) (281,293)
------------ ------------
Total liabilities and stockholders' deficit........................................... $ 3,618,543 $ 7,626,976
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-19
<PAGE>
STMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Net revenues...................................................................... $ 10,371,065 $ 20,249,828
Costs of revenues................................................................. 8,354,253 16,716,376
------------- -------------
Gross profit...................................................................... 2,016,812 3,533,452
------------- -------------
General and administrative........................................................ 1,361,340 1,280,997
Selling and marketing............................................................. 716,046 2,026,287
------------- -------------
Income (loss) from operations..................................................... (60,574) 226,168
Interest expense.................................................................. 235,665 232,966
------------- -------------
Net loss.......................................................................... $ (296,239) $ (6,798)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-20
<PAGE>
STMS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------- ---------------
COMMON STOCK COMMON STOCK ADDITIONAL
----------------- --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ------ ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........................... 8,065,600 $1,000 -- $-- $-- $ 10,744 $ 11,744
Net loss............................................. -- -- -- -- -- (296,239) (296,239)
--------- ------ ------ ------ ---------- ----------- ---------
Balance at December 31, 1995........................... 8,065,600 1,000 -- -- -- (285,495) (284,495)
Issuance of common stock............................. -- -- 100 100 9,900 -- 10,000
Net loss............................................. -- -- -- -- -- (6,798) (6,798)
--------- ------ ------ ------ ---------- ----------- ---------
Balance at December 31, 1996........................... 8,065,600 $1,000 100 $100 $9,900 $(292,293) $(281,293)
--------- ------ ------ ------ ---------- ----------- ---------
--------- ------ ------ ------ ---------- ----------- ---------
</TABLE>
See accompanying notes.
F-21
<PAGE>
STMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
<S> <C> <C>
1995 1996
------------ -----------
OPERATING ACTIVITIES
Net loss.............................................................................. $ (296,239) $ (6,798)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization....................................................... 33,570 100,162
Write-off of capitalized software development costs................................. -- 99,412
Changes in operating assets and liabilities:
Trade accounts receivable........................................................... 298,087 (4,157,282)
Inventory........................................................................... (549,672) 434,983
Deposits............................................................................ (250) 4,919
Prepaid expenses and other current assets........................................... 9,633 (68,883)
Accounts payable and accrued expenses............................................... 462,288 3,908,953
Deferred revenue.................................................................... 486,478 (187,567)
------------ -----------
Net cash provided by operating activities............................................. 443,895 127,899
INVESTING ACTIVITIES
Advances to stockholders.............................................................. -- (69,128)
Purchase of property and equipment.................................................... (77,891) (271,454)
Capitalized software development costs................................................ (152,957) (70,834)
------------ -----------
Net cash used in investing activities................................................. (230,848) (411,416)
FINANCING ACTIVITIES
Proceeds from issuance of Common Stock................................................ -- 10,000
Proceeds from borrowing on notes payable, net of payments............................. (70,650) 283,845
------------ -----------
Net cash (used in) provided by financing activities................................... (70,650) 293,845
------------ -----------
Net increase in cash.................................................................. 142,397 10,328
Cash at beginning of year............................................................. 35,770 178,167
------------ -----------
Cash at end of year................................................................... $ 178,167 $ 188,495
------------ -----------
------------ -----------
Supplemental disclosures:
Interest paid......................................................................... $ 235,665 $ 209,495
------------ -----------
------------ -----------
Significant non-cash transactions:
Notes payable exchanged for convertible Preferred Stock............................... $ 1,235,000 $ --
------------ -----------
------------ -----------
</TABLE>
See accompanying notes.
F-22
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
STMS, Inc. (the "Corporation") was incorporated under the laws of the
Commonwealth of Virginia on November 1, 1990. The Corporation is in the business
of selling and installing networked micro computer systems. The Corporation
offers hardware, software, training, on-going support and related consulting to
its customers and provides comprehensive hardware, software and network
maintenance services. The Corporation is headquartered in Sterling, Virginia,
but offers its products and services on a national basis.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
INVENTORY
Inventory consists of computers, computer software, accessories and other
related items. The inventory is stated at the lower of cost or market as
determined by the first-in, first-out method. Administrative, storage and
material handling costs have been added to inventory in the amount of $22,934
and $8,651 as of December 31, 1995 and 1996, respectively.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Corporation accumulates the costs associated with the development of new
software which it plans to offer for sale. Costs to establish the technological
feasibility of the developing product are considered to be research and
development costs and accordingly, are charged to current year operations when
incurred. Once technological feasibility has been established, cost incurred to
produce a master, including coding and testing, are capitalized. When the
product is ready for general release to the public, the capitalization of costs
ends. The Corporation's policy is to amortize capitalized software costs by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product (three year period) including the period being reported on. During 1996,
the Corporation amortized the costs of software development over a three year
period on the straight-line basis. Software development costs are reflected on
the financial statements at the lower of the unamortized costs or the net
realizable value. During 1996, the Corporation also discontinued one product and
accordingly, wrote off the accumulated costs of $99,412.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Property and equipment are
depreciated using the straight-line method over the estimated lives of five to
seven years and leasehold improvements are amortized over the lesser of the
related lease term or the useful life of 20 years.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that long-lived assets or
other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down is required. If a write-down is required, the
Corporation would prepare a discounted cash flow analysis to determine the
amount of the write-down.
F-23
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Corporation to
significant concentrations of credit risk primarily consist of cash equivalents
and trade accounts receivable. The Corporation periodically performs credit
evaluations of its customers' financial condition and generally requires no
collateral. At December 31, 1996, the Corporation maintained cash balances at
$88,495 in excess of the Federal insurance limits. From time to time during the
year cash balances exceeded the Federal insurance limit of $100,000.
DEFERRED REVENUE
The Corporation offers computer hardware, software and network maintenance
services to customers. The services are paid in advance and are packaged in
various arrangements including hours, period of coverage and availability. The
maintenance contracts can extend up to three years. The Corporation records the
maintenance contract revenue when service is provided. At year end, the unearned
portion of each contract is allocated between current and long-term based on the
time remaining on the contract and assuming a straight-line amortization. At the
end of the contract, any unused portion is considered to be revenue in the year
the contract ends.
REVENUE RECOGNITION
The Corporation generally recognizes revenues based on shipment of products.
Revenues are earned pursuant to various contracts with agencies of the Federal
government and commercial customers. The Corporation generally does not require
collateral on such contracts. The length of the Corporation's contracts are
generally range for one year.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation" which is effective for any
complete set of financial statements for any period presented subsequent to
December 15, 1995. SFAS No. 123 allows companies to account for stock-based
compensation under either the new provisions of SFAS No. 123 or the provisions
of APB No. 25, but disclosure in the footnotes to the financial statements as if
the measurement provisions of SFAS No. 123 had been adopted. The Corporation
intends to continue accounting for stock based compensation in accordance with
the provision of APB No. 25. As such, the implementation of SFAS No. 123 will
not materially impact the financial position or results of operations of the
Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. INCOME TAXES
The Corporation provides for income taxes in accordance with the liability
method.
F-24
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INCOME TAXES (CONTINUED)
The Corporation incurred net operating losses of $296,239 in the year ended
December 31, 1995 and $6,798 in the year ended December 31, 1996. A net
operating loss results in an income tax benefit due to reductions in either
prior or future income taxes.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1995 1996
---------- ---------
Deferred tax assets:
Net operating loss carryforwards............................................................. $ 109,625 $ 1,211
---------- ---------
Total deferred assets........................................................................ 109,625 1,211
Deferred tax credit:
Valuation allowance.......................................................................... (109,625) (1,211)
---------- ---------
Net deferred tax asset....................................................................... $ -- $ --
---------- ---------
---------- ---------
</TABLE>
Prior to December 31, 1994, the Corporation elected to be treated as an S
Corporation for income tax purposes. S Corporations are generally not taxable at
the corporate level, but instead, income is taxable to the stockholders.
Accordingly, as of December 31, 1994, there was no provision for an income tax
liability. Effective January 1995, the Corporation voluntarily terminated its S
Corporation status, and as such, became subject to corporate income taxes as of
that date.
3. TRANSACTIONS WITH RELATED PARTIES
As of December 31, 1996, the Corporation had loaned $133,507 to certain
officer/stockholders. The loans are unsecured. Payments on these loans are due
on demand. Effective January 1, 1996, interest is being charged at 6% per annum.
The Corporation purchases inventory from Primary Telecommunications, Inc., a
company which is owned by a principal stockholder of STMS, Inc. Purchases during
1996 amounted to $341,427. At December 31, 1996, the Corporation owed $160,426
to Primary Telecommunications, Inc.
4. NOTES PAYABLE
At December 31, 1995, notes payable consisted of the following loans from
Barry D. and Jacqueline L. Bergman:
<TABLE>
<S> <C>
Term loans...................................................... $ 144,495
Credit line loan................................................ 885,000
---------
$1,029,495
---------
---------
</TABLE>
F-25
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE (CONTINUED)
As of December 31, 1996, notes payable consisted of a term loan from Barry
D. Bergman and Jacqueline L. Bergman dated July 11, 1994, in the amount of
$125,000, secured by the personal guarantees of the stockholders, payable in
monthly installments of $4,645 which includes interest at 12% per annum.
Annual principal curtails are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 54,895
1998............................................................... 4,569
---------
$ 59,464
---------
---------
</TABLE>
5. CAPITAL LEASE OBLIGATIONS
Capital lease obligations at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 28,917
1998............................................................... 23,845
---------
52,762
Amounts representing interest...................................... (11,730)
---------
$ 41,032
---------
---------
</TABLE>
Amortization of assets recorded under capital lease obligations is included
in depreciation and amortization expense.
6. OPERATING LEASES
The Corporation is currently obligated under a lease for its office space
which expires in April 1999. However, under the provisions of a termination
option in the lease, the Corporation has terminated its lease effective during
June 1997. The Corporation has entered into a new lease for 19,195 square feet
of office and warehouse space in Reston, Virginia to be effective upon the
vacating of its current space.
The Corporation is obligated under non-cancelable, long-term leases for
office space with the following minimum annual lease payments as of December 31,
1996:
<TABLE>
<S> <C>
1997............................................................ $ 151,160
1998............................................................ 266,906
1999............................................................ 274,913
2000............................................................ 283,160
2001............................................................ 291,655
---------
$1,267,794
---------
---------
</TABLE>
Rent expense under operating leases were $90,719 and $90,055 for the years
ended December 31, 1995 and 1996, respectively.
F-26
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. CAPITAL STOCK
REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 1996 the Corporation authorized and issued 1,235 shares of
$1,000 par value Preferred Stock. The stock provides for cumulative dividends at
18%, payable monthly. The stock is held by a single stockholder who has the
option to convert the Preferred Stock into a senior debt instrument (promissory
note payable) on demand. At the stockholder's option, the stock will convert
into a one year note with interest only payable at 18% per annum until maturity.
COMMON STOCK
On October 1, 1995, the Corporation amended its articles of incorporation to
provide for the authorization of new issues of Common Stock as follows:
CLASS A
10,000,000 shares of no par Common Stock were authorized. Each share of the
previously authorized and issued common stock was exchanged for 6,930 shares of
the new Class A Common Stock. All Common Stock issued prior to October 1, 1995,
was retired.
CLASS B
100 shares of Class B no par Common Stock were authorized. The holders of
Class B Common Stock are limited to a maximum of 10% of the total votes of the
Corporation. Class B stock can be converted to Class A stock upon the occurrence
of the Company achieving certain stated levels of outside financing, as defined
in the amendment to articles of incorporation.
INCENTIVE STOCK OPTION PLAN
In January 1996, the Corporation adopted an Incentive Stock Option Plan
("the Plan") in order to advance the interests of the Corporation by providing
eligible employees with an opportunity to acquire a proprietary interest in the
Corporation. The Corporation has reserved 500,000 shares of its Class A Common
Stock for this purpose. Options are granted at the fair market value of the
Corporation's Common Stock on the date of grant. The term of the stock options
granted under the Plan may not exceed 10 years. The stock options granted as of
December 31, 1996, vest over a 4 year period.
Additional information with respect to stock option activity is summarized
as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------- -----------------
<S> <C> <C>
Outstanding at beginning of period..................................................... -- --
Options granted........................................................................ 9,500 $ 0.13
Options exercised...................................................................... -- --
Outstanding at end of period........................................................... 9,500 $ 0.13
----- -----
Options exercisable at end of period -- --
----- -----
</TABLE>
At December 31, 1996, there were 490,500 options available for future grants
under the Plan. The Corporation applies APB No. 25 in accounting for the
incentive stock option plan, and, accordingly, recognizes compensation expense
for the difference between the deemed fair market value of the
F-27
<PAGE>
STMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. CAPITAL STOCK (CONTINUED)
underlying Common Stock and the grant price of the option at the date of grant.
During the year ended December 31, 1996, the Corporation did not grant any
options at exercise prices which were less than the fair market value of the
Common Stock at the grant date.
The Corporation has adopted the disclosure provisions only of SFAS No. 123.
The effect of applying SFAS No. 123 for the year ended December 31, 1996 on pro
forma net loss is not necessarily representative of the effects on reported net
loss for future years due to, among other things, (1) the vesting period of the
stock options and the (2) fair value of additional stock options in future
years.
Had compensation expense for the Corporation's stock options been determined
based upon the fair value at the grant date for awards under the Plan consistent
with the underlying methodology prescribed under SFAS No. 123, the Corporation's
net loss for the year ended December 31, 1996 would have been approximately
$7,110. The fair value of each options grant is estimated on the date of grant
using the Minimum Value option pricing model with the following weighted-average
assumptions for 1996: average risk-free interest rate of 6%, dividend yield 0%,
and expected life of option four years, and a five year contractual life.
8. 401(K) PLAN
The Corporation sponsors a 401(k) plan which covers substantially all
employees who have provided at least six months service and attained the age of
twenty-one. Participants may contribute up to 15% of their annual compensation.
Participants are immediately vested in their voluntary contributions plus their
earnings thereon. The Corporation may make discretionary contributions at the
option of the Board of Directors.
9. SUBSEQUENT EVENTS
SIGNIFICANT CHANGE IN OWNERSHIP
On September 12, 1997, all of the outstanding common stock of STMS, Inc. was
purchased by Dunn Computer Corporation through an exchange of stock in which the
shareholders of STMS, Inc. received 150,000 shares of Dunn Computer Corporation
in exchange for all shares of STMS, Inc.
CONVERSION OF PREFERRED STOCK
As of September 12, 1997, the holder of the preferred stock described in
Note 6 exercised the option which allowed him to convert the preferred stock
into a one year promissory note. Subsequently the note was paid in full.
F-28
<PAGE>
STMS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 104,008
Trade accounts receivable, net of allowance for doubtful accounts of $22,190 3,300,116
Inventory......................................................................................... 426,902
Prepaid expenses and other current assets......................................................... 43,062
Loans to stockholders............................................................................. 148,197
------------
Total current assets................................................................................ 4,022,285
Property and equipment, net......................................................................... 474,264
Capitalized software development costs, net......................................................... 165,832
------------
Total assets........................................................................................ $ 4,662,381
------------
------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................................................................. $ 3,832,692
Accrued expenses.................................................................................. 185,766
Current portion of note payable................................................................... 1,253,525
Current portion of capital lease obligations...................................................... 16,037
Deferred revenue.................................................................................. 492,269
------------
Total current liabilities........................................................................... 5,780,289
Capital lease obligations, less current portion..................................................... 8,082
Note payable, less current portion.................................................................. 29,146
Commitments......................................................................................... --
Stockholders' deficit:
Common Stock...................................................................................... 1,100
Additional paid-in capital........................................................................ --
Accumulated deficit............................................................................... (1,156,236)
------------
Total stockholders' deficit......................................................................... (1,155,136)
------------
Total liabilities and stockholders' deficit......................................................... $ 4,662,381
------------
------------
</TABLE>
See accompanying notes.
F-29
<PAGE>
STMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
Net revenues..................................................................... $ 5,957,622 $ 7,812,531
Costs of revenues................................................................ 4,932,821 5,721,002
-------------- --------------
Gross profit..................................................................... 1,024,801 2,091,529
General and administrative....................................................... 353,990 1,034,507
Selling and marketing............................................................ 689,256 1,772,964
-------------- --------------
Loss from operations............................................................. (18,445) (715,942)
Other income (expense)........................................................... 133 (21,372)
Interest expense................................................................. (119,200) (118,003)
-------------- --------------
Net loss......................................................................... $ (137,512) $ (855,317)
-------------- --------------
-------------- --------------
</TABLE>
See accompanying note.
F-30
<PAGE>
STMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... $ (137,512) $ (855,317)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation and amortization................................................ 30,297 60,427
Changes in operating assets and liabilities:
Trade accounts receivable.................................................... 440,528 3,049,663
Inventory.................................................................... 444,410 (163,794)
Loans to stockholders........................................................ (10,553) 10,205
Prepaid expenses and other current assets.................................... (5,850) 50,497
Accounts payable............................................................. (823,096) (2,357,905)
Accrued expenses............................................................. 77,376 185,766
Deferred revenue............................................................. (70,694) 110,093
-------------- --------------
Net cash (used in) provided by operating activities.............................. (55,094) 89,635
INVESTING ACTIVITIES
Purchases of property and equipment.............................................. (8,542) (62,496)
Capitalized software development costs........................................... (17,463) (64,394)
-------------- --------------
Net cash used in investing activities............................................ (26,005) (126,890)
FINANCING ACTIVITIES
Proceeds from long-term debt..................................................... 42,974 24,577
Payments on capital lease obligations............................................ (8,291) (16,913)
Payments on long-term debt....................................................... (86,030) (54,896)
Distributions to stockholders.................................................... (37,400) --
-------------- --------------
Net cash used in financing activities............................................ (88,747) (47,232)
Net decrease in cash and cash equivalents........................................ (169,846) (84,487)
Cash and cash equivalents at beginning of the period............................. 178,167 188,495
-------------- --------------
Cash and cash equivalents at end of the period................................... $ 8,321 $ 104,008
-------------- --------------
-------------- --------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................................................... $ 119,200 $ 123,069
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-31
<PAGE>
STMS, INC.
NOTE TO FINANCIAL STATEMENTS
NOTE A:
INTERIM FINANCIAL INFORMATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the interim period are not necessarily indicative of the
results that may be expected for any future period, including the year ended
December 31, 1997. For further information, refer to the audited financial
statements and footnotes thereto included elsewhere herein.
F-32
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
We have audited the accompanying balance sheet of Dunn Computer Corporation
(a Virginia Corporation) as of February 26, 1998. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Dunn Computer Corporation as
of February 26, 1998 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Vienna, Virginia
February 26, 1998
F-33
<PAGE>
DUNN COMPUTER CORPORATION
BALANCE SHEET
FEBRUARY 26, 1998
<TABLE>
<S> <C>
ASSETS
Cash............................................................................. $ 1
-----------
-----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Preferred stock; $.001 par; 2,000,000 shares authorized;
no shares issued and outstanding............................................... $ --
Common stock; $.001 par; 20,000,000 shares authorized; one share issued and
outstanding.................................................................... --
Additional paid-in capital....................................................... 1
-----------
$ 1
-----------
-----------
</TABLE>
See accompanying note.
F-34
<PAGE>
DUNN COMPUTER CORPORATION
NOTE TO FINANCIAL STATEMENT
FEBRUARY 26, 1998
1. ORGANIZATION
Dunn Computer Corporation was incorporated in the Commonwealth of Virginia
on February 26, 1998 to become a holding company for Dunn Computer Corporation,
a Delaware Corporation, and International Data Products Corp., a Maryland
corporation, as provided in the Acquisition Agreement.
F-35
<PAGE>
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
The Boards of Directors
International Data Products, Corp. and Puerto Rico Industrial Manufacturing
Operations, Corp.:
We have audited the accompanying combined balance sheets of International
Data Products, Corp. and combined company as of September 30, 1996 and 1997, and
the related combined statements of income and retained earnings and cash flows
for each of the years in the three-year period ended September 30, 1997. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above present
fairly, in all material respects, the financial position of International Data
Products, Corp. and combined company as of September 30, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
McLean, Virginia
November 7, 1997
F-36
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------
ASSETS 1996 1997 1997
- --------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents.......................................... $ 314,677 1,013,198 891,493
Accounts receivable--trade (net of allowance of $127,733 as of
September 30, 1996 and $131,821 as of September 30, 1997) 6,635,990 5,724,022 14,595,651
Employee and stockholder advances.................................. 109,883 119,390 118,587
Inventory, net..................................................... 15,339,842 15,991,331 18,652,198
Income taxes receivable............................................ -- 401,775 401,775
Deferred income taxes.............................................. 9,557 443,415 443,415
Prepaid expenses................................................... 1,368,640 790,160 1,631,934
Other current assets............................................... 210,486 327,150 103,335
------------- ------------ -------------
Total current assets................................................. 23,989,075 24,810,441 36,838,388
Fixed assets, net of accumulated depreciation and amortization....... 1,640,423 2,252,851 2,325,143
Deferred income taxes................................................ -- 17,631 17,631
Investment in joint venture, at cost................................. 31,200 31,200 31,200
Other assets......................................................... 77,570 199,732 193,027
------------- ------------ -------------
Total assets....................................................... $ 25,738,268 27,311,855 39,405,389
------------- ------------ -------------
------------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit..................................................... $ 6,585,689 5,634,687 11,340,942
Accounts payable--trade............................................ 11,654,404 12,810,200 17,495,811
Accrued expenses................................................... 745,797 1,446,074 2,839,493
Income taxes payable............................................... 180,372 58,456 112,174
Notes payable--current portion..................................... 425,554 368,792 420,467
Notes payable--related parties..................................... 1,604,462 1,498,397 1,579,973
Other liabilities.................................................. 152,553 58,950 69,429
------------- ------------ -------------
Total current liabilities............................................ 21,348,831 21,875,556 33,858,289
Long-term liabilities:
Notes payable, net of current portion.............................. 224,926 164,308 160,860
Deferred income taxes.............................................. 10,538 -- --
Deferred rent...................................................... 226,222 163,165 143,606
------------- ------------ -------------
Total liabilities.................................................... 21,810,517 22,203,029 34,162,755
------------- ------------ -------------
Commitments and contingencies
Stockholders' equity:
International Data Products, Corp. common stock, no par value,
5,000 shares authorized, 100 shares issued and outstanding....... 40,000 40,000 40,000
Puerto Rico Industrial Manufacturing Operations Corp. common stock,
no par value, 10,000 shares authorized, 7,000 shares issued and
outstanding...................................................... 132,000 132,000 132,000
Retained earnings.................................................. 3,755,751 4,936,826 5,070,634
------------- ------------ -------------
Total stockholders' equity........................................... 3,927,751 5,108,826 5,242,634
------------- ------------ -------------
Total liabilities and stockholders' equity........................... $ 25,738,268 27,311,855 39,405,389
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, --------------------------
----------------------------------------- DECEMBER 31, DECEMBER 31,
1995 1996 1997 1996 1997
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Sales.................................... $ 80,432,480 84,291,838 71,920,739 35,999,417 25,200,523
Cost of sales............................ 69,024,772 71,889,685 58,995,644 30,838,159 21,100,060
------------- ------------ ------------ ------------ ------------
Gross profit............................. 11,407,708 12,402,153 12,925,095 5,161,258 4,100,463
Operating expenses....................... 8,709,038 11,232,702 11,598,705 3,650,900 3,694,449
------------- ------------ ------------ ------------ ------------
Income from operations................... 2,698,670 1,169,451 1,326,390 1,510,358 406,014
Other income (expenses):
Bid protest settlement................. -- 750,000 --
Interest income........................ 36,736 120,369 31,359 1,442 1,504
Interest expense....................... (524,329) (884,818) (593,012) (222,876) (224,536)
Miscellaneous, net..................... 4,411 5,742 (1,109) 37,169 4,544
------------- ------------ ------------ ------------ ------------
Income before income taxes............... 2,215,488 1,160,744 763,628 1,326,093 187,526
Income tax expense (benefit)............. 278,305 (17,708) (417,447) 289,915 53,718
------------- ------------ ------------ ------------ ------------
Net income............................... 1,937,183 1,178,452 1,181,075 1,036,178 133,808
Retained earnings, beginning of year..... 640,116 2,577,299 3,755,751 3,755,751 4,936,826
------------- ------------ ------------ ------------ ------------
Retained earnings, end of year........... $ 2,577,299 3,755,751 4,936,826 4,791,929 5,070,634
------------- ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, --------------------------
---------------------------------------- DECEMBER 31, DECEMBER 31,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income............................................. $ 1,937,183 1,178,452 1,181,075 1,036,178 133,808
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 259,356 411,979 573,228 120,980 205,968
Deferred income taxes.............................. (21,602) (363,121) (462,026) (10,538) --
Loss on disposal of fixed assets................... 3,167 3,963 -- -- --
(Increase) decrease in:
Accounts receivable -- trade, net................ (8,083,405) 9,167,428 911,968 (7,376,401) (8,871,629)
Employee and stockholder advances................ (139,101) 102,282 (9,507) 20,249 803
Inventory, net................................... (4,253,509) (6,374,158) (651,489) 3,972,991 (2,660,867)
Prepaid expenses and other assets................ (90,802) (731,624) 339,654 1,419,743 (611,254)
Income taxes receivable.......................... 76,000 -- (401,775) -- --
Increase (decrease) in:
Accounts payable -- trade........................ 5,465,918 (3,151,190) 1,155,796 1,218,782 4,685,611
Accrued expenses................................. 105,756 148,761 700,277 (52,593) 1,393,419
Other liabilities................................ (141,337) 184,064 (156,660) (139,043) (9,080)
Income taxes payable............................. 317,641 (137,269) (121,916) 419,509 53,718
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities...... (4,564,735) 439,567 3,058,625 629,857 (5,679,503)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Acquisitions of fixed assets........................... (664,085) (882,550) (1,186,157) (434,769) (278,260)
Proceeds from sale of fixed assets..................... 32,378 15,723 -- -- --
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities.................... (631,707) (866,827) (1,186,157) (434,769) (278,260)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings on line of credit.......... 524,098 (1,336,363) (951,002) 39,425 5,706,255
Proceeds from notes payable............................ 4,677,424 2,789,644 320,758 118,286 309,466
Principal payments on notes payable.................... (179,977) (811,781) (543,703) (67,488) (179,663)
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by financing activities...... 5,021,545 641,500 (1,173,947) 90,223 5,836,058
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents..... (174,897) 214,240 698,521 285,311 (121,705)
Cash and cash equivalents, beginning of year............. 275,334 100,437 314,677 314,677 1,013,198
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents, end of year................... $ 100,437 314,677 1,013,198 599,988 891,493
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
Supplemental Cash Flow Information:
The Company paid income taxes of approximately $26,000, $224,000 and
$713,000, and paid interest of approximately $365,000, $629,000 and $496,000,
during the years ended September 30, 1995, 1996, and 1997, respectively.
See accompanying notes to combined financial statements.
F-39
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, 1996, AND 1997
(1) BASIS OF PRESENTATION AND RELATED MATTERS
ORGANIZATION
The International Data Products, Corp. combined financial statements include
the accounts of International Data Products, Corp. ("IDP") and Puerto Rico
Industrial Manufacturing Operations, Corp. ("PRIMO"). IDP and PRIMO are under
common family ownership control. All material intercompany accounts and
transactions have been eliminated in combination. IDP and PRIMO combined is
hereinafter referred to as the "Company".
IDP was incorporated in Maryland on February 27, 1984. The Company sells
computer equipment and provides computer training and maintenance service
primarily to agencies and suppliers of the federal government. For each of the
three years ended September 30, 1995, 1996 and 1997, approximately 1 percent, 8
percent and 6 percent, respectively, of the Company's revenue was from federal
contracts that were awarded under section 8(a) of the Small Business Act.
Puerto Rico Industrial Manufacturing Operations, Corp. is incorporated under
the laws of the Commonwealth of Puerto Rico. PRIMO manufactures computers and
peripheral equipment for IDP. Substantially all of PRIMO's sales are to IDP,
which have been eliminated in the accompanying combined financial statements.
The Company operates in a competitive environment subject to technological
change and the emergence of new technologies, although the Company believes that
its products and services are, or would be, upgradable to new technologies.
CASH AND CASH EQUIVALENTS
The Company maintains demand deposits with several financial institutions.
At times, deposits exceed federally insured limits, but management does not
consider this a significant concentration of credit risk. Cash equivalents
consist of highly liquid investments with original maturities of 90 days or
less. The fair market value of such instruments approximates cost.
INVENTORY
Inventory consists of parts and material and is stated at the lower of cost,
using weighted average cost method, or market. The Company has established
reserves for obsolete and excess inventory at $0 and $796,404 as of September
30, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the
straight-line method based on estimated useful lives of three to seven years.
Maintenance and repair costs are charged to expense as incurred. Leasehold
improvements are capitalized and amortized over the lesser of the life of the
improvement or the remaining term of the lease.
REVENUE RECOGNITION
The Company recognizes revenues from hardware and software sales at time of
receipt by the customer. Service revenues are recognized over the contractual
period as the service is provided.
F-40
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(1) BASIS OF PRESENTATION AND RELATED MATTERS (CONTINUED)
ADVERTISING
The Company expenses the production costs of advertising the first time the
advertising is published, except for direct response advertising, which is
capitalized and amortized over its expected period of future benefit (generally
three months) based on the ratio of current direct response revenue to estimated
total direct response revenue. Direct response advertising consists primarily of
magazine advertisements which include item order numbers unique to the
advertising campaign.
At September 30, 1996, approximately $246,000 of advertising costs were
reported as prepaid expenses. There were no advertising costs reported as
prepaid expenses at September 30, 1997. For the years ended September 30, 1995,
1996 and 1997, total advertising expense was approximately $252,000, $255,000,
and $535,000, respectively.
WARRANTY EXPENSE
The Company reserves for estimated future warranty costs that may be
required to satisfy contractual requirements. Such provisions are accrued as the
related revenue is recognized. The typical warranty period ranges from one to
three years.
INCOME TAXES
The Company applies the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts and income tax
bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. The income tax provisions for IDP and PRIMO are
prepared separately and combined for financial reporting purposes.
PRIMO has been granted a tax exemption, with certain normal reservations,
from Puerto Rico income (90%), property (90%), and municipal license taxes (60%)
on its manufacturing operations under the Puerto Rico Tax Incentives Act of
1987, Act No. 8, as amended. This tax exemption is for a period of 20 years
ending on September 12, 2014.
CHANGE IN REPORTING PERIODS
PRIMO's reporting periods, as previously audited, were the year ended
December 31, 1995 and the nine months ended September 30, 1996. For purposes of
presenting the combined financial statements of the Company, PRIMO's financial
statements were conformed to reflect each of the years ended September 30, 1995
and 1996, respectively.
USE OF ESTIMATES
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported assets
F-41
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(1) BASIS OF PRESENTATION AND RELATED MATTERS (CONTINUED)
and liabilities and disclosures of contingent assets and liabilities. Actual
results may differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited combined balance sheet, statements of income and retained
earnings and cash flows as of December 31, 1997 and for the three months ended
December 31, 1996 and 1997 have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the interim period are
not necessarily indicative of the results that may be expected for any future
period, including the year ending September 30, 1998.
(2) ACCOUNTS RECEIVABLE
Accounts receivable, which are substantially all billed or billable, at
September 30, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------------ ----------
<S> <C> <C>
U.S. Government and agencies....................................... $ 3,934,632 5,236,309
Commercial......................................................... 270,201 327,535
JTP Joint Venture (note 3)......................................... 2,431,157 160,178
------------ ----------
$ 6,635,990 5,724,022
------------ ----------
------------ ----------
</TABLE>
Management of the Company believes that substantially all of the outstanding
accounts receivable will be collected within one year.
Revenues from several U.S. government agencies totaled approximately
$72,820,000, $69,111,000 and $57,871,000, for the years ended September 30,
1995, 1996 and 1997, respectively, including approximately $22,298,000,
$22,117,000 and $15,282,000 from the JTP Joint Venture in 1995, 1996 and 1997,
respectively (see note 3).
(3) INVESTMENT IN JOINT VENTURE
In November 1993, IDP formed a joint venture entity, Justice Technology
Partners Joint Venture ("JTP") with two other companies for the purpose of
obtaining and performing under a certain contract. JTP has a contract with a
federal government agency involving the sale and maintenance of computer
equipment. IDP provides the computer equipment to the joint venture and records
sales at cost plus its estimated share of the joint venture profits.
IDP has a 24 percent interest in JTP and the initial investment of $31,200
is recorded at cost. IDP's equity in the estimated earnings of the joint venture
is included in accounts receivable.
F-42
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(3) INVESTMENT IN JOINT VENTURE (CONTINUED)
Summarized financial information for this unconsolidated joint venture
entity, as of and for the years ended December 31, 1995 and 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Contract revenue......................................................... $ 44,574 43,417
Net income............................................................... 7,902 5,992
Total current assets..................................................... 3,437 12,252
Total assets............................................................. 3,487 12,293
Total liabilities........................................................ 3,006 9,979
--------- ---------
--------- ---------
</TABLE>
Distributions received in excess of profit recognized, amounting to
approximately $59,000 is included as a reduction of accounts receivable at
September 30, 1996; and profits recognized in excess of distributions received,
amounting to approximately $116,000 is included in accounts receivable at
September 30, 1997.
(4) FIXED ASSETS
Fixed assets as of September 30, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------------ -----------
<S> <C> <C>
Furniture and equipment........................................... $ 1,499,006 2,385,410
Transportation equipment.......................................... 425,404 445,353
Leasehold improvements............................................ 230,105 357,123
Testing lab and equipment......................................... 195,152 340,072
Production equipment.............................................. 159,931 143,585
------------ -----------
Total............................................................. 2,509,598 3,671,543
Less accumulated depreciation and amortization.................... (869,175) (1,418,692)
------------ -----------
Fixed assets, net................................................. $ 1,640,423 2,252,851
------------ -----------
------------ -----------
</TABLE>
(5) INDEBTEDNESS
Notes payable consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
Secured demand bank loan, interest at 10.25%...................... $ 374,760 291,689
Secured automobile loans, interest ranging from 3.7% to 11.5%..... 275,720 241,411
------------ ------------
Total notes payable............................................... 650,480 533,100
Less current portion.............................................. 425,554 368,792
------------ ------------
Notes payable, noncurrent......................................... $ 224,926 164,308
------------ ------------
------------ ------------
</TABLE>
F-43
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(5) INDEBTEDNESS (CONTINUED)
Principal payments on the long-term debt for each of the fiscal years from
1998 to 2002 and thereafter are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 368,792
1999.............................................................................. 65,723
2000.............................................................................. 49,292
2001.............................................................................. 42,598
2002.............................................................................. 6,695
----------
$ 533,100
----------
----------
</TABLE>
Other notes payable consist of automobile loans and a demand bank loan. The
automobile loans are secured by the respective automobile, and the demand loan
is secured by the Company's accounts at the respective bank. The notes mature at
intervals between November 1997 and September 2001. Interest rates on the notes
range from 3.7 percent to 11.5 percent.
Notes payable to related parties are payable to certain stockholders and
their relatives, and employees. All notes payable to related parties are
classified as current liabilities as they are callable by the holder at any
time. Notes payable to related parties bear interest at rates ranging from 8 to
11 percent. The total amounts outstanding on these related party notes payable
were approximately $1,604,000 and $1,498,000 at September 30, 1996 and 1997,
respectively.
The Company has a line of credit facility of $15,000,000, of which
$5,000,000 is secured by the Company's inventory and $10,000,000 is secured by
accounts receivable. The outstanding balance on this line of credit at September
30, 1996 and 1997 was approximately $6,586,000 and $5,635,000, respectively. The
interest rates applicable to this line of credit as of September 30, 1996 and
1997 were 8.25 percent and 8.5 percent, respectively. Subsequent to year-end,
the amounts available under this credit facility were increased to $25,000,000
with an additional temporary overline of $7,000,000 available through January
31, 1998. There is no formal expiration date on this facility although it is
subject to annual re-evaluation by the financial institution.
(6) INCOME TAXES
For combined financial reporting purposes, income (loss) before income taxes
for the years ended September 30, 1995, 1996 and 1997 include the following
components:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ---------- -----------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic (IDP)..................................... $ 355,436 (222,933) (1,769,240)
Foreign (PRIMO).................................... 1,860,052 1,383,677 2,532,868
------------ ---------- -----------
$ 2,215,488 1,160,744 763,628
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
As discussed in Note 2, PRIMO has been granted a 90 percent exemption, with
certain reservations, for income taxes on its manufacturing operations under the
Tax Incentives Act of Puerto Rico of 1987, Act No. 8, as amended. This exemption
is for a period of twenty years and ends in September 2014. Further,
F-44
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(6) INCOME TAXES (CONTINUED)
PRIMO has no temporary differences that would create deferred tax assets or
liabilities as of September 30, 1996 or 1997.
The components of income tax expense (benefit) for the Company for the years
ended September 30, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................................. $ 197,116 232,015 (60,439)
State................................................... 43,637 51,363 (13,380)
Foreign (PRIMO)......................................... 59,154 62,035 118,398
---------- ---------- ----------
299,907 345,413 44,579
---------- ---------- ----------
Deferred:
Federal................................................. (17,687) (297,303) (356,045)
State................................................... (3,915) (65,818) (105,981)
---------- ---------- ----------
(21,602) (363,121) (462,026)
---------- ---------- ----------
$ 278,305 (17,708) (417,447)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Income tax expense (benefit) amounted to $278,305 for 1995, an effective
rate of 13 percent; ($17,708) for 1996, an effective rate of (2) percent; and
($417,447) for 1997, an effective rate of (55) percent. The actual expense
(benefit) differs from the "expected expense (benefit)" for those years,
computed by applying the U.S. federal corporate tax rate of 34 percent in 1995,
1996 and 1997 to earnings (loss) before income tax expense, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)......................................... $ 753,266 394,653 259,634
Increase (decrease) in income taxes resulting from:
Foreign income not subject to U.S. federal taxes, net of foreign taxes.......... (573,264) (408,416) (742,756)
State and local income tax expense (benefit), net of federal benefit............ 24,881 (15,605) (78,710)
Increase in valuation allowance................................................. -- -- 122,690
Nondeductible meals and entertainment expenses.................................. 31,645 27,199 17,581
Other, net...................................................................... 41,777 (15,539) 4,114
---------- ---------- ----------
$ 278,305 (17,708) (417,447)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-45
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at September 30, 1996 and
1997 are presented below:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax assets:
Inventory obsolescence reserve...................................... $ -- 267,870
Warranty reserve.................................................... -- 76,799
Accrued interest on related party notes............................. 67,207 116,331
Deferred rent....................................................... 90,266 85,779
Section 263(A) inventory adjustment................................. 26,682 45,020
Accrued vacation.................................................... 42,319 43,977
Allowance for doubtful accounts..................................... 49,330 50,908
Other............................................................... -- 30,242
---------- ----------
Total gross deferred tax assets....................................... 275,804 716,926
Less: valuation allowance............................................. -- (122,690)
---------- ----------
Net deferred tax assets............................................... 275,804 594,236
---------- ----------
Deferred tax liabilities:
Income from JTP joint venture....................................... (266,247) (133,190)
Other............................................................... (10,538) --
---------- ----------
Total deferred tax liabilities........................................ (276,785) (133,190)
---------- ----------
Net deferred tax asset (liability).................................... $ (981) 461,046
---------- ----------
---------- ----------
</TABLE>
The net deferred tax asset (liability) is reflected in the accompanying
balance sheets as:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets.............................................. $ 9,557 443,415
Noncurrent deferred tax assets........................................... -- 17,631
Noncurrent deferred tax liabilities...................................... (10,538) --
--------- ---------
Net deferred tax asset (liability)....................................... $ (981) 461,046
--------- ---------
--------- ---------
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented by IDP in making this assessment.
Management has established a valuation allowance of $122,690 in 1997 to reduce
the deferred tax asset to a level where based upon the level of historical
taxable income, scheduled reversal of deferred tax liabilities, and projections
of future taxable income over the periods in which the temporary differences
become deductible based on available tax planning strategies, management
presently believes that it is more likely than not that IDP will realize the
benefits of these deductible differences.
F-46
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995, 1996, AND 1997
(7) COMMITMENTS AND CONTINGENCIES
LEASES
The Company is obligated under various noncancelable operating leases for
office/warehouse space and office equipment. The future minimum lease
obligations under these noncancelable operating leases as of September 30, 1997
are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 625,283
1999............................................................................ 661,680
2000............................................................................ 292,397
2001............................................................................ 38,568
2002 and thereafter............................................................. --
------------
$ 1,617,928
------------
------------
</TABLE>
Rent expense under these operating leases amounted to approximately
$453,000, $556,000, and $538,000 for the periods ended September 30, 1995, 1996,
and 1997, respectively. Rent payments are being expensed on a straight-line
basis over the life of the lease, with the difference recorded as deferred rent.
BID PROTEST SETTLEMENT
During the year ended September 30, 1996, IDP settled a contract award
dispute with a third party and recorded a $750,000 gain on settlement. Costs
relating to the bid protest were expensed in the period incurred and recorded as
operating expenses.
(8) RETIREMENT PLAN
IDP maintains a tax-deferred savings plan under Section 401(k) of the
Internal Revenue Code which is offered to all employees who have attained the
age of 21. The plan provides for contributions by employees as well as matching
and discretionary contributions by IDP. IDP made contributions of approximately
$150,000, $210,000, and $261,000 to the plan during the years ended September
30, 1995, 1996, and 1997.
F-47
<PAGE>
INDEX TO APPENDICES
<TABLE>
<CAPTION>
ITEM
- ------------------------------------------------------------------------------------------------------------------------
<C> <S>
A. Merger Agreement
B. Acquisition Agreement
C. 1997 Stock Option Plan
</TABLE>
<PAGE>
APPENDIX A
AGREEMENT OF MERGER
OF
DUNN COMPUTER CORPORATION
(A VIRGINIA CORPORATION),
DUNN MERGER CORP.
(A DELAWARE CORPORATION)
AND
DUNN COMPUTER CORPORATION
(A DELAWARE CORPORATION)
AGREEMENT OF MERGER dated as of March 18, 1998, by and among Dunn Computer
Corporation, a Virginia corporation ("Parent"), Dunn Merger Corp., a Delaware
corporation ("Sub"), and Dunn Computer Corporation, a Delaware corporation
("Company").
WHEREAS the total number of shares of stock which Parent has authority to
issue is 22,000,000, 20,000,000 of which are shares of common stock with a par
value of $.001 each ("Parent Common Stock") and 2,000,000 of which are shares of
preferred stock with a par value of $.001 each; and
WHEREAS the total number of shares of stock which Sub has authority to issue
is 100, all of which are of one class without par value ("Sub Common Stock");
and
WHEREAS the total number of shares of stock which Company has authority to
issue is 22,000,000, 20,000,000 of which are shares of common stock with a par
value of $.001 each ("Company Common Stock") and 2,000,000 of which are shares
of preferred stock with a par value of $.001 each; and
WHEREAS, the respective Boards of Directors of Parent, Sub and Company each
have approved the merger of Sub with and into Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, whereby (a)
each issued and outstanding share of Company Common Stock owned by Company will
be retired and canceled, (b) each issued and outstanding share of Company Common
Stock will be converted into the right to receive Parent Common Stock, (c) each
outstanding option to purchase Company Common Stock will be converted into an
option to purchase a like number of shares of Parent Common Stock, (d) each
warrant to purchase shares of Company Common Stock will be converted into a
warrant to purchase shares of Parent Common Stock and (e) each issued and
outstanding share of Sub Common Stock will be converted into a share of common
stock of the Surviving Corporation (as defined in Section 1.1); and
WHEREAS, the respective Boards of Directors of Parent, Sub and Company have
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals and are in the best interest of their respective stockholders; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants and agreements contained
in this Agreement, the parties agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the provisions of the Delaware
General Corporation Law ("DGCL"), Sub shall be merged with and into Company at
the Effective Time (as defined in Section 1.2). Following the Effective Time,
Company shall be the surviving corporation (the "Surviving Corporation") which
shall continue to exist under the name Dunn Computer Corporation and which shall
become a wholly-owned subsidiary of Parent and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. The separate
existence of Sub shall cease at the Effective Time in accordance with the
provisions of the DGCL.
Section 1.2 THE EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the date of the closing under the
Acquisition Agreement dated March 9, 1998 among, INTER ALIA, Parent and Company,
the parties shall cause the Merger to be consummated by filing a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such subsequent date
or time as Parent, Sub and Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
Section 1.3 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of the Company as now in force and effect shall
continue to be the Certificate of Incorporation of the Surviving Corporation,
and said Certificate of Incorporation shall continue in full force and effect
until further amended and changed as provided therein or by applicable law.
Section 1.5 BY-LAWS OF THE SURVIVING CORPORATION. The by-laws of the
Company as in effect immediately prior to the Effective Time will become the
by-laws of the Surviving Corporation at the Effective Time and will continue in
full force and effect until changed, altered or amended as provided therein or
by applicable law.
Section 1.6 DIRECTORS AND OFFICERS. The directors and officers in office
of the Company shall, at the Effective Time, become the members of the first
Board of Directors and the first officers of the Surviving Corporation, all of
whom shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OPTIONS AND WARRANTS;
EXCHANGE OF CERTIFICATES
Section 2.1 EFFECT ON CAPITAL STOCK, OPTIONS AND WARRANTS. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Company Common Stock, Company Stock Options (as
hereinafter defined), Bergman Stock Options (as hereinafter defined) or Warrants
(as hereinafter defined):
(a) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned directly or indirectly by the Company shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
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(b) CONVERSION OF COMPANY COMMON STOCK. Each issued and outstanding share
of Company Common Stock (other than shares to be canceled in accordance with
Section 2.1(a)) shall be converted into the right to receive one validly issued,
fully paid and nonassessable share of Parent Common Stock. Subject to 2.1(a), as
of the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive the same number of shares of Parent Common Stock upon
surrender of such certificate in accordance with Section 2.2 and any dividends
or distributions to which such holder is entitled pursuant to Section 2.2 (c).
(c) CONVERSION OF COMPANY STOCK OPTIONS. The option holders listed on
Schedule 1 attached hereto each hold outstanding stock options as of the date
hereof, whether or not fully exercisable, to purchase shares of Company Common
Stock (the "Company Stock Options") heretofore granted or assumed by Company
pursuant to a stock option, stock purchase or similar plan adopted, assumed or
maintained at any time by Company, any of its controlled affiliates or any of
their respective predecessors in interest, including but not limited to the Dunn
Computer Corporation 1997 Stock Option Plan, as amended and in effect on the
date hereof (collectively, the "Company Stock Option Plans"). The option
exercise price, the number of shares subject to the option, any related stock
appreciation rights, the dates of grant, vesting, exercisability and expiration
of the option and whether the option is an incentive stock option or a non-
qualified stock option with respect to each Company Stock Option are set forth
in the respective stock option agreement between such option holder and Company.
All rights under the Company Stock Options shall be treated as provided herein,
and to the extent the terms of the Company Stock Option Plans and/or of any
related agreements are inconsistent with the treatment to be accorded to the
Company Stock Options as provided herein, then Company shall cause the Company
Stock Option Plans and/or any related agreements with affected participants to
be amended, and all required third party, governmental and regulatory body
consents or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.
Each Company Stock Option outstanding immediately prior to the Effective
Time shall be converted at the Effective Time into an outstanding option to
purchase Parent Common Stock ("Parent Stock Option"), so that (i) from and after
the Effective Time, each such Company Stock Option may be exercised only for
shares of Parent Common Stock notwithstanding any contrary provision of the
Company Stock Option Plans or stock option agreements executed in connection
therewith and (ii) each such Parent Stock Option shall at the Effective Time be,
on substantially the same terms and conditions as were applicable to the Company
Stock Option to which it relates, an option to purchase an equal number of
shares of Parent Common Stock at an exercise price per share equal to the
exercise price per share applicable to the Company Stock Option to which it
relates; PROVIDED, HOWEVER, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under any of Sections 422-424
of the Code, the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be further
adjusted to the extent necessary in order to comply with Section 424(a) of the
Code; and PROVIDED FURTHER, that the number of shares of Parent Common Stock
that may be purchased upon exercise of such stock option shall not include any
fractional share and, upon exercise of such stock option, a cash payment shall
be made for any fractional share based upon the closing price of a share of
Parent Common Stock on the last trading day of the calendar month immediately
preceding the date of exercise.
(d) CONVERSION OF JDK WARRANTS. JDK & Associates, Inc., holds outstanding
warrants as of the date hereof, whether or not fully exercisable, to purchase
shares of Company Common Stock (the "JDK Warrants") heretofore granted by
Company pursuant to the Investor Relations Consulting Agreement dated as of
October , 1997 between the Company and JDK & Associates, Inc. (the "Consulting
Agreement"). The warrant exercise price, the number of shares subject to the
warrant, any related stock appreciation rights and the dates of grant, vesting,
exercisability and expiration of the warrant with respect
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to each JDK Warrant are set forth in the Consulting Agreement. All rights under
the JDK Warrants shall be treated as provided herein, and to the extent the
terms of the Consulting Agreement are inconsistent with the treatment to be
accorded to the JDK Warrants as provided herein, then Company shall cause the
Consulting Agreement to be amended, and all required third party, governmental
and regulatory body consents or approvals to such amendments to be procured,
such that all such inconsistencies shall be eliminated by the Effective Time.
At the Effective Time, the JDK Warrants shall be assumed by Parent.
Notwithstanding any contrary provision of the Consulting Agreement, the JDK
Warrants shall, at and after the Effective Time, evidence a warrant to purchase
100,000 shares of Parent Common Stock on the same terms and conditions as stated
in the Consulting Agreement.
(e) CONVERSION OF WARRANTS. Richard Hunt, Network 1 Financial Services,
Inc., William Hunt and Damon Testaverde each hold outstanding warrants as of the
date hereof, whether or not fully exercisable, to purchase shares of Company
Common Stock (collectively, the "Warrants") heretofore granted or assumed by
Company pursuant to the Underwriting Agreement between Company and Network 1
Financial Securities, Inc. dated April 21, 1997 (the "Underwriting Agreement").
The warrant exercise price, the number of shares subject to the warrant, any
related stock appreciation rights, the dates of grant, vesting, exercisability
and expiration of the warrant are set forth in the respective Underwriter's
Warrant to Purchase 100,000 shares of Company Common Stock. All rights under the
Warrants shall be treated as provided herein, and to the extent the terms of the
Underwriting Agreement and/or of any related agreements are inconsistent with
the treatment to be accorded to the Warrants as provided herein, then Company
shall cause the Underwriting Agreement and/or any related agreements to be
amended, and all required third party, governmental and regulatory body consents
or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.
At the Effective Time, the Warrants shall be assumed by Parent.
Notwithstanding any contrary provision of the Underwriting Agreement or any
related agreements executed in connection therewith, the Warrants shall, at and
after the Effective Time, evidence a warrant to purchase 100,000 shares of
Parent Common Stock on the same terms and conditions as stated in the respective
Underwriter's Warrant to Purchase 100,000 shares of Company Common Stock.
(f) CONVERSION OF SUB COMMON STOCK. Each issued and outstanding share of
Sub Common Stock shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation.
Section 2.2 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time, Parent shall enter into an agreement with such bank or trust
company as may be designated by Parent and reasonably satisfactory to Company
(the "Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Company Common Stock, Company Stock Options, JDK Warrants, and
Warrants, for exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.1 (b) in exchange for outstanding shares of Company Common
Stock, new option agreements representing options to purchase Parent Common
Stock executed and delivered pursuant to Section 2.1(c) in exchange for
outstanding Company Stock Options and new warrants representing the right to
purchase shares of Parent Common Stock pursuant to Sections 2.1(d) and (e) in
exchange for the JDK Warrants and the Warrants (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time, new option agreements and new warrants
being hereinafter referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
stock certificate, option agreement or warrant which immediately prior to the
Effective Time represented rights with respect to shares of Company Common Stock
("Certificates") whose shares, options or warrants, as the case may be, were
converted into similar
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rights with respect to Parent Common Stock pursuant to Section 2.1, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as the Company and Parent may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for Parent
Common Stock, a new option agreement or a new warrant, as the case may be. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock, a new option agreement or a
new warrant which such holder has the right to receive pursuant to the
provisions of this Article II and dividends or other distributions on such
shares of Parent Common Stock which such holder has the right to receive
pursuant to Section 2.2(c), and the Certificate so surrendered shall forthwith
be canceled. In the event of a surrender of a Certificate which is not
registered in the transfer records of Company or otherwise documented in the
books and records of the Company under the name of the person surrendering such
Certificate, a new stock certificate, new option agreement or new warrant, as
the case may be, representing the proper number of shares of Parent Common Stock
to which the Certificate relates may be issued or delivered, as the case may be,
to a person other than the person in whose name the Certificate so surrendered
is registered or recorded if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such issuance
and/or delivery shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock or delivery of an option agreement or
warrant to purchase Parent Common Stock to a person other than the registered or
recorded holder of such Certificate or establish to the satisfaction of Parent
that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Parent
Common Stock, the new option agreement or the new warrant, as the case may be,
in respect of such Certificate pursuant to the provisions of this Article II and
dividends or other distributions in respect of such Parent Common Stock which
such Certificate holder has the right to receive pursuant to Section 2.2(c). No
interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock issuable hereunder in respect
thereof, and all such dividends and other distributions shall be paid by Parent
to the Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II,
subject to Section 2.2(e). Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate there shall be paid to
the holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time and
with a payment date subsequent to such surrender payable with respect to such
whole shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK, COMPANY STOCK
OPTIONS, JDK WARRANTS OR WARRANTS. All shares of Parent Common Stock, new
option agreements and new warrants issued or delivered upon the surrender for
exchange of Certificates in accordance with the terms of this Article II shall
be deemed to have been issued or delivered in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock which remain unpaid at the Effective Time, and
there shall be no further registration or
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recordation of transfers on the stock transfer books or other records of the
Surviving Corporation of the shares of Company Common Stock, the Company Stock
Options, the JDK Warrants and the Warrants which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason
other than the exchange as provided in this Article II, they shall be canceled
and exchanged as provided in this Article II, except as otherwise provided by
law.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim with respect to Parent
Common Stock or any dividends or distributions with respect to Parent Common
Stock.
(f) NO LIABILITY. None of Parent, Sub, Company, the Surviving Corporation
or the Exchange Agent shall be liable to any person in respect of any shares of
Parent Common Stock, any dividends or distributions with respect thereto, any
new options, any new warrants or any cash from the Exchange Fund, in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent (provided that such cash
shall be invested only in high quality short-term instruments with low risk of
loss of principal), on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent. If, as a result of any loss
resulting from such investments, the amount of cash remaining in the Exchange
Fund is insufficient to pay the full amount to which holders of certificates
formerly representing rights with respect to Company Common Stock are entitled,
Parent shall, promptly upon demand by the Exchange Agent, deposit additional
cash into the Exchange Fund in an amount sufficient to satisfy its obligations
to such holders.
(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Parent Common Stock, any unpaid dividends and distributions
related thereto, new option agreement or new warrant deliverable in respect
thereof pursuant to this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 FURTHER ASSURANCES. In the event that this Agreement shall
have been fully approved and adopted upon behalf of Parent, Sub and Company in
accordance with the provisions of DGCL, such corporations agree that they will
cause to be executed and filed and recorded any document or documents prescribed
by the laws of the State of Delaware, and that they will cause to be performed
all necessary acts within the State of Delaware and elsewhere to effectuate the
merger herein provided for.
Section 3.2. AUTHORIZATION. The Board of Directors and the proper officers
of Parent, Sub and Company are hereby authorized, empowered, and directed to do
any and all acts and things, and to make, execute, deliver, file and record any
and all instruments, papers and documents which shall be or become necessary,
proper, or convenient to carry out or put into effect any of the provisions of
this Agreement or of the merger herein provided for.
Section 3.3. TERMINATION. Notwithstanding the full adoption of this
Agreement, this Agreement may be terminated at any time prior to the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in the event that such Agreement is abandoned by action of the Board of
Directors
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of each corporation party hereto, whether before or after approval by the
stockholders of any or all of such corporations.
IN WITNESS WHEREOF, this Agreement of Merger is hereby executed and
acknowledged on behalf of each of the corporations party hereto.
Dated: as of March 18, 1998.
<TABLE>
<S> <C> <C>
DUNN MERGER CORP.
By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Vice President and
Treasurer
DUNN COMPUTER CORPORATION
(Delaware)
By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Executive Vice President
DUNN COMPUTER CORPORATION
(Virginia)
By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Executive Vice President
</TABLE>
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APPENDIX B
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (the "Agreement") is made and entered into on the
9th day of March, 1998 among George Fuster, an individual resident in Maryland,
D. Oscar Fuster, an individual resident in Maryland, Carol N. Fuster, an
individual resident in Maryland and Wendy E. Fuster, an individual resident in
Maryland (collectively the "Sellers", and individually each a "Seller"), Dunn
Computer Corporation, a Delaware corporation, with its principal place of
business in Virginia (the "Purchaser") and Dunn Computer Corporation, a Virginia
corporation ("AHC");
RECITALS
A. George Fuster and D. Oscar Fuster (the "IDP Sellers") together own all of
the issued and outstanding capital stock of International Data Products, Corp.,
a Maryland corporation ("IDP");
B. Carol N. Fuster and Wendy E. Fuster (the "PRIMO Sellers") together own
all of the issued and outstanding capital stock of Puerto Rico Industrial
Manufacturing Operations Corp., a Puerto Rican corporation ("PRIMO");
C. The Purchaser has caused to be established AHC, and AHC will cause to be
established two wholly-owned subsidiaries of AHC, Dunn Computer Merger
Subsidiary, Inc., a Delaware corporation ("Merger Sub"), a company set up solely
for the purpose of carrying out the merger contemplated in Section 1.2 hereof,
and a Puerto Rican corporation to which will be transferred the PRIMO Assets and
the PRIMO Liabilities at Closing (as such terms are defined below) ("PAC"), all
with a view to carrying out the following transactions concurrently with the
closing of the initial public offering of shares of common stock of AHC referred
to in Sections 5.1(i) and 5.2(j) hereof (the "IPO"): (i) Merger Sub will merge
into the Purchaser which will be the surviving corporation (and all of the
outstanding securities of the Purchaser will be converted into and become
securities of AHC), (ii) all of the outstanding capital stock of IDP after
giving effect to the Redemption (as defined in Section 1.9 hereof) (the "IDP
Shares") will be contributed by the IDP Sellers to AHC in exchange for shares of
AHC and cash and (iii) the PRIMO Sellers will cause all of the assets of PRIMO
(as defined in Section 2.11(h) hereof) except for the Inter-company Indebtedness
(as defined in Section 1.7 hereof) (the "PRIMO Assets"), and all of the
liabilities of PRIMO reflected on the audited balance sheet of PRIMO as of
September 30, 1997 attached hereto as Schedule A, and liabilities incurred by
PRIMO in the ordinary course of business in arms length transactions, or
incurred by PRIMO with the consent of the Purchaser in accordance with Section
4.4 hereof, since September 30, 1997, (the "PRIMO Liabilities") to be
transferred to PAC for cash, all with the result that AHC will acquire and own
all of the capital stock of the Purchaser and of IDP and PAC will acquire and
own all of the PRIMO Assets and assume all of the PRIMO Liabilities.
NOW, THEREFORE, in consideration of the mutual promises, representations and
covenants set forth herein, and other good and valuable consideration, the
parties hereto hereby agree as follows:
I. THE ACQUISITION TRANSACTIONS
1.1 THE CLOSING. Each of the transactions described in Sections 1.2-1.4
hereof (collectively, the "Closing") shall take place concurrently with the
closing of the IPO (the "Closing Date").
1.2 THE MERGER. On the terms and conditions of the Agreement of Merger
attached hereto as Exhibit A (the "Agreement of Merger"), Merger Sub will be
merged into the Purchaser which will be the surviving corporation, and which
will be named Dunn Computer Corporation (the "Merger"). Pursuant to the Merger
the shareholders of Purchaser will receive solely AHC voting stock in exchange
for their Purchaser stock.
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1.3 CONTRIBUTION OF IDP SHARES. On the terms and conditions hereof, the
IDP Sellers shall contribute to AHC the IDP Shares. In consideration of the
contribution of the IDP Shares, AHC shall issue to the IDP Sellers 750,000
shares of AHC (Dunn Computer Corporation) common stock, par value $.001 per
share ("Dunn Common") (the "Share Portion") and shall pay to the IDP Sellers in
cash the "IDP Cash Amount" as determined as provided on Exhibit B hereto. If AHC
declares or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between the
date of this Agreement and the Closing Date, the Share Portion shall be
appropriately adjusted to account therefor.
1.4 TRANSFER OF PRIMO ASSETS AND LIABILITIES. On the terms and conditions
hereof, the PRIMO Sellers shall cause PRIMO to transfer to PAC (i) good and
valid, and as to owned real property, marketable, title to all of the PRIMO
Assets, free and clear of any mortgage, claim, lien, security interest or other
encumbrance whatsoever (collectively, "Liens"), except as provided in Section
2.11(g) hereof, and (ii) the PRIMO Liabilities. All of the other liabilities of
PRIMO shall be retained by and shall be the sole responsibility of PRIMO. In
consideration of the transfer of the PRIMO Assets and the other undertakings of
the Sellers herein, AHC shall pay to the PRIMO Sellers in cash $2,500,000, the
"PRIMO Cash Amount".
1.5 ADJUSTMENT TO SHARE PORTION. If the Average Closing Price (as defined
below) for a share of Dunn Computer Corporation (the Purchaser) common stock,
par value $.001 per share ("Purchaser Common") is less than $7.50, the Share
Portion shall be adjusted upward to that number of shares which multiplied by
the Average Closing Price equals $5,625,000. "Average Closing Price" shall be
the average of the mean between the closing high bid and asked prices for a
share of Purchaser Common, as reported on the Nasdaq National Market System for
the twenty consecutive trading days immediately preceding the date two business
days before the Closing Date. If the Purchaser declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of this Agreement and the Closing
Date, the Share Portion shall be appropriately adjusted to account therefor.
1.6 ADJUSTMENT TO PURCHASE PRICE.
(a) The "Purchase Price" shall mean the Share Portion plus the sum of the
IDP Cash Amount, the PRIMO Cash Amount and the Inter-company Indebtedness (which
sum shall equal $14,900,000).
(b) The Purchase Price shall be adjusted downward if and to the extent that
the Closing Balance Sheet (as defined in Section 1.6(c) hereof) reflects a net
asset value (net worth) of IDP and PRIMO on a combined basis of less than
$5,108,826 at Closing (any such difference, the "Shortfall Amount"), and the
Sellers shall pay to AHC the Shortfall Amount, in cash or shares of Dunn Common
(valued for this purpose at $8.50 per share), or a combination thereof, as the
IDP Sellers shall elect, within ten days of written acceptance by AHC of the
Closing Balance Sheet or within ten days of completion of the Revised Closing
Balance Sheet (as defined in Section 1.6(d) hereof), as the case may be.
(c) Within thirty days after the Closing Date, the Sellers shall cause to be
delivered to AHC a combined balance sheet of IDP and PRIMO as at the Closing
Date prepared on the basis of the same accounting principles, consistently
applied, as were used in the preparation of the Sellers' Balance Sheet (as
defined in Section 2.4 hereof) and reviewed by KPMG Peat Marwick, LLP ("Sellers'
Accountants") (the "Closing Balance Sheet").
(d) Sellers' Accountants shall make available to the Purchaser's independent
public accountants, Ernst & Young ("Purchaser's Accountants") all work papers
used in connection with the preparation of the Closing Balance Sheet. Upon
review of the Closing Balance Sheet and such work papers, if Purchaser's
Accountants disagree with the Closing Balance Sheet and if Purchaser's
Accountants and Sellers' Accountants fail to resolve such disagreement within
thirty days following receipt by the Purchaser of the Closing Balance Sheet and
the work papers of Sellers' Accountants, then at the request of either Purchaser
or
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Sellers, a third independent public accountant, selected jointly by the Sellers'
Accountants and the Purchaser's Accountants shall resolve the disagreement
between Purchaser's Accountants and Sellers' Accountants and shall revise the
Closing Balance Sheet (the "Revised Closing Balance Sheet") to reflect the
resolution. On the basis of the Closing Balance Sheet, if Purchaser advises
Sellers in writing that the Closing Balance Sheet is accepted (either after
review or after Purchaser's Accountants and Sellers' Accountants have resolved
any disagreements in respect of the Closing Balance Sheet) or, if required, on
the basis of the Revised Closing Balance Sheet, it shall be determined whether
or not there is a Shortfall Amount.
(e) The Purchase Price shall be adjusted upward if the Closing Balance
Sheet, or if there is a Revised Closing Balance Sheet, the Revised Closing
Balance Sheet, reflects a net asset value (net worth) of IDP and PRIMO on a
combined basis of more than $5,242,634 at Closing (any such difference, the
"Excess Amount"); such adjustment shall be the amount of the Excess Amount up to
a maximum adjustment of $500,000. For purposes of this Section 1.6(e) there
shall be deducted from the liabilities reflected on the Closing Balance Sheet
(or the Revised Closing Balance Sheet, as the case may be) any amounts reflected
in the liabilities for accounting, investment banking and legal fees in
connection with this Agreement and the IPO.
1.7 DISCHARGE OF IDP INDEBTEDNESS. Promptly after the Closing, AHC shall
pay to PRIMO on behalf of IDP, and in full discharge thereof, the inter-company
indebtedness running from IDP to PRIMO, which amount shall be agreed in good
faith by the Sellers and the Purchaser two business days before Closing (the
"Inter-company Indebtedness"). The Inter-company Indebtedness shall not exceed
$12,400,000 as provided on Exhibit B hereto.
1.8 PAYMENTS BY WIRE TRANSFER. All of the cash payments to be made in this
Article I shall be made by bank wire transfers to accounts designated by the
appropriate Seller to AHC prior to the Closing.
1.9 REDEMPTION. The IDP Sellers shall surrender to IDP for redemption an
appropriate number of IDP Shares (the "IDP Redemption Shares") pursuant to the
procedures, and in exchange for the consideration, described in Section 1.10
hereof (the "Redemption"), so that after the Redemption the IDP Shares shall
constitute all of the then issued and outstanding shares of capital stock of
IDP.
1.10 REDEMPTION PROCEDURES AND CONSIDERATION. Prior to the Closing, IDP
shall transfer and assign all of the assets and liabilities of its IDP F2
Engineering division (as described in Exhibit G hereto) to F2 Engineering Corp.,
an inactive corporation previously formed by IDP which has issued no shares of
capital stock, has no assets or liabilities and has conducted no activities, and
at the Closing, IDP shall transfer, or cause F2 Engineering Corp. to issue, all
of the authorized shares of capital stock of F2 Engineering Corp. to the IDP
Sellers as consideration for the IDP Redemption Shares.
II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby jointly and severally represents and warrants to the
Purchaser as follows:
2.1 ORGANIZATION OF IDP AND PRIMO AND RELATED MATTERS. IDP is a
corporation duly organized, validly existing and in good standing under the laws
of Maryland; PRIMO is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Puerto Rico; each of IDP and
PRIMO has all requisite power and authority to own, operate and lease its
assets, and to carry on its business as heretofore and as presently conducted.
True and complete copies of the currently effective articles of incorporation
and bylaws of IDP and PRIMO are attached to this Agreement as Schedules 2.1(a)
and (b). Each of IDP and PRIMO is duly authorized, qualified or licensed as a
foreign corporation and is in good standing in each jurisdiction where its
business, operations or assets requires it so to be. Schedule 2.1(c) identifies
all of the jurisdictions in which IDP and PRIMO, respectively, are authorized,
qualified or licensed as a foreign corporation. Neither IDP nor PRIMO has any
subsidiaries or equity interests in any other entity.
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2.2 THE SHARES.
(a) Each Seller owns of record and beneficially, free and clear of any
Liens, the number of IDP Shares (before giving effect to the Redemption, which
shall reduce such number of Shares by the number of IDP Redemption Shares) or
PRIMO Shares listed by such Seller's name on Exhibit C; collectively the Sellers
so own all of the Shares. The only authorized, issued and outstanding capital
stock of IDP are the IDP Shares; the only authorized, issued and outstanding
capital stock of PRIMO are the PRIMO Shares.
(b) Each of the Shares is duly authorized, validly issued and outstanding,
fully paid and non-assessable. None of the Shares has been issued in violation
of, or is subject to, any preemptive or subscription rights and there are no
outstanding convertible or exchangeable securities, calls, preferential rights,
options or warrants relating to any of the Shares. Except as set forth on
Schedule 2.2, there are no voting trust agreements or other agreements
restricting or otherwise relating to the voting, dividend rights or the
disposition of any of the Shares.
2.3 DUE AUTHORIZATION AND EXECUTION; NO CONFLICT; CONSENTS. Each Seller
has all requisite power and authority and full capacity to execute, deliver and
perform this Agreement. This Agreement has been duly and validly executed and
delivered by each Seller, and constitutes a valid and binding obligation of each
Seller enforceable against each Seller in accordance with its terms except to
the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally. Except as set forth on Schedule 2.3, the execution,
delivery and performance of this Agreement will not (a) conflict with or violate
(i) the articles of incorporation or bylaws of IDP or PRIMO, (ii) any term of
any agreement, contract, instrument, lease, commitment or other obligation to
which IDP, PRIMO or any Seller is a party or by which IDP, PRIMO or any Seller
is bound, (iii) any order, judgment or decree to which IDP, PRIMO or any Seller
is a party or subject, or by which any properties and assets of IDP or PRIMO are
bound or (iv) any provision of any applicable law, statute, ordinance, rule or
regulation or common law obligation and (b) will not result in the creation or
imposition of any Lien in favor of any third party with respect to any of the
properties and assets of IDP or PRIMO. Except as described on Schedule 2.3, (y)
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Sellers will not require the consent or
approval of or notice to any governmental authority, or constitute a violation
of any law, regulation or order of any such authority, by IDP, PRIMO, or any
Seller; and (z) none of IDP, PRIMO or any Seller is a party to or bound by any
agreement, instrument, order, judgment or decree which would require the consent
of another person to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
2.4 FINANCIAL STATEMENTS. The Sellers have delivered to the Purchaser the
combined statements of profit and loss for the years ended September 30, 1996
and 1997 and the combined balance sheet as at September 30, 1996 and 1997 (the
balance sheet at September 30, 1997 shall be referred to as the "Sellers'
Balance Sheet" and September 30, 1997 shall be referred to as the "Sellers'
Balance Sheet Date") of IDP and PRIMO, as audited by Sellers' Accountants, and
the respective individual statements of profit and loss and balance sheets for
IDP and PRIMO for such period and at such date, as audited by Sellers'
Accountants (collectively, the "Sellers' Financial Statements"). The Sellers'
Financial Statements were prepared in accordance with generally accepted
accounting principles, consistently applied as in prior periods, are correct and
complete, and fairly present the financial condition of IDP and PRIMO on a
combined basis, and of IDP and PRIMO individually, as the case may be, and the
results of their combined operations, or their respective operations, as the
case may be, as of the dates and for the periods indicated therein.
2.5 LIABILITIES. Except as set forth on Schedule 2.5 hereto, neither IDP
nor PRIMO has any liabilities or obligations (whether accrued, absolute,
contingent, known, unknown, derivative or otherwise) other than those (i)
reflected in the Sellers' Balance Sheet and not since paid or otherwise
discharged,
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(ii) listed or described on any Schedule hereto and (iii) liabilities arising
after the Sellers' Balance Sheet Date in the ordinary course of business of IDP
or PRIMO.
2.6 INTERIM OPERATIONS.
(a) ORDINARY COURSE. Except as described on Schedule 2.6 hereto, the
business of each of IDP and PRIMO has been conducted only in the ordinary course
since the Sellers' Balance Sheet Date.
(b) ABSENCE OF ADVERSE CHANGE. There has not been, since the Sellers'
Balance Sheet Date, any material adverse change in the business, assets or
financial condition of IDP and PRIMO considered as one entity. To the knowledge
of Sellers, there has been no occurrence, circumstance or combination thereof
which might reasonably be expected to result in any such material adverse
change.
2.7 LITIGATION. Except as set forth on Schedule 2.7 hereto, there is no
action, suit, proceeding, arbitration, demand, claim or investigation pending
or, to any Seller's knowledge, threatened against or involving IDP or PRIMO or
affecting or which might materially adversely affect this Agreement or the
business or assets of IDP or PRIMO or the consummation of the transactions
contemplated hereby before any court or arbitral tribunal or before or by any
governmental department, agency or body, or otherwise. Neither IDP nor PRIMO is
subject to any judgment, order, writ, injunction, decree, settlement agreement,
compliance agreement or consent decree of any court, administrative or
governmental authority or arbitrator except as set forth on Schedule 2.7 hereto.
2.8 AGREEMENTS AND COMMITMENTS.
(a) WRITTEN AND ORAL AGREEMENTS AND COMMITMENTS. Schedules 2.8(a)(i)
through and including 2.8(a)(xii) hereto set forth a complete list as of the
date hereof of all written agreements (true and correct copies of each of which
have heretofore been delivered to Purchaser) and describe all oral agreements
and commitments of IDP and of PRIMO in force as of the date hereof, as follows:
(i) SUPPLY CONTRACTS; PURCHASE ORDERS. Each outstanding supply contract or
purchase order and commitment as of December 31, 1997 exceeding $250,000 for the
purchase by IDP or PRIMO of capital assets, inventory, semi-finished goods,
supplies, services or other items.
(ii) CUSTOMER CONTRACTS. Each outstanding contract and commitment as of
December 31, 1997 exceeding $150,000 for the sale by IDP or PRIMO of goods or
services, including all Government Contracts (as defined in Section 2.9(g)).
(iii) LICENSES. Each patent, trademark, copyright, technology and other
license agreement to which IDP or PRIMO is a party, either as licensor or as
licensee.
(iv) REAL ESTATE DOCUMENTS. Each lease and sublease relating to the real
estate interests of IDP and of PRIMO; neither IDP nor PRIMO owns any real
estate.
(v) LEASES. Each lease to which either IDP or PRIMO is a party, either as
lessor or as lessee not identified in response to Section 2.8(a)(iv);
(vi) DISTRIBUTORSHIP AND SALES REPRESENTATION AGREEMENTS. Each
distributorship, sales representation and similar agreement to which either IDP
or PRIMO is a party.
(vii) INDEBTEDNESS. Each outstanding loan, loan agreement, credit
agreement, note, guarantee, security agreement, book entry advance in respect of
borrowing or commitment (including, without limitation, any amounts owing to IDP
or PRIMO from, or owed by IDP or PRIMO to, any affiliated individual or entity)
to which either IDP or PRIMO is a party or by which any of the assets of either
are bound.
(viii) EMPLOYMENT AND BENEFIT AGREEMENTS. Each employment, consulting, or
collective bargaining agreement to which either IDP or PRIMO is a party, and
each, pension, retirement, profit sharing,
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deferred compensation, bonus, life insurance and other benefit plan or agreement
which applies in any way to past or present directors, officers, employees or
consultants of either IDP or PRIMO.
(ix) STOCK OPTION PLANS. Each stock option plan and each option granted
under each stock option plan of IDP or PRIMO.
(x) INSURANCE CONTRACTS. Each insurance contract to which either IDP or
PRIMO is a party.
(xi) PRODUCT AND SERVICE WARRANTIES. A sample of each type of product,
service or other guarantee, warranty or indemnity by which IDP or PRIMO is
bound.
(xii) OTHER AGREEMENTS. Each material contract, agreement, and commitment
to which either IDP or PRIMO is a party or by which the assets of either are
bound other than those disclosed pursuant to the preceding clauses of this
Section 2.8.
(b) STATUS OF AGREEMENTS. Except as set forth on Schedule 2.8(b) hereto,
each of the contracts, agreements, commitments, licenses and leases to which
either IDP or PRIMO is a party, is a valid, legally binding and enforceable
obligation of IDP or PRIMO, and is in full force and effect. There is no default
by either IDP or PRIMO or, to the knowledge of any Seller, by the other parties
thereto under the terms of any such material contract, commitment, license or
lease, and no condition (including without limitation, the execution, delivery
and performance of this Agreement) exists which, with the passage of time, the
giving of notice, or both, is likely to result in a default by IDP or PRIMO, as
the case may be, under the terms of any thereof.
2.9 GOVERNMENT CONTRACTS.
(a) Except as set forth on Schedule 2.9 hereto, to the knowledge of the
Sellers, each of IDP and PRIMO has complied in all material respects with all
applicable laws, rules, policies, procedures, regulations, accounting standards,
cost principles, cost accounting standards, solicitation provisions and contract
clauses in conducting all past and present activities relating to Government
Contracts (as defined in Section 2.9(g)) and Government Contract procurements,
including, without limitation, accounting and record keeping activities,
disclosures, reports, wage and hour regulations, certifications and
representations, product testing, marketing activities, proposal and bid
preparation and submissions, negotiations and contract performance. To the
knowledge of the Sellers, all proposals, representations, statements,
disclosures, reports, invoices and certifications made in connection with
Government Contracts were, when made, current, accurate and complete in all
material respects. Except as set forth on Schedule 2.9 hereto, there are not
now, nor have there been since the formation of IDP or PRIMO, as the case may
be, any government investigations or audits of the IDP or PRIMO, or any officer
or employee of either in connection with Government Contract activities. Each
Government Contract of IDP and of PRIMO, as the case may be, is expected to
finish on schedule and within budget and neither IDP nor PRIMO presently has any
basis to conclude that existing schedules or budgets are not reasonable.
(b) To the knowledge of the Sellers, neither IDP nor PRIMO has been
determined by a governmental agency to be "non-responsible" in connection with
any Government Contract procurement. Neither IDP nor PRIMO has received any
notice, and neither IDP, nor PRIMO, nor any Seller is aware of any circumstances
that reasonably would be expected to justify such a notice, that any of its
Government Contracts have been or may be terminated for default. Neither IDP nor
PRIMO is debarred or suspended, or proposed for debarment or suspension from
procurements or other activities at the federal, state or local governmental
levels, and none of IDP, PRIMO or any Seller is aware of any circumstances that
would justify a proposal or decision to suspend or debar IDP or PRIMO from
procurement or other activities. IDP and PRIMO and their respective personnel
have all necessary security clearances to perform outstanding Government
Contracts and neither IDP, nor PRIMO, nor any Seller is aware of any
circumstances (including the transfer of the IDP Shares to the Purchaser) that
may lead to the suspension or revocation of such security clearances. Neither
IDP nor PRIMO has engaged in any illegal or fraudulent conduct in connection
with Government Contract activities.
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(c) Each Government Contract of IDP and of PRIMO that was awarded, or is
being considered for award, on the basis that IDP or PRIMO, as the case may be,
is classified as a small business, a small disadvantaged business or a
minority-owned business under a set aside or similar program under any federal,
state or local laws or procurement regulations is identified on Schedule 2.9
hereto.
(d) Neither IDP, nor PRIMO, nor any Seller has received written notice from,
or engaged in any discussions with, any Governmental Authority (as defined in
Section 2.9(g)) regarding the termination of any Government Contract, the
cessation of any delivery orders thereunder, any reduction by any Governmental
Authority in the amount of its business with IDP or PRIMO or allegations of
defective pricing in connection with Government Contract activities.
(e) Except as set forth on Schedule 2.9 hereto, there have been no
outstanding claims (as defined by the Federal Acquisition Regulations) by any
government procurement agency submitted by or against IDP or PRIMO in connection
with its Government Contract activities and neither IDP nor PRIMO has any basis
to conclude that any claims may be submitted by or against either company in
connection with past or present government contracting activities.
(f) To the knowledge of Sellers, each of IDP and PRIMO has at all times
complied in all material respects with all governmental and state rules, laws
and regulations relating to the payment of commissions or contingent fees and
those relating to disclosure of the payment of commissions or contingent fees in
connection with Government Contract activities.
(g) For purposes of this Agreement, (i) "Government Contracts" shall mean
contracts for procurements by or on behalf of any Governmental Authority,
including instances when IDP, PRIMO or Purchaser, as the case may be, has acted
as a subcontractor at any tier, and (ii) "Governmental Authority" shall mean any
government or political subdivision, whether federal, state, local or foreign,
or any agency or instrumentality of any such government or political
subdivision, or any federal, state, local or foreign court or arbitrator.
2.10 CERTAIN GOVERNMENTAL MATTERS.
(a) TAXES.
(i) Each of IDP and PRIMO has filed all federal, state and local returns,
reports, schedules, declarations and estimates related to taxes ("Tax Returns")
required to be filed. All such Tax Returns were correct and complete in all
respects. All taxes owed by IDP and PRIMO, as the case may be, for all periods
(and any portion of any period) have been paid or reflected as a liability on
the Sellers' Balance Sheet or will be reflected as a liability on the Closing
Balance Sheet. No claim has ever been made by an authority in a jurisdiction
where either IDP or PRIMO does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no security interests on any of the
assets of IDP or PRIMO that arose in connection with any failure (or asserted
failure) to pay any tax.
(ii) Each of IDP and PRIMO has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(iii) There is no dispute or claim concerning any tax liability of either of
IDP or PRIMO either (A) claimed or raised by any authority in writing or (B) as
to which any of the Sellers has knowledge based upon personal contact with any
agent of such authority. Schedule 2.10(a) lists all federal, state, local, and
foreign income tax returns filed with respect to either IDP or PRIMO for taxable
periods ended on or after January 1, 1992, indicates those tax returns that have
been audited, and indicates those tax returns that currently are the subject of
audit. The Sellers have delivered to the Purchaser correct and complete copies
of all federal, state, and foreign income tax returns, examination reports, and
statements of deficiencies assessed against or agreed to by IDP or PRIMO since
January 1, 1992.
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(iv) Neither IDP nor PRIMO has waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax assessment or
deficiency.
(v) Neither IDP nor PRIMO has filed a consent under Code Section 341(f)
concerning collapsible corporations. Neither IDP nor PRIMO has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"). Neither IDP nor PRIMO has been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii). Neither IDP
nor PRIMO is a party to any tax allocation or sharing agreement. Neither IDP nor
PRIMO (A) has been a member of an affiliated group filing a consolidated federal
income tax return, or (B) has any liability for the taxes of any person under
Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) For purposes of this Agreement, the following definitions shall apply:
"tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not; and "tax return" means any return,
declaration, report, claim for refund, or information return or statement
relating to taxes, including any schedule or attachment thereto, including any
amendment thereof.
(b) COMPLIANCE WITH LEGAL REQUIREMENTS. The business and operations of
each of IDP and PRIMO have not involved and do not now involve, and, assuming
that no changes occur in applicable law, the continuation thereof in the manner
in which they are now conducted will not involve, a violation of any material
legal requirement of or administered by any federal, state or local governmental
agency. To the extent that compliance with this Section 2.10 (b) depends upon
the existence or continuing validity of any governmental permit or other
authorization, each such permit or authorization is identified on Schedule 2.10
(b) hereto, and the Sellers have heretofore delivered or have caused to be
delivered to Purchaser true and correct copies of each thereof. Except as set
forth on Schedule 2.10(b), each such permit and other authorization is valid and
in full force and effect, and will not be affected by the execution, delivery
and performance of this Agreement and the change in control of IDP and PRIMO
resulting therefrom. All material obligations with respect to such permits and
other authorizations have been fulfilled, and no event has occurred which
allows, or after notice or lapse of time or both, would allow suspension,
revocation, material adverse variation or termination thereof or result in any
other impairment of the rights of IDP or PRIMO, and no Seller is aware of any
facts or circumstances which will or are likely to result in any of such permits
or other authorizations being suspended, revoked, materially and adversely
varied or terminated, or which may prejudice their renewal. To the knowledge of
the Sellers, all certificates of occupancy and permits necessary for the present
use and occupancy of any building by IDP or PRIMO have been obtained.
(c) ERISA. Schedule 2.10(c) attached hereto is a complete list of all
employee benefit plans, as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), life insurance,
hospitalization, medical and dental plans, severance, executive compensation,
bonus, deferred compensation, pension, retirement, profit sharing, excess
benefit, stock purchase and option plans (including multi-employer and multiple
employer plans), and all other plans, arrangements or practices whether written
or oral, qualified or nonqualified, sponsored, maintained, contributed to or
required to be contributed to by IDP or PRIMO or any trade or business whether
or not incorporated that together with IDP and/or PRIMO is treated as a "single
employer" under Section 414(b), (c), (m) or (o) of the Code and the rules and
regulations promulgated thereunder (referred to as "ERISA Affiliate") (each such
plan is hereinafter referred to as an "Employee Benefit Plan"). Neither IDP nor
PRIMO nor its
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ERISA Affiliates maintains or has any liability in respect of any Employee
Benefit Plan which is not disclosed on Schedule 2.10(c) hereto. Each Employee
Benefit Plan has been operated and administered in accordance with its
provisions and is in compliance in all respects with all applicable federal and
state laws, rules and regulations governing each such plan including but not
limited to ERISA, the Code, and the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") except to the extent that failure to so
qualify, administer or comply would not have a material adverse effect on the
business of IDP and PRIMO taken as a whole.
There have been no non-exempt "prohibited transactions" within the meaning
of Section 4975 of the Code or Section 406 of ERISA resulting in the imposition
of excise taxes or other monetary liability on IDP or PRIMO. Neither IDP nor
PRIMO nor any ERISA Affiliate has sponsored, ever maintained, or contributed to
an Employee Benefit Plan that is subject to Title IV of ERISA. Each Employee
Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the Code. No Employee Benefit Plan provides
benefits, including without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of the company or any
ERISA Affiliate beyond their retirement or other termination of service other
than coverage mandated by COBRA or applicable state or local law. There is no
pending or, to the knowledge of Sellers threatened assessment, complaint,
proceeding, voluntary compliance application or investigation of any kind in any
court or government agency with respect to any Employee Benefit Plan. All
benefits, expenses and other amounts due and payable under any Employee Benefit
Plan and all contributions, transfers or payments required to be made, accrued
or booked to any Employee Benefit Plan, have been paid or made, accrued and
booked. With respect to each Employee Benefit Plan, Sellers have heretofore
delivered to the Purchaser true and complete copies of any documents requested
by the Purchaser.
(d) WORKER'S COMPENSATION. Except as described on Schedule 2.10(d) hereto,
worker's compensation and unemployment compensation matters with respect to IDP
or PRIMO have been conducted and are being conducted so as to be in compliance
in all material respects with all laws and regulations applicable thereto.
(e) PLANT CLOSING LEGISLATION. As of the Closing Date, no employee of IDP
or PRIMO, without 60 days written notice, shall have suffered, an "employment
loss" as a result of a "plant closing" or "mass layoff" as those terms are
defined in the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
SectionSection 2101-2109 ("WARN") in either case during the six month period
ending with and including the Closing Date. Each of IDP and PRIMO is in
compliance in all material respects with the requirements of WARN.
(f) ENVIRONMENTAL MATTERS. Each of IDP and PRIMO and any other person or
entity for whose conduct they are or may be held responsible, have no liability
under, have never violated, and are presently in compliance in all material
respects with all Environmental Laws (as defined below) applicable to the
properties owned, leased or used by such parties (collectively, the "Sellers'
Properties") and any facilities and operations thereon, and, except as set forth
on Schedule 2.10(f) hereto, to the best of each Seller's knowledge, there exists
no Environmental Condition (as defined below) with respect to the Sellers'
Properties or any facilities or operations thereon, or with respect to any
property at which materials from the Sellers' Properties have been disposed.
Neither IDP, nor PRIMO, nor any Seller has generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced, or
processed any Hazardous Material (as defined below) or any solid waste on, under
or about the Sellers' Properties. Seller has no knowledge of the Release or
threat of Release (as defined below) of any Hazardous Material at the Sellers'
Properties. Neither IDP, nor PRIMO, nor any Seller has received notice under the
citizen suit provision of any Environmental Law in connection with the Sellers'
Properties or any facilities or operations thereon.
For purposes of this Agreement, (i) "Environment" shall mean soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air and any environmental medium, (ii)
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"Environmental Condition" shall mean any condition with respect to the
Environment on or off the Sellers' Properties or Purchaser Properties, as the
case may be, that could or does result in any damage, loss, cost, expense,
claim, demand, order or liability to any Seller, IDP, PRIMO or Purchaser by any
third party (including, without limitation, any government entity), including,
without limitation, any condition resulting from the operation of the business
of IDP, PRIMO or Purchaser, as the case may be, or any activity or operation in
the vicinity of the Sellers' Properties or the Purchaser Properties, as the case
may be, or any activity or operation formerly conducted by any person or entity
on or off the Sellers' Properties or the Purchaser Properties, as the case may
be, (iii) "Environmental Law" shall mean any environmental or health and safety
related law, regulation, rule, ordinance, bylaw, order or determination of any
governmental or judicial authority at the federal, state or local level, whether
existing as of the date hereof, previously enforced or subsequently enacted,
(iv) "Hazardous Material" shall include, without limitation, any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material, hazardous
substance, petroleum or petroleum product, asbestos, polychlorinated biphenyls,
underground storage tanks and the contents thereof or any other material defined
in or regulated pursuant to any Environmental Law, whether existing as of the
date hereof, previously enforced, or subsequently enacted, including, without
limitation, the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Clean Water Act, as amended, and the Toxic Substances
Control Act, as amended, and (v) "Release" shall mean any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, dumping or migrating into the Environment.
2.11 ASSETS.
(a) REAL ESTATE. Schedule 2.11(a) hereto sets forth a true and complete
list and a description of all of the land and interests in land of IDP and of
PRIMO (the "Sellers' Land") and a description of all of the buildings and other
structures of IDP and of PRIMO including leases of buildings and other
structures (and fixtures therein and improvements thereto), and the improvements
on and to the Sellers' Land (the "Sellers' Buildings"). The Sellers' Buildings
are located entirely on the Sellers' Land and, except as provided in Schedule
2.11(a) hereto, none of the Sellers' Buildings is subject to any mortgages,
liens, encumbrances, equities, restrictions, easements, rights-of-way or other
conflicting interests except (i) those items that secure liabilities that are
reflected in the Sellers' Balance Sheet, and (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith. To the knowledge
of Sellers, the Sellers' Buildings are in good structural condition except as
set forth on Schedule 2.11(a) hereto.
(b) INVENTORIES. Schedule 2.11(b) hereto sets forth a description of all
of the inventories as of December 31, 1997, of raw materials, parts, supplies,
work-in-progress and finished goods of IDP and PRIMO (the "Sellers'
Inventories"), and identifies all such inventories that, as of December 31,
1997, are more than 90 days old. Substantially all of the Sellers' Inventories
consist of quantities and qualities usable and salable in the ordinary course of
the business of IDP and PRIMO. Except as set forth on Schedule 2.11(b) hereto,
all of the Sellers' Inventories are located in the Sellers' Buildings.
(c) MACHINERY, EQUIPMENT AND OTHER TANGIBLES. Schedule 2.11(c) hereto sets
forth a description as of December 31, 1997 (including the location) of all of
the machinery, equipment and other tangible assets of every kind and description
and wheresoever situated (whether real or personal and whether attached or
unattached to real estate) which at December 31, 1997 were used or useful in the
business of IDP or PRIMO (the "Sellers' Machinery, Equipment and Other
Tangibles"). The Sellers' Machinery, Equipment and Other Tangibles are in good
operating condition and repair, ordinary wear and tear excepted, and are free of
any material defects, and are located in the Sellers' Buildings.
(d) INTELLECTUAL PROPERTY. The business and operations of neither IDP nor
PRIMO have infringed or violated or required the use of, except as set forth on
Schedule 2.11(d) hereto, and do not now infringe or violate or require the use
of, except as set forth on Schedule 2.11(d) hereto, any patent, copyright,
trademark, trade name, invention, discovery, trade secret, secret process or
other proprietary asset of any
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other person. Except as set forth in Schedule 2.11(d) hereto, there are no
patents or patentable inventions developed by any director, officer or employee
of IDP or PRIMO used or useful in the business of IDP and PRIMO considered as
one enterprise which have not been transferred to, and are not owned free of any
encumbrances by, IDP or PRIMO.
(e) ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable
reflected in the Sellers' Balance Sheet and all accounts and notes receivable
arising subsequent to the Sellers' Balance Sheet Date (the "Sellers' Accounts
and Notes Receivable"), have arisen in the ordinary course of business of IDP or
PRIMO and represent valid obligations due to IDP or PRIMO, as the case may be,
and, except as set forth on Schedule 2.11(e) hereto, have been collected or are
collectible in accordance with their terms in the ordinary course of business of
IDP or PRIMO, as the case may be, in the aggregate recorded amounts thereof less
the bad debt reserve shown on the Sellers' Balance Sheet or accrued after the
Sellers' Balance Sheet Date in accordance with past practice.
(f) ASSETS USED IN BUSINESS. Since one year before the Sellers' Balance
Sheet Date, neither IDP nor PRIMO has utilized any assets in the conduct of its
business and operations other than (i) assets reflected on the Sellers' Balance
Sheet or the combined balance sheet of IDP and PRIMO as of September 30, 1996
included in the Sellers' financial statements, (ii) assets set forth on
Schedules 2.11(a) through and including 2.11(f) hereto and (iii) supplies and
inventories consumed or disposed of by IDP or PRIMO in the ordinary course of
business.
(g) TITLE TO ASSETS. Except as set forth on Schedule 2.11(g) hereto,
either IDP or PRIMO has good, and as to owned real property, marketable, title
to, or in the case of property held under lease, a valid and enforceable right
to use, all of the Sellers' Land, Buildings, Inventories, Machinery, Equipment
and Other Tangibles, Intellectual Property, Accounts and Notes Receivable and
all assets reflected in the Sellers' Balance Sheet except those disposed of in
the ordinary course of business since the Sellers' Balance Sheet Date, and such
assets are not subject to any Liens except as set forth on Schedule 2.11(g)
hereto except (i) those items that secure liabilities that are reflected in the
Sellers' Balance Sheet and (ii) statutory liens for amounts not yet delinquent
or which are being contested in good faith. None of the assets of either IDP or
PRIMO are subject to any pending or, to the knowledge of Sellers, threatened
judicial order, ordinance or planning restriction as to which any Seller has
knowledge which might have a material adverse effect on the business of IDP and
PRIMO. Except as affected by the transactions contemplated hereby, IDP and PRIMO
as lessees have the right under valid and subsisting leases to occupy, use,
possess and control all real property leased by IDP and PRIMO as presently
occupied, used, possessed and controlled by IDP and PRIMO.
(h) PRIMO ASSETS. The assets of PRIMO reflected on the PRIMO Balance
Sheet, the names "PRIMO" and "Puerto Rico Industrial Manufacturing Operations
Corp.", and all other assets of PRIMO and all contracts to which PRIMO is a
party, other than assets disposed of in the ordinary course of business since
the date of the PRIMO Balance Sheet, are the "PRIMO Assets."
2.12 INSURANCE. All of the assets of IDP and of PRIMO are insured in
accordance with good industry practice with respect to loss due to fire and
other risks (except that PRIMO does not have product liability insurance), in
amounts and coverage which are reasonable and customary in light of the business
conducted by IDP or PRIMO, as the case may be, pursuant to the policies of
insurance listed and described on Schedule 2.8(a)(x) hereto. All insurance
policies in effect on the date hereof which relate to product liability of IDP,
together with the amounts reserved on the Sellers' Balance Sheet for product
liability and expenses to contest product liability, are in amounts and coverage
which are reasonable and customary in light of the business conducted by IDP.
The amount of insurance coverage with respect to the risks associated with the
operation of PRIMO meet the minimum requirements mandated by the government of
Puerto Rico.
2.13 DISTRIBUTIONS. PREPAYMENT. ETC. Except as set forth on Schedule 2.13
hereto, neither IDP nor PRIMO has since the Sellers' Balance Sheet Date sold or
disposed of, or created Liens upon, any material
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assets, except in the ordinary course of business. Except as set forth on
Schedule 2.13 hereto, neither IDP nor PRIMO has since the Sellers' Balance Sheet
Date declared or paid any dividend or made any other distribution to any of its
shareholders; and has not prepaid or otherwise discharged any outstanding
indebtedness, or made any expenditures or disbursements of funds or commitments,
except in the ordinary course of business.
2.14 CONCERNING EMPLOYEES.
(a) LABOR RELATIONS. Except as described on Schedule 2.14(a) hereto, there
are no labor controversies pending against either IDP or PRIMO in the form of a
proceeding, claim or litigation. Neither IDP nor PRIMO has, with respect to its
employees, recognized any labor organization; no such organization has been
certified as the exclusive bargaining agent of any such employees; there has
been no demand on behalf of any labor organization to represent any such
employees; and no Seller has any knowledge of any present efforts of any labor
organization seeking to represent any such employees. Except as set forth on
Schedule 2.14(a) hereto, neither IDP nor PRIMO has had, and to the knowledge of
any Seller there is not now threatened, a strike, work stoppage or work
slowdown.
(b) Set forth on Schedule 2.14(b) hereto is a true and complete list of all
employees of IDP and of PRIMO and their respective compensation (including
commissions and bonuses), dates of birth and dates of hire.
(c) There are no employee benefits provided by IDP or PRIMO except for
benefits disclosed on Schedule 2.8(a)(viii) or Schedule 2.10(c) hereto and
matters covered by insurance.
2.15 WARRANTIES. All products and services have been produced, performed
or sold heretofore by IDP and by PRIMO in a condition which meets all applicable
written warranty obligations and applicable governmental and industry standards,
codes and regulations.
2.16 BOOKS AND RECORDS. All books and records of IDP and of PRIMO are in
all material respects complete and correct and have been maintained in
accordance with good industry practice and have heretofore been made available
to Purchaser.
2.17 INVESTMENT INTENT. The IDP Sellers are purchasing the shares included
in the Share Portion for their own account and each IDP Seller has the present
intention of holding such shares for investment purposes and not with a view to
any public distribution of such shares in violation of any federal or state
securities laws.
2.18 REGISTRATION STATEMENT. To the best knowledge and belief of the IDP
Sellers, the descriptions of IDP and PRIMO and their historical businesses and
operations contained in the registration statement of AHC (Dunn Computer
Corporation), draft of the date hereof do not contain any untrue statement of
material fact and do not omit to state a material fact required in order to make
the statements therein not misleading. This representation is made only by the
IDP Sellers.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND AHC
The Purchaser (which term shall mean for purposes of this Article III the
Purchaser and Dunn Computer Corporation, a Virginia corporation, except where
the context requires otherwise) and AHC hereby represent and warrant to the
Sellers as follows:
3.1 ORGANIZATION OF PURCHASER AND RELATED MATTERS. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite power and authority to enter into and perform
this Agreement. Dunn Computer Corporation, a Virginia corporation, is a
wholly-owned subsidiary of the Purchaser, is duly organized, validly existing
and in good standing under the laws of Virginia, and has all requisite power and
authority to own its assets and to carry on its business as it has been and is
conducted.
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3.2 DUE AUTHORIZATION AND EXECUTION; NO CONFLICT. This Agreement has been
duly and validly authorized, executed and delivered by the Purchaser and
constitutes a valid and legally binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms. The execution, delivery and
performance of this Agreement by the Purchaser does not and will not conflict
with or violate its charter and by-laws or any term of any agreement, contract,
instrument, lease, commitment or other obligation to which the Purchaser is a
party or by which the Purchaser is bound, or any order, judgment or decree to
which the Purchaser is a party or subject, by which any properties and assets of
the Purchaser are bound, or any provision of any applicable law, statute,
ordinance, rule, regulation or common law obligation and will not result in the
creation or imposition of any Lien in favor of any third party with respect to
any of the properties and assets of Purchaser. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
the Purchaser and AHC will not require the consent or approval of or notice to
any governmental authority, or constitute a violation of any law, regulation or
order of any such authority by the Purchaser or AHC, and neither the Purchaser
nor AHC is a party to or bound by any agreement, instrument, order, judgement or
decree which would require the consent of another person to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
3.3 CAPITALIZATION. The authorized capital stock of the Purchaser is
20,000,000 shares of Dunn Computer Corporation common stock, $.001 par value per
share ("Purchaser Common") of which (i) 5,150,000 shares are issued and
outstanding, (ii) 2,200,000 shares underlie employee stock options that may be
granted pursuant to the 1997 stock option plan of Purchaser, options to purchase
1,832,000 shares have been granted in accordance therewith, (iii) 25,000 shares
underlie options granted to Barry D. Bergman and Jacqueline L. Bergman in
September 1997 in connection with the Purchaser's acquisition of STMS, and (iv)
100,000 shares underlie warrants held by the underwriters in the initial public
offering of the shares of Purchaser, and 2,000,000 shares of Dunn Computer
Corporation preferred stock, $.001 par value per share, none of which have been
issued, and there is no present intention to issue any such shares. All of such
Purchaser Common are, or when issued upon exercise of such employee stock
options or such warrants will be, duly authorized, validly issued and
outstanding, fully paid and non-assessable. There are no voting trust agreements
or other agreements restricting or otherwise relating to the voting, dividend
rights or the disposition of any Purchaser Common. Except as set forth above,
there are no Purchaser Common reserved for issuance. All of the outstanding
Purchaser Common, and all of the Purchaser Common which underlie such employee
stock options and warrants will be converted into shares of Dunn Common on a
one-for-one basis pursuant to the Agreement of Merger.
3.4 INTERIM OPERATIONS--ORDINARY COURSE. The business of the Purchaser has
been conducted only in the ordinary and usual course since the Purchaser Balance
Sheet Date.
3.5 ABSENCE OF ADVERSE CHANGE. There has not been, since the Purchaser
Balance Sheet Date any material adverse change in the business, assets,
financial condition or prospects of the Purchaser. There has been no occurrence,
circumstance or combination thereof which might reasonably be expected to result
in any such material adverse change.
3.6 INVESTMENT INTENT. AHC is purchasing the IDP Shares for its own
account and AHC has the present intention of holding the IDP Shares for
investment purposes and not with a view to any public distribution of the IDP
Shares in violation of any federal or state securities laws.
3.7 REPORTS.
(a) As of their respective dates, none of the registration statement of AHC
on Form S-1, expected to be filed with the SEC soon after the date hereof, or
the related Prospectus nor the Purchaser's Annual Report on Form 10-KSB for the
fiscal year ended October 31, 1997, nor any other document filed under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
hereof, each in the form (including exhibits and any documents specifically
incorporated by reference therein) filed with the SEC contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
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material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(b) The Purchaser has timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since April 21, 1997, with (i) any federal
or state regulatory authority having jurisdiction over the Purchaser, (ii) the
SEC, and (iii) the National Association of Securities Dealers, Inc., and any
other self-regulatory organization), and has paid all fees and assessments due
and payable in connection therewith.
3.8 FINANCIAL STATEMENTS. The Purchaser has delivered to the Sellers the
statement of profit and loss for the years ended October 31, 1996 and 1997 and
the balance sheet as at October 31, 1996 and 1997 (the balance sheet at October
31, 1997 shall be referred to as the "Purchaser Balance Sheet" and October 31,
1997 shall be referred to as the "Purchaser Balance Sheet Date"), as audited by
Purchaser's Accountants (collectively, the "Purchaser Financial Statements").
The Purchaser Financial Statements were prepared in accordance with generally
accepted accounting principles, consistently applied as in prior periods, are
correct and complete, and fairly present the financial condition of Purchaser
and the results of its operations as of the dates and for the periods indicated
therein.
3.9 LIABILITIES. The Purchaser has no liabilities or obligations (whether
accrued, absolute, contingent, known, unknown, derivative or otherwise) other
than those (i) reflected in the Purchaser Balance Sheet or the notes thereto and
not since paid or otherwise discharged, (ii) listed or described on any Schedule
hereto and (iii) liabilities arising after the Purchaser Balance Sheet Date in
the ordinary course of business of Purchaser.
3.10 LITIGATION. Except for the Pulsar litigation involving a dispute as
to a rebate from Hewlett-Packard in the amount of approximately $125,000, there
is no action, suit, proceeding, arbitration, demand, claim or investigation
pending or, to Purchaser's knowledge, threatened against or involving Purchaser
or affecting or which might materially adversely affect this Agreement or the
business or assets of Purchaser or the consummation of the transactions
contemplated hereby before any court or arbitral tribunal or before or by any
governmental department, agency or body, or otherwise. Purchaser is not subject
to any judgment, order, writ, injunction, decree, settlement agreement,
compliance agreement or consent decree of any court, administrative or
governmental authority or arbitrator except as set forth on Schedule 3.10
hereto.
3.11 AGREEMENTS AND COMMITMENTS. Each of the contracts, agreements,
commitments, licenses and leases to which Purchaser is a party, is a valid,
legally binding and enforceable obligation of Purchaser, and is in full force
and effect. There is no default by Purchaser or, to the knowledge of Purchaser,
by the other parties thereto under the terms of any such material contract,
commitment, license or lease, and no condition (including without limitation,
the execution, delivery and performance of this Agreement) exists which, with
the passage of time, the giving of notice, or both, is likely to result in a
default by Purchaser under the terms of any thereof.
3.12 GOVERNMENT CONTRACTS.
(a) To the knowledge of Purchaser, Purchaser has complied in all material
respects with all applicable laws, rules, policies, procedures, regulations,
accounting standards, cost principles, cost accounting standards, solicitation
provisions and contract clauses in conducting all past and present activities
relating to Government Contracts and Government Contract procurements,
including, without limitation, accounting and record keeping activities,
disclosures, reports, wage and hour regulations, certifications and
representations, product testing, marketing activities, proposal and bid
preparation and submissions, negotiations and contract performance. To the
knowledge of Purchaser, all proposals, representations, statements, disclosures,
reports, invoices and certifications made in connection with Government
Contracts were, when made, current, accurate and complete in all material
respects. Except as set forth on Schedule 3.12 hereto, there are not now, nor
have there been since the formation of Purchaser, any government investigations
or
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audits of Purchaser, or any officer or employee of Purchaser in connection with
Government Contract activities. Each Government Contract of Purchaser is
expected to finish on schedule and within budget and Purchaser presently does
not have any basis to conclude that existing schedules or budgets are not
reasonable.
(b) To the knowledge of Purchaser, Purchaser has not been determined by a
governmental agency to be "non-responsible" in connection with any Government
Contract procurement. Purchaser has not received any notice and Purchaser is not
aware of any circumstances that reasonably would be expected to justify such a
notice, that any of its Government Contracts have been or may be terminated for
default. Purchaser is not debarred or suspended, nor proposed for debarment or
suspension from procurements or other activities at the federal, state or local
governmental levels, and Purchaser is not aware of any circumstances that would
justify a proposal or decision to suspend or debar Purchaser from procurement or
other activities. Purchaser and its personnel have all necessary security
clearances to perform outstanding Government Contracts and Purchaser is not
aware of any circumstances that may lead to the suspension or revocation of such
security clearances. Purchaser has not engaged in any illegal or fraudulent
conduct in connection with Government Contract activities.
(c) Purchaser has not received written notice from, or engaged in any
discussions with, any Governmental Authority regarding the termination of any
Government Contract, the cessation of any delivery orders thereunder, any
reduction by any Governmental Authority in the amount of its business with the
Purchaser or allegations of defective pricing in connection with Government
Contract activities.
(d) There are no outstanding claims (as defined by the Federal Acquisition
Regulations) by any government procurement agency submitted by or against
Purchaser in connection with its Government Contract activities and Purchaser
has no basis to conclude that any claims may be submitted by or against
Purchaser in connection with past or present government contracting activities.
(e) To the knowledge of Purchaser, Purchaser has at all times complied in
all material respects with all governmental and state rules, laws and
regulations relating to the payment of commissions or contingent fees and those
relating to disclosure of the payment of commissions or contingent fees in
connection with Government Contract activities.
3.13 CERTAIN GOVERNMENTAL MATTERS.
(a) TAXES.
(i) Purchaser has filed all Tax Returns required to be filed. All such Tax
Returns were correct and complete in all respects. As of the Purchaser Balance
Sheet Date, all taxes owed by Purchaser for all periods (and any portion of any
period) have been paid or reflected as a liability on the Purchaser Balance
Sheet. No claim has ever been made by an authority in a jurisdiction where
Purchaser does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no security interests on any of the assets of
Purchaser that arose in connection with any failure (or asserted failure) to pay
any tax.
(ii) Purchaser has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(iii) There is no dispute or claim concerning any tax liability of Purchaser
either (A) claimed or raised by any authority in writing or (B) as to which
Purchaser has knowledge based upon personal contact with any agent of such
authority.
(iv) Purchaser has not waived any statute of limitations in respect of taxes
or agreed to any extension of time with respect to a tax assessment or
deficiency.
(b) COMPLIANCE WITH LEGAL REQUIREMENTS. The business and operations of
Purchaser have not involved and do not now involve, and, assuming that no
changes occur in applicable law, the continuation
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thereof in the manner in which they are now conducted will not involve, a
violation of any material legal requirement of or administered by any federal,
state or local governmental agency. Except as set forth on Schedule 3.13(b),
each permit and other authorization of Purchaser is valid and in full force and
effect, and will not be affected by the execution, delivery and performance of
this Agreement. All material obligations with respect to such permits and other
authorizations have been fulfilled, and no event has occurred which allows, or
after notice or lapse of time or both, would allow suspension, revocation,
material adverse variation or termination thereof or result in any other
impairment of the rights of Purchaser, and Purchaser is not aware of any facts
or circumstances which will or are likely to result in any of such permits or
other authorizations being suspended, revoked, materially and adversely varied
or terminated, or which may prejudice their renewal. All certificates of
occupancy and permits necessary for the present use and occupancy of any
building by Purchaser have been obtained.
(c) ERISA. Neither Purchaser nor its ERISA Affiliates maintains or has any
liability in respect of any Employee Benefit Plan. Each Employee Benefit Plan
has been operated and administered in accordance with its provisions and is in
compliance in all respects with all applicable federal and state laws, rules and
regulations governing each such plan including but not limited to ERISA, the
Code, and COBRA except to the extent that failure to so qualify, administer or
comply would not have a material adverse effect on the business of Purchaser.
There have been no non-exempt "prohibited transactions" within the meaning
of Section 4975 of the Code or Section 406 of ERISA resulting in the imposition
of excise taxes or other monetary liability on Purchaser. Neither Purchaser nor
any ERISA Affiliate has sponsored, ever maintained, or contributed to an
Employee Benefit Plan that is subject to Title IV of ERISA. Each Employee
Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the Code. No Employee Benefit Plan provides
benefits, including without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of Purchaser or any
ERISA Affiliate beyond their retirement or other termination of service other
than coverage mandated by COBRA or applicable state or local law. There is no
pending or, to the knowledge of Purchaser, threatened assessment, complaint,
proceeding, voluntary compliance application or investigation of any kind in any
court or government agency with respect to any Employee Benefit Plan. All
benefits, expenses and other amounts due and payable under any Employee Benefit
Plan and all contributions, transfers or payments required to be made, accrued
or booked to any Employee Benefit Plan, have been paid or made, accrued and
booked.
(d) WORKER'S COMPENSATION. Worker's compensation and unemployment
compensation matters with respect to Purchaser have been conducted and are being
conducted so as to be in compliance in all material respects with all laws and
regulations applicable thereto.
(e) PLANT CLOSING LEGISLATION. As of the Closing Date, no employee of
Purchaser, without 60 days written notice, shall have suffered, an "employment
loss" as a result of a "plant closing" or "mass layoff" as those terms are
defined in WARN. Purchaser is in compliance in all material respects with the
requirements of WARN in either case during the six month period ending with and
including the Closing Date.
(f) ENVIRONMENTAL MATTERS. Purchaser and any other person or entity for
whose conduct it is or may be held responsible, have no liability under, have
never violated, and are presently in compliance in all material respects with
all Environmental Laws applicable to the properties owned, leased or used by
such parties (collectively, the "Purchaser Properties") and any facilities and
operations thereon, and, to the best of Purchaser's knowledge, there exists no
Environmental Condition with respect to the Purchaser Properties or any
facilities or operations thereon, or with respect to any property at which
materials from the Purchaser Properties have been disposed. Purchaser has not
generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced, or processed any Hazardous Material or any
solid waste on, under or about the Purchaser Properties. Purchaser has no
knowledge of the Release or
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threat of Release of any Hazardous Material at the Purchaser Properties.
Purchaser has not received notice under the citizen suit provision of any
Environmental Law in connection with the Purchaser Properties or any facilities
or operations thereon.
3.14 ASSETS.
(a) REAL ESTATE. None of the real estate assets of Purchaser is subject to
any mortgages, liens, encumbrances, equities, restrictions, easements,
rights-of-way or other conflicting interests. To the knowledge of Purchaser, the
real estate assets of Purchaser are in good structural condition.
(b) INVENTORIES. Substantially all of the Purchaser's inventories consist
of quantities and qualities usable and salable in the ordinary course of the
business of Purchaser.
(c) MACHINERY, EQUIPMENT AND OTHER TANGIBLES. The Purchaser's machinery,
equipment and other tangibles are in good operating condition and repair,
ordinary wear and tear excepted, and are free of any material defects, and are
located at the Purchaser Properties.
(d) INTELLECTUAL PROPERTY. The business and operations of Purchaser have
not infringed or violated or required the use of, and do not now infringe or
violate or require the use of, any patent, copyright, trademark, trade name,
invention, discovery, trade secret, secret process or other proprietary asset of
any other person. There are no patents or patentable inventions developed by any
director, officer or employee of Purchaser used or useful in the business of
Purchaser which have not been transferred to, and are not owned free of any
encumbrances by, Purchaser.
(e) ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable of
Purchaser have arisen in the ordinary course of business of Purchaser and
represent valid obligations due to Purchaser, and have been collected or are
collectible in accordance with their terms in the ordinary course of business of
Purchaser in the aggregate recorded amounts thereof less the bad debt reserve
shown on the Purchaser's balance sheet in accordance with past practice.
(f) ASSETS USED IN BUSINESS. Since one year before the Purchaser Balance
Sheet Date, Purchaser has not utilized any assets in the conduct of its business
and operations other than (i) assets reflected on the Purchaser Balance Sheet
and (ii) supplies and inventories consumed or disposed of by Purchaser in the
ordinary course of business.
(g) TITLE TO ASSETS. Purchaser has good, and as to owned real property,
marketable, title to, or in the case of property held under lease, a valid and
enforceable right to use, all of Purchaser's land, buildings, inventories,
machinery, equipment and other tangibles, intellectual property, accounts and
notes receivable and all assets reflected in the Purchaser Balance Sheet except
those disposed of in the ordinary course of business since the Purchaser Balance
Sheet Date, and such assets are not subject to any Liens. None of the assets of
Purchaser are subject to any pending or, to the knowledge of Purchaser,
threatened judicial order, ordinance or planning restriction as to which
Purchaser has knowledge which might have a material adverse effect on the
business of Purchaser. Purchaser as lessee has the right under valid and
subsisting leases to occupy, use, possess and control all real property leased
by Purchaser as presently occupied, used, possessed and controlled by Purchaser.
3.15 INSURANCE. All of the assets of Purchaser are insured in accordance
with good industry practice with respect to loss due to fire and other risks in
amounts and coverage which are reasonable and customary in light of the business
conducted by Purchaser.
3.16 DISTRIBUTIONS. PREPAYMENT. ETC. Since the Purchaser Balance Sheet
Date, Purchaser has not sold or disposed of, or created Liens upon, any material
assets, except in the ordinary course of business. Since the Purchaser Balance
Sheet Date, Purchaser has not declared or paid any dividend or made any other
distribution to any of its shareholders; and has not prepaid or otherwise
discharged any outstanding indebtedness, or made any expenditures or
disbursements of funds or commitments, except in the ordinary course of
business.
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3.17 EMPLOYEE MATTERS. There are no labor controversies pending against
Purchaser in the form of a proceeding, claim or litigation. Purchaser has not,
with respect to its employees, recognized any labor organization; no such
organization has been certified as the exclusive bargaining agent of any such
employees; there has been no demand on behalf of any labor organization to
represent any such employees; and Purchaser has no knowledge of any present
efforts of any labor organization seeking to represent any such employees.
Except as set forth on Schedule 3.17 hereto, Purchaser has not had, and to the
knowledge of Purchaser, there is not now threatened, a strike, work stoppage or
work slowdown.
3.18 WARRANTIES. All products and services have been produced, performed
or sold heretofore by Purchaser in a condition which meets all applicable
written warranty obligations and applicable governmental and industry standards,
codes and regulations.
3.19 BOOKS AND RECORDS. All books and records of Purchaser are in all
material respects complete and correct and have been maintained in accordance
with good industry practice.
3.20 ORGANIZATION OF AHC AND RELATED MATTERS. AHC is a corporation duly
organized, validly existing and in good standing under the laws of Virginia. AHC
has engaged in no business since the date of its incorporation, except for
entering into this Agreement and preparing and filing the Registration Statement
in connection with the proposed IPO (the "Registration Statement"), and will
engage in no business until the Closing except amending the Registration
Statement. The execution, delivery and performance of this Agreement by AHC does
not and will not conflict with or violate its charter and by-laws or any term of
any agreement, contract, instrument, lease, commitment or other obligation to
which AHC is a party or by which AHC is bound, or any order judgment or decree
to which AHC is a party or subject, by which any properties and assets of AHC
are bound, or any provision of any applicable law, statute, ordinance, rule or
regulation and will not result in the creation or imposition of any Lien in
favor of any third party with respect to any of the properties and assets of
AHC.
3.21 DUE AUTHORIZATION AND EXECUTION BY AHC. AHC has all requisite power
and authority to execute, deliver and perform this Agreement. This Agreement has
been duly and validly executed and delivered by AHC, and constitutes a valid and
binding obligation of AHC enforceable against AHC in accordance with its terms.
3.22 CAPITALIZATION OF AHC. The authorized capital stock of AHC is
20,000,000 shares of common stock, $.001 par value per share ("Dunn Common"), of
which (i) 5,150,000 shares will be issued in the Merger, (ii) 2,200,000 shares
will underlie employee stock options granted pursuant to the 1997 stock option
plan of Purchaser (which plan will be adopted by and become a plan of AHC),
1,832,000 of which have been issued in accordance therewith, (iii) 25,000 shares
will underlie options granted to Barry D. Bergman and Jacqueline L. Bergman in
September 1997 in connection with the Purchaser's acquisition of STMS (which
options will be adopted by and become options of AHC), (iv) 100,000 shares will
underlie warrants held by the underwriters in the initial public offering of the
shares of Purchaser (which warrants will be adopted by and become warrants of
AHC), (v) 7,500,000 shares are proposed to be issued in the IPO, (vi) 750,000
shares will be issued as provided in Section 1.3 hereof, and (vii) 600,000
shares underlie options to be issued (300,000 to each) to the IDP Sellers
pursuant to the employment agreements referred to in Sections 5.1(e) and 5.2(d),
subject to increase to 800,000 (400,000 to each IDP Seller) as provided in such
agreements, and 2,000,000 shares of preferred stock, $.001 par value per share,
none of which have been issued, and there is no present intention to issue any
such shares. All of such shares of Dunn Common when issued will be duly
authorized, validly issued and outstanding, fully paid and non-assessable. There
are no voting trust agreements or other agreements restricting or otherwise
relating to the voting, dividend rights or the disposition of any shares of Dunn
Common.
3.23 CONCERNING MERGER SUB. Merger Sub will be organized by AHC solely for
the purpose of carrying out the Merger; AHC will own all of the outstanding
shares of capital stock of Merger Sub; there will be no options, warrants or
rights to acquire shares of Merger Sub outstanding ; and Merger Sub will
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<PAGE>
engage in no business activity and will hold no assets other than those
necessary to consummate the Merger.
IV. PRE-CLOSING COVENANTS
4.1 PRESS RELEASES. Prior to the Closing, no party will issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior consent
of, the other (in the case of the Sellers, George Fuster or D. Oscar Fuster)
which consent will not be unreasonably withheld; provided, however, that nothing
herein will prohibit any party from issuing or causing the publication of any
such press release or public announcement to the extent that such party
determines such action to be required by law or the rules of any stock exchange
applicable to it, in which case the party making such determination will use
reasonable efforts to allow the other parties reasonable time to comment on such
release or announcement in advance of its issuance.
4.2 REGISTRATION STATEMENT. From the date hereof until the Closing Date,
the Sellers and AHC and the Purchaser will cooperate among themselves and use
all reasonable efforts to respond to comments of the Securities and Exchange
Commission ("SEC"), prepare amendments to the Registration Statement, and
generally to seek to have the Registration Statement declared effective by the
SEC as soon as is practicable.
4.3 CONFIDENTIAL NATURE OF INFORMATION. Subject to Section 4.1, whether or
not the Closing occurs, each of the parties hereto will treat, and will cause
their respective advisors and representatives (collectively, "Representatives")
to treat, in confidence all documents, materials and other information disclosed
by the other party, whether during the course of the negotiations leading to the
execution of this Agreement or thereafter, in its investigation of the other
party and in the preparation of agreements and other documents relating to the
consummation of such transactions. Prior to the Closing, and if this Agreement
is terminated, none of the parties will use, and each of them will cause its
Representatives not to use in its business, any non-public information furnished
by any other party. If this Agreement is terminated, each of the parties will
return, and will cause its Representatives to return, to the other party all
originals and copies of non-public documents and materials of the type provided
for in this Section 4.3 which have been furnished in connection with this
Agreement.
4.4 OPERATION OF THE BUSINESS.
(a) Except as contemplated herein or as otherwise consented to by the
Purchaser in writing (which consent will not be unreasonably withheld), prior to
the Closing, the Sellers will cause IDP and PRIMO to:
(i) Use reasonable efforts to keep the business of IDP and of PRIMO intact
and not take or knowingly permit to be taken or do or knowingly suffer to be
done anything other than in the ordinary course of business as the same is
presently being conducted, to maintain the goodwill and reputation associated
with their business;
(ii) Continue their existing practices relating to the maintenance of assets
used in their business;
(iii) Not purchase, sell, lease or dispose of, or make any contract for the
purchase, sale, lease or disposition of, or subject to Lien, any assets other
than in the ordinary course of their business;
(iv) Except to the extent required by law or specifically provided for
elsewhere herein or on Schedule 4.4(d) hereto, not increase the rates of
compensation of any employee except for normal salary increases in the ordinary
course of business consistent with past practice; and
(v) Not amend their governing documents or make any change in their capital
stock or grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock
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<PAGE>
(b) Except as contemplated herein or as otherwise consented to by the IDP
Sellers in writing (which consent will not be unreasonably withheld), prior to
the Closing, the Purchaser (which shall mean for purposes of this Section 4.4(b)
the Purchaser and Dunn Computer Corporation, a Virginia corporation and AHC)
will:
(i) Use reasonable efforts to keep the business of the Purchaser intact and
not take or not permit to be taken or do or knowingly suffer to be done anything
other than in the ordinary course of business as the same is presently being
conducted, and to maintain the goodwill and reputation associated with the
business of the Purchaser;
(ii) Continue its existing practices relating to the maintenance of assets
used in its business; and
(iii) Not amend its governing documents, or make any change in its capital
stock or, except pursuant to the Purchaser's existing Employee Stock Option
Plan, grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock.
4.5 SATISFACTION OF CONDITIONS. Prior to the Closing, each of the parties
hereto will use reasonable efforts to satisfy promptly all conditions required
hereby to be satisfied by such party in order to expedite the consummation of
the transactions contemplated hereby.
4.6 REGISTRATION STATEMENT, AMENDMENTS. At the time the Registration
Statement is filed with the SEC and at the time each amendment thereto is filed
with the SEC, the IDP Sellers shall certify in writing to AHC and the Purchaser
to the effects set forth in Section 2.18 hereof to their best knowledge and
belief, referring to the relevant filing.
4.7 WAIVERS BY SMALL BUSINESS ADMINISTRATION. The Purchaser and the IDP
Sellers shall, together, use reasonable efforts to seek to have IDP's
governmental counterparty in each "Section 8(a)" contract request from the Small
Business Administration a waiver of termination for convenience that would
result from the transfer of control of IDP upon the Closing.
V. CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER. The obligations
of the Purchaser under this Agreement to consummate the transactions
contemplated hereby are subject to the satisfaction, at or prior to the Closing,
of all of the following conditions, any one or more of which, other than the
condition set forth in Section 5.1(i) hereof, may be waived at the option of the
Purchaser:
(a) NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by the Sellers in the performance of any of
the covenants herein to be performed by them prior to the Closing, and the
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing, except for
representations and warranties made as of a specified date (other than those
contained in Sections 2.11(e) and (f) which shall be dated within two weeks of
the Closing Date), which shall be true and correct in all material respects as
of the specified date, and the Sellers shall have delivered to the Purchaser a
certificate of all of the Sellers certifying each of the foregoing, dated the
Closing Date;
(b) TRANSFER DOCUMENTS. There shall have been delivered to AHC by the IDP
Sellers certificates representing the IDP Shares, which certificates shall be
duly endorsed for transfer or accompanied by duly executed stock powers. There
shall have been delivered to PAC bills of sale and all other documents
appropriate to transfer to PAC all of the PRIMO Assets. There shall have been
entered into assignment and assumption agreements as to all of the contracts of
PRIMO and the PRIMO Liabilities transferring such contracts and Liabilities to
PAC.
(c) CONSENTS; NO LEGAL OBSTRUCTION. Except for (i) the approval of the tax
authority in Puerto Rico, (ii) any approval of the Small Business
Administration, and (iii) the approvals marked with an asterisk,
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<PAGE>
each as referred to on Schedule 2.3 hereto, the governmental and private
approvals and consents identified on Schedule 2.3 hereto shall have been
obtained and shall be in full force and effect. As to the approvals and consents
marked with an asterisk, the Sellers shall use commercially reasonable efforts
to obtain them. There shall not have been entered a preliminary or permanent
injunction, temporary restraining order or other judicial or administrative
order or decree in any jurisdiction, the effect of which prohibits the Closing;
(d) NO MATERIAL ADVERSE CHANGE. Without limiting the generality of Section
5.1(a), since the Sellers' Balance Sheet Date, no material adverse change shall
have occurred with respect to the financial condition, assets or business of IDP
and PRIMO considered as one entity;
(e) EMPLOYMENT AGREEMENTS. IDP and PRIMO shall have entered into
employment agreements with each of George Fuster and D. Oscar Fuster in the
forms attached as Exhibits D and E hereto;
(f) CERTAIN INDEBTEDNESS. The IDP indebtedness in the principal amount of
$1,557,057 as of January 31, 1998, running to the Sellers and certain relatives
of the Sellers and set forth on Exhibit F hereto shall have been refinanced (i)
to provide for three year terms and interest rates of 8% per annum in the case
of indebtedness running to a Seller and (ii) to provide for one year terms and
interest rates of 11% per annum in the other cases. The IDP Sellers shall cause
IDP and PRIMO not to incur indebtedness from any Seller or any relative of any
Seller other than on commercially reasonable and arms length terms between the
date hereof and the Closing Date.
(g) The Redemption provided for in Sections 1.9 and 1.10 hereof shall have
occurred.
(h) OPINION OF COUNSEL. The Sellers shall have furnished to the Purchaser
a favorable opinion of Thacher Proffitt & Wood dated the Closing Date
substantially in the form attached as Exhibit H hereto.
(i) CONCURRENT PUBLIC OFFERING. The IPO in which the net proceeds are at
least equal to the Cash Portion shall have occurred, and the shares of Dunn
Common to be issued in the Merger and such shares to be issued in the IPO shall
have been designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The obligations of
the Sellers under this Agreement to consummate the transactions contemplated
hereby are subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any of or more of which, other than the condition set
forth in Section 5.2(j) hereof, may be waived at the option of the Sellers:
(a) NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by the Purchaser in the performance of any of
the covenants herein to be performed by it prior to the Closing, and the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing, except for
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date, and the Purchaser
shall have delivered to the Sellers a certificate certifying each of the
foregoing, dated the Closing Date and signed by one of its executive officers on
its behalf;
(b) PURCHASE PRICE. AHC shall have (i) delivered to the IDP Sellers share
certificates standing in the respective names of the IDP Sellers representing
the Share Portion of the Purchase Price and (ii) delivered to the IDP Sellers
the IDP Cash Amount and to PRIMO the PRIMO Cash Amount.
(c) NO LEGAL OBSTRUCTION. There shall not have been entered a preliminary
or permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing;
(d) EMPLOYMENT AGREEMENTS. IDP and PRIMO shall have entered into
employment agreements with each of George Fuster and D. Oscar Fuster in the
forms attached as Exhibits D and E hereto;
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<PAGE>
(e) NO MATERIAL ADVERSE CHANGE. Without limiting the generality of Section
5.2(a), since the date of this Agreement, no material adverse change shall have
occurred with respect to the financial condition, assets, business or prospects
of the Purchaser;
(f) REGISTRATION RIGHTS AGREEMENT. AHC shall have entered into a
registration rights agreement in the form attached as Exhibit I hereto.
(g) OPINION OF COUNSEL. The Purchaser shall have furnished to the Sellers
a favorable opinion of Jones, Day, Reavis & Pogue dated the Closing Date
substantially in the form set forth in Exhibit J hereto.
(h) FAIRNESS OPINION. Purchaser shall have received an opinion from Ferris
Baker Watts, to the effect that, in its opinion, the consideration to be paid by
the Purchaser hereunder is fair to the Purchaser and its stockholders from a
financial point of view ("Fairness Opinion"), and Purchaser shall not have taken
any action which causes Ferris Baker Watts to withdraw its Fairness Opinion
prior to Closing;
(i) DIRECTORS. George Fuster and D. Oscar Fuster shall be duly appointed
by the Boards of Directors of AHC and PAC to the Boards of Directors of AHC and
PAC effective on the Closing Date;
(j) CONCURRENT PUBLIC OFFERING. The IPO in which the net proceeds are at
least equal to the Cash Portion shall have occurred.
VI. THE CLOSING.
6.1 THE CLOSING. Subject to the fulfillment of the conditions precedent
specified in Article V, the Closing will take place concurrently with the
closing of the IPO or on such other date as the parties may agree. The Closing
will take place at the offices of Jones, Day, Reavis & Pogue at 1450 G Street,
N.W., Washington, D.C. 20005.
6.2 SELLERS' OBLIGATIONS. At the Closing, the Sellers will deliver to the
Purchaser the following:
(a) TRANSFER DOCUMENTS. The documents referred to in Section 5.1(b);
(b) RECEIPTS. Appropriate receipts; and
(c) OTHER. All other documents and papers required to be delivered by
Section 5.1 as conditions to the Closing.
6.3 AHC'S OBLIGATIONS. At the Closing, AHC will deliver to the Sellers:
(a) PURCHASE PRICE. The Purchase Price, in the manner specified in
Sections 1.3, 1.4 and 1.7; and
(b) OTHER. All other documents and papers required to be delivered by
Section 5.2 as conditions to the Closing.
VII. SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the Sellers and of the Purchaser and AHC
herein shall survive until and including the second anniversary of the Closing,
provided that the representations and warranties of the Sellers contained in
Sections 2.2, 2.5, 2.9 and 2.10(a) hereof and of the Purchaser and AHC contained
in Sections 3.3, 3.9, 3.12, 3.13(a) and 3.22 hereof shall survive without
limitation. The parties hereto shall be entitled to rely on the representations
and warranties made pursuant to this Agreement notwithstanding any investigation
conducted before or after the Closing for or on behalf of any party.
7.2 GENERAL INDEMNIFICATION OBLIGATION OF THE SELLERS.
(a) Subject to the limitations contained in Sections 7.1 and 7.4 hereof,
each Seller jointly and severally agrees to indemnify and hold harmless the
Purchaser and AHC from and against any and all losses,
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<PAGE>
liabilities, damages, penalties, costs or expenses (including attorneys fees and
expenses) ("Losses") based upon, arising out of or otherwise in respect of (i)
any alleged or actual inaccuracy in or breach of any representation or warranty
of any Seller contained in this Agreement or in any document delivered
hereunder, or (ii) any breach by any Seller of any covenant contained in this
Agreement.
(b) The IDP Sellers shall indemnify and hold IDP harmless for any tax
liability attributable to any gain realized by IDP by reason of the Redemption.
(c) The Purchaser shall, as to any asserted liability of Sellers for taxes
under Section 7.2(a) or (b), promptly notify Sellers of, and permit the
participation of Sellers in any investigation, audit or other proceeding by any
tax authority empowered to administer or enforce such tax and shall not consent
to the settlement or final determination in such proceeding without the prior
written consent of Sellers, which consent will not be unreasonably withheld;
provided, however that this Section 7.2(c) shall not permit Sellers to have
knowledge of or participate in the resolution of any other issues that may be a
part of any such investigation, audit or proceeding.
7.3 GENERAL INDEMNIFICATION OBLIGATION OF THE PURCHASER AND AHC. Subject
to the limitations contained in Sections 7.1 and 7.4 hereof, the Purchaser and
AHC jointly and severally agree to indemnify and hold harmless the Sellers from
and against any and all Losses based upon, arising out of or otherwise in
respect of (i) any alleged or actual inaccuracy in or breach of any
representation or warranty of the Purchaser and AHC contained in this Agreement
or in any document delivered hereunder, or (ii) of any breach by the Purchaser
or AHC of any covenant contained in this Agreement.
7.4 LIMITATIONS; NOTICE AND OPPORTUNITY TO DEFEND.
(a) LIMITATIONS. Neither the Purchaser, nor AHC nor any Seller shall have
any liability, or be subject to any claim under this Article VII unless a Claims
Notice (as defined in Section 7.4(b) hereof) in respect thereof is given by the
Purchaser or the Sellers, as the case may be, on or before the second
anniversary of the Closing, and unless and until all Losses on account of
matters covered by this Article VII (suffered by the Purchaser and AHC or the
Sellers, as the case may be) exceed $500,000, whereupon the Purchaser and AHC or
the Sellers, as the case may be, shall be entitled to receive indemnity payments
to the full extent of the aggregate amount of Losses not to exceed $10,000,000.
Notwithstanding anything else herein to the contrary, the provisions and
limitations contained in this Section 7.4 shall not apply to Losses (and
indemnifications in respect thereof) arising out of or otherwise in respect of
any alleged or actual (i) inaccuracies in or breach of any representation or
warranty of any Seller contained in Sections 2.2, 2.5, 2.9, or 2.10(a) hereof,
(ii) inaccuracies in or breach of any representation or warranty of the
Purchaser contained in Sections 3.3, 3.9, 3.12, 3.13(a) or 3.22 hereof, or (iii)
breach of any covenant contained in this Agreement by the Purchaser or any
Seller.
(b) NOTICE AND OPPORTUNITY TO DEFEND.
(i) NOTICE OF ASSERTED LIABILITY. As soon as is reasonably practicable
after any party hereto becomes aware of any claim that it has under this Article
VII that may result in a Loss (a "Liability Claim"), the party shall give notice
thereof (a "Claims Notice") to the other parties. A Claims Notice shall be given
in good faith and shall describe the Liability Claim in reasonable detail, and
shall indicate the amount (estimated, if necessary and to the extent feasible)
of the Loss that has been or may be suffered by the party.
(ii) THE SELLERS' OPPORTUNITY TO DEFEND. The Sellers may elect to defend,
at their own expense and by their own counsel, any Liability Claim given by the
Purchaser by giving notice to such effect to the Purchaser within thirty days
(or sooner if circumstances so require) of the receipt of the Claims Notice;
provided that if the Sellers so elect, the Purchaser shall cooperate with such
defense. If the Sellers elect to defend such Liability Claim, the Purchaser
shall have the right to participate, at the expense of the Purchaser, in the
defense of such Liability Claim. If the Sellers do not elect to defend a
Liability Claim, the Purchaser may defend, pay, or settle such Liability Claim
as it determines to be appropriate, provided that
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<PAGE>
the Purchaser may not settle or compromise any proceeding in respect of any
Liability Claim without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld.
(iii) THE PURCHASER'S AND AHC'S OPPORTUNITY TO DEFEND. The Purchaser and
AHC may elect to defend on all the same terms upon which the Sellers may do so
under Section 7.4(b)(ii) hereof.
VIII. TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of the Purchaser and the Sellers;
(b) By either the Purchaser or the Sellers if the Closing shall not have
occurred on or before June 30, 1998; or
(c) By either the Purchaser or the Sellers if there shall have been
entered a final non-appealable order or injunction of any court or
governmental authority restraining or prohibiting the consummation of the
transactions contemplated hereby or any material part thereof.
8.2 EXPENSES IN THE EVENT OF TERMINATION. In the event of termination of
this Agreement under Section 8.1 (except by the Sellers pursuant to clause (b)
thereof), no party shall have any obligation to reimburse the other for its fees
and expenses incurred in connection with this Agreement or transactions
contemplated hereby. There will be no further liability hereunder on the part of
any party hereto if this Agreement is so terminated, except under Section 4.3
and except by reason of a material breach of any covenant contained in this
Agreement. If this Agreement is terminated as provided in Section 8.1(b) hereof,
the Purchaser shall pay to the Sellers a termination fee in the amount of
$500,000, provided that if the Closing does not occur on or before June 30, 1998
because (i) the conditions in Section 5.1 were not met, or (ii) the IPO is
postponed or terminated because of general market conditions on the basis of a
joint decision of Ferris Baker Watts and Gruntal & Co. (or if such firms do not
agree, upon the decision of a third investment banking firm chosen by Ferris
Baker Watts and Gruntal & Co.), then no termination fee shall be paid.
IX. MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by telegram or electronic facsimile transfer (confirmed in writing by
mail simultaneously dispatched) to the appropriate party at the address
specified below:
(a) If to the Purchaser or to AHC, to:
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
Facsimile No.: 703-450-0406
Attention: President
(b) If to the Sellers, to:
George and D. Oscar Fuster
20 Firstfield Road
Gaithersburg, MD 20878
Facsimile No.: 301-590-8133
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<PAGE>
With a copy not necessary to constitute notice to:
Robert C. Azarow
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile No.: 212-912-7751
or to such other address or addresses as any such party may from time to
time designate as to itself by like notice.
9.2 BROKERS. Each Seller represents and warrants to the Purchaser and the
Purchaser represents and warrants to the Sellers that it has not dealt with any
broker or finder in connection with any of the transactions contemplated by this
Agreement and, to its knowledge, no broker or other person is entitled to any
commission or finder's fee in connection therewith, except that the Sellers have
engaged and, subject to Section 9.3 hereof, will pay Gruntal & Co. as their
investment bankers in respect of such transactions.
9.3 EXPENSES. Each of IDP and the Sellers will pay one-half of the fees
and expenses of IDP and Sellers (except that to the extent that payments to
Gruntal & Co. for their advice and services exceed $600,000 the excess will be
solely the responsibility of the Sellers), and the Purchaser will pay the
expenses of Purchaser, in connection with this Agreement and the consummation of
the transactions contemplated herein.
9.4 HEADINGS. The headings in this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of its provisions. Terms used in the Exhibits and Schedules hereto that are
defined herein are used therein as so defined.
9.5 INTEGRATION, MODIFICATION AND WAIVER. This Agreement and the
agreements contemplated herein constitute the entire agreement between the
parties pertaining to the subject matter hereof and supersede all prior
understandings of the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties. No
waiver of any of the provisions of this Agreement shall be deemed to be or shall
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which together shall constitute one and the same
instrument.
9.7 DEFINITION OF "STATE". For purposes of this Agreement, "state" shall
include the Commonwealth of Puerto Rico.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of New York without giving effect to its
principles of conflicts of laws.
9.9 FURTHER ASSURANCES. Each party hereto agrees to execute and deliver
such instruments and take such other actions as may reasonably be requested in
order to carry out the intent of any of the agreements herein.
9.10 KNOWLEDGE. Any reference to a person's knowledge or best knowledge
shall mean, as of the date of the statement in question, such person's actual
knowledge and what such person should have known in the ordinary exercise of
that person's duties as an officer or director of IDP and PRIMO, considering for
these purposes, each Seller to be an officer and director of both IDP and PRIMO.
9.11 PUERTO RICO TAX EXEMPTION. If within 180 days of the Closing Date,
the appropriate tax authority in Puerto Rico has not granted or approved a tax
exemption for PAC that is substantially equivalent to the tax exemption now
enjoyed by PRIMO in Puerto Rico, then the Sellers shall reimburse and indemnify
PAC for the first $200,000 of taxes paid in or to Puerto Rico by PAC for the
period
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commencing on the Closing Date that PAC would not have paid if such tax
exemption had been granted or approved. Any such reimbursement will not be
subject to or counted against the $500,000 threshold set forth in Section 7.4.
9.12 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs,
personal representatives and permitted assigns, but will not be assignable by
any party without the prior written consent of the other parties.
IN WITNESS WHEREOF, each party hereto has executed, or caused to be executed
by its representative thereunto duly authorized, this Agreement on the date
first above written.
<TABLE>
<S> <C>
/s/ GEORGE FUSTER
------------------------------------------
George Fuster
/s/ D. OSCAR FUSTER
------------------------------------------
D. Oscar Fuster
/s/ CAROL N. FUSTER
------------------------------------------
Carol N. Fuster
/s/ WENDY E. FUSTER
------------------------------------------
Wendy E. Fuster
</TABLE>
<TABLE>
<S> <C> <C>
DUNN COMPUTER CORPORATION
(VIRGINIA)
By: /s/ JOHN D. VAZZANA
-----------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
DUNN COMPUTER CORPORATION
(DELAWARE)
By: /s/ JOHN D. VAZZANA
-----------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
</TABLE>
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<PAGE>
INDEX TO THE ACQUISITION AGREEMENT EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A Agreement of Merger
Exhibit B IDP Cash Amount; Inter-company Indebtedness
Exhibit C Ownership of Shares
Exhibit D and E Employment Agreement of George Fuster;
Employment Agreement of D. Oscar Fuster
Exhibit F IDP Indebtedness
Exhibit G Assets and Liabilities of IDP F Squared Engineering division
Exhibit H Opinion of Sellers' Counsel
Exhibit I Registration Rights Agreement
Exhibit J Opinion of Purchaser's Counsel
</TABLE>
<PAGE>
SCHEDULES TO THE ACQUISITION AGREEMENT
<TABLE>
<S> <C> <C>
Schedule A Audited Balance Sheet of PRIMO as of September 30, 1997
Disclosure Letter, dated February 27, 1998, with schedules and addendums thereto:
Schedule 2.1(a) Articles of Incorporation and Bylaws of IDP
2.1(b) Articles of Incorporation and Bylaws of PRIMO
2.1(c) Foreign Qualifications of IDP and PRIMO
2.2 Restrictions on Shares
2.3 Conflict; Creation of Lien; Consent, Approval, Notice, Violations
2.5 Liabilities
2.6 Interim Operations
2.7 Litigation
2.8(a)(i) Supply Contracts, Purchase Orders
(ii) Customer Contracts
(iii) Licenses
(iv) Real Estate Documents
(v) Leases
(vi) Distributor and Sales Representation Agreements
(vii) Indebtedness
(viii) Employment and Benefit Agreements
(ix) Stock Option Plans
(x) Insurance Contracts
(xi) Product and Service Warranties
(xii) Other Agreements
2.8(b) Status of Agreements
2.9 Government Contracts; Investigations, Audits; Small Disadvantaged
Minority Business Contracts; Claims
2.10(a) Tax Returns
2.10(b) Permits and Authorizations
2.10(c) Employee Benefit Plans
2.10(d) Worker's Compensation
2.10(f) Environmental Matters
2.11(a) Real Estate
2.11(b) Inventories
2.11(c) Machinery, Equipment and Other Tangibles
2.11(d) Intellectual Property
2.11(e) Accounts and Notes Receivable
2.11(f) Assets Used in Business
2.11(g) Title to Assets
2.13 Sold, Disposed of, Created Liens; Dividends, Distributions,
Prepayments, etc.
2.14(a) Labor Relations
2.14(b) Employees
3.10 Litigation
3.17 Employee Matters
4.4(d) Operation of Business--Compensation of Employees
</TABLE>
<PAGE>
APPENDIX C
DUNN COMPUTER CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE OF PLAN: ADMINISTRATION
1.1 PURPOSE.
The Dunn Computer Corporation 1997 Stock Option Plan (hereinafter, the
"Plan") is hereby established to grant to officers and other employees of Dunn
Computer Corporation (the "Company") or of its parents or subsidiaries (as
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code")), if any, and to non-employee directors,
consultants and advisors and other persons who may perform significant services
for or on behalf of the Company, a favorable opportunity to acquire common
stock, $.001 par value ("Common Stock"), of the Company and, thereby, to create
an incentive for such persons to remain in the employ of or provide services to
the Company and to contribute to its success.
The Company may grant under the Plan both incentive stock options within the
meaning of Section 422 of the Code ("Incentive Stock Options") and stock options
that do not qualify for treatment as Incentive Stock Options ("Nonstatutory
Options"). Unless expressly provided to the contrary herein, all references
herein to "options," shall include both incentive Stock Options and Nonstatutory
Options.
1.2 ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company (the
"Board") if each member is a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), or a
committee (the "Committee") of two or more directors, each of whom is a
Non-Employee Director. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be filled
by the Board.
A majority of the members of the Committee shall constitute a quorum for the
purposes of the Plan. Provided a quorum is present, the Committee may take
action by affirmative vote or consent of a majority of its members present at a
meeting. Meetings may be held telephonically as long as all members are able to
hear one another, and a member of the Committee shall be deemed to be present
for this purpose if he or she is in simultaneous communication by telephone with
the other members who are able to hear one another. In lieu of action at a
meeting, the Committee may by written consent of a majority of its members.
Subject to the express provisions of the Plan, the Committee shall have the
authority to construe and interpret the Plan and all Stock Option Agreements (as
defined in Section 3.4) entered into pursuant hereto and to define the terms
used therein, to prescribe, adopt, amend and rescind rules and regulations
relating to the administration of the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Committee may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper; and, provided, further, in its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan. Subject to the
express limitations of the Plan, the Committee shall designate the individuals
from among the class of persons eligible to participate as provided in Section
1.3 who shall receive options, whether an optionee will receive Incentive Stock
Options or Nonstatutory Options, or both, and the amount, price, restrictions
and all other terms and provisions of such options (which need not be
identical).
Members of the Committee shall receive such compensation or their services
as members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with
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the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No members of the Committee or the
Board shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan, and all members of the Committee
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
1.3 PARTICIPATION.
Officers and other employees of the Company, non-employee directors,
consultants and advisors and other persons who may perform significant services
on behalf of the Company shall be eligible for selection to participate in the
Plan upon approval by the Committee; provided, however, that only "employees"
(within the meaning of Section 3401(c) of the Code) of the Company shall be
eligible for the grant of Incentive Stock Options. An individual who has been
granted an option may, if otherwise eligible, be granted additional options if
the committee shall so determine. No person is eligible to participate in the
Plan by matter of right; only those eligible persons who are selected by the
Committee in its discretion shall participate in the Plan.
1.4 STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 3.5, the stock to be offered
under the Plan shall be shares of authorized but unissued Common Stock,
including any shares repurchased under the terms of the Plan or any Stock Option
Agreement entered into pursuant hereto. The cumulative aggregate number of
shares of Common Stock to be issued under the Plan shall not exceed 2,200,000*,
subject to adjustment as set forth in Section 3.5.
If any option granted hereunder shall expire or terminate for any reason
without having been fully exercised, the unpurchased shares subject thereto
shall again be available for the purposes of the Plan. For purposes of this
Section 1.4, where the exercise price of options is paid by means of the
grantee's surrender of previously owned shares of Common Stock, only the net
number of additional shares issued and which remain outstanding in connection
with such exercise shall be deemed "issued" for purposes of the Plan.
2. STOCK OPTIONS
2.1 EXERCISE PRICE; PAYMENT.
(a) The exercise price of each Incentive Stock Option granted under the Plan
shall be determined by the Committee, but shall not be less than 100% of the
"Fair Market Value" (as defined below) of Common Stock on the date of grant. If
an Incentive Stock Option is granted to an employee who at the time such option
is granted owns (within the meaning of section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of capital stock of the
Company, the option exercise price shall be at least 110% of the Fair Market
Value of Common Stock on the date of grant. The exercise price of each
Nonstatutory Option also shall be determined by the Committee, but shall not be
less than 85% of the Fair Market of Common Stock on the date of grant. The
status of each option granted under the Plan as either an Incentive Stock Option
or a Nonstatutory Option shall be determined by the Committee at the time the
Committee acts to grant the option, and shall be clearly identified as such in
the Stock Option Agreement relating thereto.
"Fair Market Value" for purposes of the Plan shall mean: (i) the closing
price of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any, on the day immediately preceding the date
of grant, or, if shares were not traded on the day preceding such date of grant,
then on the next preceding trading day during which a sale occurred; or (ii) if
Common Stock is not
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* Formerly 600,000 shares. The increase in the aggregate number of shares of
Common Stock issuable under the Plan from 600,000 to 2,200,000 shares was
approved by the Board of Directors on September 4, 1997, subject to
stockholder approval within twelve months (see Section 3.8 of the Plan).
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traded on an exchange but is quoted on an exchange but is quoted on Nasdaq or a
successor quotation system, (1) the last sales price (if Common Stock is then
listed on the Nasdaq Stock Market) or (2) the mean between the closing
representative bid and asked price (in all other cases) for Common Stock on the
day prior to the date of grant as reported by Nasdaq or such successor quotation
system; or (iii) if there is no listing or trading of Common Stock either on a
national exchange or over-the-counter, that price determined in good faith by
the Committee to be the fair value per share of Common Stock, based upon such
evidence as it deems necessary or advisable.
(b) In the discretion of the Committee at the time the option is exercised,
the exercise price of any option granted under the Plan shall be paid in full in
cash, b check or by the optionee's interest-bearing promissory note (subject to
any limitations of applicable state corporations law) delivered at the time of
exercise; provided, however, that subject to the timing requirements of Section
2.7, in the discretion of the Committee and upon receipt of all regulatory
approvals, the person exercising the option may deliver as payment in whole or
in part of such exercise price certificates for Common Stock of the Company
(duly endorsed or with duly executed stock powers attached), which shall be
valued at its Fair Market Value on the day of exercise of the option, or other
property deemed appropriate by the Committee; and, provided further, that,
subject to Section 422 of the Code, so-called cashless exercises as permitted
under applicable rules and regulations of the Securities and Exchange Commission
and the Federal Reserve Board shall be permitted in the discretion of the
Committee. Without limiting the Committee's discretion in this regard,
consecutive book entry stock-for-stock exercises of options (or "pyramiding")
also are permitted in the Committee's discretion.
Irrespective of the form of payment, the delivery of shares issuable upon
the exercise of an option shall be conditioned upon payment by the optionee to
the Company of amounts sufficient to enable the Company to pay all federal,
state, and local withholding taxes resulting, in the Company's judgment, from
the exercise. In the discretion of the Committee, such payment to the Company
may be effected through (i) the Company's withholding from the number of shares
of Common Stock that would otherwise be delivered to the optionee by the Company
on exercise of the option a number of shares of Common Stock equal in value (as
determined by the Fair Market Value of Common Stock on the date of the exercise)
to the aggregate withholding taxes, (ii) payment by the optionee to the Company
of the aggregate withholding taxes in cash, (iii) withholding by the Company
from other amounts contemporaneously owed by the Company to the optionee, or
(iv) any combination of these three methods, as determined by the Committee in
its discretion.
2.2 OPTION PERIOD.
(a) The Committee shall provide, in the terms of each Stock Option
Agreement, when the option subject to such agreement expires and becomes
unexercisable, but in no event will an Incentive Stock Option granted under the
Plan be exercisable after the expiration of ten years from the date it is
granted. Without limiting the generality of the foregoing, the Committee may
provide in the Stock Option Agreement that the option subject thereto expires 30
days following a Termination of Employment (as defined in Section 3.2 hereof)
for any reason other than death or disability, or six months following a
Termination of Employment for disability or following an optionee's death.
(b) Outside Date for Exercise. Notwithstanding any provisions of this
Section 2.2. in no event shall any option granted under the Plan be exercised
after the expiration date of such option set forth in the applicable Stock
Option Agreement.
2.3 EXERCISE OF OPTIONS.
Each option granted under the Plan shall become exercisable and the total
number of shares subject thereto shall be purchasable, in a lump sum or in such
installments, which need not be equal, as the Committee shall determine;
provided, however, that each option shall become exercisable as to at least 10%
of the shares of Common Stock covered thereby on each anniversary of the date
such option is granted; and provided, further, that if the holder of an option
shall not in any given installment period purchase all of the shares which such
holder is entitled to purchase in such installment period, such
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holder's right to purchase any shares not purchased in such installment period
shall continue until the expiration or sooner termination of such holder's
option. The Committee may, at any time after grant of the option and from time
to time, increase the number of shares purchasable in any installment, subject
to the total number of shares subject to the option and the limitations set
forth in Section 2.5. At any time and from time to time prior to the time when
any exercisable option or exercisable portion thereof become unexercisable under
the Plan or the applicable Stock Option Agreement, such option, or portion
thereof may be exercised in whole or in part; provided, however, that the
Committee may, by the terms of the option, require any partial exercise to be
with respect to a specified minimum number of shares. No option or installment
thereof shall be exercisable except with respect to whole shares. Fractional
share interests shall be disregarded, except that they may be accumulated as
provided above and except that if such a fractional share interest constitutes
the total shares of Common Stock remaining available for purchase under an
option at the time of exercise, the optionee shall be entitled to receive on
exercise a certified or bank cashier's check in an amount equal to the Fair
Market Value of such fractional share of stock.
2.4 TRANSFERABILITY OF OPTIONS.
Except as the Committee may determine as aforesaid, an option granted under
the Plan shall, by its terms, be nontransferable by the optionee other than by
will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined by the Code), and shall be exercisable
during the optionee's lifetime only by the optionee or by his or her guardian or
legal representative. More particularly, but without limiting the generality of
the immediately preceding sentence, an option may not be assigned, transferred
(except as provided in the preceding sentence), pledged or hypothecated (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any option contrary to the provisions of
the Plan and the applicable Stock Option Agreement, and any levy of any
attachment or similar process upon an option, shall be null and void, and
otherwise without effect, and the Committee may, in its sole discretion, upon
the happening of any such event, terminate such option forthwith.
2.5 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS.
To the extent that the aggregate Fair Market Value (determined on the date
of grant as provided in Section 2.1 above) of the Common Stock with respect to
which Incentive Stock Options granted hereunder (together with all other
Incentive Stock Option plans of the Company) are exercisable for the first time
by an optionee in any calendar year under the Plan exceeds $100,000, such
options granted hereunder shall be treated as Nonstatutory Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted.
2.6 DISQUALIFYING DISPOSITIONS OF INCENTIVE STOCK OPTIONS.
If Common Stock acquired upon exercise of any Incentive Stock Option is
disposed of in a disposition that, under Section 422 of the Code, disqualifies
the option holder from the application of
Section 421(a) of the Code, the holder of the Common Stock immediately before
the disposition shall comply with any requirements imposed by the Company in
order to enable the Company to secure the related income tax deduction to which
it is entitled in such event.
2.7 CERTAIN TIMING REQUIREMENTS.
At the discretion of the Committee, shares of Common Stock issuable to the
optionee upon exercise of an option may be used to satisfy the option exercise
price or the tax withholding consequences of such exercise, in the case of
persons subject to Section 16 of the Securities Exchange Act of 1934, as
amended, only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written election by the
optionee to use shares of Common Stock issuable to the optionee upon exercise of
the option to pay all or part of the option price or
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the withholding taxes made at least six months prior to the payment of such
option price or withholding taxes.
2.8 NO EFFECT ON EMPLOYMENT.
Nothing in the Plan or in any Stock Option Agreement hereunder shall confer
upon any optionee any right to continue in the employ of the Company, any Parent
Corporation or any subsidiary or shall interfere with or restrict in any way the
rights of the company, its Parent Corporation and its Subsidiaries, which are
hereby expressly reserved, to discharge any optionee at any time for any reason
whatsoever, with or without cause.
For purposes of the Plan, "Parent Corporation" shall mean any corporation in
an unbroken chain of corporations ending with the Company if each of the
corporations other than the Company then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. For purposes of the Plan, "Subsidiary" shall mean
any corporation in an unbroken chain of corporations beginning with the Company
if each of the corporations other than the last corporation in the unbroken
chain then owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
3. OTHER PROVISIONS
3.1 SICK LEAVE AND LEAVE OF ABSENCE.
Unless otherwise provided in the Stock Option Agreement, and to the extent
permitted by Section 422 of the Code, an optionee's employment shall not be
deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Company if the period of any such leave does not exceed
a period approved by the Company, or, if longer, if the optionee's right to
reemployment by the Company is guaranteed either contractually or by statute. A
Stock Option Agreement may contain such additional or different provisions with
respect to leave of absence as the Committee may approve, either at the time of
grant of an option or at a later time.
3.2 TERMINATION OF EMPLOYMENT.
For purposes of the Plan "Termination of Employment," shall mean the time
when the employee-employer relationship between the optionee and the Company,
any Subsidiary or any Parent Corporation is terminated for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an optionee by
the Company, any Subsidiary or any Parent Corporation, (ii) at the discretion of
the Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company, a Subsidiary or any Parent Corporation
with the former employee. Subject to Section 3.1, the Committee, in its absolute
discretion, shall determine the affect of all maters and questions relating to
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that such leave of absence or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then-applicable regulations
and revenue rulings under said Section.
3.3 ISSUANCE OF STOCK CERTIFICATES.
Upon exercise of an option, the Company shall deliver to the person
exercising such option a stock certificate evidencing the shares of Common Stock
acquired upon exercise. Notwithstanding the foregoing, the Committee in its
discretion may require the Company to retain possession of any certificate
evidencing stock acquired upon exercise of an option which remains subject to
repurchase under the provisions of the Stock Option Agreement or any other
agreement signed by the optionee in order to facilitate such repurchase
provisions.
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3.4 TERMS AND CONDITIONS OF OPTIONS.
Each option granted under the Plan shall be evidenced by a written Stock
Option Agreement ("Stock Option Agreement") between the option holder and the
Company providing that the option is subject to the terms and conditions of the
Plan and to such other terms and conditions not inconsistent therewith as the
Committee may deem appropriate in each case.
3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; MERGER AND CONSOLIDATION.
If the outstanding shares of Common Stock are changed into, or exchanged for
cash or a different number of kind of shares or securities of the Company or of
another corporation through reorganization, merger, recapitalization,
reclassification, stock split-up, reverse stock split, stock dividend, stock
consolidation, stock combination, stock reclassification or similar transaction,
an appropriate adjustment shall be made by the Committee in the number and kind
of shares as to which options may be granted. In the event of such a change or
exchange, other than for shares or securities of another corporation or by
reason of reorganization, the Committee shall also make a corresponding
adjustment changing the number of kind of shares and the exercise price per
share allocated to unexercised options or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment, however, shall be made without change in the total price applicable
to the unexercised portion of the option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices).
In the event of a "spin-off" or other substantial distribution of assets of
the Company which has a material diminutive effect upon the Fair Market Value of
the Common Stock, the Committee in its discretion shall make an appropriate and
equitable adjustment to the exercise prices of options then outstanding under
the Plan.
Where an adjustment under this Section 3.5 of the type described above is
made to an Incentive Stock Option, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(b)(3) of the Code.
In connection with the dissolution or liquidation of the Company or a
partial liquidation involving 50% or more of the assets of the Company, a
reorganization of the Company in which another entity is the survivor, a merger
or reorganization of the Company under which more than 50% of the Common Stock
outstanding prior to the merger or reorganization is converted into cash or into
a security of another entity, a sale of more than 50% of the Company's assets,
or a similar event that the Committee determines, in its discretion, would
materially alter the structure of the Company or its ownership, the Committee,
upon 30 days prior written notice to the option holders, may, in its discretion,
do one or more of the following: (i) shorten the period during which options are
exercisable (provided they remain exercisable for at least 30 days after the
date the notice is given); (ii) accelerate any vesting schedule to which an
option is subject; (iii) arrange to have the surviving or successor entity grant
replacement options with appropriate adjustments in the number and kind of
securities and option prices, or (iv) cancel options upon payment to the option
holders in cash, with respect to each option to the extent then exercisable
(including any options as to which the exercise has been accelerated as
contemplated in clause (ii) above), of any amount that is the equivalent of the
Fair Market Value of the Common Stock (at the effective time of the dissolution,
liquidation, merger, reorganization, sale or other event) or the fair market
value of the option. In the case of a change in corporate control, the Committee
may, in considering the advisability or the terms and conditions of any
acceleration of the exercisability of any option pursuant to this Section 3.5,
take into account the penalties that may result directly or indirectly from such
acceleration to either the Company or the option holder, or both, under Section
280G of the Code, and may decide to limit such acceleration to the extent
necessary to avoid or mitigate such penalties or their effects.
No fractional share of Common Stock shall be issued under the Plan on
account of any adjustment under this Section 3.5.
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3.6 RIGHTS OF PARTICIPANTS AND BENEFICIARIES.
The Company shall pay all amounts payable hereunder only to the option
holder or beneficiaries entitled thereto pursuant to the Plan. The Company shall
not be liable for the debts, contracts or engagements of any optionee or his or
her beneficiaries, and rights to cash payments under the Plan may not be taken
in execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company.
3.7 GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of options and the issuance and
delivery of shares of Common Stock under options granted hereunder, shall be
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law) and
federal margin requirements and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
3.8 AMENDMENT AND TERMINATION.
The Board or the Committee may at any time suspend, amend or terminate the
Plan and may, with the consent of the option holder, make such modifications of
the terms and conditions of such option holder's option as it shall deem
advisable, provided, however, that, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, (A) materially
increase the benefits accruing to participants under the Plan; (B) materially
increase the number of securities which may be issued under the Plan; or (C)
materially modify the requirements as to eligibility for participation in the
Plan. No option may be granted during any suspension of the Plan or after such
termination. The amendment, suspension or termination of the Plan shall not,
without the consent of the option holder affected thereby, alter or impair any
rights or obligations under any option theretofore granted under the Plan. No
option may be granted during any period of suspension nor after termination of
the Plan, and in no event may any option be granted under the Plan after the
expiration of ten years from the date the Plan is adopted by the Board.
3.9 TIME OF GRANT AND EXERCISE OF OPTION.
An option shall be deemed to be exercised when the Secretary of the Company
receives written notice from an option holder of such exercise, payment of the
exercise price determined pursuant to Section 2.1 of the Plan and set forth in
the Stock Option Agreement, and all representations, indemnifications and
documents reasonably requested by the Committee.
3.10 PRIVILEGES OF STOCK OWNERSHIP; NON-DISTRIBUTIVE INTENT; REPORTS TO
OPTION HOLDERS.
A participant in the Plan shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually issued to the optionee.
Upon exercise of an option at a time when there is not in effect under the
Securities Act of 1933, as amended, a Registration Statement relating to the
Common Stock issuable upon exercise or payment therefor and available for
delivery a Prospectus meeting the requirements of Section 10(a)(3) of said Act,
the optionee shall represent and warrant in writing to the Company that the
shares purchased are being acquired for investment and not with a view to the
distribution thereof.
The Company shall furnish to each optionee under the Plan the Company's
annual report and such other periodic reports, if any, as are disseminated by
the Company in the ordinary course to its stockholders.
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3.11 LEGENDING SHARE CERTIFICATES.
In order to enforce any restrictions imposed upon Common Stock issued upon
exercise of an option granted under the Plan or to which such Common Stock may
be subject, the Committee may cause a legend or legends to be placed on any
share certificates representing such Common Stock, which legend or legends shall
make appropriate reference to such restrictions, including, but not limited to,
a restriction against sale of such Common Stock for any period of time as may be
required by applicable laws or regulations. If any restriction with respect to
which a legend was placed on any certificate ceases to apply to Common Stock
represented by such certificate, the owner of the Common Stock represented by
such certificate may require the Company to cause the issuance of a new
certificate not bearing the legend.
Additionally, and not by way of limitation, the Committee may impose such
restrictions on any Common Stock issued pursuant to the Plan as it may deem
advisable, including, without limitation, restrictions under the requirements of
any stock exchange upon which Common Stock is then traded.
3.12 USE OF PROCEEDS.
Proceeds realized pursuant to the exercise of options under the Plan shall
constitute general funds of the Company.
3.13 CHANGES IN CAPITAL STRUCTURE; NO IMPEDIMENT TO CORPORATE TRANSACTIONS.
The existence of outstanding options under the Plan shall not affect the
Company's right to effect adjustments, recapitalizations, reorganizations or
other changes in its or any other corporation's capital structure or business,
any merger or consolidation, any issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company's or any other corporation's assets or business, or
any other corporate act, whether similar to the events described above or
otherwise.
3.14 EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by the
stockholders of the Company within twelve months after the date of the Board's
initial adoption of the Plan. Options may be granted but not exercised prior to
stockholder approval of the Plan. If any options are so granted and stockholder
approval shall not have been obtained within twelve months of the date of
adoption of this Plan by the Board of Directors, such options shall terminate
retroactively as of the date they were granted.
3.15 TERMINATION.
The Plan shall terminate automatically as of the close of business on the
day preceding the tenth anniversary date of its adoption by the Board or earlier
as provided in Section 3.8. Unless otherwise provided herein, the termination of
the Plan shall not affect the validity of any option agreement outstanding at
the date of such termination.
3.16 NO EFFECT ON OTHER PLANS.
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Subsidiary or any Parent
Corporation. Nothing in the Plan shall be construed to limit the right of the
Company (i) to establish any other forms of incentives or compensation for
employees of the Company, any Subsidiary or any Parent Corporation or (ii) to
grant or assume options or other rights otherwise than under the Plan in
connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
VIRGINIA STOCK CORPORATION ACT
Section 697 A of the Virginia Stock Corporation Act ("VSCA") provides that a
corporation may indemnify an individual made a party to a proceeding because he
is or was a director against liability incurred in the proceeding if (1) he
conducted himself in good faith, (2) he believed, in the case of conduct in his
official capacity with the corporation, that his conduct was in its best
interests, and, in all other cases, that his conduct was at least not opposed to
its best interests, and (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. Section 697 C of the VSCA
provides that the termination of a proceeding by judgment, order, settlement or
conviction is not, of itself, determinative that the director did not meet the
standard of conduct set forth in Section 697 A.
Section 697 D of the VSCA provides that a corporation may not indemnify a
director under Section 697 in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation, or
in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Indemnification permitted under Section 697 of the VSCA in connection with
a proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 698 of the VSCA states that, unless limited by its articles of
incorporation, a corporation shall indemnify a director who entirely prevails in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding.
Section 701 of the VSCA provides that a corporation may not indemnify a
director under Section 697 unless authorized in the specific case after a
determination has been made that indemnification of the director is permissible
in the circumstances because he has met the standard of conduct set forth in
Section 697. Such determination is to be made (1) by the board of directors by a
majority vote of a quorum consisting of directors not at the time parties to the
proceeding, (2) if such a quorum is not obtainable, by majority vote of a
committee duly designated by the board of directors (in which designation
directors who are parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding, (3) by special legal
counsel selected as set forth in the statute, or (4) by the shareholders
(without the vote of shares owned by or voted under the control of directors who
are at the time parties to the proceeding).
Section 699 of the VSCA provides that a corporation may pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of the final disposition of the proceeding if (1) the director furnishes
the corporation a written statement of his good faith belief that he has met the
standard of conduct described in Section 697, (2) the director furnishes the
corporation a written undertaking to repay the advance if it is ultimately
determined that he did not meet the standard of conduct, and (3) a determination
is made that the facts then known to those making the determination would not
preclude indemnification. Determinations and authorizations of payments under
Section 699 are to be made in the manner specified in Section 701 of the VSCA.
Under Section 700.1 of the VSCA, an individual who is made a party to a
proceeding because he is or was a director of a corporation may apply to a court
for an order directing the corporation to make advances or reimbursement for
expenses or to provide indemnification. The court shall order the corporation to
make advances and/or reimbursement for expenses or to provide indemnification if
it determines that the director is entitled to such advances, reimbursement or
indemnification and shall also
II-1
<PAGE>
order the corporation to pay the director's reasonable expenses incurred to
obtain the order. With respect to a proceeding by or in the right of the
corporation, the court may (1) order indemnification of the director to the
extent of his reasonable expenses if it determines that, considering all the
relevant circumstances, the director is entitled to indemnification even though
he was adjudged liable to the corporation and (2) also order the corporation to
pay the director's reasonable expenses incurred to obtain the order of
indemnification.
Section 702 of VSCA states that, unless limited by a corporation's articles
of incorporation, (1) an officer of the corporation is entitled to mandatory
indemnification under Section 698 of the VSCA, and is entitled to apply for
court-ordered indemnification under Section 700 of the VSCA, to the same extent
as a director, and (2) the corporation may indemnify and advance expenses to an
officer, employee or agent of the corporation to the same extent as to a
director.
Section 703 of the VSCA provides that a corporation may purchase and
maintain insurance on behalf of an individual 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,
employee benefit plan or other enterprise, against liability asserted against
him or incurred by him in that capacity, or arising from his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Sections 697 or 698 of the VSCA.
Section 704 of the VSCA states that a corporation shall have power to make
any further indemnity, including indemnity with respect to a proceeding by or in
the right of the corporation, and to make additional provision for advances and
reimbursement of expenses, to any director, officer, employee or agent that may
be authorized by its articles of incorporation or any bylaw made by the
shareholders or any resolution adopted, before or after the event, by the
shareholders, except an indemnity against (1) his willful misconduct, or (2) a
knowing violation of the criminal law. Unless the articles of incorporation, or
any such bylaw or resolution expressly provide otherwise, any determination as
to the right to any further indemnity shall be made in accordance with Section
701 B of the VSCA. Each such indemnity may continue as to a person who has
ceased to have the capacity referred to above and may inure to the benefit of
the heirs, executors and administrators of such person.
ARTICLES OF INCORPORATION
Article 11 of the Company's Articles of Incorporation provides that the
Company shall, to the fullest extent permitted by the law of Virginia, indemnify
an individual who is or was a director or officer of the Company and who was,
is, or is threatened to be made, a named defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(collectively, a "proceeding"), against any obligation to pay a judgment,
settlement, penalty, fine (including any excise tax assessed with respect to any
employee benefit plan) or other liability and reasonable expenses (including
counsel fees) incurred with respect to such a proceeding, except such
liabilities and expenses as are incurred because of such director's or officer's
willful misconduct or knowing violation of criminal law.
Article 11 also provides that unless a determination has been made that
indemnification is not permissible, the Company shall make advances and
reimbursements for expenses reasonably incurred by a director or officer in a
proceeding as described above upon receipt of an undertaking from such director
or officer to repay the same if it is ultimately determined that such director
or officer is not entitled to indemnification.
Article 11 also provides that the determination that indemnification is
permissible, the authorization of such indemnification (if applicable), and the
evaluation as to the reasonableness of expenses in a specific case shall be made
as provided by law. Special legal counsel selected to make determinations under
such Article 11 may be counsel for the Company. The termination of a proceeding
by judgment,
II-2
<PAGE>
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that a director or officer
acted in such a manner as to make him or her ineligible for indemnification.
For the purposes of Article 11, every reference to a director or officer
includes, without limitation, (1) every individual who is a director or officer
of the Company, (2) an individual who, while a director or officer, is or was
serving at the Company's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, (3) an individual who
formerly was a director or officer of the Company or who, while a director or
officer, occupied at the request of the Company any of the other positions
referred to in clause (2) of this sentence, and (4) the estate, personal
representative, heirs, executors and administrators of a director or officer of
the Company or other person referred to herein. Service as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
controlled by the Company is deemed service at the request of the Company. A
director or officer is deemed to be serving an employee benefit plan at the
Company's request if such person's duties to the Company also impose duties on,
or otherwise involve services by, such person to the plan or to participants in
or beneficiaries of the plan.
INDEMNIFICATION AGREEMENTS
The Company may enter into indemnification agreements with its directors and
officers for the indemnification of and advancing of expenses to such persons to
the fullest extent permitted by law.
INSURANCE
Dunn has purchased directors and officers liability insurance in the amount
of $1.0 million.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Acquisition Agreement, dated March 9, 1998, by and among Dunn, the Company, George Fuster, D. Oscar
Fuster, Carol N. Fuster and Wendy E. Fuster. (Included as Appendix B to the Proxy Statement/Prospectus
contained in this Registration Statement).
2.2 Agreement of Merger, dated as of March 18, 1998 between Dunn Merger Corp., Dunn and the Company.
(Included as Appendix A to the Proxy Statement/Prospectus contained in this Registration Statement).
2.3 Stock Purchase Agreement, dated September 12, 1997, by and among STMS Acquisition Corp., Dunn, STMS,
Inc., John Signorello, Timothy McNamee, Steve Salmon and certain other stockholders of Dunn. (Filed as
Exhibit 2.1 to Dunn's Current Report on Form 8-K, dated September 12, 1997, filed September 27, 1997
(File No. 0-22263) and hereby incorporated by reference).
3.1 Articles of Incorporation of the Company, dated February 5, 1998 and effective as of February 26, 1998.
(Filed as Exhibit 3.1 to the Registration Statement on Form S-1, Amendment No. 1, of the Company, dated
April 1, 1998 (File No. 333-47631), and hereby incorporated by reference).
3.2 By-laws of the Company, effective as of March 5, 1998. (Filed as Exhibit 3.2 to the Registration
Statement on Form S-1, Amendment No. 1, of the Company, dated April 1, 1998 (File No. 333-47631), and
hereby incorporated by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.3 Certificate of Incorporation and amendments thereto of Dunn (Filed as Exhibit 3.1 to Dunn's Registration
Statement on Form SB-2, dated January 13, 1997 (File No. 333-19635) and hereby incorporated by
reference).
3.4 By-Laws of Dunn.
4.1 Specimen common stock certificate for the Company. (Filed as Exhibit 4.3 to the Registration Statement
on Form S-1, Amendment No. 1, of the Company, dated April 1, 1998 (File No. 333-47631), and hereby
incorporated by reference).
4.2 Form of Underwriters Warrants (Filed as Exhibit 4.2 to Dunn's Registration Statement on Form SB-2, dated
January 13, 1997 (File No. 333-19635) and hereby incorporated by reference).
4.3 Loan and Security Agreement, dated as of May 28, 1996 by and between Dunn and SIGNET BANK and Amendment
Nos 1, 2 and 3 thereto (Filed as Exhibit 4.2 to Dunn's Form 10-KSB, for the fiscal year ended October
31, 1997 (File No. 0-22263) and hereby incorporated by reference).
4.4 Amendment No. 4, dated February 28, 1998 to the Loan and Security Agreement by and between Dunn and
SIGNET BANK, dated as of May 28, 1996.
4.5 Consulting Agreement, dated as of October 1997, by and between Dunn and JDK & Associates, Inc.
(entitling JDK & Associates to warrants to purchase 100,000 shares of Dunn common stock).
5.1 Opinion of Jones, Day, Reavis & Pogue regarding the validity of the securities being registered.
8.1 Opinion of Jones, Day, Reavis & Pogue regarding certain Federal income tax consequences relating to the
Merger.
10.1 GSA Schedule (Filed as Exhibit 10.2 to Dunn's Registration Statement on Form SB-2, Amendment 1, dated
March 14, 1997 (File No. 333-19635) and hereby incorporated by reference).
10.2 Agreement, dated November 21, 1995, by and between GCH Systems, Inc. and Dunn regarding Lockheed (Filed
as Exhibit 10.4 to Dunn's Registration Statement on Form SB-2, Amendment 1, dated March 14, 1997 (File
No. 333-19635) and hereby incorporated by reference).
10.3 Agreement, dated March 25, 1997, by and between Dunn and the Social Security Administration (Filed as
Exhibit 10.5 to Dunn's Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997 (File No.
333-19635) and hereby incorporated by reference).
10.4 Agreement, dated June 12, 1995, by and between Dunn and the Administrative Office of the U.S. Courts
(Filed as Exhibit 10.6 to Dunn's Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997
(File No. 333-19635) and hereby incorporated by reference).
10.5 Agreement, dated September 29, 1994, by and between Dunn and the Health Care Finance Administration
(Filed as Exhibit 10.7 to Dunn's Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997
(File No. 333-19635) and hereby incorporated by reference).
10.6 Agreement effective September 8, 1997, by and between Virginia Contracting Authority and Dunn (Filed as
Exhibit 10.6 to Dunn's Form 10-KSB, dated January 30, 1998 (File No. 0-22263) and hereby incorporated by
reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.7 Employment Agreement by and between Dunn and John D. Vazzana (Filed as Exhibit 99.1 to Dunn's
Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997 (File No. 333-19635) and hereby
incorporated by reference).
10.8 Employment Agreement by and between Dunn and Thomas P. Dunne (Filed as Exhibit 99.2 to Dunn's
Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997 (File No. 333-19635) and hereby
incorporated by reference).
10.9 Deed of Lease, dated October 31, 1994, between C&T Partnership and Dunn and addendums thereto (Filed as
Exhibit 10.9 to Dunn's Form 10-KSB, dated January 30 , 1998 (File No. 0-22263) and hereby incorporated
by reference).
10.10 Deed of Lease, dated February 7, 1997, between APA Properties No. 6 L.P. and STMS, Inc. and First
Amendment thereto, dated July 23, 1997 (Filed as Exhibit 10.10 to Dunn's Form 10-KSB, dated January 30,
1998 (File No. 0-22263) and hereby incorporated by reference).
10.11 1997 Stock Option Plan. (Included as Appendix C to the Proxy Statement/Prospectus contained in this
Registration Statement).
10.12 General Service Administration Schedule for International Data Products, Corp.
10.13 Agreement, dated May 5, 1997, by and between International Data Products, Corp. and the U.S. Air Force,
the Desktop V Contract.
10.14 Agreement, dated January 6, 1998, by and between International Data Products, Corp. and the Department
of the Navy.
10.15 Deed of Lease, dated January 31, 1995, between Northtech Business Park and International Data Products,
Corp.
10.16 Deed of Lease, dated July 15, 1994, between Puerto Rico Industrial Development Company and Puerto Rico
Industrial Manufacturing Operations, Corp.
10.17 Agreement, dated July 11, 1995, by and between International Data Products, Corp. and the Social
Security Administration.
10.18 Form of Employment Agreements by and between the Company and each of George D. Fuster and D. Oscar
Fuster. (Filed as Exhibit 10.18 to the Registration Statement on Form S-1, Amendment No. 1, of the
Company, dated April 1, 1998 (File No. 333-47631), and hereby incorporated by reference).
21.1 List of Subsidiaries. (Filed as Exhibit 21.1 to the Registration Statement on Form S-1, Amendment No. 1,
of the Company, dated April 1, 1998 (File No. 333-47631), and hereby incorporated by reference).
23.1 Consents of Ernst & Young LLP, Independent Auditors (previously filed).
23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors (previously filed).
23.3 Consent of Davis, Sita & Company, P.A., Independent Auditors (previously filed).
23.4 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
24.1 Power of Attorney (previously filed).
27.1 Financial Data Schedule (previously filed).
27.2 Financial Data Schedule.
99.1 Form of Proxy Card.
</TABLE>
(b) Financial Statement Schedules
Schedule II--Valuation and Account Reserve
All other schedules have been omitted because they are inapplicable or the
information is provided in the Financial Statements including the Notes thereto
included in the Proxy Statement/Prospectus.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 (the "Securities Act") and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.
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. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Sterling, in the Commonwealth of Virginia, on April 6, 1998.
DUNN COMPUTER CORPORATION
BY: /S/ THOMAS P. DUNNE
-----------------------------------------
Thomas P. Dunne
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------ -------------------------------- ------------
/s/ THOMAS P. DUNNE Chairman, Chief Executive
- ------------------------------ Officer and President April 6,
Thomas P. Dunne (Principle Executive Officer) 1998
Executive Vice President, Chief
/s/ JOHN D. VAZZANA Financial Officer and Director April 6,
- ------------------------------ (Principal Financial and 1998
John D. Vazzana Accounting Officer)
*CLAUDIA N. DUNNE Vice President and Director
- ------------------------------ April 6,
Claudia N. Dunne 1998
*VADM E.A. BURKHALTER, JR., Director
USN (RET.)
- ------------------------------ April 6,
VADM E.A. Burkhalter, Jr., USN 1998
(Ret.)
*DANIEL SINNOTT Director
- ------------------------------ April 6,
Daniel Sinnott 1998
*By his signature set forth below, John D. Vazzana, pursuant to duly executed
Powers of Attorney duly filed with the Securities and Exchange Commission, has
signed this Amendment No. 2 to the Registration Statement on Form S-4 on behalf
of the persons whose signatures are printed above, in the capacities set forth
opposite their respective names.
/s/ JOHN D. VAZZANA
-----------------------------------------
John D. Vazzana
II-7
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
We have audited the consolidated financial statements of Dunn Computer
Corporation (a Delaware corporation) as of October 31, 1996 and 1997, and for
each of the three years in the period ended October 31, 1997 and have issued our
report thereon dated January 7, 1998, except for Notes 2 and 11, with respect to
the earnings per share calculations, as to which the date is March 5, 1998,
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 21(b) of this Registration
Statement. The schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole
presents fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Vienna, Virginia
January 7, 1998, except for Notes 2 and 11,
with respect to the earnings per
share calculations, as to which
the date is March 5, 1998
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYNG ACCOUNT AND RESERVE
DUNN COMPUTER CORPORATION
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
CLASSIFICATION PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
- ------------------------------------------------------------ ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 31, 1995............................... $ -- -- -- $ --
Year ended October 31, 1996............................... $ -- 15,000 -- $ 15,000
Year ended October 31, 1997............................... $ 15,000 62,000* -- $ 77,000
Three months ended January 31, 1998 (unaudited)........... $ 77,000 -- -- $ 77,000
Inventory reserve:
Year ended October 31, 1995............................... $ -- -- -- $ --
Year ended October 31, 1996............................... $ -- 20,000 -- $ 20,000
Year ended October 31, 1997............................... $ 20,000 230,000* -- $ 250,000
Three months ended January 31, 1998 (unaudited)........... $ 250,000 -- -- $ 250,000
</TABLE>
- ------------------------
* Additions represent purchase price adjustments relating to the acquisition
of STMS, Inc.
S-2
<PAGE>
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
The Boards of Directors
International Data Products, Corp. and Puerto Rico Manufacturing Operations
Corp.:
Under date of November 7, 1997, we reported on the combined balance sheets
of International Data Products, Corp. and combined company as of September 30,
1996 and 1997, and the related combined statements of income, retained earnings,
and cash flows for each of the years in the three-year period ended September
30, 1997, which are included in the prospectus. In connection with our audits of
the aforementioned combined financial statements, we also audited the related
combined financial statement schedule in the registration statement. This
financial statement schedule is the responsibility of the Companies' management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic combined financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
McLean, Virginia
November 7, 1997
S-3
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYNG ACCOUNT AND RESERVE
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
CLASSIFICATION PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
- ------------------------------------------------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 30, 1995.............................. $ -- -- -- $ --
Year ended September 30, 1996.............................. $ -- 127,733 -- $ 127,733
Year ended September 30, 1997.............................. $ 127,733 4,088 -- $ 131,821
Inventory reserve:
Year ended September 30, 1995.............................. $ -- -- -- $ --
Year ended September 30, 1996.............................. $ -- -- -- $ --
Year ended September 30, 1997.............................. $ -- 796,404 -- $ 796,404
</TABLE>
S-4
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
DUNN COMPUTER CORPORATION
* * *
ARTICLE I
Offices
The principal office and place of business of this corporation will be
11307 Sunset Hills Road, Suite B7, Reston, Virginia 22090. Permission and
authority is hereby given the Board of Directors to change the location of
said principal office and of said principal place of business, or either,
from time to time as it may deem advisable, and also to establish such
offices or places of business elsewhere, either within or without the State
of Virginia, as in the opinion of the Board may be advisable.
ARTICLE II
Stockholders Annual Meetings
SECTION 1. The annual meetings of the stockholders of this corporation
shall be held on the second Tuesday of April of each year either at the
principal office of the corporation or at such other place either in or out
of the State of Virginia as the Board of Directors may authorize and fix by
resolution or order. No prior Notice of said annual meeting shall be required.
Special Meetings
SECTION 2. Special meetings of the stockholders may be called at any time
by the Board of Directors, the President, or any number of stockholders
holding in the aggregate at least twenty-five percent (25%) of the number of
shares outstanding. Such meetings shall be held at the principal office of
the corporation unless called by the Board of Directors to be held at some
other place, in which event it shall be held at such other place.
1
<PAGE>
Notice of Special Meetings
SECTION 3. In all elections of directors each stockholder shall have the
right to cast one vote for each share of stock owned by him and entitled to
vote, and he may cast the same in person or by proxy.
Waiver of Notice
SECTION 4. Any meeting of the stockholders may be held by agreement in
writing of all the stockholders, and where notice or publication of any
notice is required, the same may be waived in writing by all of the
stockholders. Any meeting of the stockholders at which all the outstanding
stock of the corporation is present or represented shall be valid and
binding, notwithstanding lack or insufficiency of notice.
Quorum--Adjustments
SECTION 5. At all meetings of the stockholders, a quorum shall consist of
at least a majority of all of the shares of stock issued and outstanding,
exclusive of that held by the corporation, either in person or by proxy.
If a sufficient number of shares is not present at the time and place
appointed, any number of shares present or represented, less than a quorum,
may adjourn any stockholders' meeting from time to time until the meeting is
regularly constituted and the business to come before the meeting is
completed.
Voting
SECTION 6. Upon any question to be determined at a stockholders' meeting
other than the election of directors, which is otherwise provided for by
statute or by Section 3 of Article III of these Bylaws, if a vote by stock be
demanded upon such question by any stockholder, each stockholder shall be
entitled to one vote for each share of stock owned by him and entitled to a
vote, and he may exercise this right in person or by proxy.
2
<PAGE>
The concurrence by the vote of not less than a majority of the capital
stock present or represented at any meeting and entitled to vote shall be
necessary and prerequisite to any corporate action to be taken at any
stockholders' meeting.
Record of Meetings
SECTION 7. A record shall be kept of the meeting of the stockholders and
the action taken at the same, which shall be verified by the person acting as
Secretary thereof.
ARTICLE III
Directors
Number, Qualification and Term of Office
SECTION 1. The business, property and affairs of the corporation shall be
managed and controlled by its Board of Directors. The Board of Directors
shall consist of not less than three nor more than seven persons, as may be
determined by the stockholders from time to time, to be elected at the first
meeting of the stockholders and at every annual meeting thereafter. Such
directors need not be stockholders of the corporation nor residents of the
State of Virginia. They shall hold office for one year and until their
successors are elected and qualified.
Executive Committee
SECTION 2. The Board of Directors may by resolution or resolutions passed
by majority of the whole Board, designate and elect an Executive Committee of
not less than three members of the Board of whom one shall be the President
of the corporation. The Executive Committee shall have and may exercise all
the powers of the Board of Directors in the management of the business
affairs of the corporation when the Board is not in session, and shall have
power to authorize the seal of the corporation to be affixed to all papers
which may require it. The Executive Committee shall meet upon the call of the
President and shall keep a full record of its proceedings which may be
reviewed by the Board of Directors at any time. The Executive Committee shall
serve at the will and pleasure of the Board of Directors and the Board of
Directors may change the membership of the Executive Committee at any time,
provided, however, that the President of the corporation shall always be a
member of the Executive Committee.
3
<PAGE>
Elections
SECTION 3. In all elections of directors each stockholder shall have the
right to cast one vote for each share of stock owned by him and entitled to
vote, and he may cast the same in person or by proxy, for as many persons as
there are directors to be elected, or he may cumulate such votes and give one
candidate as many votes as the number of directors to be elected multiplied
by the number of his shares of stock shall equal; or he may distribute them
on the same principle among as many candidates and in such manner as he shall
desire, and the directors shall not be elected in any other manner.
Vacancies
SECTION 4. The stockholders at any meeting may remove any director and
fill the vacancy until the next annual meeting. A vacancy in the Board
occurring from any other cause may be filled by the Board until the next
annual meeting of the stockholders.
Meetings
SECTION 5. Regular meetings of the Board of Directors may be held at such
time and place as may be hereafter prescribed by these Bylaws, or as the
Board may from time to time designate by resolution. No notice shall be
required as to regular meetings of the Board if the Board by resolution
determines a precise time and place for such meetings.
Special meetings of the Board may be called by the President, or any two
directors.
Notice of any meeting of the Board may be given, until otherwise ordered
by the Board of Directors, by the Secretary of the corporation or by the
person or persons calling such meeting, at least five days before the time of
such meeting, either by written notice thereof mailed to each director, or by
telegram or telephone.
Meetings of the Board may be held at any time and place without notice
upon the written consent of all the directors.
The action of a majority of the Board, although not at a regularly called
meeting, and the record thereof, if assented to in writing by all the members
of the Board, shall be as valid and effective in all respects as if such
action were taken by the Board in regular meeting assembled.
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Quorum
SECTION 6. Until otherwise prescribed by these Bylaws, a majority of the
Board shall constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present, a majority of
those persons present may adjourn the meeting from time to time until a
quorum is present.
Authority of Board to Encumber
Property of Corporation
SECTION 7. In addition to the power and authority vested in the Board of
Directors of this corporation by the statutes and laws of the State of
Virginia and under the Bylaws of the corporation, the Board of Directors
shall have, and it is hereby expressly given and granted, the power, right
and authority to encumber and mortgage the real estate and other property of
this corporation or any part or parts thereof, and to convey the same in
trust to secure the payment of corporate obligations.
When Interest of Director Does Not Disqualify Him
SECTION 8. No person duly elected a director of this corporation shall be
disqualified to take office as such director, or to serve as such, or to vote
upon any matter coming before the Board of Directors of this corporation, or
to do any other act or thing otherwise proper to be done as such director, by
reason of the fact that such person is a stockholder, director, officer or
employee of any other corporation; or is a partner, or proprietor of another
business, the Board of Directors of this corporation being expressly
authorized to make, approve or ratify contracts, leases, agreements and other
transactions between this corporation and any other corporation or business
notwithstanding any interest which any member or members of the Board of
Directors of this corporation may have in such corporation or business.
Record of the Board
SECTION 9. The Board of Directors shall cause to be kept a record of its
proceedings which shall be verified by the signature of the person acting as
Secretary of the meeting. On any question as to which there is disagreement
the names of the
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record, if any member at the time requires it.
Books of Account--Annual Report
SECTION 10. The directors and officers shall keep accurate accounts of the
corporate transactions and to such end shall cause the books of the
corporation to be settled and balanced at least once in every twelve months.
The Board of Directors may from time to time adopt such annual accounting
periods as it shall deem advisable.
ARTICLE IV
Officers and Agents
Election and Appointment
SECTION 1. As soon as may be after their election, the Board of Directors
shall choose a President of the corporation from among the directors, who
shall hold office until his successor is elected and qualified.
At the same time the Board of Directors shall choose a Vice President, a
Secretary and a Treasurer, none of whom need be members of the Board. The
directors may at any time elect from among the directors a Chairman of the
Board of Directors, and may also elect an Executive Vice President, an
Assistant Secretary and an Assistant Treasurer, who need not be members of
the Board. All of the officers in this paragraph mentioned shall hold office
during the pleasure of the Board.
The Board of Directors may employ such other employees, agents, attorneys
and representatives as the Board may deem advisable to perform such duties as
the Board may prescribe, and fix their compensation.
If required by the Board, the President, Vice President, Executive Vice
President, Treasurer, Secretary or any officer, agent or employee appointed
by the Board shall give bond payable to the corporation in such penalty and
with such conditions and security as the Board may approve.
Compensation
SECTION 2. The Board of Directors of this corporation shall have, and it
is hereby given, the authority and right to fix the compensation of all
officers (including members of the Board of Directors and the officers
mentioned in Section 1
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immediately above), agents, and employees of the corporation, who shall
receive such compensation as the Board may from time to time prescribe.
President
SECTION 3. The President shall be the chief executive officer of the
corporation. Unless some other officer or agent is specially appointed and
authorized for the purpose, the President shall sign the corporate name of
the corporation to all deeds, mortgages, writings and other contracts made by
the corporation, except such as are necessary or incidental to the exercise
of the powers vested in other officers or agents by the Board of Directors;
and generally, the President shall have the exercise supervision and control
over all the business, affairs and property of the corporation, except as may
be vested in other officers or agents by action of the Board of Directors,
and shall perform such duties as are incident to the conduct of its business
not otherwise provided for in its Bylaws or by action of the Board of
Directors or vested in other officers or agents by action of the Board of
Directors.
Vice President
SECTION 4. The Vice President shall in the absence or incapacity of the
President perform the duties of the President and shall have such other
powers and authority as may be assigned to him by the Board of Directors,
either generally or specifically.
Executive Vice President
SECTION 5. The Executive Vice President shall have supervision and control
over so much of the business affairs and property of the corporation as may
be delegated to him from time to time by the Board of Directors, either
generally or specifically.
Secretary
SECTION 6. The Secretary, or an Assistant Secretary, shall have the
custody of the minute book, stock book, corporate seal and all records and
papers of the corporation, subject to the supervision and control of the
President, except such as the Board may put in the custody of other officers,
agents or employees.
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The Secretary, or an Assistant Secretary, shall attend all meetings of the
stockholders and of the Board of Directors and act as Secretary thereof,
keeping a record of the proceedings of such meetings in a book to be
maintained for the purpose. The Secretary shall give or cause to be given,
unless otherwise specially provided, notice to all meetings of the
stockholders, directors, committees and other meetings of the officers or
representatives of the corporation, and shall perform such other duties as
may be prescribed by the Board of Directors or the President.
Treasurer
SECTION 7. The Treasurer or Assistant Treasurer shall have custody of the
corporate funds and securities, subject to the supervision and control of the
President, shall keep full and accurate accounts of receipts and
disbursements of the corporation; and shall deposit all moneys and other
valuable effects, in the name and to the credit of the corporation, in such
depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation subject to such
regulations as may be prescribed by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and to the
directors at regular meetings of the Board whenever they, or any of them, may
request it, an account of transactions as Treasurer and of the financial
condition of the corporation, and such other reports as may from time to time
be required of him by the President.
Signature of Orders for the
Payment of Money
SECTION 8. The funds of the corporation shall be disbursed in such manner
as may be prescribed by the Board of Directors. All checks, notes, drafts and
other orders of the corporation for the payment of money shall be drawn,
signed or countersigned as the Board of Directors may from time to time
prescribe.
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ARTICLE V
Capital Stock
Certificate of Stock
SECTION 1. The Board of Directors shall cause to be issued to any
association or its legal receiver appearing on the books of the corporation
to be the owner of any shares of its stock, a certificate or certificates
therefor, under the corporate seal of the corporation, to be signed by the
President, or a Vice President, and the Secretary, or an Assistant Secretary,
of the corporation, which certificate shall be in such form as the Board of
Directors may adopt. Such certificates shall be issued in order from a stock
certificate book to be kept by the Secretary under the supervision of the
Board.
Unless otherwise specially ordered by the Board, no such certificate shall
be issued or delivered until the stock represented thereby has been fully
paid for or security satisfactory to the Board given for the residue
remaining unpaid; but such payment may be made in property, property rights
services or otherwise when authorized and approved by the Board of Directors.
Transfer of Stock
SECTION 2. Shares of the capital stock of the corporation shall be
transferable by it only upon the books of the corporation by the holder
thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Closing of Transfer Books and Fixing Record Date
SECTION 3. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any proper purpose, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period, but not to
exceed, in any case, fifty (50) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, such books shall be closed for at least
ten (10) days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix, in advance, a date as
the record date for any determination of shareholders, such date, in any
case, to be not more than fifty (50) days and, in case of a
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meeting of shareholders, not less than ten (10) days prior to the date on
which the particular action requiring such determination of shareholders is
to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed, or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of shareholders.
ARTICLE VI
General Provisions
Dividends
SECTION 1. The Board of Directors may declare, and the corporation may
pay, dividends on its outstanding shares in cash, property, or its own
shares, pursuant to law and subject to the provisions of its Articles of
Incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends, such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or equalizing dividends, or for
such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Checks
SECTION 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers, or such other person or persons
as the Board of Directors may, from time to time, designate.
Fiscal Year
SECTION 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
Seal
SECTION 5. The corporate seal of the corporation shall
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have inscribed thereon the name of the corporation, the year of its
organization, and the state of incorporation. The seal may be used by causing
it, or a facsimile thereof, to be impressed or affixed or reproduced or
otherwise.
ARTICLE VII
Amendments
SECTION 1. These Bylaws may be altered, amended or repealed, or new bylaws
adopted, at any regular meeting of the Board of Directors, or at any special
meeting of the Board of Directors, if notice of such proposed action be
contained in the notice of such special meeting.
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Exhibit 4.4
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of the 28th day of February, 1998 is made by and between DUNN COMPUTER
CORPORATION, a Virginia corporation (the "Borrower"), and FIRST UNION NATIONAL
BANK, a national banking association (successor by merger to Signet Bank and the
"Lender").
RECITALS
A. The Lender and the Borrower entered into a Loan and Security Agreement
dated as of May 28, 1997 (as amended through the date hereof, the
"Agreement") pursuant to which the Lender has agreed to extend credit to
the Borrower, and the Borrower has agreed to obtain credit from the Lender,
on the terms and conditions set forth in such Agreement.
B. The Borrower has requested that the Lender make certain modifications to
the Agreement, including increasing the Maximum Amount, and the Lender has
consented to such request subject to the execution of this Amendment and
the satisfaction of the conditions specified herein.
C. The Borrower and the Lender now desire to execute this Amendment to set
forth their agreements with respect to the modifications to the Agreement.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrower agree
as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment and not
defined herein are defined in the Agreement.
SECTION 2. Amendments to Agreement. Section 1 of the Agreement is amended
by replacing the definition of the term Termination Date its entirety with the
following definition:
"Termination Date" means May 31, 1998, and any extensions or extensions
thereof granted by the Lender in its sole discretion.
SECTION 3. Representations and Warranties of Borrower. The Borrower
represents and warrants to the Lender that:
(a) It has the power and authority to enter into and to perform this
Amendment, to execute and deliver all documents relating to this Amendment,
and to incur the obligations provided for in this Amendment, all of which
have been duly authorized and approved in accordance with the Borrower's
corporate documents;
(b) This Amendment, together with all documents executed pursuant
hereto, shall constitute when executed the valid and legally binding
obligations of the Borrower in accordance with their respective terms;
(c) Except with respect to events or circumstances occurring
subsequent to the date thereof and known to the Lender, all representations
and warranties made in the Agreement are true and correct as of the date
hereof, with the same force and effect as if all representations and
warranties were fully set forth herein;
(d) The Borrower's obligations under the Loan Documents remain valid
and enforceable obligations, and the execution and delivery of this
Amendment and the other documents executed in connection herewith shall not
be construed as a novation of the Agreement or any of the other Loan
Documents; and
(e) As of the date hereof, the Borrower has no offsets or defenses
against the payment of any of the Obligations.
<PAGE>
SECTION 4. Waiver of Claims. As a specific inducement to the Lender without
which the Borrower acknowledges the Lender would not enter into this Amendment
and the other documents executed in connection herewith, the Borrower hereby
waives any and all claims that it may have against the Lender, as of the date
hereof, arising out of or relating to the Agreement or any other Loan Document
whether sounding in contract, tort or any other basis.
SECTION 5. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Lender shall have received this Amendment,
all executed and completed by the Borrower.
SECTION 6. Waiver of Default. Upon the Lender's execution of this Amendment
and the occurrence of the conditions to the effectiveness of this Amendment set
forth in Section 5 hereof, the Lender agrees to waive the Default under the
Agreement resulting from the Borrower's entering into an Agreement in Principal
to acquire the business and operations of International Data Products Corp. and
Puerto Rico Industrial Manufacturing Operations Corp. in violation of Section
6.10; provided, however, that this waiver shall not constitute a waiver of any
right, power or privilege to which the Lender is entitled under this Amendment,
the Agreement or any of the other Loan Documents as a result of any other
Default or upon the occurrence of a subsequent Default, including a Default
occurring because of the continuation of conduct by the Borrower as to which the
Lender is waiving its rights as of the date hereof.
SECTION 7. Miscellaneous.
7.1 Reference to Agreement. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement" and each reference in
the other Loan Documents to the Agreement, shall mean and be a reference to
the Agreement as amended hereby.
7.2 Effect on Loan Documents. Except as specifically amended above,
the Agreement and all other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the
generality of the foregoing, all Collateral given to secure the Obligations
of the Borrower under the Agreement and the other Loan Documents prior to
the date hereof does and shall continue to secure all Obligations of the
Borrower under the Agreement, as amended hereby and the other Loan
Documents, and, except as provided in the Agreement and the other Loan
Document, no such Collateral shall be released until all Obligations are
satisfied and completely discharged.
7.3 No Waiver. Except as specifically provided in Section 7 hereof,
the execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Lender under any
of the Loan Documents, nor constitute a waiver of any provision of any of
the Loan Documents.
7.4 Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all costs and expenses of the Lender in connection with the preparation,
reproduction, execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto.
7.5 Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia, without giving
effect to conflict of law provisions.
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be signed by their duly authorized representatives under seal all as of the
day and year first above written.
DUNN COMPUTER CORPORATION, a Virginia
corporation
ATTEST: By: /s/ Thomas P. Dunn
------------------------------------
Thomas P. Dunn, President
/s/ Claudia N. Dunne
- --------------------------
(Asst. Secretary)
[corporate seal]
FIRST UNION NATIONAL BANK,
National banking association
By: /s/ Robert L. Reed
------------------------------------
Robert L. Reed, Asst. Vice President
<PAGE>
Exhibit 4.5
INVESTOR RELATIONS
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), is made and entered as of the ___
day of October 1997 ("Effective Date") by and between Dunn Computer
Corporation, Inc., a Delaware corporation ("Company"), and JDK & Associates,
Inc., a California corporation ("Consultant").
RECITALS
Company desires to have Consultant perform consulting services for it and
Consultant desires, subject to the terms and conditions of this Agreement, to
perform consulting services for Company.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND UNDERTAKINGS
HEREIN CONTAINED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT
AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO AGREE AS
FOLLOWS:
1. ENGAGEMENT AND DESCRIPTION OF SERVICES.
1.1 Company hereby retain Consultant as a consultant, and Consultant
hereby agrees to act as such consultant and to furnish such consulting
services to Company as requested from time to time by Company. Such
consulting services shall include, but not be limited to, consultation
regarding any proposals for new business ventures, general consultation and
advice concerning any debt or equipment financing, advice regarding any sale
of assets, mergers, acquisitions, consolidations or joint ventures, advice
with respect to possible strategic alliances and other growth opportunities,
and offering, if required, recommendations with respect to the foregoing.
1.2 Consultant will, when appropriate, arrange meetings between
representatives of Company and individuals and financial institutions in the
investment community, such as security analysts, portfolio managers and
market makers. Consultant shall also develop, implement and maintain an
ongoing market support system that increases broker awareness of Company's
activities and stimulates investor interest in Company. The stock market
support systems shall include, but not be limited to, Consultant's initial
shareholder communication system, investor generation system and media
relations system, which have been defined and developed by Consultant. It is
understood that Consultant's ability to relate information regarding
Company's activities is dependent upon the information provided by Company to
Consultant.
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1.3 Consultant's role shall be to advise and review only, it being
understood that the management of Company will have final authority with
respect to all managerial decisions. It is further understood and
acknowledged by the parties hereto that the value of Consultant's advice is
not measurable in any qualitative manner and Consultant shall be obligated to
render advice upon the request of Company in good faith, but shall not be
obligated to spend any specific amount of time in doing so.
2. TERM.
The term of this Agreement ("Term") shall begin as of the Effective Date
and shall terminate twelve (12) months thereafter, unless terminated or
extended in accordance with provisions of this Agreement.
3. COMPENSATION.
As compensation for all services rendered by Consultant pursuant to this
Agreement, Company shall compensate as follows:
3.1 Company shall pay to Consultant the sum of Five Thousand
Dollars ($5,000) per month during term.
3.2 Concurrently with the execution of this Agreement the Company
shall issue to Consultant a warrant ("Warrant") entitling Consultant to
purchase up to One Hundred Thousand (100,000) shares ("Warrant Shares") of
Company's common stock at an exercise price of $6.50 per share. The warrants
shall vest 1/24th at the end of each month over the first three (3) months of
Agreement; remaining warrants shall vest 1/9th at the end of each month
during months four (4) through twelve (12). One Hundred Thousand (100,000)
warrant shares with an exercise price of $6.50 per share shall vest over
twelve (12) month period from "Effective Date", provided that vesting shall
cease upon the termination of this Agreement. If Consultant terminates this
Agreement within six (6) months of Effective Date all Warrant Shares
previously vested are to be returned. All Warrant Shares, to the extent
vested, shall be exercisable through November 1, 2002.
Company shall file a registration statement to register the Warrant Shares
with the Securities and Exchange Commission ("SEC") prior to the expiration
of one year from the Effective Date. If the Warrant Shares are not
registered and the registration statement declared effective by the SEC
within ninety (90) days after the expiration of the initial 12 month term
("Required Effective Date"), Company will register the Warrant Shares on a
Form S-8 Registration Statement ("S-8 Registration Statement) within 10
business days of the Required Effective Date. If Company fails to have the
S-8 Registration Statement registering the Warrant Shares declared effective
by the SEC within the time period set forth herein, the exercise price of the
Warrants will be reduced by One Dollar ($1.00) for each thirty (30) days
after said date until the S-8 Registration Statement is effective.
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Consultant shall have "piggyback" registration rights with respect to the
Warrant Shares. Said Warrant Shares if registered shall be locked up for a
period of twelve (12) months from the Effective Date.
3.3 Company shall reimburse Consultant for agreed upon budgetary
expenses incurred on a monthly basis which basis which will be due upon
receipt of invoice. Expenses to include, but not limited to, the following:
Press releases, overnight mail, conference calls, marketing pieces, special
events, travel and entertainment, media placement, etc.
3.4 All expenses of registration and qualification incurred in
connection with the registration of the Warrant Shares shall be borne by
Company, except that the holder of the Warrant Shares shall bear the fees and
expenses of its own counsel, if any.
4. INDEPENDENT CONTRACTOR.
It is expressly agreed that Consultant is acting as an independent
contractor performing its services hereunder, and this Agreement is not
intended to, nor does it create, an employer-employee relationship nor shall
it be construed as creating any joint venture or partnership between Company
and Consultant. Consultant shall be responsible for all applicable federal,
state and other taxes on behalf of Consultant, including without limitation
social security, federal, state and other local income taxes. Since
Consultant is acting solely as an independent contractor under this
Agreement, Consultant shall not be entitled to insurance or other benefits
normally provided by Company to its employees.
5. ASSIGNMENT.
This Agreement is being entered into in reliance upon and in consideration
of the skill and qualifications of Consultant. Consultant shall not
voluntarily or by operation of law assign or otherwise transfer the
obligations incurred on its part pursuant to the terms of this Agreement
without the prior written consent of Company. Any attempt at assignment or
transfer by Consultant of its obligations hereunder, without such consent,
shall be null and void.
6. NON-COMPETITION.
Consultant agrees that during the Term it shall not, directly or
indirectly (whether for compensation or otherwise), alone or as an agent,
principal, partner, officer, employee, trustee, director, shareholder,
consultant or in any other capacity own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or furnish
any capital to, or be connected in any manner with, or provide any services as
a consultant for any business which has any activities or products directly
competitive with the activities and products of Company. Subject to the
foregoing, Company hereby acknowledges that Consultant is in the business of
providing consulting advice of the nature contemplated by this Agreement to
others and nothing herein contained shall be
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construed to limit or restrict Consultant in conducting such business with
respect to rendering such advice to others.
7. CONFIDENTIALITY.
Consultant recognizes that during the course of Consultant's activities on
behalf of Company, it will accumulate certain proprietary and confidential
information and trade secrets used in Company's business and will have
divulged to it certain confidential and proprietary information and trade
secrets about the business, operations and prospects of Company, which
constitute valuable business assets of Company. Consultant hereby
acknowledges and agrees that such information ("Proprietary Information") is
confidential and proprietary and constitutes trade secrets and that the
Proprietary Information belongs to Company and not to Consultant. Consultant
agrees, to the extent not prohibited by law, that it shall not, at any time
subsequent to the execution of this Agreement, whether during or after the
Term, disclose, divulge or make known, directly or indirectly, to any person,
or otherwise use or exploit in any manner any Proprietary Information
obtained by Consultant under this Agreement, except in connection with and to
the extent required by its performance of its duties hereunder for Company.
Upon termination of this Agreement Consultant shall deliver to Company all
tangible displays and repositories of Proprietary Information.
8. TERMINATION.
This Agreement may be terminated on the occurrence of any one of the
following events:
8.1 The expiration of the Term hereof;
8.2 The mutual agreement of the parties;
8.3 By either party, with or without cause, on notice given to the
Party at least thirty (30) days prior to the effective date of termination.
9. DISCLAIMER OF RESPONSIBILITY FOR ACTS OF COMPANY.
The obligations of Consultant described in this Agreement consist solely
of the furnishing of information and advice to Company. In no event shall
Consultant be required by this Agreement to act as the agent of Company or
otherwise to represent or make decisions for Company. All final decisions
with respect to acts of Company or its affiliates, whether or not made
pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of the Company or such affiliates and Consultant
shall under no circumstances be liable for any expenses incurred or loss
suffered by Company as a consequence of such decisions.
10. GENERAL PROVISIONS.
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10.1 GOVERNING LAW AND JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of Delaware. Each
of the Parties hereto consents to such jurisdiction for the enforcement of
this Agreement and matters pertaining to the transaction and activities
contemplated hereby.
10.2 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, first class mail, or
telecopied, addressed as follows:
PARTY ADDRESS
----- -------
Company Dunn Computer Corporation
1306 Squire Court
Sterling, VA 20166
Attn: Thomas Dunne, President
Telecopier No.: 703-450-0406
with a copy, which shall not constitute notice, to:
------------------------------
------------------------------
------------------------------
------------------------------
Telecopier No.:
---------------
Consultant JDK & Associates, Inc.
19800 MacArthur Boulevard, Suite 880
Irvine, California 92612
Attn: Joseph D. Kowal
Telecopier No.: 714-222-2965
with a copy, which shall not constitute notice, to:
Harry S. Stahl, Esq.
McKenna & Stahl
2603 Main Street, Suite 1010
Irvine, California 92614
Telecopier No: 714-752-6723
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; five (5) business days after
deposit in any United States Post Office in the continental United States,
postage prepaid, if mailed; when answered back, if telexed; and when receipt
is acknowledged or confirmed, if telecopied.
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10.3 ATTORNEYS FEES. In the event a dispute arises with respect to
this Agreement, the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorney's
fees and expenses incurred in ascertaining such party's rights, in preparing
to enforce or in enforcing such party's rights under this Agreement, whether
or not it was necessary for such party to institute suit.
10.4 COMPLETE AGREEMENT. This Agreement supersedes any and all of the
other agreements, either oral or in writing, between the Parties with respect
to the subject matter hereof and contains all of the covenants and agreements
between the parties with respect to such subject matter in any manner
whatsoever. Each Party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by any Party, or anyone herein, and that no other agreement,
statement or promise not contained in this Agreement shall be valid or
binding. This Agreement may be changed or amended only by an amendment in
writing signed by all of the Parties or their respective
successors-in-interest.
10.5 BINDING. This Agreement shall be binding upon and inure to the
benefit of the successors-in-interest, assigns and personal representatives
of the respective Parties, except that this Agreement may not be assigned by
Consultant without the prior written consent of Company.
10.6 UNENFORCEABLE TERMS. Any provision hereof prohibited by law or
unenforceable under the law of any jurisdiction in which such provision is
applicable shall as to such jurisdiction only be ineffective without
affecting any other provision of this Agreement. To the full extent, however,
that such applicable law may be waived to the end that this Agreement be
deemed to be a valid and binding agreement enforceable in accordance with its
terms, the Parties hereto hereby waive such applicable law knowingly and
understanding the effect of such waiver.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts and when so executed shall constitute one agreement
binding on all the Parties, notwithstanding that all the Parties are not
signatory to the original and same counterpart.
10.8 FURTHER ASSURANCE. From time to time each Party will execute
and deliver such further instruments and will take such other action as any
other Party may reasonably request in order to discharge and perform their
obligations and agreements hereunder and to give effect to the intentions
expressed in this Agreement.
10.9 MISCELLANEOUS PROVISIONS. The various headings and numbers
herein and the grouping of provisions of this Agreement into separate
articles and paragraphs are for the purpose of convenience only and shall not
be considered a party hereof. The language in all parts of this agreement
shall in all cases by construed in accordance with its fair meaning as if
prepared by all Parties to the Agreement and not strictly for or against any
of the Parties.
6
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
DUNN COMPUTER CORPORATION
A Delaware corporation
By: /s/ Thomas P. Dunne
---------------------------
Its:
-----------------------
"CONSULTANT"
JDK & ASSOCIATES, INC.
A California corporation
By: /s/ Joseph D. Kowal
---------------------------
Joseph D. Kowal, President
7
<PAGE>
EXHIBIT 5.1
[Letterhead of Jones, Day, Reavis & Pogue]
April 3, 1998
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
Re: 5,297,743 shares of Common Stock, par value $0.001 per share, of
Dunn Computer Corporation, a Virginia corporation, including
200,000 shares subject to issuance pursuant to warrants
Ladies and Gentlemen:
We are acting as special counsel for Dunn Computer Corporation, a
Virginia corporation (the "Company"), in connection with the Agreement of Merger
dated as of March 18, 1998 (the "Merger Agreement") among the Company, Dunn
Merger Corp., a Delaware corporation ("Merger Sub"), which is a subsidiary of
the Company, and Dunn Computer Corporation, a Delaware corporation ("Dunn"),
pursuant to which (i) Merger Sub will be merged into Dunn (the "Merger"), (ii)
5,097,743 shares of common stock, par value $0.001 per share, of Dunn will be
converted into 5,097,743 shares (the "Merger Shares") of common stock, par value
$0.001 per share, of the Company, and (iii) warrants (the "Dunn Warrants") to
purchase a total of up to 200,000 shares of common stock, par value $0.001 of
Dunn, will be converted into warrants (the "Warrants") to purchase up to 200,000
shares of common stock, par value $0.001, of the Company (the "Warrant Shares").
We have examined such documents, records and matters of law as we
have deemed necessary for purposes of this opinion, and based thereon and on
the assumptions identified herein, and subject to the qualifications set
forth herein, we are of the opinion that:
1. The Merger Shares are duly authorized and, when issued in
accordance with the Merger Agreement and upon the completion of the filing
contemplated by the General Corporation Law of the State of Delaware to
effect the Merger, or at such later date and time as may be specified in such
filing and accepted by the Secretary of State of the State of Delaware (the
"Effective Time"), will be validly issued, fully paid and nonassessable.
<PAGE>
Dunn Computer Corporation
April 3, 1998
Page 2
2. The Warrant Shares to be issued and sold pursuant to the
Warrants are duly authorized and, when issued and sold following the
Effective Time in accordance with the terms of the Warrants, will be validly
issued, fully paid and nonassessable.
In rendering this opinion, we have assumed that the shares of
common stock of Dunn to be converted into Merger Shares are duly authorized,
validly issued, fully paid and nonassessable. In rendering this opinion we
also have assumed that prior to the Effective Time: (i) the Registration
Statement on Form S-4 (the "Registration Statement") filed by you to effect
registration under the Securities Act of 1933, as amended, of the Merger
Shares and the Warrant Shares will have become effective under the Securities
Act; (ii) the stockholders of Dunn, and Dunn as sole stockholder of the
Company prior to the Merger, will have approved and adopted the Merger
Agreement in accordance with the General Corporation Law of the State of
Delaware; (iii) the Warrants will have been duly authorized and approved by
the Board of Directors of the Company, and each holder of Dunn Warrants will
have duly agreed to the issuance of the Warrants in conversion of the Dunn
Warrants in the Merger; and (iv) the transactions contemplated by the Merger
Agreement will have been consummated in accordance with the terms of the
Merger Agreement.
With respect to all of the documents reviewed by us in connection
with this opinion, we have assumed, without investigation, the genuineness of
all signatures, the authenticity of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
certified or reproduced copies. In rendering our opinion set forth above, we
have relied as to factual matters upon information obtained from the Company
and Dunn (and their respective officers and representatives) and public
officials.
This letter is furnished to you solely for use in connection with
the Merger and may not be used for any other purpose without our express
permission. We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to us under the caption
"Legal Matters" in the prospectus/proxy statement comprising a part of the
Registration Statement. In giving such consent we do not thereby admit that
we are in the category of persons whose consent is required under Section 7
of the Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE>
EXHIBIT 8.1
[Letterhead of Jones, Day, Reavis & Pogue]
April 3, 1998
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
Attn: John D. Vazzana
Re: Form S-4 Registration Statement
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Dunn Computer Corporation, a Virginia corporation
(the "Company"), relating to the merger (the "Merger") of Dunn Merger Corp. , a
Delaware corporation, with and into Dunn Computer Corporation, a Delaware
corporation ("Dunn"). We are acting as special tax counsel to Dunn in
connection with the Merger.
In our opinion, the discussion set forth in the Registration Statement
under the caption "THE MERGER AND THE IDP ACQUISITION -- Certain Federal Income
Tax Considerations," insofar as it purports to describe the provisions of law
referred to therein, is accurate in all material respects.
We express no opinion on matters other than those referred to above. This
opinion is intended for the sole benefit of Dunn and may not be relied on by any
other person.
We hereby consent to the use of this opinion as Exhibit 8.1 to the
Registration Statement and to the reference to our firm under the heading "THE
MERGER AND THE IDP ACQUISITION -- Certain Federal Income Tax Considerations" in
the proxy statement/prospectus that is part of the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE>
Exhibit 10.12
[Logo of IDP]
Authorized ADP Schedule Pricelist
FSC Group 70, Part I, Sections B & C
GENERAL PURPOSE COMMERCIAL AUTOMATIC DATA PROCESSING EQUIPMENT, END USER
COMPUTERS (NORMALLY MICROCOMPUTERS) AND EQUIPMENT USED PRIMARILY OFF-LINE, AND
SOFTWARE
Applicable special Item Numbers:
- --------------------------------
Special Item Number 132-8 Purchase of Hardware
Special Item Number 132-18 Repair Service
Special Item Number 132-19 Repair Parts
<TABLE>
<CAPTION>
FSC Classes and Category Codes
- ------------------------------
Hardware Category Code
- -------- -------------
<S> <C>
FSC Class 7010-0001 End User Computers ......................... G
FMC Class 7010-0003 Laptop, Portable and Notebook Computers .... H
FSC Class 7025-0004 Printers (ADP) ............................. A
FMC CLASS 7025-0006-Local Area Network Equipment and Accessories J
FMC CLASS 7025-0010 Other ADP Input/Output and Storage Devices . C
FSC CLASS 7025-0011 Modems and Multiplexers .................... D
FSC CLASS 7035-0001 ADP Support Equipment ...................... E
FSC CLASS 7050-0001 ADP Boards ................................. F
Software:
- ---------
FSC Class 7030-0001 Operating System Software .................. O
</TABLE>
International Data Products, Corporation (IDP)
20 Firstfield Road
Gaithersburg, Maryland 20878-1793
Telephone Number 301-590-8100
Contract Number: _________________________________________
Period covered by Contract: __________________________________
General Services Administration
Federal Supply Service
Products and ordering information in this Authorized ADP Schedule Pricelist is
also available on the GSA Advantage system. Agencies can browse GSA andvantage
by accessing GSA's Home Page via Internet at www.gsa.gov.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Information for Ordering Offices ............................................ 0-3
Terms and Conditions Applicable to (SIN 132-8, 132-18, 132-19) .............. 3-3
Terms and Conditions Applicable to Purchase (SIN 132-8) ..................... 3-4
Terms and Conditions Applicable to Repair (SIN-132-18) and Parts (Sin 132-19) 4-6
Attachment AA: OCONUS On-Site Service Location
Attachment BB: Points of Production
</TABLE>
<PAGE>
Information for Ordering Offices
1. Geographic Scope of Contract: The geographic scope of this contract is the 48
contiguous states, the District of Columbia, Elmendorf AFB and Eileson AFB,
Alaska, and Oahu, Hawaii.
2. Contractor's Ordering Address and Payment Address:
International Data Products, Corporation
20 Firstfield Road
Gaithersburg, Maryland 20878-1793
Government Commercial Credit Cards will be acceptable for payment. In addition,
bank account information for wire transfer payments will be shown on the
invoice.
Below are the telephone numbers that can be used by ordering agencies to obtain
technical and/or ordering assistance.
Technical Support
301-590-8100 Extension 7299
Sales/Orders
301-590-8100 (Receptionist to direct appropriate GSA Account Manager)
3. Reserved
4. Statistical Data for Government Ordering Office Completion of Standard Form
279:
Block 9: G Order/Modification under Federal Schedule
Block 16 Contractor Establishment Code (DUNS) #103934774
Block 30. Type of Contractor- A Small Disadvantaged Business
Block 31. Women Owned Small Business -No.
Block 34 RESERVED
Block 36. Contractor's Taxpayer Identification Number (TIN)-#521328445
4a. Cage Code: 45815
5. FOB Destination for all CONUS locations and OCONUS APO addresses. For all
other OCONUS locations, shipping charges may apply outside the scope of the
contract. Please contact your account manager at (301) 590-8100.
6. COMMERCIAL DELIVERY SCHEDULE (MULTIPLE AWARD SCHEDULES)
(a) TIME OF DELIVERY. The contractor shall deliver to destination within the
number of calendar days after receipt of order (ARO), as set forth below.
Offerors shall insert in the "Time of Delivery" (days ARO)" column in the
Schedule of Items a definite number of calendar days within which delivery will
be made. In no case shall the offered delivery time exceed the contractor's
normal commercial practice.
<TABLE>
<CAPTION>
ITEMS or GROUPS OF ITEMS DELIVERY TIME
(SIN or Nomenclature) (DAYS ARO)
- ----------------------- -------------
<S> <C>
132-8 30 Days ARO
</TABLE>
(b) (EXPEDITED DELIVERY TIMES. For those items that can be delivered quicker
than the delivery times in paragraph (a), the offeror is requested to insert
below, a time (hours/days ARO) that delivery can be made when expedited delivery
is requested.
<TABLE>
<CAPTION>
ITEMS or GROUPS OF ITEMS DELIVERY TIME
(SIN or Nomenclature) (DAYS ARO)
- ----------------------- -------------
<S> <C>
132-8 30 Days ARO
</TABLE>
(c) OVERNIGHT AND 2-DAY DELIVERY TIMES. IDP may be able to deliver product via
overnight/day delivery upon verbal confirmation with an IDP GSA Account Manager.
The charge will be a minimum fee of $20.00 or 1% of the total GSA order for next
day delivery and a fee of $15.00 or 1% of the GSA order for Two Day delivery,
whichever is greater. The minimum dollar value for express delivery of the order
cannot be less than $1500.00 unless mutually agreed upon between the ordering
office and the GSA Account Manager.
(d) URGENT REQUIREMENTS. When the Federal Supply Schedule contract delivery
period does not meet the bona fide urgent delivery requirements of an ordering
agency, agencies are encouraged, if time permits, to contact the contractor for
the purpose of obtaining accelerated delivery. The contractor shall reply to the
inquiry within 3 workdays after receipt. (Telephonic replies shall be confirmed
by the contractor in writing.) If the contractor offers an accelerated delivery
time acceptable to the ordering agency, any order(s) placed pursuant to the
agreed upon accelerated delivery time frame shall be delivered within this
shorter delivery time and in accordance with all other terms and conditions of
the contract.
0
<PAGE>
7. Discounts: The prices are net and discounts have been deducted.
a. Prompt Payment: 1/2%-Net 20 days from receipt of invoice or date of
acceptance, whichever is later.
b. Quantity-NO
c. Dollar Value-YES, The following discount structure will be
implemented for all IDP desktops and notebooks:
<TABLE>
<CAPTION>
DISCOUNT OFF OF IDP'S COMMERCIAL
DOLLAR VALUE PRICE LIST
------------ --------------------------------
<S> <C>
$50,000-$149,999 ........... 41%
$150,000-$499,999 .......... 43%
$500,000-$2,999,999 ........ 44%
$3,000,000-AND up .......... 45%
</TABLE>
d. Governmental Educational Institutions- They are offered the same
discount as all other Government customers.
e. Discount for use of Government Commercial Credit Card- NO
f. Other- NONE
8. Production Points and Statements Concerning Foreign Produced Items
More than one production point exists for delivery under this schedule contract.
Please refer to Attachment BB.
9. Export Packaging: All products shipped to OCONUS locations will be packaged
according to Industry Standard's Export Guidelines.
10. Small Requirements. The minimum order dollar value of orders to be issued is
$50.00.
11. Maximum order: (all dollar amounts are exclusive of any discount for prompt
payment)
(b) Special Items Number 132-8- Purchase of Hardware
The maximum dollar value per order will be $500,000 for all
hardware products.
(c) Special Items Number 132-19- Repair Parts
The maximum dollar value per order will be $10,000.
Note: Maximum Order do not apply to Special Items Numbers 132-12
Maintenance of Equipment, 132-18 repair Service, or 132-34 Maintenance
of Software. The contractor shall honor any order exceeding the maximum
order limitations in paragraph (b), unless that order (or orders) is
returned to the ordering office within 5 days after issuance, with
written notice stating the contractors' intent not to ship the item (or
items) called for and the reasons. Upon receiving this notice, the
Government may acquire the supplied or services from another source.
11b. Orders that exceed the Maximum Order (I-FSS-125) (AUG 1995) (a) In
accordance with FAR 8.404 there may be circumstances where an ordering activity
finds it advantageous to request a price reduction such as where quantity of an
individual order clearly indicates the potential for obtaining a reduced price.
To assist the customer agencies to determine when they should seek a price
decrease a level called a maximum order has been established under the contract.
When an agency order exceeds this amount it is recommended that the ordering
activity contact the contractor for a reduced price.
(b) Contractor may:
(1) Offer a new lower price for this requirement (the Price
Reduction Clause is not applicable to orders placed over the
Maximum order in FAR 52.216-19.)
(2) offer the lowest price available under the contract; or
(3) decline the order, orders must be returned in accordance with
FAR 52-216-19.
(c) A delivery order for quantities that exceed the maximum order may be placed
with the contractor selected in accordance with FAR 8.404. The order will be
placed under the current contract.
(d) Sales for orders that exceed the Maximum Order shall be reported in
accordance with GAR 552.238-72.
12. FEDERAL ADP/TELECOMMUNICATION STANDARDS REQUIREMENTS: Federal departments
and agencies acquiring products from this Schedule must comply with the
provisions of the Federal Standards Program, as appropriate (reference: NIST
Federal Standards Index). Inquiries to determine whether or not specific
products listed herein comply with Federal Information Processing Standards
(FIPS) or Federal Telecommunication Standards (FED-STDS), which are cited by
ordering offices, shall be responded to promptly by the Contractor.
12.1 FEDERAL INFORMATION PROCESSING STANDARDS PUBLICATIONS (FIPS PUBS): ADP
products under this Schedule that do not conform to Federal Information
Processing Standards (FIPS) should not be acquired unless a waiver has been
granted in accordance with the applicable "FIPS Publication". Federal
Information Processing Standards Publications (FIPS PUBS) are
1
<PAGE>
issued by the U.S. Department of Commerce, National Institute of Standards
Technology (NIST), pursuant National Security Act. Information concerning their
availability and applicability should be obtained from the National Technical
Information Service (NTIS), 5285 Port royal Road, Springfield, Virginia, 22161.
FIPS PUBS include voluntary standards when these are adopted for Federal use.
Individual orders for FIPS PUBS should be referred to the NTIS Sales Office and
orders for subscription service should be referred to the NTIS Subscription
Officer both at the above address, or telephone number (703) 487-4650.
12.2 FEDERAL TELECOMMUNICATION STANDARDS (FED-STD): Telecommunication products
under this Schedule that do not conform to Federal Telecommunication Standards
(FED-STDS) should not be acquired unless a waiver has been granted in accordance
with the applicable "FED-STD". Federal Telecommunications Standards are issued
by the U.S. Department of Commerce, National Institute of Standards and
Technology (NIST), pursuant to National Security Act. Ordering information and
information concerning the availability of FED-STDS should be obtained from the
GSA Specification Sales Office, Room 6654 7th and D Streets, SW, Washington DC
20407, telephone number (202) 708-9205. Please include a self addressed mailing
label when requesting information by mail. Information concerning their
applicability can be obtained by writing or calling the U.S. Department of
Commerce, National Institute of Standards and Technology, Gaithersburg, MD
20899, telephone number 301/975-2833.
13. SECURITY REQUIREMENTS. In the event security requirements are necessary, the
ordering activities may incorporate, in their delivery order(s) a security
clause in accordance with current laws, regulations and individual agency
policy; however, the burden of administering the security requirements shall be
with the ordering agency. If any costs are incurred as a result of the inclusion
of security requirements, such costs will be negotiated with the Schedule
Contractor on an open market basis outside the scope of the contract.
14. CONTRACT ADMINISTRATION FOR ORDERING OFFICES: Any ordering office, with
respect to any one or more delivery orders placed by it under this contract, may
exercise the same rights of termination as might the GSA Contracting Officer
under provisions of FAR 52.249-1, 52.249-2, and 52.249-8.
15. GSA Advantage! (formerly the SO ITS on-line Schedule System)
The GSA Advantage! is an on-line, interactive electronic information and
ordering system that provides on-line access to vendor's schedule price lists
with ordering information, terms and conditions, and up-to-date pricing that
will aid Schedule users in acquisitions. The GSA Advantage! Will allow the user
to:
a. Search by Vendor's Name or Contract Number to view or download
the vendor's complete GSA-approved pricelist with terms,
conditions, and up-to-date pricing.
b. Perform various searches across all contracts including, but
not limited to:
(1).Manufacturer
(2)Manufacturer's Part Number; and
(3)Product Category (ies).
Agencies can browse GSA Advantage! By accessing the Internet World Wide
Web utilizing a browser (ex. Netscape). The Internet address is
http://www.gsa.gov.
16. Use of Group 70 Schedules Contracts. In accordance with far 8.404:
a. Ordering activities can place orders of $2500 or less with any GSA Federal
Supply Schedule contractor. GSA has already determined the prices of items under
these contracts to be fair and reasonable.
b. To reasonably ensure that a selection represents the best value and meets the
agency's needs at the lowest overall cost, before placing an order of more than
$2500, an ordering activity should--
(1) Consider reasonably available information about products
offered under Multiple Award Schedule (MAS) contracts; this
standards is met if the ordering activity does the following:
(i) Considers products and prices contained in any GSA,
MAS automated information system (e.g. GSA
Advantage!); or
(ii) If automated information is not available, reviews at
least three (3) pricelists.
(2) In selecting the vest value item at the lowest overall cost
(the price of the item plus administrative costs), the
ordering activity may consider such factors as--
(i) Special features on one item not provided by
comparable items which are required in effective
program performance;
(ii) Trade-in considerations;
(iii) Probable life of the item selected as compared with
that of a comparable item;
(iv) Warranty Conditions; and
(v) Maintenance availability.
(3) Give preference to the items of small business concerns when two or more
items at the same delivered price will meet an ordering activity's needs.
c. MAS contractors will not be required to pass on to all schedule users a price
reduction extended only to an individual agency for a specific order. There may
be circumstances where an ordering activity finds it advantageous to request a
price reduction, such as where the ordering activity finds that a schedule
product is available elsewhere at a lower price, or where the quantity of an
individual order clearly indicates the potential for obtaining a reduced price.
d. Ordering activities should document orders of $2500 or less by identifying
the contractor the item was purchased from, the item purchased, and the amount
paid. For orders over $2,500, MAS ordering files should be documented in
accordance with internal
2
<PAGE>
agency practices. Agencies are encouraged to keep documentation to a minimum.
GENERAL TERMS AND CONDITIONS APPLICABLE TO PURCHASE (132-8), REPAIR SERVICE
(132-18) AND REPAIR PARTS (132-19).
GENERAL PURPOSE COMMERCIAL AUTOMATIC DATA PROCESSING EQUIPMENT AND SOFTWARE
The following terms and conditions are applicable to all Special Item Numbers:
1. GEOGRAPHIC SCOPE OF CONTRACT.
The geographic scope of this contract is the 48 contiguous states, the District
of Columbia, Elmendorf AFB, Eileson AFB, Alaska, and Oahu, Hawaii.
2. CONTRACTOR COMMITMENTS, WARRANTIES, AND REPRESENTATION
a. For the purpose of this contract, commitments, warranties, and
representations include, in addition to those agreed to for the entire schedule
contract:
(1) Time of Delivery/Installation quotations for individual orders;
(2) Technical representations and/or warranties of products concerning
performance, total system performance and/or configuration, physical, design,
and/or functional characteristics and capabilities of a
product/equipment/service/software package submitted in response to requirements
which result in orders under this schedule contract.
(3) Any representations and/or warranties concerning the products made in any
literature, description, drawings, and/or specifications furnished by the
contractor.
b. The above is not intended to enlarge the scope of this schedule contract for
individual orders. Prices, options, terms and conditions of any orders are
limited strictly to those specified in the schedule contract and pricelist and
agreed to by GSA.
3. OVERSEAS ACTIVITIES
The terms and conditions of this contract shall apply to all orders for
installation, maintenance and repair of equipment in areas listed in the
pricelist outside the 48 contiguous states and the District of Columbia, except
for the following modifications:
a. In place of an installation date for equipment, a shipping date shall be
specified on the order.
b. The contractor agreed to promptly install all equipment, ready for use.
c. Upon request of the contractor, the Government may provide the contractor
with logistics support, as available, in accordance with all applicable
Government Regulations. Such Government support will only be provided on a
reimbursable basis, and will only be provided to the contractor's technical
personnel whose services are exclusively required for the fulfillment of the
terms and conditions of this contract (Purchase, Maintenance, and Repair
Service). This is subject to the terms and conditions found in section I.15
of this contract.
d. The contractor agrees to accept orders for repair of equipment, except for
the following additions and modifications: NONE.
TERMS AND CONDITIONS APPLICABLE TO PURCHASE OF GENERAL PURPOSE COMMERCIAL
AUTOMATIC DATA PROCESSING EQUIPMENT (SPECIAL ITEM 1328)
1. MATERIAL AND WORKMANSHIP. All equipment furnished thereunder must be new and
satisfactorily perform the function for which it is extended.
2. ORDER. A written order, EDI (GSA Advantage! And FACNET) and credit card
orders shall be the only basis for purchase in accordance with the provisions of
this contract. If time of delivery extends beyond the expiration date of the
contract, the contractor will be obligated to meet the delivery and installation
date specified in the original order. Written orders, EDI orders, credit card
orders or, in the case of BPA's or BOA's, telephone orders are permissible.
3. TRANSPIRATION OF EQUIPMENT.
FOB DESTINATION. Prices cover delivery to destination of equipment to all CONUS
locations and OCONUS APO addresses. For all other OCONUS locations, shipping
charges may apply. Please contact your account manager at (301) 590-8100.
4. INSTALLATION AND TECHNICAL SERVICES
a. INSTALLATION. When the equipment provided under this contract is not
normally self-installable, the contractor's technical personnel shall
be available to the Government at the Government's location to install
the equipment, and train Government personnel in the use and
maintenance of the equipment.
3
<PAGE>
The charges for such services are $175.00 per hour.
b. OPERATING AND MAINTENANCE MANUALS. The contractor shall furnish the
Government with one (1) copy of all operating and maintenance manuals
relating to the equipment being installed/purchased.
5. ACCEPTANCE
Equipment must operate in accordance with manufacturer's published
specifications. The user agency should give the contractor a notice of
acceptance or rejection within 30 days from receipt of the equipment. The
Government is relieved if all risk of loss or damage prior to acceptance.
6. GUARANTEE
a. The contractor will furnish on all IDP Products maintenance, machine
adjustments, repairs, and parts at the Government's location for a
period of one year. In addition, IDP has a 3 year limited warranty on
its computer and notebook configurations. The first year includes
on-site, parts and labor, and 48 hour response time for all CONUS
locations as well as Elmendorf and Eileson AFB, Alaska, Oahu, Hawaii,
and the OCONUS locations in attachment AA. On-site service will be
available Monday through Friday, excluding US Federal Holidays, from
0800-1800 hrs. local time. IDP will provide, through our closest
contracted depot facility, Mail Back/Carry In service for all other
OCONUS locations. Years two and three of IDP's 3 year limited warranty
for IDP systems, are depot and labor only. IDP will return the repaired
or replaced unit within 5 business days. For a complete copy of our
warranty conditions and limitations, please contact your account
manager at (301) 590-8100.
For additional manufacture warranties, see product list.
b. All parts replaced during the guarantee period shall become the
property of the contractor.
c. Prior to the expiration of the gurantee period, whenever equipment
is shipped for repair or mechanical replacement purposes, the
contractor shall bear all costs, including, but not limited to, costs
of packing, transportation, rigging, drayage, and insurance. This
guarantee shall apply to the replacement machine from the date of its
acceptance.
d. When equipment is returned to the contractor's establishment for
repairs, the contractor shall be responsible for any damage or loss
from the time the equipment is removed from the Gvoernment's
installation until equipment is returned to such installation.
e. This guarantee does not apply if damage to the equipment is
occasioned by fault or negligence of the Government.
f. Inspection and repair of defective equipment under this guarantee
will only be performed at the contractor's plant at:
INTERNATIONAL DATA PRODUCTS, CORP.
20 Firstfield Road
Gaithersburg, MD 20878-1793
(301) 590-8100
and defective equipment will be repaired or replaced within 48 hours
after receipt.
7. PURCHASE PRICE FOR ORDERED EQUIPMENT. The purchase price that the Government
will be charged will be the Government price in effect at the time of order
placement or the Government purchase price that is in effect on the installation
date (or delivery date when installation is not applicable), whever is less.
8. TRADE IN OF INFORMATION TECHNOLOGY (FIP) EQUIPMENT
When an agency determines that Informaiton Technology (FIP) equipment will be
replaced, the agency shall follow the contracting policies and procedures in the
Federal Acquisition Regulation (FAR), the policies and procedures regarding
Disposition of Information Technology Excess Personnel Property in the Federal
Property Management Regulations (FPMR) (41 CFR 101-43.6), and the policies and
procedures on exchange/sale contained in FPMR 41 CFR part 101-46.
TERMS AND CONDITIONS APPLICABLE TO REPAIR SERVICE (SPECIAL ITEM 132-18)
AND REPAIR PARTS (SPECIAL ITEM 132-19) FOR GENERAL PURPOSE COMMERCIAL
AUTOMATIC DATA PROCESSING EQUIPMENT, WHEN REQUIRED SERVICE IS NOT
COVERED BY GUARANTEE PROVISIONS
1. SERVICE AREAS
a. The repair service rates listed herein are applicable to all of the
48 contiguous states, the District of Columbia, Elmendorf AFB, Eileson
AFB, Alaska, Oahu, Hawaii, and the overseas locations listed in
attachment AA. If any additional charge is to apply because of greater
distance from the contractor's service locations, the mileage rate or
other distance factor shall be stated in Paragraph 5.c.(3) of this
Special Item 132.18.
b. When repair services cannot be performed at the Government
installation site, they will be performed at the contractor's plant(s)
listed below:
International Data Products, Corp.
20 Firstfield Road
Gaithersburg, Maryland 20878-1793
ATTN: Service Dept.
4
<PAGE>
2. ORDER
a. Agencies may use blanket purchase orders, individual purchase orders, or
small order procedures for ordering repair service under this contract. Blanket
purchase orders shall not exceed beyond the end of the contract period. Written
orders, EDI orders, credit card orders or, in the case of BPA's, telephone
orders are permissible.
3. LOSS OR DAMAGES. When the contractor removes equipment to his
establishment for repairs, the contractor shall be responsible for any damage
or loss from the time the equipment is removed from the Government
installation until it is returned to such installation.
4. RESPONSIBILITIES OF THE CONTRACTOR
a. The contractor shall always be responsive to the Government's repair
service needs. The contractor shall perform all repair services which are
ordered by the Government during the contract term.
b. The contractor's repair service personnel shall complete repairs as
soon as possible after notification by the Government that service is
required. Within the service areas, this normally should be done within 2
hours after notification.
c. Only new, standard, parts shall be used in effecting repairs. Parts
which have been replaced shall remain the property of the Government
except when the Government concludes that an appropriate allowance is
obtained for such defective parts.
d. GUARANTEE. All repair work will be unconditionally guaranteed for a
period of ninety (90) calendar days.
5. REPAIR RATE PROVISIONS
a. CHARGES. Charges for repair service will include the labor charge
computed at the rates set forth below, for the time during which
repairmen are actually engaged in work; and, when, applicable, the charge
for travel or transportation.
b. MULTIPLE MACHINES. When repairs are ordered by a Government agency on
two or more machines located in one or more buildings within walking
distance of each other, the charges will be computed from the time the
repairman commences work on the first machine until the work is completed
on the last machine. The time required to go from one machine to another,
or one building to another, will consider actual work performance and
chargeable to the Government, provided the time consumed in going between
machines (or buildings) is reasonable.
c. TRAVEL OR TRANSPORTATION
(1) AT THE CONTRACTOR'S SHOP
(a) When equipment is returned to the contractor's shop for adjustment or
repairs which are not covered by the guarantee provision, the cost of
transportation, packing, etc., from the Government location to the
contractor's plant and return to the Government location shall be borne
by the Government.
(b) The Government should not return defective equipment to the
contractor for adjustment and repairs or replacement without his prior
consultation and instruction.
(2) AT THE GOVERNMENT LOCATION. (Within Established Service Areas)
When equipment is repaired at the Government location and repair rates
are established for service areas or zone, the listed rates are
applicable to any Government location within such service areas or zones.
No extra charge, time or expense will be allowed for travel or
TRANSPORTATION or repairmen or machines to or from the Government office
such overhead is included in the repair service rates listed. (3) AT THE
GOVERNMENT LOCATION. (Outside Established Service Areas)
(a) The repair service rates listed for subparagraph (2) above apply
except that a travel charge of $31 per mile for repairmen will apply to
the round-trip distance between the geographic limits of the the
applicable service area and the Government location. Such charge will
apply as an additional charge, but it will be limited to one round trip
for each request that is made by the ordering activity for repair service
regardless of whether repairs are performed at the Government location or
at the contractor's shop.
(b) When the overall travel charge computed at the above mileage rate is
unreasonable, (considering time required for travel, actual and necessary
TRANSPORTATION cost, and the allowable Government per diem rate for each
night the repairman is required to remain overnight at the Government
location) the Government shall have the option or reimbursing the
contractor for actual cost, provided that the actual costs are reasonable
and allowable. The contractor shall furnish the Government a report of
travel performed and related expense incurred. The report shall include
departure and arrival dates, times and the applicable mode of travel.
d. LABOR RATES
(1) REGULAR HOURS. The Regular Hours repair service rate listed herein
shall entitle the Government to repair service during the period 8:00
a.m. to 5:00 p.m. Monday through Friday, exclusive of holidays observed
at the Government location. There shall be no additional charge for
repair service which was requested during Regular Hours but performed
outside Regular Hours defined above, at the convenience of the
contractor.
(2) AFTER HOURS. When the Government requires that repair service be
performed outside Regular Hours defined above, except Sundays and
Holidays observed at the Government location, the After Hours repair
service rates listed herein shall apply . The Regular Hours rate defined
above shall apply when repair service is requested during Regular Hours
but performed After Hours at the convenience of the contractor.
(3) SUNDAY AND HOLIDAYS. When the Government requires that repair service
be performed on Sundays and Holidays observed at the Government location,
the Sunday and Holiday repair service rates listed herein shall apply.
When repair service is
5
<PAGE>
requested to be performed during Regular Hours and/or After Hours but is
performed at the convenience of the contractor on Sunday or Holidays
observed at the Government location, the Regular Hours and/or After Hour
repair service rates as applicable.
REPAIR SERVICE RATES
<TABLE>
<CAPTION>
MINIMUM REGULAR HRS. AFTER HRS. SAT/SUN
LOCATION CHARGE* PER HOUR** PER HOUR** HOLIDAYS
- --------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Contractor's......... $180 $90 155.00 $195.00
Shop
Government........... $230.00 $115.00 $215.00 $250.00
Location
(Within established
service areas)
Government........... $330.00 $180.00 $280.00 $380.00
Location
</TABLE>
(Outside established service areas)
*Minimum charges include 2 full hours on the job.
**Fractional Hours, at the end of the job, will be prorated to the
nearest quarter hours.
6. INVOICES AND PAYMENTS
Invoices for repair service shall be submitted by the contractor as soon
as possible after completion of the work. Payment under blanket purchase
orders will be made quarterly or monthly except where cash payment
procedures are used. Payment under blanket purchase orders will be made
quarterly or monthly except where cash payment procedures are used.
Invoices shall be submitted separately to each government office ordering
services under the contract. The cost of repair parts shall be shown as a
separate item on the invoice and shall be priced in accordance with
Special Item 132.19. PROMPT PAYMENT DISCOUNTS, IF APPLICABLE, SHALL BE
SHOWN ON THE INVOICE.
REPAIR PARTS SPECIAL ITEM 132-19
1. PRICES. All parts, furnished All parts shall be as spares or as repair
parts in connection with repair of equipment manufacturer. All parts shall be
furnished at prices as indicated in the contractor's commercial pricelist
dated March 10, 1997at a discount of 38-42% off our Commercial Price List.
2. GUARANTEE. All parts, furnished either as spares or repair parts in
connection with repair of equipment, will be unconditionally guaranteed for a
period of one year.
6
<PAGE>
ATTACHMENT AA
IDP'S OCONUS on-site service is limited to the following locations:
<TABLE>
<S> <C> <C>
Belgium Nurnberg Taegu
Chievres AB Ramstein Tong du Chon
Florennes AB Schwabisch Gemund Uinonbu
Shape HQ, Mons Schweinfurt Netherlands
Germany Spangdahlem Amsterdam
Ansbach Stuttgard Brunssum
Aschaffenburg Vilseck Rotterdam
Augsburg Wertheim Soesterberg
Baumholder Wildflkecken The Hague
Bad Kreuznach Wiesbaden Okinawa
Bitburg Worms Camp Butler
Bremerhaven Wurzburg Camp Foster
Darmstadt Zweibrucken Kadena
Frankfurt Italy Panama
Fulda Livomo Corozon
Furth Leghorn Fort Clayton
Karlstadt Naples Howard AFB
Grafenwerth Rome Panama City
Giessen Vicenza United Kingdom
Goeppingen Japan Alconbury
Hanau Atsugi Croughton
Heilbronn Tokyo Greeman Commons
Hoenfiels Yokohama High Wycombe
Illesheim Yokosuka London
Kaiserslautern Korea Mildenhall
Karlsruhe Osan Oxford
Mannheim Pusan Uxbridge
Munich Seoul
Neu Ulm Suwon
</TABLE>
<PAGE>
POINTS OF PRODUCTION
(ATTACHMENT BB)
<TABLE>
<S> <C>
International Products Corporation, 20 Firstfield Road Gaithersburg, MD20878-1793
Corporation Montgomery County (301) 590-8100
Machete Industrial Park Bldg. T-0609-0-63
Road 744, Km 1.1 Guayama, P.R.00785
ALR ALR 9401 Jeronimo Road Irvine, CA92718 Orange
County (714) 581-6770
Lexmark Lexmark International, Inc. 740 New Circle
Road, N.W. Lexington, KY40511 Fayette County
(800) 258-8575
Singpore
Japan
Denmark
South Korea
Microdyne Microdyne 1140 Ringwood Ct. San Jose, CA95131
Santa Clara County (408) 432-1191
Sony Sony Electronics Inc. Display Systems
Manufacturing 16450 West Bernado Drive San
Diego, CA91217-1804 San Diego County (619)
673-2400
Mexico
Japan
STB STB Systems, Inc. 1651 North Glenville Drive
Richardson, TX75081 Dallas County (972)
234-8750
Mexico
</TABLE>
<PAGE>
5/6/97 INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRECELIST
CAGE Code: 45815 FCI-96-DL0001B
LR
<TABLE>
<CAPTION>
CLIN # MANUFACTURER'S P/N SERVER-PENTIUM PRO GSA PRICE
- ---------------- --------------------------------- --------------------------------- ---------------------
<S> <C> <C> <C>
9003 74636001 ALR Revolution QUAD6 Server Pent
200 MHz CPU 512k (expandable to 4
CPUs, 64 MB ECC RAM, 15 slots, 13
bays, 2 MB video, 3yr. On-site
warranty $ 7,711
9004 74636601-50 ALR Revolution 6X6 Pent Pro 200
MHz 512k (exp. Up to 6 CPUS), 128
MB RAM, 12 slots, 14 bays, F/W
Ultra SCSI, 6X CD 2MB vid., 3
yr.on-site warranty-NT SERVER $ 14,739
<CAPTION>
CLIN # MANUFACTURER'S P/N SERVER-UPGRADE PACKAGE GS GSA PRICE
- ---------------- --------------------------------- --------------------------------- ---------------------
<S> <C> <C> <C>
9013 11910696 ALR QUAD6 Revpack, additional
Pent Pro 200MHz,64 MB RAM, Ultra
SCSI RAID controller, 6 bay hot
swap cage, 6X CD-RM, redundant
power supply, 10/100 ethernet $ 2,980
IDP CORPORATION
<CAPTION>
CLIN # MANUFACTURER'S P/N CDROM -- INTERNAL GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1035 GSA1035 12X SCSI CD-ROM drive -- $206
internal.
1036 GSA1036 12-20X SCSI CD-ROM drive -- $229
internal.
4820 GSA4820 8XIDE CD-ROM drive -- $86
internal.
4822 GSA4822 16X IDE CD-ROM drive -- $104
internal.
<CAPTION>
CLIN # MANUFACTURER'S P/N HARD DRIVE--IDE GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
121 GSA121 1.6GB PC/AT IDE hard disk $209
drive for IDP 500/600
Series Computers.
1020 GSA1020 2.1GB PC/AT IDE hard disk $252
drive for IDP 500/600
Series Computers.
1030 GSA1030 3.2 GB PC/AT IDE hard disk $361
drive for IDP 500/600
Series Computers.
<CAPTION>
CLIN # MANUFACTURER'S P/N HARD DRIVE--SCSI GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1021 GSA1021 2 GB SCSI hard disk drive. $548
Does not include cable.
1022 GSA1022 4 GB SCSI hard disk drive. $950
Does not include cable.
1023 GSA1023 9 GB SCSI hard disk drive. $1,305
Does not include cable.
<CAPTION>
CLIN # MANUFACTURER'S P/N MODEM-- EXTERNAL GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1061 GSA1061 IDP's 33.6Kbps fax/ modem $109
with internet kit --
external.
1063 GSA1063 IDP's 33.6Kbps fax/ modem $109
with paging, voice mail,
and speakerphone
capabilities -- external.
<CAPTION>
CLIN # MANUFACTURER'S P/N MODEM-- INTERNAL GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1060 GSA1060 IDP's 56Kbps fax/ modem $90
with internet kit --
internal.
1062 GSA1062 IDP's 33 Kbps fax/ modem $144
with paging, voice mail,
and speakerphone
capabilities -- internal.
<CAPTION>
CLIN # MANUFACTURER'S P/N MONITOR--COLOR GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
6332 GSA6332 IDP 15" High-Res Digital $250
Monitor, .28mm dot pitch,
up to 1280X1064/60Hz NI.
Energy Star, MPR-II.
6333 GSA6333 IDP 17" High-Res Digital $456
Monitor, .28mm dot pitch,
up to 1280X1064/60Hz NI.
Energy Star, MPR-II.
6334 GSA6334 IDP 20" High-Res Digital $1,044
Monitor, .28mm dot pitch,
up to 1600X1280/60Hz NI.
Energy Star, MPR-II.
<CAPTION>
CLIN # MANUFACTURER'S P/N NOTEBOOK-- ACCESSORIES GSA PRICE
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
271 GSAP271 PC Card Token Ring Adapter. $284
272 GSAP272 PC Card Ethernet 10/100 for $180
10base and 100base-TX PC
Card Adapter (RJ45).
2201 GSAP2201 33.6Kbps PC Card Fax/ Modem $154
with Cellular Capabilities.
2202 GSAP2202 Combo PC Card 10base-T, $299
33.6 modem, Flash ROM Card.
8532 GSAP8532 IDP's Microsoft compatible $8
serial mouse.
8533 GSAP8533 IDP's Microsoft compatible $8
PS2 mouse.
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
1
<PAGE>
5/6/97
INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRICELIST
FCI-96-DL0001B
CAGE Code: 45815
<TABLE>
<C> <C> <S> <C>
8602 GSAP8602 IDP's Windows 95 keyboard. $ 14
9132 GSAP9132 Executive soft carrying case for notebook computers. Available at time of
system purchase only. $ 48
9133 GSAP9133 Hard shell carrying case for notebook computers and accessories. Available at
time of system purchase only. $ 97
9134 GSAP9134 Pressurized air NB/printer carrying case, w/shock absorbing air bag around
compartment & air padded shoulder strap. Available at time of system purchase. $ 72
28253 GSAP28253 MPEG-1 PC Card for use with 560 Series Notebooks only. Produces full motion,
30 frames per second (FPS), MPEG video $ 215
28311 GSAP28311 Battery charger for IDP 500CD/530/560/570/515 Series Notebooks. (Comes
complete with power source.) Available at time of system purchase only. $ 80
28315 GSAP28315 Car adapter for IDP 500CD/530/560/570/515 Series Notebooks. Available at time
of system purchase only. $ 42
28320 GSAP28320 NiMH battery for IDP 500CD/530/560 and 515 Series Notebooks. Available at time
of system purchase only. $ 72
28321 GSAP28321 NiMH battery for IDP 570 Series Notebooks. Available at time of system
purchase only. $ 75
51540 GSAP51540 External Floppy Disk Drive Pack for IDP 515 Series Notebooks. $ 31
</TABLE>
<TABLE>
CLIN# Manufacturer's P/N NOTEBOOK -- COMPUTER GSA Price
<C> <C> <S> <C>
3001 GSAP3001 IDP 530XD Notebook, 10.4" DSTN, 8MB, FDD, Sound, Batt., Adapt., Case, $1,286
and operating system included. Add HDD & CPU.
3002 GSAP3002 IDP 530CD Notebook, 10.4" DSTN, 8MB, Fdd, 10X CD-ROM, Sound, Batt., $1,407
Adapt., Case, and operating system included. Add HDD & CPU.
3011 GSAP3011 IDP 530XD Notebook, 11.3" TFT, 8MB, FDD, Sound, Batt., Adapt., Case, $1,745
and operating system included. Add HDD & CPU.
3012 GSAP3012 IDP 530CD Notebook, 11.3" TFT, 8MB, FDD, 10X CD-ROM, Sound, Batt., $1,866
Adapt., Case, Port Rep., and operating system included. Add HDD & CPU.
3150 GSAP3150 IDP 515 Notebook, 12.1'TFT, P133 CPU, 16MB, 256K, FDD, 1.4GB HDD, 6X $2,999
CD-ROM, Batt., Adapt., Case, Port Rep., and operating system included.
3152 GSAP3152 IDP 515 Notebook, 12.1" TFT, P133 CPU, 16MB, 256K, FDD, 2.1GB HDD, $3,120
Batt, Adapt., Case, Port Rep, and operating system included.
3603 GSAP3603 IDP 560CD Notebook, 12.1" DSTN, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, $1,655
Batt, Adapt., Case, and operating system included. Add HDD & CPU.
3612 GSAP3612 IDP 560CD Notebook, 11.3" TFT, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, $1,963
Batt, Adapt., Case, and operating system included. Add HDD & CPU.
3613 GSAP3613 IDP 560CD Notebook, 12.1" TFT, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, $2,241
Batt, Adapt., Case, and operating system included. Add HDD & CPU.
3701 GSAP3701 IDP 570CD Modular Notebook, 12.1" DSTN, 16MB, FDD, 10X CD-ROM, Sound, $1,839
Batt, Adapt., Case, and operating system included. Add HDD & CPU.
3711 GSAP3711 IDP 570CD Modular Notebook, 12.1" TFT, 16MB, FDD, 10X CD-ROM, Sound, $2,493
Batt, Adapt., Case, and operating system included. Add HDD & CPU.
</TABLE>
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N NOTEBOOK -- CPU PENTIUM GSA Price
5241 GSAP5241 Pentium 133MHz CPU for IDP 530/560 Series Notebooks. Must be ordered $162
with notebook.
18551 GSAP18551 Pentium 133MHz Mobile CPU and Daughter Card for IDP 570 Series $306
Notebooks. Must be ordered with notebook.
18552 GSAP18552 Pentium 150MHz Mobile CPU and Daughter Card for IDP 570 Series $362
Notebooks. Must be ordered with notebook.
18553 GSAP18553 Pentium 166MHz Mobile CPU and Daughter Card for IDP 570 Series $513
Notebooks. Must be ordered with notebook.
</TABLE>
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N NOTEBOOK -- DOCKING STATIONS GSA Price
28300 GSAP28300 Docking station to be used with IDP 500CD/530/560 Series Notebooks. $234
28301 GSAP28301 Docking station to be used with IDP 570 Series Notebooks. $345
</TABLE>
INT'T DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
2
<PAGE>
5/6/97
INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRICELIST
FCI-96-DL0001B
CAGE Code: 45815
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N NOTEBOOK -- HARD DRIVE GSA Price
28297 GSAP28297 1.4GB HDD for IDP 500CD/560 Series Notebooks. Includes removable $258
adapter, cabling, and screws.
28298 GSAP28298 1.4GB HDD for IDP 530 Series Notebooks. Includes removable adapter, $258
cabling, and screws.
28299 GSAP28299 1.4GB HDD for IDP 570 Series Notebooks. Includes removable adapter, $258
cabling, and screws.
29801 GSAP29801 2.1GB HDD for IDP 500CD/560 Series Notebooks. Includes removable $378
adapter, cabling, and screws.
29802 GSAP29802 2.1GB HDD for IDP 530 Series Notebooks. Includes removable adapter, $378
cabling, and screws.
29803 GSAP29803 2.1GB HDD for IDP 570 Series Notebooks. Includes removable adapter, $378
cabling, and screws.
29804 GSAP29804 2.1GB HDD for IDP 400/500 Series Notebooks. Includes removable adapter, $378
cabling, and screws.
282984 GSAP28298-4 1.4GB HDD for IDP 400/500 Series Notebooks. Includes removable adapter, $258
cabling, and screws.
</TABLE>
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N NOTEBOOK -- MEMORY GSA Price
2100 GSAP2100 4MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB $25
to 12MB total memory.
2164 GSAP2164 64MB RAM (2x32MB modules) to upgrade IDP 560 Series Notebooks ONLY, $504
from base of 8MB to 72MB total memory.
5160 GSAP5160 8MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series $58
Notebooks, from base of 16MB to 24MB total memory.
5161 GSAP5161 16MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series $100
Notebooks, from base of 16MB to 32MB total memory.
5162 GSAP5162 32MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series $420
Notebooks, from base of 16MB to 48MB total memory.
28280 GSAP28280 8MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB $49
to 16MB total memory.
28290 GSAP28290 16MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of $91
8MB to 24MB total memory.
28296 GSAP28296 32MB RAM (2x16MB modules) to upgrade IDP 500CD/530/560 Series $182
Notebooks, from base of 8MB to 40MB total memory.
</TABLE>
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N NOTEBOOK -- OPERATING SYSTEM GSA Price
787 GSAP787 DOS/Windows for Workgroups for IDP's notebooks. Must be ordered with $0
system.
788 GSAP788 Windows 95 for IDP's notebooks. Must be ordered with system. $0
789 GSAP789 Windows NT Workstation v4.0 for IDP's notebooks. Must be ordered with $0
system.
</TABLE>
<TABLE>
<C> <C> <S> <C>
CLIN# Manufacturer's P/N PC -- ACCESSORIES GSA Price
371 GSAP371 PCI Ultra SCSI Host Adapter Kit. $263
372 GSAP372 ISA Fast SCSI Plug and Play Adapter Kit. $141
373 GSAP373 PC Card Fast SCSI-2 Host Adapter Kit. $171
1050 GSAP1050 Front Load Type III PC-Card reader for IDP 500/600 Series Computers. $688
1071 GSAP1071 IDP's Multimedia Upgrade with two 8-watt speakers, 16-bit soundcard, $167
and an 8X IDE CD-ROM.
1073 GSAP1073 IDP's Enhanced Multimedia Upgrade with two 8-watt speakers, 16-bit $185
soundcard, and 16X IDE CD-ROM.
1550 GSAP1550 IDP's 6 Outlet Surge Protector. Available at time of system purchase $8
only.
1551 GSAP1551 IDP's 8 Outlet Surge Protector. Available at time of system purchase $54
only.
1552 GSAP1552 IDP's Uninterruptable Power Supply (UPS) -- 400 watts. Available at $254
time of system purchase only.
</TABLE>
INT'T DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
3
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRICELIST
FCI-96-DL0001B
<TABLE>
<C> <S> <C> <C>
8532 GSA8532 IDP's Microsoft compatible serial mouse. $8
8602 GSA8602 IDP's Windows 95 keyboard $14
CLIN # Manufacturer's P/N PC-- BUNDLE GSA Price
10000 GSA10000 IDP 500 Desktop, P166 CPU, 16MB, 512K, 1.6GB HDD, FDD, 2MB video, $1,189
8X CD-ROM, kybd/ mse ,Win95.
20000 GSA2000 IDP 500 Desktop, P200 CPU, 32MB, 512K, 2.1GB HDD, FD, 2MB $1,397
video, 16X CD-ROM, kbyd/ mse, Win9.
30000 GSA3000 IDP 600 Desktop, PP180 (256K) CPU, 32MB, 2.1GB HDD, FDD, $1,754
2MB video, 16X CD-ROM, kybd/ mse, NT.
CLIN # Manufacturer's P/N PC -- CPU PENTIUM GSA Price
1043 GSA1043 Intel Pentium Pro 180MHz (256K) CPU for IDP 600 $554
Series Computers. Must be ordered with system
1044 GSA1044 Intel Pentium Pro 200MHz (256K) CPU for IDP 600 $687
Series Computers. Must be ordered with system.
1046 GSA1046 Cyrix P150+ CPU for IDP 500 Series Computers. $115
Must be ordered with system
1047 GSA1047 Cyrix P166+ CPU for IDP 500 Series Computers. $127
5201 GSA5201 Intel Pentium 166MHz CPU for IDP 500 Series $268
Computers. Must be ordered with system.
5202 GSA5202 Intel Pentium 200MHz CPU for IDP 500 Series $326
Computers. Must be ordered with system.
5241 GSA5241 Intel Pentium 133MHz CPU for IDP 500 Series $162
Computers. Must be ordered with system.
5291 GSA5291 Intel Pentium 166MHz CPU with MMX for IDP 500 $352
5292 GSA5292 Intel Pentium 200 MHz CPU with MMX for IDP 500 $633
Series Computers. Must be ordered with system.
CLIN # Manufacturer's P/N PC -- MEMORY EXPANSION GSA Price
5991 GSA5991 8MB 32-bit memory upgrade for IDP 500/600 Series $60
Computers. (2X4MB) Must be installed when on GSA order.
5992 GSA5992 16MB 32-bit memory upgrade for IDP 500/600 Series $91
Computers. (2X8MB) Must be installed when on GSA order.
5993 GSA5993 32MB 32-bit memory upgrade for IDP 500/600 Series $180
Computers. (2X16MB) Must be installed when on GSA order.
5994 GSA5994 8MB 36-bit parity memory. (2 X 4MB SIMM) Must be $67
ordered with computer
5995 GSA5995 16MB 36-bit parity memory. (2 X 8MB SIMM) Must be $130
ordered with computer.
5996 GSA5996 32MB 36-bit parity memory.#(2 X 16MB SIMM) Must be $228
ordered with computer.
CLIN # Manufacturer's P/N PC -- OPERATING SYSTEM GSA Price
787 GSA787 DOS/ Windows for Workgroups for IDP 500/600 Series $0
Computers. Must be ordered with system.
788 GSA788 Windows 95 for IDP 500/600 Series Computers. Must be $0
ordered with system.
789 GSA789 Windows NT Workstation v4.0 for IDP 500/600 Series $0
Computers. Must be ordered with system.
CLIN # Manufacturer's P/N PC -- PENTIUM DESKTOP GSA Price
4010 GSA4010 IDP 500 Desktop, 512K, FDD, 2MB video, keyboard, mouse $535
and operating system included. Add HDD & CPU & RAM.
CLIN # Manufacturer's P/N PC -- PENTIUM MINITOWER GSA Price
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
4
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRICELIST
FCI-96-DL0001B
<TABLE>
<C> <S> <C> <C>
4011 GSA4011 IDP 500 Mini Tower, 512K, FDD 2MB video, keyboard, mouse $537
and operating system included. Add HDD & CPU & RAM.
CLIN # Manufacturer's P/N PC -- PENTIUM PRO DESKTOP GSA Price
4416 GSA4416 IDP 600 Desktop, FDD, 2MB video, keyboard, mouse, and $664
operating system included. Add HDD & CPU & RAM.
CLIN # Manufacturer's P/N PC -- PENTIUM PRO TOWER GSA Price
4415 GSA4415 IDP 600 Tower, FDD, 2MB video, keyboard, mouse, and $700
operating system included. Add HDD & CPU. & RAM
CLIN # Manufacturer's P/N PC -- PENTIUM TOWER GSA Price
4012 GSA4012 IDP 500 Tower, 512K, FDD 2MB video, keyboard, mouse, and $572
operating system included. Add HDD & CPU. & RAM
CLIN # Manufacturer's P/N PC -- UPGRADES GSA Price
1070 GSA1070 16-bit wavetable soundcard for IDP 500/600 Series $35
Computers.
1075 GSA1075 Upgrade to 64-bit bit 3D 4MB video card for IDP 500/600 $95
Series Computers. At time of system purchase only.
CLIN# Manufacturer's P/N PRINTER -- DOT MATRIX GSA Price
807 2391003 2391 Plus, 24 pin Dot Matric Printer, 360x360 dpi, up to 300cps FastDraft $459
mode, 64K print buffer, Energy Star. 2 yr. carry-in express warranty.
804 11A6000 4227, 9 pin Dot Matrix Printer, 240x144 dpi, up to 533 cps FastDraft mode. $1,248
60K print buffer. 1 yr. on-site express warranty.
CLIN# Manufacturer's P/N PRINTER -- INKJET GSA Price
804 4090001 Color JetPrinter 2070 Printer, 600x600 dpi, up to 7ppm black $329
draft, 4ppm color draft, Energy Star. 1 yr carry-in express
warranty.
CLIN# Manufacturer's P/N PRINTER -- LASER GSA Price
800 15A1300 Optra Lxn+ Laser Printer, 8MB memory, 25MHz AMD RISC $2,192
processor, 16ppm at 300x600 dpi, 500-sheet input, Energy
Star. 1 yr on-site express warranty.
801 4049-LM0 Optra Lx+ Laser Printer, 4MB memory, 25MHz AMD RISC $1,818
processor, 16ppm at 300x600 dpi, 500-sheet input, Energy
Star. 1 yr on-site express warranty.
802 15A1000 Optra R+ Laser Printer, 4MB memory, 25MHz AMD RISC processor, $1,230
16ppm at 300x600 dpi, 200-sheet input, Energy Star. 1 yr.
carry-in express warranty.
803 403910P 4039 10plus Laser Printer, 2MB memory, 16MHz AMD RISC $1,016
processor, 10ppm at 300x600 dpi, 200-sheet input, Energy
Star. 1 yr carry-in express warranty
809 11A9000 Optra N Laser Printer (Optra N 240), 4MB memory, 50MHz Intel $2,645
i960 processor, 24ppm at 300x600 dpi, two 500-sheet input,
Energy Star. 1 yr. on-site
MICRODYNE
CLIN# Manufacturer's P/N NETWORK -- ETHERNET GSA Price
192 883-003500-001 NE2500 plus, full-duplex, PNP ISA Ethernet Card. $68
193 883-005700-001 NE5500plus, 32-bit 10baseT/2 Combo PCI Ethernet Card. $76
195 883-105001-001 NE10/100, 32-bit 10/100baseT/2 Combo PCI Ethernet Card $80
CLIN# Manufacturer's P/N NETWORK- HUB GSA Price
1911 9906106-100 EH-106 Eagle Century Hub 100Mbps 6-port. $645
1912 9906112-200 EHS-112 Eagle Stack Century Hub 100Mbps 12-port $1,293
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
5
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
GSA SCHEDULE PRICELIST
FCI-96-DL0001B
<TABLE>
<C> <S> <C> <C>
1913 9906115-200 EHS-115 Eagle Stack 100Mbps SNMP Management Module $912
CLIN# Manufacturer's P/N NETWORK -- MICROHUB GSA Price
1914 9906008-10 EH-8, 8-port 10Base-T Eagle MicroHub (BNC, RJ-45) $98
1915 9906012-10 EH-12, 12-port 10Base-T Eagle MicroHub (BNC, RJ-45) $144
1916 9906024-10 EH-24, 24-port 10Base-T Eagle MicroHub (BNC, RJ-45) $266
1917 9906008-12 EH-8, 8-port 10Base-T Eagle MicroHub (BNC, RJ-45) Euro. $106
1918 9906012-12 EH-12, 12-port 10 Base-T Eagle MicroHub (CBNC, RJ-45) Euro $152
1919 9906024-12 EH-24, 24-port 10Base-T Eagle MicroHub (BNC, RJ-45) Euro. $274
CLIN# Manufacturer's P/N NETWORK -- SWITCH GSA Price
1921 9907041-001 ES 4+100 Eagle Switch. $1,293
1922 9907044-001 ES 4X4 Eagle Switch. $1.980
CLIN# Manufacturer's P/N NETWORK -- TOKEN RING GSA Price
197 032001 Token Ring IRMAtrac 4/16 PCI Twisted Pair Adapter $213
198 009163-1 Token Ring IRMAtrac 4/16 Fiber Optic ISA/ MCAAdapter $597
CLIN# Manufacturer's P/N PCMCIA -- NETWORK GSA Price
199 883-002967-001 NE4200 -- Ethernet PCMCIA Adapter (BNC and RJ45). $106
SONY
CLIN# Manufacturer's P/N DIGITAL CAMERA GSA Price
533 4DSC-F1 Digital Still Camera, Color 1.8 LCD Screen, 4MB int. $776
flash RAM (stores 180 images), 640x480 pixels, wireless (infrared)
& serial PC/ MAC connectivity.
CLIN# Manufacturer's P/N MONITOR -- COLOR GSA Price
533 GDM-17SE2T High-End 17 Trinitron CRT (16 viewable) 1600X1200 @ $839
60Hz PC and 1280X1024 @ 75Hz MAC resolution -- Energy Star.
536 GDM-20SE2T High-End 20 Trinitron CRT (19 viewable) Multiscan $1,828
Graphic Display with 1600X1200 @ 75Hz PC and 1280x1024 @ 75Hz MAC
resolution -- Energy Star
539 CPD-200SF 17 Trinitron CRT (15.9 viewable) Multiscan Graphic $746
Display with 1280x1024 @ 75Hz PC and 1152x870 @ 75Hz MAC resolution
-- Energy Star.
5331 CPD-100SF 15 Trinitron CRT (13.9 viewable) Multiscan Graphic $393
Display with 1280x1024 @ 60Hz PC and 1024x768 @ 75Hz MAC resolution
-- Energy Star.
5332 CPD-300SFT 20 Trinitron CRT (19 viewable) Multiscan $1,572
Graphic Display with 1280x1024 @ 80Hz PC and 1280x1024 @ 75Hz MAC resolution
-- Energy Star.
5333 GDM-W900 24 Trinitron CRT (22.5 viewable) Multiscan Graphic $4,289
Display supports resolutions up to 1920x1200 @ 76Hz.
CLIN# Manufacturer's P/N PHOTO PRINTER GSA Price
5335 DPP-M55 Digital Color Photo Printer for high quality $456
pictures, uses VP standard 5.5x3.9 paper, 70pps, wireless connectivity to
Sony's Digital Camera.
STB
CLIN# Manufacturer's P/N GRAPHIC ACCELERATOR GSA Price
547 LTS32 STB LTS32 Lightspeed 128 2.25MB, 128-bit Graphic $88
Accelerator
549 V3C38 STB V3C38 Velocity 3D, 64-bit 8MB Graphic $264
Accelerator.
550 V3X34 STB V3X34 Velocity 3D, 64-bit 4MB Graphic Accelerator $176
551 N3R34 STB V3R34 Nitro 3D, 64-bit 4MB Multimedia $132
Accelerator.
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD ROAD, GAITHERSBURG, MD 20878
301-590-8100
6
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
COMMERCIAL PRICELIST
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# CDROM -- INTERNAL LIST PRICE
<S> <C> <C>
1035 12X SCSI CD-ROM drive -- internal $ 358
1036 12-20X-SCSI CD-ROM drive -- internal. $ 398
4820 8X IDE CD-ROM drive -- internal $ 150
4822 16X IDE CD-ROM drive -- internal. $ 180
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# HARD DRIVE -- IDE LIST PRICE
<S> <C> <C>
121 1.6GB PC/AT IDE hard disk drive for IDP 500/600 Series Computers. $ 360
1020 2.1GB PC/AT IDE hard disk drive for IDP 500/600 Series Computers. $ 435
1030 3.2 GB PC/AT IDE hard disk drive for IDP 500/600 Series Computers. $ 622
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# HARD DRIVE -- SCSI LIST PRICE
<S> <C> <C>
1021 2 GB SCSI hard disk drive. Does not include cable. $ 944
1022 4 GB SCSI hard disk drive. Does not include cable. $ 1,638
1023 9 GB SCSI hard disk drive. Does not include cable. $ 2,250
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# MODEM -- EXTERNAL LIST PRICE
<S> <C> <C>
1061 IDP's 33.6Kbps fax/modem with internet kit -- external. $ 156
1063 IDP's 33.6Kbps fax/modem with paging, voice mail, and speakerphone capabilities -- $ 280
external.
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# MODEM -- INTERNAL LIST PRICE
<S> <C> <C>
1060 IDP's 56Kbps fax/modem with internet kit -- internal. $ 156
1062 IDP's 33.6Kbps fax/modem with paging, voice mail, and speakerphone capabilities -- $ 250
external.
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# MONITOR -- COLOR LIST PRICE
<S> <C> <C>
6332 IDP 15 High-Res Digital Monitor, .28mm dot pitch, up to 1280x1064/60Hz NI. Energy Star, $ 416
MPR-II.
6333 IDP 17 High-Res Digital Monitor .28mm dot pitch, up to 1280x1064/60Hz NI. Energy Star, $ 760
MPR-II.
6334 IDP 20 High-Res Digital Monitor .28mm dot pitch, up to 1600x1280/60 Hz NI. Energy Star, $ 1,740
MPR-II.
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- ACCESSORIES LIST PRICE
<S> <C> <C>
271 PC Card Token Ring Adapter $ 474
272 PC Card Ethernet 10/100 for 10base-T and 100base-TX PC Card Adapter (RJ45) $ 300
2201 33.6Kbps PC Card Fax/Modem with Cellular Capabilities. $ 256
2202 Combo PC Card 10base-T, 33.6 modem, Flash ROM Card. $ 498
8532 IDP's Microsoft compatible serial mouse. $ 14
8533 IDP's Microsoft compatible PS2 mouse. $ 14
8602 IDP's Windows 95 keyboard. $ 24
9132 Executive soft carrying case for notebook computers. Available at time of system $ 80
purchase only.
9133 Hard shell carrying case for notebook computers and accessories. Available at time of $ 161
system purchase only.
9134 Pressurized air NB/printer carrying case, w/shock absorbing air bag around compartment & $ 120
air padded shoulder strap. Available at time of system purchase.
28253 MPEG-1 PC Card for use with 560 Series Notebooks only. Produces full motion, 30 frames per $ 358
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD RAOD, GAITHERSBURG, MD 20878
301-590-8100
1
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
COMMERCIAL PRICELIST
<TABLE>
<S> <C> <C>
second (FPS), MPEG video
28311 Battery charger for IDP 500CD/530/560/570/515 Series Notebooks. (Comes complete with power $ 133
source.) Available at time of system purchase only.
28315 Car adapter for IDP 500CD/530/560/570/515 Series Notebooks. Available at time of system $ 70
purchase only.
28320 NiMH battery for IDP 500CD/530/560 and 515 Series Notebooks. Available at time of system $ 120
purchase only.
28321 NiMH battery for IDP 570 Series Notebooks. Available at time of system purchase only. $ 126
51540 External Floppy Disk Drive Pack for IDP 515 Series Notebooks. $ 52
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- COMPUTER LIST PRICE
<S> <C> <C>
3001 IDP 530XD Notebook, 10.4 DSTN, 8MB, FDD, Sound, Batt., Adapt., Case, and operating system $ 2,125
included. Add HDD & CPU.
3002 IDP 530CD Notebook, 10.4 DSTN, 8MB, Fdd, 10X CD-ROM, Sound, Batt., Adapt., Case, and $ 2,325
operating system included. Add HDD & CPU.
3011 IDP 530XD Notebook, 11.3 TFT, 8MB, FDD, Sound, Batt., Adapt., Case, and operating system $ 2,885
included. Add HDD & CPU.
3012 IDP 530CD Notebook, 11.3 TFT, 8MB, FDD, 10X CD-ROM, Sound, Batt., Adapt., Case, Port Rep., $ 3,085
and operating system included. Add HDD & CPU.
3150 IDP 515 Notebook, 12.1TFT, P133 CPU, 16MB, 256K, FDD, 1.4GB HDD, 6X CD-ROM, Batt., Adapt., $ 4,957
Case, Port Rep., and operating system included.
3152 IDP 515 Notebook, 12.1 TFT, P133 CPU, 16MB, 256K, FDD, 2.1GB HDD, Batt, Adapt., Case, Port $ 5,157
Rep, and operating system included.
3603 IDP 560CD Notebook, 12.1 DSTN, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, Batt, Adapt., Case, $ 2,735
and operating system included. Add HDD & CPU.
3612 IDP 560CD Notebook, 11.3 TFT, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, Batt, Adapt., Case, $ 3,245
and operating system included. Add HDD & CPU.
3613 IDP 560CD Notebook, 12.1 TFT, 8MB, 256K, FDD, 10X CD-ROM, Snd/TV Out, Batt, Adapt., Case, $ 3,705
and operating system included. Add HDD & CPU.
3701 IDP 570CD Modular Notebook, 12.1 DSTN, 16MB, FDD, 10X CD-ROM, Sound, Batt, Adapt., Case, $ 3,040
and operating system included. Add HDD & CPU.
3711 IDP 570CD Modular Notebook, 12.1 TFT, 16MB, FDD, 10X CD-ROM, Sound, Batt, Adapt., Case, $ 4,120
and operating system included. Add HDD & CPU.
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- CPU PENTIUM LIST PRICE
<S> <C> <C>
5241 Pentium 133MHz CPU for IDP 530/560 Series Notebooks. Must be ordered with notebook. $ 267
18551 Pentium 133MHz Mobile CPU and Daughter Card for IDP 570 Series Notebooks. Must be ordered $ 506
with notebook.
18552 Pentium 150MHz Mobile CPU and Daughter Card for IDP 570 Series Notebooks. Must be ordered $ 598
with notebook.
18553 Pentium 166MHz Mobile CPU and Daughter Card for IDP 570 Series Notebooks. Must be ordered $ 848
with notebook.
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- DOCKING STATIONS LIST PRICE
<S> <C> <C>
28300 Docking station to be used with IDP 500CD/530/560 Series Notebooks. $ 407
28301 Docking station to be used with IDP 570 Series Notebooks. $ 600
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- HARD DRIVE LIST PRICE
<S> <C> <C>
28297 1.4GB HDD for IDP 500CD/560 Series Notebooks. Includes removable adapter, cabling, and $ 430
screws.
28298 1.4GB HDD for IDP 530 Series Notebooks. Includes removable adapter, cabling, and screws. $ 430
</TABLE>
INT'L DATA PRODUCTS CORP., 20 FIRSTFIELD RAOD, GAITHERSBURG, MD 20878
301-590-8100
2
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
COMMERCIAL PRICELIST
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- HARD DRIVE LIST PRICE
<C> <S> <C>
28299 1.4GB HDD for IDP 570 Series Notebooks. Includes removable adapter, cabling, and screws. $ 430
29801 2.1GB HDD for IDP 500CD/560 Series Notebooks. Includes removable adapter, cabling, and
screws. $ 630
29802 2.1GB HDD for IDP 530 Series Notebooks. Includes removable adapter, cabling, and screws. $ 630
29803 2.1GB HDD for IDP 570 Series Notebooks. Includes removable adapter, cabling, and screws. $ 630
29804 2.1GB HDD for IDP 400/500 Series Notebooks. Includes removable adapter, cabling, and screws. $ 630
282984 1.4GB HDD for IDP 400/500 Series Notebooks. Includes removable adapter, cabling, and screws. $ 430
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN #NOTEBOOK -- MEMORY LIST PRICE
<C> <S> <C>
2100 4MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB to 12MB total memory. $ 42
2164 64MB RAM (2x32MB modules) to upgrade IDP 560 Series Notebooks ONLY, from base of 8MB to 72MB
total memory. $ 840
5160 8MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series Notebooks, from base of 16MB
to 24MB total memory. $ 96
5161 16MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series Notebooks, from base of 16MB
to 32MB total memory. $ 166
5162 32MB 3.3volt 144pin SO DIMM modules to upgrade IDP 515/570 Series Notebooks, from base of 16MB
to 48MB total memory. $ 700
28280 8MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB to 16MB total memory. $ 82
28290 16MB RAM to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB to 24MB total memory. $ 152
28296 32MB RAM (2x16MB modules) to upgrade IDP 500CD/530/560 Series Notebooks, from base of 8MB to
40MB total memory. $ 304
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# NOTEBOOK -- OPERATING SYSTEM LIST PRICE
<C> <S> <C>
787 DOS/Windows for Workgroups for IDP's notebooks. Must be ordered with system. $ 0
788 Windows 95 for IDP's notebooks. Must be ordered with system. $ 0
789 Windows NT Workstation v4.0 for IDP's notebooks. Must be ordered with system. $ 0
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- ACCESSORIES LIST PRICE
<C> <S> <C>
371 PCI Ultra SCSI Host Adapter Kit. $ 458
372 ISA Fast SCSI Plug and Play Adapter Kit. $ 245
373 PC Card Fast SCSI-2 Host Adapter Kit. $ 298
1050 Front Load Type III PC-Card reader for IDP 500/600 Series Computers. $ 118
1071 IDP's Multimedia Upgrade with two 8-watt speakers, 16-bit soundcard, and an 8X IDE CD-ROM. $ 291
1073 IDP's Enhanced Multimedia Upgrade with two 8-watt speakers, 16-bit soundcard, and 16X IDE
CD-ROM. $ 321
1550 IDP's 6 Outlet Surge Protector. Available at time of system purchase only. $ 13
1551 IDP's 8 Outlet Surge Protector. Available at time of system purchase only. $ 94
1552 IDP's Uninterruptable Power Supply (UPS) -- 400 watts. Available at time of system purchase
only. $ 442
8532 IDP's Microsoft compatible serial mouse. $ 14
8602 IDP's Windows 95 keyboard. $ 24
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
MANUFACTURER
CLIN# PC -- BUNDLE LIST PRICE
</TABLE>
3
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
COMMERCIAL PRICELIST
<TABLE>
<C> <S> <C>
10000 IDP 500 Desktop, P166 CPU, 16MB, 512K, 1.6GB HDD, FDD, 2MB video, 8X CD-ROM, Kybd/mse, Win95. $ 1,989
20000 IDP 500 Desktop, P200 CPU, 32MB, 512K, 2.1GB HDD, FDD, 2MB video, 16X CD-ROM, Kybd/mse,
Win95. $ 2,339
30000 IDP 600 Desktop, P180 (256K) CPU, 32MB, 2.1GB HDD, FDD, 2MB video, 16X CD-ROM, Kybd/mse, NT. $ 2,929
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- CPU PENTIUM LIST PRICE
<C> <S> <C>
1043 Intel Pentium Pro 180MHz (256K) CPU for IDP 600 Series Computers. Must be ordered with
system. $ 916
1044 Intel Pentium Pro 200MHz (256K) CPU for IDP 600 Series Computers. Must be ordered with
system. $ 1,136
1046 Cyrix P150+ CPU for IDP 500 Series Computers. Must be ordered with system. $ 190
1047 Cyrix P166+ CPU for IDP 500 Series Computers. Must be ordered with system. $ 210
5201 Intel Pentium 166MHz CPU for IDP 500 Series Computers. Must be ordered with system. $ 442
5202 Intel Pentium 200MHz CPU for IDP 500 Series Computers. Must be ordered with system. $ 539
5241 Intel Pentium 133MHz CPU for IDP 500 Series Computers. Must be ordered with system. $ 267
5291 Intel Pentium 166MHz CPU with MMX for IDP 500 Series Computers. Must be ordered with
system. $ 581
5292 Intel Pentium 200MHz CPU with MMX for IDP 500 Series Computers. Must be ordered with
system. $ 1,046
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- MEMORY EXPANSION LIST PRICE
<C> <S> <C>
5991 8MB 32-bit memory upgrade for IDP 500/600 Series Computers. (2X4MB) Must be installed when on
GSA order. $ 100
5992 16MB 32-bit memory upgrade for IDP 500/600 Series Computers. (2X8MB) Must be installed when
on GSA order. $ 152
5993 32MB 32-bit memory upgrade for IDP 500/600 Series Computers. (2X16MB) Must be installed when
on GSA order. $ 300
5994 8MB 36-bit parity memory. (2X4MB SIMM) Must be ordered with computer. $ 112
5995 16MB 36-bit parity memory. (2X8MB SIMM) Must be ordered with computer. $ 216
5996 32MB 36-bit parity memory. (2X16MB SIMM) Must be ordered with computer. $ 380
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- OPERATING SYSTEM LIST PRICE
<C> <S> <C>
787 DOS/Windows for Workgroups for IDP 500/600 Series Computers. Must be ordered with system. $ 0
788 Windows 95 for 500/600 Series Computers. Must be ordered with system. $ 0
789 Windows NT Workstation v4.0 for IDP 500/600 Series Computers. Must be ordered with system. $ 0
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- PENTIUM DESKTOP LIST PRICE
<C> <S> <C>
4010 IDP 500 Desktop, 512K, FDD, 2MB video, keyboard, mouse, and operating system included. Add
HDD, CPU, & RAM. $ 885
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- PENTIUM MINITOWER LIST PRICE
<C> <S> <C>
4011 IDP 500 Minitower, 512K, FDD, 2MB video, keyboard, mouse, and operating system included.
Add HDD, CPU, & RAM. $ 888
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
MANUFACTURER
CLIN# PC -- PENTIUM PRO DESKTOP LIST PRICE
</TABLE>
4
<PAGE>
INTERNATIONAL DATA PRODUCTS CORPORATION
COMMERCIAL PRICELIST
<TABLE>
<C> <S> <C>
4416 IDP 600 Desktop, FDD, 2MB video, keyboard, mouse, and operating system included. Add HDD,
CPU, & RAM. $ 1,098
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- PRO TOWER LIST PRICE
<C> <S> <C>
4415 IDP 600 Tower, FDD, 2MB video, keyboard, mouse, and operating system included. Add HDD,
CPU, & RAM. $ 1,158
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- PENTIUM TOWER LIST PRICE
<C> <S> <C>
4012 IDP 500 Tower, 512K, FDD, 2MB video, keyboard, mouse, and operating system included. Add HDD,
CPU, & RAM. $ 946
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURER
CLIN# PC -- UPGRADES LIST PRICE
<C> <S> <C>
1070 16-bit wavetable soundcard for IDP 500/600 Series Computers. $ 60
1075 Upgrade to 64-bit 3D 4MB video card for IDP 500/600 Series Computers. At time of system
purchase only. $ 165
</TABLE>
5
<PAGE>
Exhibit 10.13
----------------------
AWARD/CONTRACT
----------------------
- -------------------------------------- ---------- --------------
1. THIS CONTRACT IS A RATED ORDER --> RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350) J 1 3
- -------------------------------------- ---------- --------------
- -----------------------------------
2. CONTRACT (True Inst. Ident.) NO
E01620-97-D-0001
- -----------------------------------
- -----------------------------------
3. EFFECTIVE DATE
- -----------------------------------
- -------------------------------------------
4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
- -------------------------------------------
- -------------------------------------------
5. ISSUED BY CODE GK01D
--------------
Headquarters Standard Systems Group (SSG/PKZ)
55 North Ramp Road, BLdg 820
Maxwell AFB-Gunter Annex AL 36114-3331
ATTN: Ms. Yulanda Andrews, (334) 416-3147
- --------------------------------------------
- ------------------------------------------------------
6. ADMINISTERED BY (if other than item 5) CODE S2101A
------
DCMC Baltimore
200 Towsontown Blvd., West
Towson, MD 21204-5299
- ------------------------------------------------------
- --------------------------------------------------------------------------------
7. NAME AND ADRESS OF CONTRACTOR (No., street, city, county, State and Zip Code)
International Data Products, Corp.
20 Firstfield Road
Montgomery County
Gaithersburg, MD 20878
- --------------------------------------------------------------------------------
CODE 45815 FACILITY CODE
- --------------------------------------------------------------------------------
- ----------------------------------------
8. Delivery
IAW SEC D, PARA 1
/ / FOB ORIGIN / /OTHER (see below)
- ----------------------------------------
- ----------------------------------------
9. DISCOUNT FOR PROMPT PAYMENT
1/2% 10 CALENDAR DAYS
- ----------------------------------------
- ------------------------------ ------------------------------
10. SUBMIT INVOICES ITEM
(4 copies unless otherwise IAW Sec G,
specified) TO THE ADDRESS para 5
SHOWN IN -->
- ------------------------------ ------------------------------
- ------------------------------------------------
11. SHIP TO/MARK FOR CODE
IAW Section F, para 2
- ------------------------------------------------
- -----------------------------------------------------
12. PAYMENT WILL BE MADE BY CODE SC1034
DFAS Columbus Center-JSC-Capital
Post Office Box 182263
Columbus, OH 43218-2263
- -----------------------------------------------------
- -------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN
COMPETITION:
/ / 10 U.S.C. 2304(c)( ) / / 41 U.S.C. 253(c)( )
- -------------------------------------------------------------
- -------------------------------------------------------------
14. ACCOUNTING AND APPROPRIATION DATA
Minimum Obligated on Delivery Order 0001
- -------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delivery IAW Section B.,
CLINS 0001-0006
Estimated
- -------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $729,010,929.00
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------------------------------
VI SEC DESCRIPTION PAGE(S)
- -------------------------------------------------------------------------------------------------------------------------
PART I--THE SCHEDULE
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
X A SOLICITATION/CONTRACT FORM 1-2
X B SUPPLIES OR SERVICES AND PRICES/COSTS 1-39
X C DESCRIPTION/SPECS./WORK STATEMENT 1-19
X D PACKAGING AND MARKING 1-3
X E INSPECTION AND ACCEPTANCE 1-3
X F DELIVERIES OR PERFORMANCE 1-6
X G CONTRACT ADMINISTRATION DATA 1-9
X H SPECIAL CONTRACT REQUIREMENTS 1-9
- -------------------------------------------------------------------------------------------------------------------------
PART II--CONTRACT CLAUSES
- -------------------------------------------------------------------------------------------------------------------------
X I CONTRACT CLAUSES 1-18
- -------------------------------------------------------------------------------------------------------------------------
PART III--LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- -------------------------------------------------------------------------------------------------------------------------
X J LIST OF ATTACHMENTS 1
- -------------------------------------------------------------------------------------------------------------------------
PART IV--REPRESENTATIONS AND INSTRUCTIONS
- -------------------------------------------------------------------------------------------------------------------------
X K REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS
L INSTHS. CONDS., AND NOTICES TO OFFERORS
M EVALUATION FACTORS FOR AWARD
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- ----------------------------------------------------------------------------
17. / / CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required to sign
this document and return ____ copies to issuing office.) Contractor agrees
to furnish and deliver all items or perform all the services set forth or
otherwise identified above and on any continuation sheets for the
consideration stated herein. The rights and obligations of the parties to
this contract shall be subject to and governed by the following documents:
(a) this award/contract, (b) the solicitation, if any, and (c) such
provisions, representations, certifications, and specifications, as are
attached or incorporated by reference herein. (Attachments are listed
herein.)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
18. /X/ AWARD (Contractor is not required to sign this document.) Your
offer on Solicitation Number F01620-95-R-AO51, including the additions or
changes made by you which additions or changes are set forth in full
above, is hereby accepted as to the items listed above and on any
continuation sheets. This award consummates the contract which consists of
the following documents: (a) the Government's solicitation and your offer,
and (b) this award/contract. No further contractual document is necessary.
- ----------------------------------------------------------------------------
- -------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print)
- -------------------------------------------------------------
19B. NAME OF CONTRACTING 19C. DATE SIGNED
BY See Page 2 of 2
---------------------------------
(Signature of person authorized
to sign)
- -------------------------------------------------------------
- -------------------------------------------------------------
20A. NAME OF CONTRACTING OFFICER
- -------------------------------------------------------------
20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY See Page 2 of 2
----------------------------------
(Signature of Contracting Officer)
- -------------------------------------------------------------
- -------------------------------------------------------------------------------
NSN 7540-01-152-8069 26-107 STANDARD FORM 26 (REV. 4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.214(a)
GPO: 1985 O-461-275 (2005)
<PAGE>
-----------------------------
SOLICITATION, OFFER AND AWARD
-----------------------------
- ------------------------------------ -------- ------------
1. THIS CONTRACT IS A RATED ORDER RATING PAGE
UNDER DPAS (15 CFR 350) (See H-5) --> 1 OF 1 PAGES
- --------------------------------------- -------- ------------
- ----------------
2. CONTRACT NO.
- ----------------
- -------------------
3. SOLICITATION NO.
F01620-95-R-A051
- -------------------
- ----------------------
4. TYPE OF SOLICITATION
SEALED BID (IFB)
X NEGOTIATED (RFP)
- ----------------------
- ---------------
5. DATE ISSUED
17 JUL 95
- ---------------
- ---------------------------
6. REQUISITION/PURCHASE NO.
- ---------------------------
- ----------------------------------------------------
7. ISSUED BY
Headquarters Standard Systems Group (HQ SSG)
Directorate of Contracting (HQ SSG/PKN)
55 North Ramp Road (Bldg 820)
Maxwell AFB-Gunter Annex AL 36114-3331
Contracting Officer: Ms Kay P. Walker (334) 416-1781
- ----------------------------------------------------
- -----------------------------------------------------------------
8. ADDRESS OFFER TO (if other than item 7)
NOTE 1: Sequential page numbering is done by section in this RFP.
- -----------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: In sealed bid solicitations, "offer" and "offeror" mean "bid" and
"bidder".
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOLICITATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. Sealed offers in original and (See L21) copies for furnishing the supplies
or services in the Schedule will be received at the place specified in item
7, or if handcarried, in the depository located in (See L19) until 3:00 P.M.
CDST time on 6 SEP 95. CAUTION--LATE Submissions, Modifications, and
Withdrawals of Offers-Commercial Items: See Section L, Provision
No. 252.211-7018. All offers are subject to all terms and conditions contained
in this solicitation.
- --------------------------------------------------------------------------------
- ------------------------------
10. FOR INFORMATION
CALL: -->
- ------------------------------
- ------------------------------
A. NAME
Capt. Chad W. Lusher
- ------------------------------
- ------------------------------------------------------
B. TELEPHONE NO (include area code) (NO COLLECT CALLS)
(334) 416-1782
- ------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(3) SEC DESCRIPTION PAGE(S) (3) SEC DESCRIPTION PAGE(S)
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- ---------------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 1-16
- ---------------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 1-31 PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACH.
- ---------------------------------------------------------------------------------------------------------------------------------
X C DESCRIPTION/SPECS./ WORK STATEMENT 1-18 X J LIST OF ATTACHMENTS 1
- ---------------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING 1-3 PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 1-3 X K REPRESENTATIONS, CERTIFICATIONS AND
- --------------------------------------------------------------- OTHER STATEMENTS OF OFFERORS 1-21
X F DELIVERIES OR PERFORMANCE 1-5
- ---------------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 1-8 X L INSTRS., CONDS., AND NOTICES TO OFFERORS 1-112
- ---------------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS 1-8 X M EVALUATION FACTORS FOR AWARD 1-11
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
OFFER (Must be fully completed by offeror)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: Item 12 does not apply if the solicitation includes the provisions at
52.214-16, Minimum Bid Acceptance Period.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. In compliance with the above, the undersigned agrees, if this offer is
accepted within 335 calendar days from the date for receipt of offers
specified above, to furnish any or all items upon which prices are offered at
the price set opposite each item, delivered at the designated point(s),
within the time specified in the schedule.
- --------------------------------------------------------------------------------
- --------------------------------
13. DISCOUNT FOR PROMPT PAYMENT
(See DFARS 252.211-7001)
- --------------------------------
- ------------------
10 CALENDAR DAYS
1/2%
- ------------------
- ------------------
20 CALENDAR DAYS
%
- ------------------
- ------------------
30 CALENDAR DAYS
0%
- ------------------
- ------------------
CALENDAR DAYS
%
- ------------------
- --------------------------------------------------------------------------------
14. ACKNOWLEDGEMENT OF AMENDMENTS
(The offeror acknowledges receipt of amendments to the SOLICITATION for
offerors and related documents numbered and dated:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
AMENDMENT NO. DATE AMENDMENT NO. DATE
- ------------------------------------------------------------------
<S> <C> <C> <C>
0001 26 AUG 95 0004 16 JAN 96
- ------------------------------------------------------------------
0002 5 SEP 95 0005 07 JUN 96
- ------------------------------------------------------------------
0003 18 OCT 95
- ------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------
15A. NAME AND CAGE CODE 45815 FACILITY
ADDRESS OF International Data Products Corp.
OFFEROR 20 Firstfield Road
Montgomery County
Gaithersburg, MD 20878
- ------------------------------------------------------------------
- --------------------------------------
15B. TELEPHONE NO. (include area code)
301-590-8100
- --------------------------------------
- --------------------------------------------------------------------------------
15C. CHECK IF REMITTANCE ADDRESS IS DIFFERENT FROM ABOVE - ENTER SUCH ADDRESS
IN SCHEDULE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16. NAME AND TITLE OF PERSON AUTHORIZED TO SIGN OFFER (Type or print)
George Fuster, President
- --------------------------------------------------------------------------------
- ----------------------------
17. SIGNATURE
(ILLEGIBLE) 10/22/96
- ----------------------------
- --------------------------------------------------------------------------------
AWARD (To be completed by Government)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19. ACCEPTED AS TO ITEMS NUMBERED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20. AMOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21. ACCOUNTING AND APPROPRIATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:
10 U.S.C. 2304 (c)( ) 41 U.S.C. 253(c)( )
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
23. SUBMIT INVOICES TO ADDRESS SHOWN IN ITEM
(4 copies unless otherwise specified) --> G-5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24. ADMINISTERED BY (if other than item 7)
CODE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25. PAYMENT WILL BE MADE BY
CODE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
26. NAME OF CONTRACTING OFFICER (Type or print)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
27. UNITED STATES OF AMERICA
(signature of Contracting Officer)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28. AWARD DATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT -- Award will be made on this Form, or on Standard Form 26, or by
other authorized official written notice.
- --------------------------------------------------------------------------------
____7540-01-152-8084 33-133 STANDARD FORM 33 (REV. 4-85)
(EF)
PREVIOUS EDITION NOT USABLE Prescribed by GSA
FAR (48 CFR) 53.214(c)
III-6-1 BAFO
Proposal Submittal #1 Date: October 23, 1996
<PAGE>
F01620-97-D-0001
PAGE 2 OF 3
TRIPARTITE AGREEMENT
EFFECTIVE DATE: CONTRACT NUMBER:
8(a)CONTRACTOR: International Data Products
20 Firstfield Road
Gaithersburg MD 20878
BY: /s/ George Fuster
TYPED NAME AND TITLE: George Fuster, President
DATE: October 22, 1996
SMALL BUSINESS ADMINISTRATION:
OFFICE OF MINORITY ENTERPRISE DEVELOPMENT
SBA NUMBER: 0353-97-006069
BY: /s/ Martin Gold, DO(A)/WDO
TYPED NAME AND TITLE:
DATE: 12/27/96
PROCURING ACTIVITY: HQ SSG/PKZ
55 North Ramp Road, Bldg. 820
Maxwell Air Force Base-Gunter Annex AL 36114-3331
BY: /s/ Veronica G. Alexander
TYPED NAME AND TITLE: Contracting Officer
DATE: 5 May 97
<PAGE>
F01620-97-D-0001
PAGE 3 of 3
FAR 52.252-2 CLAUSE INCORPORATED BY REFERENCE (JUNE 1988)
- -------------------------------------------------------------------------------
The following additional clauses are hereby incorporated into the contract.
Where the identically numbered clause appears elsewhere in the contract, the
version listed below along with the applicable completions takes precedence.
FAR REF CLAUSE TITLE
- ---------------- -------------------------------------
52.219-11 Special 8(a) Contract Conditions (FEB 1990)
Name of Agency: USAF (SSG/PKZ)
52.219-12 Special 8(a) Subcontract Conditions (FEB 1990)
Prime Contract Number: F01620-97-D-0001
Name of Agency: USAF (SSG/PKZ)
Name of Subcontractor: International Data Products
52.219-14 Limitations on Subcontracting (Jan 1991)
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 1 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
B.1 GENERAL DESCRIPTION
a. This is a firm fixed-price (FFP), indefinite delivery, indefinite
quantity (ID/IQ) contract providing commercial computer systems and bundled
support services to support general purpose applications which will satisfy
portable, desktop, and server computer needs common throughout the Air Force,
other Department of Defense (DoD) agencies (excluding Navy & Army), and as
directed by GSA, other Federal civilian agencies. These systems are to be
delivered to Air Force, DoD, and other Federal civilian agencies worldwide.
The applications include office automation functions such as word processing,
data base management, spreadsheet creation/manipulation, and business
graphics. This contract provides the following:
(1) Contract Line Item Number (CLIN) 0001, purchase of portable
computer systems, office automation (OA) software (SW), other software,
peripherals, components, upgrades, and bundled support services as identified
in Section C, the Contractor's Technical and Management proposals, and
Section B, Table B-1.
(2) CLIN 0002, purchase of desktop computer systems, office
automation (OA) software (SW), other software, peripherals, components,
upgrades, and bundled support services as identified in Section C, the
Contractor's Technical and Management proposals, and Section B, Table B-2.
(3) CLIN 0003, purchase of advanced desktop computer systems,
office automation (OA) software (SW), other software, peripherals,
components, upgrades, and bundled support services as identified in Section
C, the Contractor's technical and Management proposals, and Section B, Table
B-3.
(4) CLIN 0004, purchase of advanced computer based servers,
network operating system (NOS) software (SW), other software, peripherals,
components, upgrades, and bundled support services as identified in Section
C, the Contractor's Technical and Management proposals, and Section B, Table
B-4.
(5) CLIN 0005, purchase of portable printers; impact printers;
entry level color printers; laser-quality printers; and laser-quality network
printers, to include upgrades, components, and bundled support services as
identified in Section C, the Contractor's Technical and Management proposals,
and Section B, Table B-5.
(6) CLIN 0006, data as identified in Section C, Sec/Para J.10,
Exhibit A, Contract Data Requirements List (CDRL), and the Contractor's
Technical and Management proposals.
(7) CLIN 0007, purchase of portable computer systems, desktop
computer systems, advanced desktop computer systems, advanced computer based
servers, network operating system software, office automation (OA) software
(SW), other software, peripherals,
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 2 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
components, upgrades, and bundled support services as identified in Section C
and Section B, Table B-6.
b. This contract will avoid product obsolescence and take
advantage of emerging technology to satisfy user requirements through
changes, additions, substitutions, upgrades, and updates as technology,
standards, and procedures evolve.
B.2 CONTRACT MINIMUM/MAXIMUM
a. In the base year of the contract, the minimum amount for award
will be $100,000.00. Orders beyond the minimum will be determined by user
needs.
b. The specific services, products, and quantities will be
identified on each delivery order. The exercise of an option does not
re-establish the contract minimum.
c. In accordance with the terms and conditions of the Settlement
Agreement dated 8 September 1997, the total estimated quantities are hereby
modified to reflect a value of $100M. The Contractor shall immediately
notify the Air Force, in writing, when 80% of this estimate is reached. The
Contractor shall not accept any order which would exceed the estimated
quantities valued at $100M unless authorized by the Contracting Officer to do
so.
d. A maximum of $729,010,929 is established for this contract
including option amounts, broken out as follows:
1. A maximum of $729,010,929 is established for this contract
for ordering by the Department of the Air Force and other Department of
Defense components.
2. A maximum of 20% is estimated for this contract for ordering
by other Federal Civilian Agencies.
d. Proposals for a single CLIN/Sub-Line Item Number (SLIN), or
group thereof, and for quantities for less than those in the Price Evaluation
Model (PEM) will not be accepted and will be ineligible for award. Offerors
must propose on all CLINs/SLINs in Section B.
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 3 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
B.3 THE SCHEDULE
<TABLE>
<CAPTION>
CLIN
NO. Supplies/Services
- --- -----------------
<S> <C>
0001 INFO CLIN
PORTABLE SYSTEMS:
The Contractor shall provide portable computer systems, office
automation (OA) software (SW), other software, peripherals,
components, upgrades, and bundled support services as
identified in Section C, the Contractor's Technical and
Management proposals, and Section B, Table B-1.
0002 INFO CLIN
DESKTOP OA SYSTEM:
The Contractor shall provide desktop computer systems, office
automation (OA) software (SW), other software, peripherals,
components, upgrades, and bundled support services as
identified in Section C, the Contractor's Technical and
Management proposals, and Section B, Table B-2.
0003 INFO CLIN
ADVANCED DESKTOP SYSTEM:
The Contractor shall provide advanced desktop computer
systems, office automation (OA) software (SW), other software,
peripherals, components, upgrades, and bundled support
services as identified in Section C, the Contractor's
Technical and Management proposals, and Section B, Table B-3
0004 INFO CLIN
SERVER:
The Contractor shall provide advanced computer based servers,
network operating system (NOS) software (SW), other software,
peripherals, compo-nents, upgrades, and bundled support
services as identified in Section C, the Contractor's
Technical and Management proposals, and Section B, Table B-4.
0005 INFO CLIN
PRINTERS:
The Contractor shall provide portable printers; impact
printers; entry level color printers; laser-quality printers;
and laser-quality network printers, components, upgrades, and
bundled support services as identified in Section C, the
Contractor's Technical and Management proposals, and Section
B, Table B-5.
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 4 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
CLIN
NO. Supplies/Services
- --- -----------------
<S> <C>
0006 INFO CLIN
DATA:
The Contractor shall provide data as required in
Section C, Sec/Para J.10, Exhibit A, Contract Data
Requirements List (CDRL), and the Contractor's Technical and
Management proposals.
0007 INFO CLIN
PORTABLE, DESKTOP OA, ADVANCED DESKTOP SYSTEMS,
SERVER:
The Contractor shall provide portable computer systems,
desktop computer systems, advanced desktop computer systems,
advanced computer based servers, network operating system
software, office automation (OA) software (SW), other
software, peripherals, components, upgrades, and bundled
support services as identified in Section C and Section B,
Table B-6.
</TABLE>
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
1001 PORTABLE SYSTEMS: As Req. See Table B-1
The Contractor shall provide EA
CLIN 0001 products and services
in accordance with (IAW) delivery
orders issued during the basic
contract period. Ordering period
is for 12 months beginning from
the date of contract award.
1002 DESKTOP OA SYSTEM: As Req. See Table B-2
The Contractor shall provide EA
CLIN 0002 products and services
IAW delivery orders issued during
the basic contract period. Ordering
period is for 12 months beginning
from the date of contract award.
1003 ADVANCED DESKTOP SYSTEM: As Req. See Table B-3
The Contractor shall provide EA
CLIN 0003 products and services
IAW delivery orders issued during
the basic contract period. Ordering
period is for 12 months beginning
from the date of contract award.
1004 SERVER: As Req. See Table B-4
The Contractor shall provide EA
CLIN 0004 products and services IAW
delivery orders issued during the
basic contract period. Ordering
period is for 12 months beginning
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 5 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
from the date of contract award.
1005 PRINTERS:
The Contractor shall provide As Req. See Table B-5
CLIN 0005 products and services EA
IAW delivery orders issued during
the basic contract period. Ordering
period is for 12 months beginning
from the date of contract award.
1006 DATA:
The Contractor shall provide As Req. NSP
CLIN 0006 data as required during See Exhibit A
the basic contract period. Ordering
is for 12 months beginning from the
date of contract award.
1007 PORTABLE, DESKTOP OA, As Req. See Table B-6
ADVANCED DESKTOP SYSTEMS, SERVER: EA
The Contractor shall provide
CLIN 0007 products and services
IAW delivery orders issued during
the basic contract period. Ordering
period is for 12 months beginning
from the date of contract award.
</TABLE>
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
2001 Option 1 CLIN PORTABLE SYSTEMS: As Req. See Table B-1
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0001 products and
services IAW delivery orders issued
during Option Period 1. Ordering
period is for 12 months.
2002 Option 1 CLIN DESKTOP OA SYSTEM: As Req. See Table B-2
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0002 products and
services IAW delivery orders
issued during Option Period 1.
Ordering period is for 12 months.
2003 Option 1 CLIN ADVANCED DESKTOP As Req. See Table B-3
SYSTEM: EA
If option is exercised to extend
ordering,
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 6 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
the Contractor shall
provide CLIN 0003 products and
services IAW delivery orders
issued during Option Period 1.
Ordering period is for 12 months.
2004 Option 1 CLIN SERVER: As Req. See Table B-4
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0004 products and
services IAW delivery orders
issued during Option Period I.
Ordering period is for 12 months.
2005 Option 1 CLIN PRINTERS: As Req. See Table B-5
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0005 products and
services IAW delivery orders issued
during Option Period 1. Ordering
period is for 12 months.
2006 Option 1 CLIN DATA: As Req. NSP
If option is exercised to extend See Exhibit A
ordering, the Contractor shall
provide CLIN 0006 data as
required during Option Period 1.
Ordering period is for 12 months.
2007 Option 1 CLIN PORTABLE, DESKTOP As Req. See Table B-6
OA, ADVANCED DESKTOP SYSTEMS, EA
SERVER:
If option is exercised to extend
ordering the Contractor shall
provide CLIN 0007 products and
services IAW delivery orders
issued during Option Period 1.
Ordering period is for 12 months.
</TABLE>
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
3001 Option 2 CLIN PORTABLE SYSTEMS: As Req. See Table B-1
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0001 products and
services IAW delivery orders
issued during Option Period 2.
Ordering period is for 12 months.
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 7 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
3002 Option 2 CLIN DESKTOP OA SYSTEM: As Req. See Table B-2
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0002 products and
services IAW delivery orders
issued during Option Period 2.
Ordering period is for 12 months.
3003 Option 2 CLIN ADVANCED DESKTOP As Req. See Table B-3
SYSTEM: EA
If Option is exercised to
extend ordering, the Contractor
shall provide CLIN 0003 products
and services IAW delivery orders
issued during Option Period 2.
Ordering period is for 12 months.
3004 Option 2 CLIN SERVER: As Req. See Table B-4
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0004 products and
services IAW delivery orders
issued during Option Period 2.
Ordering period is for 12 months.
3005 Option 2 CLIN PRINTERS: As Req. NSP
If option is exercised to extend See Exhibit A
ordering, the Contractor shall
provide CLIN 0005 products and
services IAW delivery orders issued
during Option Period 2. Ordering
period is for 12 months
3006 Option 2 CLIN DATA: As Req. NSP
If option is exercised to extend See Exhibit A
ordering, the Contractor shall
provide CLIN 0006 data as required
during Option Period 2. Ordering
period is for 12 months.
3007 Option 2 CLIN PORTABLE, DESKTOP OA, As Req. See Table B-6
ADVANCED DESKTOP SYSTEMS, SERVER: EA
If option is exercised to extend
ordering the Contractor shall
provide CLIN 0007 products and
services IAW delivery orders
issued during Option Period 2.
Ordering period is for 12 months.
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 8 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
4001 Option 3 CLIN PORTABLE SYSTEMS: As Req. See Table B-1
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0001 products and
services IAW delivery orders issued
during Sustainment Option Period 3.
Ordering period is for 12 months.
4002 Option 3 CLIN DESKTOP OA SYSTEM: As Req. See Table B-2
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0002 products and
services IAW delivery orders issued
during Sustainment Option Period 3.
Ordering period is for 12 months.
4003 Option 3 CLIN ADVANCED DESKTOP As Req. See Table B-3
SYSTEM: EA
If option is exercised to extend
ordering, the Contractor shall
provide CLIN 0003 products and
services IAW delivery orders
issued during Sustainment Option
Period 3. Ordering period is for
12 months.
4004 Option 3 CLIN SERVER: As Req. See Table B-4
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0004 products and
services IAW delivery orders
issued during Sustainment Option
Period 3. Ordering period is for
12 months.
4005 Option 3 CLIN PRINTERS: As Req. See Table B-5
If Option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0005 products and
services IAW delivery order
issued during Option Period 3.
Ordering period is for 12 months.
4006 Option 3 CLIN DATA: As Req. NSP
If option is exercised to extend See Exhibit A
ordering, the Contractor shall
provide CLIN 0006 data as required
during Sustainment Option
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 9 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
Period 3. Ordering period is
for 12 months.
4007 Option 3 CLIN PORTABLE, DESKTOP As Req. See Table B-6
OA, ADVANCED DESKTOP SYSTEMS, EA
SERVER:
If option is exercised to extend
ordering the Contractor shall
provide CLIN 0007 products and
services IAW delivery orders issued
during Option Period 3. Ordering
period is for 12 months.
</TABLE>
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
5001 Option 4 CLIN PORTABLE SYSTEMS: As Req. See Table B-1
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0001 products and
services IAW delivery orders
issued during Sustainment Option
Period 4. Ordering period is for
12 months.
5002 Option 4 CLIN DESKTOP OA SYSTEM: As Req. See Table B-2
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0002 products and
services IAW delivery orders issued
during Sustainment Option Period 4.
Ordering period is for 12 months.
5003 Option 4 CLIN ADVANCED DESKTOP As Req. See Table B-3
SYSTEM: EA
If option is exercised to extend
ordering, the Contractor shall
provide CLIN 0003 products and
services IAW delivery orders issued
during Sustainment Option Period 4.
Ordering period is for 12 months.
5004 Option 4 CLIN SERVER: As Req. See Table B-4
If option is exercised to extend EA
ordering, the Contractor shall
provide CLIN 0004 products and
services IAW delivery orders
issued during Sustainment Option
Period 4. Ordering period is for
12 months.
5005 Option 4 CLIN PRINTERS: As Req. See Table B-5
</TABLE>
<PAGE>
F01620-97-D-0001/P00009
Section B, Page 10 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS
<TABLE>
<CAPTION>
Quantity Unit Price
CLIN Purchase Total Item
NO. Supplies/Services Unit Amount
- --- ----------------- -------- ----------
<S> <C> <C> <C>
If option is exercised to EA
extend ordering, the Contractor
shall provide CLIN 0005 products
and services IAW delivery orders
issued during Option Period 4.
Ordering Period is for 12 months.
5006 Option 4 CLIN DATA: As Req. NSP
If option is exercised to extend See Exhibit A
ordering, the Contractor shall
provide CLIN 0006 data as
required during Sustainment Option
Period 4. Ordering period is for
12 months.
5007 Option 4 CLIN PORTABLE, DESKTOP As Req. See Table B-6
OA, ADVANCED DESKTOP SYSTEMS, EA
SERVER:
If option is exercised to extend
ordering the Contractor shall
provide CLIN 0007 products and
services IAW delivery orders issued
during Option Period 4. Ordering period
is for 12 months.
</TABLE>
B.4 THE TABLES
<TABLE>
<CAPTION>
CLIN DESCRIPTION TABLE PAGE
- --------------------------------------------------------------------
<S> <C> <C> <C>
0001 Portable Systems B-1 11 of 46
0002 Desktop OA System B-2 18 of 46
0003 Advanced Desktop System B-3 28 of 46
0004 Server B-4 34 of 46
0005 Printers B-5 41 of 46
0006 Data NSP*
0007 Portable Systems, B-6 42 of 46
Desktop OA System
Advanced Desktop System,
Server
</TABLE>
- -----------
*Since data is not separately priced, table is not required.
<PAGE>
<TABLE>
<CAPTION>
97-D-0001
Section B Page 11 of 46
TABLE
PART I - THE SCHEDULE, SECTION B-SUPPLIED OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM # OEM # UNIT PRICE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Two versions of the IDP 530DC Series Multiple OEM entries for item
Notebook, are available for order as means contractor may supply
follows: using any of OEM sources/OEM
part #'s listed
PORTABLES
Features common to all IDP 530CD
Series Notebooks are:
Motherboard 530, 32-bit PCI Local Bus
Graphics w/1MB video display DRAM,
aMB RAM (on motherboard), PC Card
Type IV slots, 256k sync burst cache
Floppy Drive, 3.5"
CD ROM Drive 10X
Pointing Device, Touchpad
NiMH Rachargeable Battery
A/C Adapter, IDP 530
Carrying Case, Soft
Adapter Plug, Europe and Italy
Adapter Plug, Great Britain
1001AA Windows 95/Office 97 Portable, IDP IDP 530 $2,391
530CD Series Notebook
SLIN 1001AA consists of the above
IDP 530CD common features and the
following:
Intel Pantium CPU 1) Intel Pentium 150MHz PGA 1)AB0502CSLM60150
Mobile CPU, 2.9v 2)AB0503166SL239
2) Intel Pentium 166MHz CPU
Display, 12.1* DSTIN IDP NOT0190
Additional SMB RAM (uses two memory Smart Modular
slots-leaves no DIMM slots available
for additional RAM).16MB total system
memory
Hard Drive 1.44GB EIDE 1)Hitachi 1)DK224A-14
2)Toshiba 2)MK-1403MAV
3)IBM 3)DMCA-21440
Microsoft Client License for NT NOS Microsoft 2272075V40VL
Host
Microsoft Exchange Client (Email) Microsoft 381-00465
License
<CAPTION> OY2 OY2 UNIT OY3 OY3 UNIT OY4 OYA4 UNIT
SLIN OY1 PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- -------- ------------ ------------ ------------ ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2001AA $2,271 3001AA $2,158 4001AA $2,050 5001AA $1,947
</TABLE>
<PAGE>
97-D-0001
Section B Page 12 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002, PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Windows 95 Operating System S/W, CD
ROM-based Media and Documentation Microsoft SOF0342
InterDrive Client for Windows 95,
Network File Sharing for Windows 95 FTP Software ON-440-SITE-920
Office Professional 97, CD ROM-based
Media & Online Documentation Microsoft 353-00220
Windows NT/Office 97 Portable, IDP
1001AB 530CD Series Notebook IDP 530 $2,391
SLIN 1001AB consists of the above
IDP 530CD common features and the
following:
1) Intel Pentium 150MHz PGA
Mobile CPU, 2.9v 1) AB0502CSLM60150
Intel Pentium CPU 2) Intel Pentium 166MHz CPU 2) AB0503166SL239
Display, 12.1" DSTN IDP NOTO190
Additional 8MB RAM (uses two memory
slots - leaves no DIMM slots available
for additional RAM) 16MB total system
memory Smart Modular SM532013101XSG7
1) Hitachi 1) DK224A-14
2) Toshiba 2) MK-1403MAV
Hard Drive, 1.44GB EIDE 3) IBM 3) DMCA-21440
Microsoft Client License for NT NOS
Host Microsoft 2272075V40VL
Microsoft Exchange Client (E-mail)
License Microsoft 361-00465
Windows NT Workstation 4.0 Operating
System S/W, CD ROM-based Media &
Documentation FTP Software NT-440-SITE-920
Office Professional 97 S/W, CD ROM-
based Media & On-Line Documentation Microsoft 353-00220
Multiple OEM entries for item
Two versions of the IDP 573 Series means contractor may supply
Modular Notebook, are available for using any of OEM sources/OEM
order as follows: part is listed
<CAPTION>
SLIN OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
OY1 SLIM PRICE SLIM Price SLIM PRICE SLIM PRICE
- ------ -------- -------- ----- -------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1001AB 2001AB $2,271 3001AB $2,158 4001AB $2,050 5001AB $1,947
</TABLE>
<PAGE>
97-D-0001
Section B Page 13 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Features common to all IDP 573
Series Modular Notebooks are:
Motherboard 573, 64-bit PCI Local Bus
Graphics w/2MB video display DRAM,
16MB EDO RAM (on motherboard), PC
Card Type IV slots, 256K sync burst
cache
Floppy Drive, 3.5", Removable
CD ROM Drive, 20X, Removable
Pointing Device, Touchpad
NMH Rechargeable Battery
A/C Adapter, IDP 573
Carrying Case, Soft
Adapter Plug, Europe and Italy
Adapter Plug, Great Britain
1001AH Windows 95/Office 97 Traveler's IDP IDP 573 $3,048
573 Series Modular Notebook
SLIN 1001AH consists of the above
IDP 573 common features and the
following:
Intel Pentium 166MMX CPU Intel A80503166SL239
Display, 12.1" Active Matrix TFT IDP NOT0181
Additional 16MB DIMM Module (uses 1) Smart Modular 1) SM564021319ANWG6
one memory slot - leaves one DIMM slot 2) Advantage 2) 1D16/N573
available for additional RAM). 32MB
total system memory
Hard Drive, 2 1GB EIDE 1) Hitachi 1) DK225A-21
2) Toshiba 2) MK-2103MAV
3) IBM 3) DTNA-22160
Microsoft Client License for NT NOS Microsoft 2272075V40VL
Host
Microsoft Exchange Client (Email) Microsoft 381-00465
License
Windows 95 Operating System S/W, CD Microsoft SOF0342
ROM-based Media and Documentation
InterDrive Client for Windows 95, FTP Software ON-440-SITE-920
Network File Sharing for Windows 95
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1001AH 2001AH $2,895 3001AH $2,750 4001AH $2,613 5001AH $2,482
</TABLE>
<PAGE>
-97-D-0001
Section B Page 14 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Office Professional 97 S/W, CD Romm- Microsoft 353-00220
based Modle & On-Line Documentation
1001AJ Windows 95 Traveler's, NDP 573 Series IDP 573 $2,812
Modular Notebook
Same as SLIN 1001AH but without
Microsoft Office Professional 97
TRAVELER The upgrades below are for SLINs IDP 573
UPGRADES-HARD 1001AH-1001AJ
DRIVES
10018A Removable Hard Drive Upgrade, FIC 1) Toshiba 1) MK-3003MAN $136
(Factory installed Component), 3.08GB 2) IBM 2) DLGA-23080
(replace base 2.1GB drive with 3.08GB 3) Hitachi 3) DK226A-32
drive)
PORTABLE The upgrades below are for SLINs
UPGRADES-HARD 1001AA-1001AB
DRIVE
1001BB Removable Hard Drive Upgrade, FIC 1) Hitachi 1) DK225A-21 $145
(Factory installed Component), 2.1GB 2) Toshiba 2) MK-2103MAV
(replaces base 1.44GB drive with 2.1GB 3) IBM 3) DTNA-22160
drive)
1001BC Removable Hard Drive Upgrade, FIC 1) Toshiba 1) MK-3003MAN $284
(Factory Installed Component), 3.08GB 2) IBM 2) DLGA-23080
(replaces base 1.44GB drive with 3) Hitachi 3) DK226A-32
3.08GB drive)
TRAVELER The upgrades below are for SLINs
UPGRADES- 1001AH-1001AJ
MEMORY
1001BD Memory,16MB DIMM RAM Add-On 1) Smart Modular 1) SM564021319ANWG6 $150
FIC (Factory Installed Component); 2) Advantage 2) ID16/N573
Adds 16MB to base unit at factory for a
total of 48MB. Uses one DIMM slot
1001BE Memory, 16M DIMM RAM Add-On, 1) Smart Modular 1) SM564021319ANWG6 $150
UIC (User Installed Component); 2) Advantage
Adds 16MB to base unit.
Uses one DIMM slot
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1001AJ 2001AJ $2,672 3001A/J $2,538 4001AJ $2,411 5001AJ $2,291
TRAVELER
UPGRADES-HARD
DRIVES
10018A 2001BA $131 3001BA $125 4001BA $119 5001BA $113
PARTABLE
UPGRADES-HARD
DRIVE
1001BB 2001BB $136 3001BB $131 4001BB $125 5001BB $118
1001BC 2001BC $269 3001BC $256 4001BC $243 5001BC $231
TRAVELER
UPGRADES-
MEMORY
1001BD 2001BD $143 3001BD $135 4001BD $129 5001BD $122
1001BE 2001BE $143 3001BE $135 4001BE $129 5001BE $122
</TABLE>
MODIFICATION Page 12
<PAGE>
P 97-D-0001
TABLE Section B Page 15 of 46
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
PORTABLE The upgrades below are for SLINs
UPGRADES - 1001AA - 1001AB
MEMORY
1001BF Memory, Additional SMB RAM for a Smart Modular SM564021319ANWG6 $91
total of 24MB, FI (Factory Installed
Component); One (1) 16MB DIMM
module replaces two (2) 4MB DIMMs in
SLINs 1001AA - 1001AB
1001BG Memory, Additional 24M RAM for a Smart Modular SM564021319ANWG6 $274
total of 40MB, FI (Factory Installed
Component); Two (2) 16MB DIMM
modules replace two (2) 4MB DIMMs in
SLINs 1001AA - 1001AB
PORTABLE The upgrade below is for SLINs
UPGRADES - 1001AA - 1001AB
DISPLAY
1001BH Upgrade Screen to 12.1 Active Metrix IDP NOT0172 $497
Screen from 12.1 Dual Scan FIC
ACCESSORIES
1001CA Hard Carrying Case (for notebook only) IDP NP-3000AF $68
1001CB Battery, NIMH Rechargeable for IDP IDP DR36AZS35 $85
573 Series Notebook (for SLINs 1001AH
- 1001AJ)
1001CC Battery, NIMH Rechargeable for ID IDP PWR0079 $66
530 Series Notebook (for SLINs 1001AA
- 1001AB)
PERIPHERALS The peripherals below are for all IDs
CLIN 0001 systems. (Note SLIN
1001DA and 1001DB are for purchase of
additional primary hard drives. Only one
primary drive may be installed in the
notebook at a time.
1001DA Additional 2.1GB Primary Removable 1) Hitachi 1)DK225A-21
HDD (interchangeable with base drive ) - 2) Toshiba 2)MK-2103MAV
FIC (Factory Installed Component) 3) IBM 3)DTNA-22160 $423
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PORTABLE
UPGRADES -
MEMORY
1001BF 2001BF $87 3001BF $83 4001BF $78 5001BF $75
1001BG 2001BG $261 3001BG $248 4001BG $235 5001BG $224
PORTABLE
UPGRADES -
DISPLAY
1001BH 2001BH $472 3001BH $449 4001BH $426 5001BH $405
ACCESSORIES
1001CA 2001CA $65 3001CA $61 4001CA $58 5001CA $55
1001CB 2001CB $81 3001CB $77 4001CB $73 5001CB $70
1001CC 2001CC $63 3001CC $60 4001CC $57 5001CC $54
PERIPHERALS
1001DA 2001DA $402 3001DA $382 4001DA $363 5001DA $344
</TABLE>
MODIFICATION P00012
<PAGE>
-97-0001
Section B Page 16 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1001DB Additional 3.00GB Primary Removable HDD 1) Toshiba 1) MK-3003MAN $615
(interchangeable with base drive) - FIC 2) IBM 2) DLGA-23080
(Factory Installed Component) 3) Hitachi 3) DK226A-32
1001DE Monitor, 15" Color - up to 1260x 1024 1) IDP 56w $270
2) Goldstar 56l
1001DF Win95 Enhanced Keyboard IDP E06101D-C $11
1001DG Serial Mouse, 2 button IDP S7F-24-981 $6
1001DK RESERVED RESERVED RESERVED
1001DM (2) Speakers, 6 Watts 1) JBL 1) MEDIA2V2 $48
2) JBL 2) Media 100
1001DN Backup Storage Device, Seagate 3.2GB Seagate STT63200P-R $223
External Tape Star Travan with 2
cartridges - FIC (Factory Installed
Component
PCMCIA CARDS
The PCMCIA cards below are for all
IDP's CLIN 0001 systems.
1001DP PCMCIA Hard Drive, 260MB Type III Calluna CT260MC $271
1001DQ PCMCIA, Fax/Modem 33.6Kbps Smart Modular 011-20643 $128
1001DR PCMCIA, Ethernet Combo - 10Mbps SMC 8020BT $91
1001DS PCMCIA, SCSI Adapter - NewMedia New Media NMC00505 $108
BusToester with SCSI - 2 cables
1001DT PCMCIA, Network Adapter 3COM 3C589D-COMBO $184
1001DU Docking Station with Network IDP NOT0118 $317
Interface Card, For use with SLINs
1001AA - 1001AB ONLY
1001DV External Hard Drive for Docking Seagate ST52160N $405
Station, 2.1GB SCSI Hard Drive
Includes New Media PCMCIA SCSI II
Host Adapter, and External Case, for
use with SLIN 1001DU
1001DW PCMCIA FLASH MEMORY IDP APATAFLS04 $67
SOFTWARE
<CAPTION>
OY1 OY1 OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1001DB 2001DB $584 3001DB $555 4001DB $527 5001DB $501
1001DE 2001DE $257 3001DE $244 4001DE $232 5001DE $220
1001DF 2001DF $11 3001DF $10 4001DF $10 5001DF $9
1001DG 2001DG $6 3001DG $6 4001DG $5 5001DG $5
1001DK 2001DK 3001DK 4001DK 5001DK
1001DM 2001DM $45 3001DM $43 4001DM $41 5001DM $39
1001DN 2001DN $212 3001DN $201 4001DN $191 5001DN $182
PCMCIA CARDS
1001DP 2001DP $258 3001DP $245 4001DP $233 5001DP $221
1001DQ 2001DQ $122 3001DQ $116 4001DQ $110 5001DQ $104
1001DR 2001DR $87 3001DR $83 4001DR $78 5001DR $75
1001DS 2001DS $102 3001DS $97 4001DS $92 5001DS $88
1001DT 2001DT $175 3001DT $166 4001DT $158 5001DT $150
1001DU 2001DU $301 3001DU $286 4001DU $272 5001DU $258
1001DV 2001DV $384 3001DV $365 4001DV $347 5001DV $330
1001DW 2001DW $83 3001DW $79 4001DW $75 5001DW $71
</TABLE>
<PAGE>
97-D-0001
Section B Page 17 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0001 PORTABLE SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
1001FA Office Professional 97, License Only Microsoft 353-00220 $210
1001FB Office Professional 97, License and CD Microsoft 353-00220 $217
ROM-based Media & On-Line
Documentation
1001FG Windows NT Workstation v4.0, Microsoft (Select SOF0718, NT-440-SITE- $206
InterdriveNT Operating System S/W; Distribution), 920
License Only FTP Software
1001FM Windows NT Workstation v4.0, Microsoft (Select SOF0718, NT-440-SHR $230
Interdrive NT Operating System S/W; Distribution)
License with CD ROM-based Media & FTP Software
Documentation
1001FK Windows 95, Interdrive 95 Operating Microsoft (Select SOF0342, ON-440-SITE- $166
System License Only Distribution) 920
FTP Software
1001FL Windows 95, Interdrive 95 Operating Microsoft (Select SOF0342, ON-440-SHR $167
System; License and CD ROM-based Distribution),
Media & Documentation FTP Software
1001FP X-Terminal 95 Emulation S/W License FTP Software EX32-SITE-920; EX32- $17
with Documentation 700
1001FQ X-Terminal 95 Emulation S/W License FTP Software EX32-SITE-920 $4
Only
1001FR X-Terminal 95 Emulation S/W License, FTP Software EX32-SITE-920; EX32- $19
Media and Documentation 210; EX32-700
1001FS X-Terminal 95 Emulation S/W License, FTP Software EX32-SITE-920; EX32- $10
Media without Documentation 210
1001FT NOS Applications Client S/W; Tally Systems CYUS-PX $17
Conergy (Client) License with
Documentation
1001FU NOS Applications Client S/W; Tally Systems CYUS-PX $17
Conergy (Client) License without
Documentation
1001FV NOS Applications Client S/W; Tally Systems CYUS-PX $17
Conergy (Client) License, Media &
Documentation
1001FW NOS Applications Client S/W; Tally Systems CYUS-PX $17
Conergy (Client) License and Media
without Documentation
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1001FA 2001FA $200 3001FA $190 4001FA $180 5001FA $171
1001FB 2001FB $206 3001FB $195 4001FB $186 5001FB $176
1001FG 2001FG $196 3001FG $186 4001FG $177 5001FG $168
1001FH 2001FH $218 3001FH $207 4001FH $197 5001FH $187
1001FK 2001FK $159 3001FK $151 4001FK $144 5001FK $137
1001FL 2001FL $178 3001FL $169 4001FL $160 5001FL $152
1001FP 2001FP $16 3001FP $16 4001FP $15 5001FP $14
1001FQ 2001FQ $4 3001FQ $4 4001FQ $3 5001FQ $3
1001FR 2001FR $18 3001FR $17 4001FR $17 5001FR $16
1001FS 2001FS $10 3001FS $9 4001FS $9 5001FS $8
1001FT 2001FT $16 3001FT $16 4001FT $15 5001FT $14
1001FU 2001FU $16 3001FU $16 4001FU $15 5001FU $14
1001FV 2001FV $16 3001FV $16 4001FV $15 5001FV $14
1001FW 2001FW $16 3001FW $16 4001FW $15 5001FW $14
</TABLE>
<PAGE>
97-D-0001
Section B Page 18 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
DESKTOP OA Seven upgradeable Mid-Tower system Multiple OEM entries for
COMPUTERS SLINs available summarized as follows: item means contractor may
supply using any of OEM
Sources OEM part #s listed
Features common to all above IDP 500
Series are as follows:
Motherboard, Intel TC430vx Chipsel
512K piplined burst cache, 2 serial
ports, 1 parallel port, 2 USB
connectors, up to 4 EIDE devices,
4PCI/31SA bus slots (1 shared leaving
six usable slots), 4 memory SIMM slots ECS P5VS-Be
Floppy Drive (3.5"), 1.44MB 1) Sony 1) MPF-920
2) Alps 2) DF334H911A
3) Teac 3) FD-235HF
PCI Network Adapter 10 Base T/10 Base 2, SMC 8432BTA
w/RJ45, BNC AUI connectors
PC Card Reader (PCMCIA) Front 1) SCM 1) SBI-D2P
Accessible 2) Greystone 2) GS-320
Windows 95 Keyboard IDP E06101D-C
Serial Mouse, 2 button IDP S7F-24-9B1
32 bit PCI Wavetable Sound Card Ensoniq S-5016
Microphone QuickShot W5838
(2) Speakers, 8 watts 1) JBL 1) Media 2V2
2) JBL 2) Media 100
CD ROM, 24x IDE 1) Goldstar 1) CRD-8240B
2) Toshiba 2) XM-6102B
Microsoft Client License for NT NOS Host Microsoft 2272075V40VL
Microsoft Exchange Client (Email) S/W Microsoft 381-00465
& License
Adapter Plug, Europe and Italy IDP NW-1WPHS
Adapter Plug, Great Britain IDP NW-5WPHS
The following resources remain
available in all above IDP systems: 2
memory SIMM slots, 2 EIDE ports, 2
PCMCIA slots, 1 serial port, 1
parallel port, UDB port
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DESKTOP OA
COMPUTERS
</TABLE>
<PAGE>
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM 97-D-0001
International Date Products Section B Page 19 of 46
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1002AA IDP 500 Series System - Windows IDP 500 $2,142
95/Office 97
Intel Pentium 200MMX Processor, 16MB
RAM, 2 5GB EIDE Hard Drive
SLIN 1002AA consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 200MMX Processor Intel FV8050366200
Memory, 2x 8MB EDO DRAM SIMMs (total 1) Smart Modular 1)SM532023081X4S6
16MB RAM) 2) Advantage 2)E232-1X16-60T
Hard Drive, 3 1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 15" Color - up to 1280x1024 1) IDP 1) 56w
2) Goldstar 2) 56i
Video Adapter, 64-bit with 2MB DRAM 1) Diamond 1) STV2520P-OEM
2) ATI 2) VideoBoost
Windows 95 Operating System S/W, CD Microsoft SOF0342
ROM-based Media & Documentation
InterDrive 95, Network FTP Software ON-440-SITE-920
File Sharing for Windows 95
Office Professional 97 S/W, CD Microsoft 353-00220
ROM-based Media & On-Line Documentation
1002AB IDP 500 Series System - Windows 95 IDP 500 $1,885
Intel Pentium 200MMX Processor, 16 MB
RAM, 2.5GB EIDE Hard Drive
CPU, Intel Pentium 200MMX Processor Intel FV8050366200
Memory, 2x 8MB EDO DRAM SIMMs (total 1) Smart Modular 1)SM532023081X4S6
16MB RAM) 2) Advantage 2)E232-1X16-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 15" Color - up to 1280x1024 1) IDP 1) 56w
2) Goldstar 2) 56i
Video Adapter, 64-bit with 2 MB DRAM 1) Diamond 1)STV2520P-OEM
2) ATI 2) VideoBoost
Windows 95 Operating System S/W, CD
ROM-based Media & Documentation Microsoft SOF0342
InterDrive Client for Windows 95, FTP Software ON-440-SITE-920
Network File Sharing for Windows 95
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002AA 2002AA $2,035 3002AA $1,933 4002AA $1,836 5002AA $1,744
1002AB 2002AB $1790 3002AB $1701 4002AB $1616 5002AB $1535
</TABLE>
<PAGE>
-97-D-0001
Section B Page 20 of 46
TABLE
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1002AC IDP 500 Series System - Windows
95/Office 97
Intel Pentium 200MMX Processor, 32MB
RAM, 3.1GB Hard Drive IDP 500 $1,999
SLIN 1002AC consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 200MMX Processor Intel FV8050366200
Memory, 2x 16MB EDO DRAM SIMMs 1) Smart Modular 1) SM53204482X3S7
(total 32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 17" Color, up to 1280x1024 1) IDP 1) 76w
2) Goldstar 2) 76i
3) Goldstar 3) 77i
Video Adapter, 64-bit with 2 MB DRAM 1) Diamond 1) STV2520P-OEM
2) ATI 2) VideoBoost
Windows 95 Operating System S/W, CD Microsoft SOF0342
ROM-based Media & Documentation
InterDrive Client for Windows 95, FTP Software ON-440-SITE-920
Network File Sharing for Windows 95
Office Professional 97 S/W, CD ROM- Microsoft 353-00220
based Media & On-Line Documentation
1002AD IDP 500 Series System - Windows IDP 500 $1,999
NT/Office 97
Intel Pentium 200MMX Processor, 32MB
RAM, 3.1GB Hard Drive
SLIN 1002AD consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 200MMX Processor Intel FV8050366200
Memory, 2x 16MB EDO DRAM SIMMs 1) Smart Modular 1)SM53204482X3S7
(total 32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 17" Color - up to 1280x1024 1) IDP 1) 76w
2) Goldstar 2) 76i
3) Goldstar 3) 77i
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002AC 2002AC $1,899 3002AC $1,804 4002AC $1,714 5002AC $1,628
1002AD 2002AD $1,899 3002AD $1,804 4002AD $1,714 5002AD $1,628
</TABLE>
<PAGE>
97-D-0001
Section B Page 21 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
Video Adapter, 64-bit with 2 MB DRAM 1) Diamond 1) STV2520P-OEM
2) ATI 2) VideoBoost
Windows NT Workstation 4.0 Operating Microsoft SOF0718
System S/W, CD ROM-based Media &
Documentation
InterDrive NT Client 2.1, Network File FTP Software NT-440-SITE-920
Sharing for Windows NT
Office Professional 97 S/W, CD ROM- Microsoft 353-00220
based Media & On-Line Documentation
1002AE IDP 500 Series System - Windows IDP 500 $2,945
95/Office 97 Intel
Pentium 233MMX Processor, 32 MB
Ram, 3.1GB Hard Drive
SLIN 1002AE consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 233MMX Processor Intel FV8050366233
Memory, 2x 16MB EDO DRAM SIMMs 1) Smart Modular 1)SM53204482X3S7
(total 32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 17" Color - up to 1280x1024 1) IDP 1) 76w
2) Goldstar 2) 76i
3) Goldstar 3) 77i
64-bit PCI Video Adapter w/4MB DRAM DIAMOND ST3D-P2400OEM
Windows 95 Operating System S/W, CD Microsoft SOF0342
ROM-based Media & Documentation
InterDrive Client for Windows 95,
Network File Sharing for Windows 95 FTP Software ON-440-SITE-920
Office Professional 97 S/W, CD ROM-
based Media & On-Line Documentation Microsoft 353-00220
IDP 500 Series System - Windows IDP 500 $2,945
NT/Office 97 Intel
Pentium 233MMX Processor, 32 MB
1002AF Ram, 3.1GB Hard Drive
SLIN 1002AF consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 233MMX Processor Intel FV8050366233
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002AE 2002AE $2,798 3002AE $2,658 4002AE $2,525 5002AE $2,399
1002AF 2002AF $2,798 3002AF $2,658 4002AF $2,525 5002AF $2,399
</TABLE>
<PAGE>
TABLE
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM 97-D-0001
International Data Products Section B Page 22 of 46
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- -------------------------------------- -------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Memory, 2x 16MB EDO DRAM SIMMs 1) Smart Modular 1) SM53204482X3S7
(total 32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 17" Color, up to 1280x1024 1) IDP 1) 76w
2) Goldstar 2) 76I
3) Goldstar 3) 77I
64-bit PCI Video Adapter w/4MB DRAM DIAMOND ST3D-P2400OEM
Windows NT Workstation 4.0 Operating Microsoft SOF0718
System S/W, CD ROM-based Media &
Documentation
InterDrive NT Client 2.1, Network File FTP Software NT-440-SITE-920
Sharing for Windows NT
Office Professional 97 S/W, CD ROM- Microsoft 353-00220
based Microsoft Media & On-Line
Documentation
1002AG IDP 500 Series System - Windows IDP 500 $3,156
95/Office 97 with Scanner & Imaging
Software,
Intel Pentium 233MMX Processor, 32 MB
Ram, 3.1GB Hard Drive
SLIN 1002AG consists of the above IDP
500 Series common features and
available resources plus following:
CPU, Intel Pentium 233MMX Processor Intel FV8050366233
Memory, 2x 16MB EDO DRAM SIMMs 1) Smart Modular 1) SM53204482X3S7
(total 32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Monitor, 17" Color - up to 1280 x 1024 1) IDP 1) 76w
2) Goldstar 2) 76i
3) Goldstar 3) 77i
64-bit PCI Video Adapter w/4MB DRAM DIAMOND ST3D-P2400OEM
Windows 95 Operating System S/W, CD Microsoft SOF0342
ROM-based Media & Documentation
InterDrive Client for Windows 95, FTP Software ON-440-SITE-920
Network File Sharing for Windows 95
Office Professional 97 S/W, CD ROM- Microsoft 353-00220
based Media & On-Line Documentation
Personal Color Scanner Kodak 1003912
Imaging Software for Scanner Eastman IMAGINGPRO-GM
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002AG 2002AG $2,998 3002AG $2,848 4002AG $2,706 5002AG $2,571
</TABLE>
<PAGE>
0-97-D-0001
Section B Page 23 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
UPGRADES-
MEMORY
1002BA Memory, 16MB RAM Add-On (2x16MB EDO Smart Modular SM53204482X3S7 $82
DRAM SIMMs replaces 2 8MB SIMMs): FIC
(Factory Installed Component) for
SLINs 1002AA - 1002AB; Adds 16MB of
memory to system at factory
1002BB Memory, 16MB RAM Add-On (2x8MB EDO 1) Smart Modular 1) SM532023081X4S6 $83
DRAM SIMMs): UIC (User Installed 2) Advantage 2) E232-1X16-60T
Component) for SLINs 1002AA - 1002AG
1002BC Memory, 16MB RAM Add-On (2x8MB EDO 1) Smart Modular 1) SM532023081X4S6 $83
DRAM SIMMs): FIC (Factory Installed 2) Advantage 2) E232-1X16-60T
Component) for SLINs 1002AC - 1002AG:
Adds 16MB of memory to system at
factory
1002BD Memory, 16MB RAM Add-On (2x8MB EDO 1) Smart Modular 1) SM532023081X4S6 $83
DRAM SIMMs): UIC (User Installed 2) Advantage 2) E232-1X16-60T
Component) for SLINs 1002AC - 1002AG
1002BE Memory, 32MB RAM Add-On (2x16MB EDO 1) Smart Modular 1) SM53204482X3S7 $136
DRAM SIMMs): FIC (Factory Installed 2) Advantage 2) E432-4X4-60T
Component) for SLINs 1002AA - 1002AG;
Adds 32MB of memory to system at
factory
1002BF Memory, 32MB RAM Add-On (2x16MB EDO 1) Smart Modular 1) SM53204482X3S7 $136
DRAM SIMMs): UIC (User Installed 2) Advantage 2) E432-4X4-60T
Component) for all SLINs 1002AA -
1002AG
1002BG Memory, 64MB RAM Add-On (2x32MB EDO 1) Smart Modular 1) SM532084082X3S6 $295
DRAM SIMMs): FIC (Factory Installed 2) Advantage 2) E832-4X4-60T
Component) for SLINs 1002AA - 1002AG:
Adds 64MB of memory to system at
factory
1002BH Memory, 64MB RAM Add-On (2x32MB EDO 1) Smart Modular 1) SM532084082X3S6 $295
DRAM SIMMs): UIC (User Installed 2) Advantage 2) E832-4X4-60T
Component) for all SLINs 1002AA -
1002AG
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UPGRADES-
MEMORY
1002BA 2002BA $78 3002BA $74 4002BA $70 5002BA $67
1002BB 2002BB $79 3002BB $75 4002BB $71 5002BB $68
1002BC 2002BC $79 3002BC $75 4002BC $71 5002BC $68
1002BD 2002BD $79 3002BD $75 4002BD $71 5002BD $68
1002BE 2002BE $129 3002BE $123 4002BE $117 5002BE $111
1002BF 2002BF $129 3002BF $123 4002BF $117 5002BF $111
1002BG 2002BG $280 3002BG $266 4002BG $253 5002BG $240
1002BH 2002BH $280 3002BH $266 4002BH $253 5002BH $240
</TABLE>
<PAGE>
97-D-0001
Section B Page 24 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
1002BJ Memory, 96MB RAM Add-On (4x32MB EDO 1) Smart Modular 1) SM532084082X3S6 $550
DRAM SIMMs exchange for 2x16MB Base 2) Advantage 2) E832-4X4-60T
Memory; total memory with FIC (Factory
Installed Component) = 128MB): FIC
(Factory Installed Components) for all
SLINs 1002AC - 1002AG
1002BK Memory, 112MB RAM Add-On (4x32MB EDO 1) Smart Modular 1) SM532084082X3S6 $600
DRAM SIMMs exchange for 2x 8MB Base 2) Advantage 2) E832-4X4-605
Memory; total memory with FIC (Factory
Installed Component) = 128MB): FIC
(Factory Installed Components) for all
SLINs 1002AA - 1002AB
UPGRADES-
PROCESSOR
1002BL Procesor, Pentium 233MMX, UIC (User Intel FV8050366233 $398
Installed Component); User Upgrade for
SLINs 1002AA - 1002AD to Pentium 233MMX
1002BM Processor, Pentium 233MMX, FIC Intel FV8050366233 $159
(Factory Installed Component): Factory
Upgrade for SLINs 1002AA - 1002AD to
Pentium 233MMX
1002BN RESERVED
UPGRADES-HARD
DRIVES
1002BQ Base Hard Drive Upgrade to 4.0GB EIDE; 1) Western Digital 1) WDC-AC34000 $90
FIC (Factory Installed Component) for 2) Seagate 2) ST34342A
SLINS 1002AA - 1002AG (replaces base
3.1GB HDD with 4.0GB HDD)
1002BR 2nd Hard Drive, 4.0GB EIDE; FIC 1) Western Digital 1) WDC-AC34000 $356
(Factory Installed Component) - Adds 2) Seagate 2) ST34342A
4.0GB EIDE Hard Drive at factory as
2nd Hard Drive for SLINs 1002AA -
1002AG
1002BS 2nd Hard Drive, 4.0GB EIDE; UIC (User 1) Western Digital 1) WDC-AC34000 $356
Installed Component) - Adds 4.0GB EIDE 2) Seagate 2) ST34342A
Hard Drive as 2nd Hard Drive for SLINs
1002AA - 1002AG
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002BJ 2002BJ $523 3002BJ $496 4002BJ $472 5002BJ $448
1002BK 2002BI $570 3002BI $542 4002BI $514 5002BI $489
UPGRADES-
PROCESSOR
1002BL 2002BO $378 3002BO $359 4002BO $341 5002BO $324
1002BM 2002BM $151 3002BM $144 4002BM $137 5002BM $130
1002BN
UPGRADES-HARD
DRIVES
1002BQ 2002BQ $85 3002BQ $81 4002BQ $77 5002BQ $73
1002BR 2002BR $338 3002BR $321 4002BR $305 5002BR $290
1002BS 2002BS $338 3002BS $321 4002BS $305 5002BS $290
</TABLE>
<PAGE>
97-D-0001
TABLE Section B Page 25 of 46
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1002BT 2nd Hard Drive, 3.1GB EIDE; FIC 1) Western Digital 1) WDC-AC33100 $259
(Factory Installed Lcomponent) - Adds 2) Seagate 2) ST33240A
3.1GB EIDE hard Drive as 2nd Hard Drive 3) IBM 3) DAQA-33240
for SLINs 1002AA - 1002AG at factory
1002BU 2nd Hard Drive, 3.1GB EIDE; UIC (User 1) Western Digital 1) WDC-AC33100 $259
Installed Component) - Adds 3.1GB EIDE 2) Seagate 2) ST33240A
Hard Drive as 2nd Hard Drive for SLINs 3) IBM 3) DAQA-33240
1002AA - 1002AG
1002BV Removable Carrier for EIDE HDD: Mobile Rack RH-10C $52
consumes 5.25" bay; ordered with CLIN 2
IDP systems results in base hard drive
being installed at factory as removable
drive. If ordered with SLINs 1002BQ -
1002BT, second drive will be installed at
factory as removable HDD.
ACCESSORIES
1002BW Monitor 17" UIC (User Installed 1) IDP 1) 76w $456
Component) 2) Goldstar 2) 76i
3) Goldstar 3) 77i
1002BX Monitor 17" FIC (Factory Installed 1) IDP 1) 76w $211
Component) - Replaces 15" Monitor for 2) Goldstar 2) 76i
SLINs 1002AA - 1002AB 3) Goldstar 3) 77i
1002BY RESERVED
1002BZ RESERVED
UPGRADES-
VIDEO
1002CA Interface Video - FIC (Factory Installed Diamond ST11S220-BLK $77
Component); Diamond Stealth II S220
4MB SGRAM PCI Video Adapter.
Replaces Diamond 2MB DRAM at factory
for SLINs 1002AA - 1002AD
1002CB Interface Video - FIC (Factory Installed Diamond ST11S220-BLK $36
Component); Diamond Stealth II S220
4MB SGRAM PCI Video Adapter.
Replaces Diamond 3D 4MB DRAM at factory
for SLINs 1002AE - 1002AG
1002CC Interface Video - UIC (User Installed Diamond ST11S220-BLK $115
Component); Diamond SteaLth II S220
4MB SGRAM PCI Video Adapter
PERIPHERALS
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002BT 2002BT $246 3002BT $234 4002BT $222 5002BT $211
1002BU 2002BU $246 3002BU $234 4002BU $222 5002BU $211
1002BV 2002BV $ 49 3002BV $ 47 4002BV $ 44 5002BV $ 42
1002BW 2002BW $434 3002BW $412 4002BW $391 5002BW $372
1002BX 2002BX $201 3002BX $191 4002BX $181 5002BX $172
1002CA 2002CA $ 73 3002CA $ 69 4002CA $ 66 5002CA $ 63
1002CB 2002CB $ 34 3002CB $ 32 4002CB $ 31 5002CB $ 29
1002CC 2002CC $109 3002CC $104 4002CC $ 99 5002CC $ 94
</TABLE>
<PAGE>
TABLE 97-D-0001
PART I - THE SCHEDULE, SECTION B - Section B Page 26 of 46
SUPPLIES OR SERVICES AND PRICE/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1002DA CD ROM, 24X Internal IDE CD ROM 1) Goldstar 1)CRD-8240B $93
2) Toshiba 2) XM-6102B
1002DB Backup Storage Device, Seagate 3.2GB
Internal TapeStor Travan, with 2 Seagate STT23200F-R $186
cartridges FIC (Factory Installed
Component)
1002DC Fax/Modem; 56Kbps internal Smart Modular ST5614-DNAMBK $85
1002DD SCSI HOST ADAPER - FIC (Factory Advansys ABP-930U $66
Installed Component)
1002DH PCI 10/100 Mbps network adapter w/RJ45 SMC 9432TX $62
connector (UIC)
SOFTWARE GENERAL OPERATING SYSTEM ENVIORNMENT
1002FA Office Professional 97, License only Microsoft 353-00220 $210
1002FB Office Professional 97, License and CD Microsoft 353-00220 $217
ROM-based Media & On-Line Documentation
1002FG Windows NT Workstation v4.0, Microsoft (Select SOF0718, $206
Interdrive NT Operating System S/W; Distribution), FTP NT-440-SITE-920
License Only Software
1002FH Windows NT wWorkstation v4.0, Microsoft (Select SOF0718, $230
Interdrive NT Operating System S/W; Distribution), FTP NT-440-SHR
License and CD ROM-based Media & Software
Documentation
1002FK Windows 95, Interdrive 95 Operating Microsoft (Select SOF0342, $168
System; License Only Distribution), FTP ON-440-SITE-920
Software
1002FL Windows 95, Interdrive 95 Operating Microsoft (Select SOF0342, $187
System; License and CD ROM-based Media Distribution), FTP ON-440-SHR
& Documentation Software
1002FP X-Terminal 95 Emulation S/W License FTP Software EX32-SITE- $17
with Documentation 920; EX32
700
1002FQ X-Terminal 95 Emulation S/W License FTP Software EX32-SITE- $4
without Documentation 920
1002FR X-Terminal 95 Emulation S/W License FTP Software EX32-SITE- $19
Media and Documentation 920; EX32
210; EX32-700
1002FS X-Terminal 95 Emulation S/W License FTP Software EX32-SITE- $10
and Media without Documentation 920; EX32
210
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------ -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2002DA $88 3002DA $84 4002DA $80 5002DA $76
2002DB $177 3002DB $168 4002DB $159 5002DB $151
2002DC $81 3002DC $77 4002DC $73 5002DC $70
2002DD $63 3002DD $60 4002DD $57 5002DD $54
2002DH $59 3002DH $56 4002DH $53 5002DH $50
2002FA $200 3002FA $190 4002FA $180 5002FA $171
2002FB $206 3002FA $195 4002FA $186 5002FA $176
2002FG $196 3002FG $186 4002FG $177 5002FG $168
2002FH $218 3002FH $207 4002FH $197 5002FH $187
2002FK $159 3002FK $151 4002FK $149 5002FK $137
2002FL $178 3002FL $169 4002FL $160 5002FL $152
2002FP $16 3002FP $16 4002FP $15 5002FP $14
2002FQ $4 3002FQ $4 4002FQ $4 5002FQ $3
2002FR $18 3002FR $17 4002FR $17 5002FR $16
2002FS $10 3002FS $9 4002FS $9 5002FS $8
</TABLE>
<PAGE>
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM 97-D-0001
International Data Products Section B Page 27 of 46
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1002FT NOS Applications Client S/W: Cenergy Talley Systems CYUS-PX $17
(Client) License with Documentation
1002FU NOS Applications Client S/W: Cenergy Talley Systems CYUS-PX $17
(Client) License without Documentation
1002FV NOS Applications Client S/W: Cenergy Talley Systems CYUS-PX $17
(Client) License, Media & Documentation
1002FW NOS Applications Client S/W: Cenergy Talley Systems CYUS-PX $17
(Client) License and Media without
Documentation
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1002FT 2002FT $16 3002FT $16 4002FT $15 5002FT $14
1002FU 2002FU $16 3002FU $16 4002FU $15 5002FU $14
1002FV 2002FV $16 3002FV $16 4002FV $15 5002FV $14
1002FW 2002FW $16 3002FW $16 4002FW $15 5002FW $14
</TABLE>
<PAGE>
97-D-0001
Section B Page 28 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0003 ADVANCED DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Advanced Desktop Two upgradeable Dual Pentium II 233 or Multiple OEM entries
Computers 286 MHz Mid-Tower systems SLINs for item means
available summarized as follows: contractor may supply
using any of OEM
sources/OEM part #s listed
DUAL PENTIUM II Features common to Dual Pentium II 233
COMPUTERS or 286 MHz Mid-tower system, IDP 700
Series Advanced Systems are as follows:
(1) CPU, Pentium II 1) Intel Pentium II 1) BX80522P233512
233 MHz, w/512K cache 2) 8055P288512
2) Intel Pentium II
286 MHz, w/512K cache
Dual Pentium II Motherboard, Intel 440FX Tyan S1682D
Chipsel, 2 serial ports, 1 parallel port,
Dual Channel PCI IDE, 2 USB connectors,
up to 4EIDE devices, 5PCI/31SA slots (7
usable slots) PS/2 connector. Supports up
to two Pentium II processors.
Memory, 2x 16MB EDO DRAM SIMMs (total 1) Smart Modular 1) SM53204482X3S7
32MB RAM) 2) Advantage 2) E432-4X4-60T
Hard Drive, 3.1GB EIDE 1) Western Digital 1) WDC-AC33100
2) Seagate 2) ST33240A
3) IBM 3) DAQA-33240
Floppy Drive (3.5"), 1.44MB 1) Sony 1) MPF-920
2) Alps 2) DF334H911A
3) Teac 3) FD-235HF
64-bit PCI Video Adapter w/4MB DRAM Diamond ST3D-P2400OEM
PCI Network Adapter 10 Base T/10 Base 2, SMC 8432BTA
w/RJ45, BNC and AUI connectors
Monitor, 17" Color - up to 1280x1024 1) IDP 1) 76w
2) Goldstar 2) 76i
3) Goldstar 3) 77i
CD ROM, 24x IDE 1) Goldstar 1) CRD-8240B
2) Toshiba 2) XM -81028
32 bit PCI Wavetable Sound Card Ensoniq S-5016
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
F6 97-D-0001
Section B Page 29 of 46
TABLE
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- -------------------------------------- -------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
(2) Speakers 8 watts 1) JBL 1) MEDIA2V2
2) JBL 2) Media 100
Microphone Quick Shot W5838-B
PC Card Reader (PCMCIA) Front Accessible 1) SCM 1) SBI-D2P
2) Greystone 2) GS-320
Windows 95 Keyboard IDP SKR-1104IPS
Serial Mouse, 2 button IDP S7F-24-9B1
Microsoft Client License for NT NOS Host Microsoft 2272075V40VL
Microsoft Exchange Client (Email) S/W & License Microsoft 381-00465
Office Professional 97 License, CD ROM Based Microsoft 353-00220
Media and On-Line Documentation
Adapter Plug, Europe and Italy IDP NW-1WPHS
Adapter Plug, Great Britain IDP NW-5WPHS
1003AA IDP 700 Series Advanced System - Windows IDP 700 $3,697
NT/Office 97 Intel Pentium II 233 or 266
Processor, 32MB RAM, 3.1GB Hard Drive
SLIN 1003AA consists of the above IDP
Advanced Pentium II System common features
and available resources plus the following:
Windows NT 4.0 Operating System and CD ROM Microsoft SOF0718
based media and documentation
InterDrive NT Client 2.1 License, Media and FTP Software NT-440-SITE-920
Documentation
1003AB IDP 700 Series Advanced System - Windows IDP 700 $3,697
95/Office 97 Intel Pentium II 233 or 266
Processor, 32MB RAM, 3.1GB Hard Drive
SLIN 1003AB consists of the above IDP
Advanced Pentium II System common features
and available resources plus the following:
Windows 95 Operating System and CD ROM Microsoft SOF0342
based media and documentation
InterDrive Client for Windows 95 License, Media FTP Software ON-440-SITE-920
and Documentation
UPGRADES -
PROCESSOR
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1003AA 2003AA $3,512 3003AA $3,337 4003AA $3,170 5003AA $3,011
1003AB 2003AB $3,512 3003AB $3,337 4003AB $3,170 5003AB $3,011
</TABLE>
<PAGE>
97-D-0001
Section B Page 30 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0003 ADVANCED DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
1003AV Intel Pentium II 300MHz CPU - FIC Intel 8055P300512 $997
(Factory Installed Component) Add-On;
For SLINS 1003AA and 1003AB, Adds
2nd CPU at factory for dual processing
at factory
1003AW Intel Pentium II 300MHz CPU - ULC (User Intel 8055P300512 $997
Installed Component) Add-On; For SLINS
1003AA and 1003AB, Adds 2nd CPU for
dual processing
1003AX Intel Pentium II 300MHz CPU - FIC Intel 8055P300512 $229
(Factory Installed Component); for SLINS
1003AA and 1003AB, Replaces 233MHz base
CPU at factory
1003AY Intel Pentium II 266MHz CPU - FIC Intel 8X80522P266512 $957
(Factory Installed Component) Add-On;
For SLINS 1003AA and 1003AB, Adds 2nd
CPU for dual processing
1003AZ Intel Pentium II 266MHz CPU - ULC (User Intel 8X80522P266512 $957
Installed Component) Add-On; For SLINS
1003AA and 1003AB, Adds 2nd CPU for
dual processing
UPGRADES -
MEMORY
1003BA Memory, 14MB RAM ADD ON (2x 8448 EDO 1)
DRAM SIMMs); FIC (Factory Installed 1) Smart Modular SM532023081X4S6
Component) for SLINs 1003AA - 1003AB, 2) Advantage 2) E232-1X16-60T $83
Adds 16MB of RAM to system at factory
1003BB Memory, 16MB RAM ADD ON (2x 8448 EDO 1)
DRAM SIMMs); UIC (User Installed 1) Smart Modular SM532023081X4S6
Component) for SLINs 1003AA - 1003AB 2) Advantage 2) E232-1X16-60T $83
1003BC Memory, 32MB RAM ADD ON (2x 1648 EDO 1) Smart Modular 1) SM53204482X3S7
DRAM SIMMs); FIC (Factory Installed 2) Advantage 2) E432-4X4-60T $136
Component) for SLINs 1003AA - 1003AB.
Adds 32MB of RAM to system at factory
1003BD Memory, 32MB RAM ADD ON (2x 1648 EDO 1) Smart Modular 1) SM53204482X3S7
DRAM SIMMs); UIC (User Installed 2) Advantage 2) E432-4X4-60T $136
Component) for SLINs 1003AA - 1003AB
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1003AV 2003AV $947 3003AV $899 4003AV $854 5003AV $812
1003AW 2003AW $947 3003AW $899 4003AW $854 5003AW $812
1003AX 2003AX $217 3003AX $206 4003AX $196 5003AX $186
1003AY 2003AY $909 3003AY $863 4003AY $820 5003AY $779
1003AZ 2003AZ $909 3003AZ $863 4003AZ $820 5003AZ $779
UPGRADES -
MEMORY
1003BA 2003BA $79 3003BA $75 4003BA $71 5003BA $68
1003BB 2003BB $79 3003BB $75 4003BB $71 5003BB $68
1003BC 2003BC $129 3003BC $123 4003BC $117 5003BC $111
1003BD 2003BD $129 3003BD $123 4003BD $117 5003BD $111
</TABLE>
<PAGE>
-97-D-0001
Section B Page 31 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 ADVANCED DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1003BE Memory, 64MB RAM ADD ON (2x 32MB EDO 1) Smart Modular 1) $295
DRAM SIMMs); FIC (Factory Installed 2) Advantage SM532064082x3S6
Component) for SLINs 1003AA - 1003AB. 2) E832-4x4-60T
Adds 32MB of RAM to system at factory
1003BF Memory, 64MB RAM ADD ON (2x 32MB EDO 1) Smart Modular 1) $295
DRAM SIMMs); UIC (User Installed 2) Advantage SM532064082x3S8
Component) for SLINs 1003AA - 1003AB 2) E832-4x4-60T
1003BG Memory, 96MB RAM Add-On (4x 32MB EDO 1) Smart Modular 1) $550
DRAM SIMMs exchange for 2x 16MB Base 2) Advantage SM532084082x3S6
Memory; total memory with FIC (Factory 2) E832-4x4-60T
Installed Component)= 128MB):FIC
(Factory Installed Component) for all
SLINs 1003AA - 1003AB
UPGRADES-HARD
DRIVES
1003BH Base Hard Drive Upgrade to 4.0GB E-1DE; 1) Western Digital 1) WDC-AC34000 $89
FIC (Factory Installed Component) for 2) Seagate 2) ST34342a
SLINs 1003AA. AB (replaces base 3.1GB
HDD with 4.0OGB HDD)
1003BJ 2nd HDD 4.0GB E-IDE; FIC (Factory 1) Western Digital 1) WDC-AC34000 $356
Installed Component) - Adds 4.0 GB E-IDE 2) Seagate 2) ST34342A
HDD as 2nd HDD fo SLINs 1003AA - 1003AB
at factory
1003BK 2nd HDD 4.0GB E-IDE; UIC (User Installed 1) Western Digital 1) WDC-AC34000 $356
Component) - Adds 4.0 GB E-IDE HDD as 2) Seagate 2) ST34342A
2nd HDD for SLINs 1003AA - 1003AB
1003BL 2nd Hard Drive, 3.1GB E-IDE FIC (Factory 1) Western Digital 1) WDC-AC33100 $259
Installed Component) - Adds 3.1 GB E-IDE 2) Seagate 2) ST33240A
Hard Drive as 2nd Hard Drive for SLINs 3) IBM 3) DAOA-33240
1003AA - 1003AB at factory
1003BM Reserved
1003BN Removable Carrier for EIDE HDD; consumes Mobile Rack RH-10C $52
5.25" bay; ordered with CLIN 3 IDP
system results in base hard drive being
installed at factory as removable drive.
If ordered with SLINs 1003BJ-1003BM,
second drive will be installed at factory
as removable HDD.
UPGRADES-
VIDEO
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1003BE 2003BE $280 3003BE $266 4003BE $253 5003BE $240
1003BF 2003BF $280 3003BF $266 4003BF $253 5003BF $240
1003BG 2003BG $523 3003BG $496 4003BG $472 5003BG $446
1003BH 2003BH $85 3003BH $81 4003BH $77 5003BH $73
1003BJ 2003BJ $338 3003BJ $321 4003BJ $305 5003BJ $290
1003BK 2003BK $338 3003BK $321 4003BK $305 5003BK $290
1003BL 2003BL $246 3003BL $234 4003BL $222 5003BL $211
1003BN 2003BN $49 3003BN $47 4003BN $44 5003BN $42
</TABLE>
<PAGE>
FB, 97-D-4461
Section B Page 32 of 46
TABLE
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN (03 ADVANCED DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1003BV Interface Video - FIC (Factory Installed Diamond ST11S220-BLK $36
Component); Diamond Stealth N S220 4MB
SGRAM PCI Video Adapter. Replaces Diamond
3D 4MB DRAM at factory
1003BW Interface Video - UIC (User Installed Diamond ST11S220-BLK $115
Component); Diamond Stealth II S220 4MB
SGRAM PCI Video Adaptor
UPGRADES -
MONITOR
1003BK Monitor 20" Color; FIC (Factory 1) IDP 1) 20w
Installed Component); Replaces 17" 2) Goldstar 2) 20i $511
Monitor in SLINs 1003AA, 1003AB
1003BY Monitor 20" Color; UIC (User 1) IDP 1) 20w
Installed Component) 2) Goldstar 2) 20i $944
PERIPHERALS
1003DA Backup Storage Device, Seagate 3.2GB Seagate STT23200F-R $186
Internal TapeStor Traven, with 2
cartridges - FIC (Factory Installed
Component)
1003DB CD ROM, 24X Internal IDE 1) Goldstar 1) CRD-8240B
2) Toshiba 2) XM-6102B $104
1003DE Fax/Modem; 56Kbps Internal Smart Modular ST5614-DNAMBK $85
1003DF BCSI Host Adapter - FIC (Factory Adveneys ABP-930U $66
Installed Component)
1003DG PCI 10/100bps network adapter w/RJ45 SMC 9432TX $62
connector (UIC)
SOFTWARE GENERAL OPERATING SYSTEM
ENVIRONMENT
1003FA Office Professional 97, License only Microsoft 353-00220 $210
1003FB Office Professional 97, License, Microsoft 353-00220 $217
CD ROM-based Media & On-Line
Documentation
1003FG Windows NT Workstation v4.0 Microsoft (Select SOF0716, NT-440-
InterdriveNT Operating System Distribution), FTP Site-920 $208
S/W; License Only Software
1003FH Windows NT Workstation v4.0, Microsoft (Select SOF0718, NT-440- $230
Interdrive NT Operating System S/W; Distribution), FTP SHR
License, CD ROM-based Media & Software
Documentation
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1003BV 2003BV $34 3003BV $32 4003BV $31 5003BV $29
1003BW 2003BW $109 3003BW $104 40038W $99 50038W $94
UPGRADES -
MONITOR
1003BK 2003BX $456 3003BX $461 40003BX $436 5003BX $416
1003BY 2003BY $944 3003BY $697 4003BY $852 5003BY $810
PERIPHERALS
1003DA 2003DA $177 3003DA $168 4003DA $159 5003DA $152
1003DB 2003DB $99 3003DB $94 4003DB $89 500308 $84
1003DE 2003DE $81 3003DE $77 4003DE $73 5003DE $70
1003DF 2003DF $63 3003DF $60 4003DF $57 5003DF $54
1003DG 2003DG $59 3003DG $56 4003DG $53 5003DG $50
SOFTWARE
1003FA 2003FA $200 3003FA $190 4003FA $180 5003FA $171
1003FB 2003FB $206 3003FB $195 4003FB $186 5003FB $176
1003FG 2003FG $196 3003FG $186 4003FG $177 5003FG $168
1003FH 2003FH $218 3003FH $207 4003FH $197 5003FH $187
</TABLE>
<PAGE>
97-D-0001
Section B Page 33 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0003 ADVANCED DESKTOP SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
1003FK Windows 95, Interdrive 96 Operating Microsoft (Select SOF0342, ON-440- $168
System; License Only Distribution), FTP SITE-920
Software
1003FL Windows 95, Interdrive 96 Operating Microsoft (Select SOF0342, ON-440- $187
System; License, CD ROM-based Media & Distribution), FTP SHR
Documentation Software
1003FM X-Terminal 95 Emulation S/W License with FTP Software EX32-SITE-920; EX32 $17
Documentation 700
1003FN X-Terminal 95 Emulation S/W License FTP Software EX32-SITE-920 $4
without Documentation
1003FP X-Terminal 95 Emulation S/W License, FTP Software EX32-SITE-920; EX32 $19
Media, and Documentation 210; EX32-700
1003FQ X-Terminal 95 Emulation S/W License FTP Software EX32-SITE-920; EX32 $10
and Media without Documentation 210
1003FT NOS Applications Client S/W; Conergy Tally Systems CYUS-PX $17
(Client) License with Documentation
1003FU NOS Applications Client S/W; Conergy Tally Systems CYUS-PX $17
(Client) License without Documentation
1003FV NOS Applications Client S/W; Conergy Tally Systems CYUS-PX $17
(Client) License, Media & Documentation
1003FW NOS Applications Client S/W; Conergy Tally Systems CYUS-PX $17
(Client) License and Media without
Documentation
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1003FK 2003FK $159 3003FK $151 4003FK $144 5003FK $137
1003FL 2003FL $178 3003FL $169 4003FL $160 5003FL $152
1003FM 2003FM $16 3003FM $16 4003FM $15 5003FM $14
1003FN 2003FN $4 3003FN $4 4003FN $3 5003FN $3
1003FP 2003FP $18 3003FP $17 4003FP $17 5003FP $16
1003FQ 2003FQ $10 3003FQ $9 4003FQ $9 5003FQ $8
1003FT 2003FT $16 3003FT $16 4003FT $15 5003FT $14
1003FU 2003FU $16 3003FU $16 4003FU $15 5003FU $14
1003FV 2003FV $16 3003FV $16 4003FV $15 5003FV $14
1003FW 2003FW $16 3003FW $16 4003FW $15 5003FW $14
</TABLE>
<PAGE>
F6 97-D-0001
Section B Page 34 of 46
TABLE
PART I - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0002 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- -------------------------------------- -------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Multiple OEM entries for
item means contractor may
supply using any of OEM
SERVERS sources/OEM part as listed
ALR Quads SMP Server by IDP configured as
follows: (supports up to Quad Pentium PRO
processors) Operating System sold separately,
1004AA configured as follows: IDP 74626011 $6,649
(1) Intel Pentium PRO 200MHz 256k cache Intel PPRO200256
2.1GB Ultra SCSI HDD Seagale ST31255W
Memory, 32MB ECC RAM (2 x 16MB DIMMS) 1) Smart Modular 1) SMS72028062E4G6
expandable to 2GB 2) Advantage 2) ADC272-2X8-66VB2
PC1 Local Bus Architecture, 15 expansion
slots(7PCI, 7EISA, 1 shared), 13 storage bays ALR 12209726-20
Redudent power supply (total two 575 watts power
supplies) ALR 13000366-01
Adaptec 2940UW Ultra SCSI Controller Adaptec 2940UW
1) Diamond 1) STV2520P-OEM
2MB DRAM PCI Video Adapter 2) STB 2) 110-0415-109
1) Goldstar 1) CRD-8240B
CD ROM, 24X Internal IDE 2) Toshiba 2) XM-6102B
PCI Network Adapter 10 Base T/10 Base 2
w/RJ45, BNC and ALH connectors SMC 6432BTA
ALR 6-Bay RAID Cage ALR 11902013
ALR Rail Kit (6) ALR 82295005
Serial Mouse ALR 11600203
101-key Keyboard ALR 11113112
Adapter Plug, Europe and Italy IDP NW-1WPHS
Adapter Plug, Great Britain IDP NW-5WPHS
inforMANAGER Software ALR 69000484
Floppy Drive (3.5"), 1.44MB ALR 11402537
UGPRADES - PROCESSOR
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004AA 2004AA $6,317 3004AA $6,001 4004AA $5,701 5004AA $5,416
</TABLE>
<PAGE>
FD 97-D-0001
Section B Page 35 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0004 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1004BA Intel Pentium PRO 260Mhz (256k)CPU ADD ON Intel PPRO200256 $738
FIC and UIC - SLIN 1004AA Server supports
up to 4 CPUs on a single motherboard
Voltage Regulator Kit ALR
1004BB Intel Pentium PRO 200Mhz(512k); FIC Intel PPRO200512 $1,016
Factory Installed Component); Replaces
Pentium PRO 256k CPU with 512k version
at factory. Server supports up to 4 CPUs.
Voltage Regulator Kit ALR
1004BC Intel Pentium PRO 280Mhz (512k) CPU ADD Intel PPRO200512 $1,387
ON FIC and UIC - SLIN 1004AA (Server
supports up to 4 CPUs)
Voltage Regulator Kit ALR
UPGRADES-
MEMORY
ECC MEMORY (Each consumes 1 DIMM slot.
Must be ordered in pairs. SLIN 1004AA
has 16 memory sockets, 14 remain
available
1004BD 32MB DIMM FIC (Factory Installed 1) Smart Modular 1) SM572044012D3G6 $306
Component) 32MB Add-on at factory 2) Advantage 2) ADC472-4X4-66V62
1004BE 32MB DIMM UIC (User Installed 1) Smart Modular 1) SM572044012D3G6 $306
Component) 32MB Add-on 2) Advantage 2) ADC472-4x4-66VB2
1004BF 64MB DIMM FIC (Factory Installed 1) Smart Modular 1) SM572064012D3G6
Component 64MB Add-on factory 2) Advantage 2) ADC872-4x4-66VB2 $591
1004BG 64MB DIMM UIC (User Installed 1) Smart Modular 1) SM572064012D3G6 $591
Component) 64MB Add-on 2) Advantage 2) ADC872-4x4-66VB2
1004BH 126MB DIMM FIC (Factory Installed 1) Smart Modular 1) SM572164014D4G6 $1,596
Component) - 126MB Add-on at factory 2) Advantage 2) ADC1672-16x4-
66VB4
1004BJ 126MB DIMM UIC (User Installed 1) Smart Modlar 1) SM572164014D4G6 $1,598
Component) - 126MB Add-on 2) Advantage 2) ADC1672-16x4-
66VB4
1004BK 254MB DIMM FIC (Factory Installed 1) Smart Modular 1) SM572324014D4G6 $4,959
Component) - 256M Add-on at factory 2) Advantage 2) ADC3272-16x4-
66VB4
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004BA 2004BA $701 3004BA $666 4004BA $633 5004BA $601
1004BB 2004BB $965 3004BB $917 4044BB $871 5004BB $827
1004BC 2004BC $1,317 3004BC $1,251 4004BC $1,189 5004BC $1,129
1004BD 2004BD $293 3004BD $278 4004BD $264 5004BD $251
1004BE 2004BE $293 3004BE $278 4004BE $264 5004BE $251
1004BF 2004BF $561 3004BF $533 4004BF $507 5004BF $481
1004BG 2004BG $561 3004BG $533 4004BG $507 5004BG $481
1004BH 2004BH $1,518 3004BH $1,442 4004BH $1,370 5004BH $1,302
1004BJ 2004BI $1,518 3004BI $1,442 4004BI $1,370 5004BI $1,302
1004BK 2004BJ $4,711 3004BJ $4,475 4004BJ $4,252 5004BJ $4,039
</TABLE>
MODIFICATION page 12
<PAGE>
97-D-0001
Section B Page 36 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0004 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1004BL 254MB DIMM UIC (User Installed Component) 1) Smart Modular 1)SM572324014D4G5 $4,959
256MB Add-on 2) Advantage 2)ADC3272-16X4-
66VB4
UPGRADES -
HARD DRIVES
1004BM 4.5GB SC81 Hard Drive Upgrade; FIC Seagate ST34572WC $239
(Factory Installed Component) Replaces
2.1GB on SLIN 1004AA - must be
installed in 6 Bay Raid Cage
1004BN 4.5GB SC81 Hard Drive Add-on (adds 4.5GB Seagate ST34572WC $594
Hard Drive as additional drive, must be
used in 6 Bay Raid Cage in SLIN 1004AA)
1004BP 9GB SC81 Hard Drive Add-on; (adds 9GB Seagate ST19171WC $835
Hard Drive as additional drive, must be
used in 6 Bay Raid Cage in SLIN 1004AA)
ACCESSORIES
1004BQ Three (3) channel FW RAID Controller ALR 11900963-01 $1,366
with 4MB Cache
1004BR 1400 VA Smart UPS with PowerChute Plus APC SU1400NET $711
Software
1004BS Reserved
1004BT 8-port Video Switch Box ALR 11603007-08 $1,316
1004BU 7" Cable Kit (Video, Keyboard, Mouse ALR 10116030-07 $55
Cable)
1004BV 12" Cable Kit (Video, Keyboard, Mouse ALR 10116030-12 $64
Cable)
PERIPHERALS
1004DA 4GB SC31 Tape Backup with Seagate w/ Seagate STD24000N $806
Backup Exec for NT Server software
1004DB CD Tower SMS Data Products 1070TOWER7/0
1004DC 8X SC31 CD ROM for CD Tower Sony CDU-41S $143
1004DD CD JUKEBOX - Three (3) NEC MultiSpin NEC CDR-C302 $978
4xc drives
1004DE Fax Modem Bank w/SW - Hayes enhanced Hayes 08-01356; $1,162
8-port serial board, Hayes Accura 336 LAN Source 08-02760;08-2760;
External Fax Modem, LANSource WINport/ WPFPUNL
FAXport NT Combo
1004DF External 33.6Kbps Fax Modem V.34 Hayes 08-02760 $102
1004DG PCI Network Adapter 10/100 Mbps SMC 9432TX $69
1004DH PC Card Reader - (PCMCIA) Front 1) SCM 1) SBI-02P $69
Accessible 2) Greystone 2) QS-320
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004 BL 2004BK $4,711 30004BK $4,475 4004BK $4,252 5004BK $4,039
UPGRADES -
HARD DRIVES
1004BM 2004BL $227 3004BL $216 4004BL $205 5004BL $195
1004BN 2004BM $564 3004BM $536 4004BM $509 5004BM $484
1004BP 2004BN $793 3004BN $754 4004BN $716 5004BN $680
ACCESSORIES
1004BQ 2004BO $1,316 3004BO $1,250 4004BO $1,186 5004BO $1,129
1004BR 2004BP $875 3004BP $642 4004BP $610 5004BP $579
1004BS
1004BT 2004BR $1,251 3004BR $1,188 4004BR $1,129 5004BR $1,072
1004BU 2004BS $52 3004BS $50 4004BS $47 5004BS $45
1004BV 2004BT $61 3004BT $58 4004BT $55 5004BT $52
PERIPHERALS
1004DA 2004DA $766 3004DA $728 4004DA $691 5004DA $657
1004DB 2004DB $303 3004DB $266 4004DB $274 5004DB $260
1004DC 2004DC $138 3004DC $129 4004DC $123 5004DC $117
1004DD 2004DD $929 3004DD $663 4004DD $838 5004DD $797
1004DE 2004DE $1,104 3004DE $1,049 4004DE $996 5004DE $846
1004DF 2004DF $97 3004DF $92 4004DF $87 5004DF $63
1004DG 2004DG $66 3004DG $62 4004DG $59 5004DG $56
1004DH 2004DH $66 3004DH $62 4004DH $59 5004DH $56
</TABLE>
<PAGE>
97-D-0001
Section B Page 37 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0004 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
1) IDP 1) 56w
1004DJ Monitor, 15" Color - up to 1280x 1024 2) Goldstar 2) 56i $270
CD ROM, 24X Internet IDE - UIC (User 1) Goldstar 1) CRD-8240B
1004DK Installed Component) 2) Toshiba 2) XM-6102B $93
SOFTWARE -
SERVER
Microsoft (Select
1004FB Windows NT Server V4.0 License Only Distribution) 2273275V40VL $499
Windows NT Server V4.0 License Media Microsoft (Select
1004FC and documentation Distribution) 2273275V40VL $505
Exchange Enterprise Server V1.x License
1004FF Only Microsoft 395-00595 $557
Exchange Enterprise Server V1.x License,
1004FG Media and Documentation Microsoft 395-00595 $584
SOFTWARE - NETWORK ADMINISTRATION SW (Elements
NETWORK ADMIN not included in Windows NT Server v4.0
Network Administration Software
1004FJ Utilities; License Only $151
Antivirus SW - Eliashim VirusSafe NT Eliashim VirusSafeNT
Inventory SW - Conergy v1.0 Tally Systems CYUS-PX
SOFTWARE - DA
1004FK MS Professional 97 License Only Microsoft 353-00220 $210
MS Professional 97 License, Media and
1004FL Documentation Microsoft 353-00220 $217
SOFTWARE - Microsoft Windows NT Server NOS Client
LICENSES Access Licenses
1004FM Windows NT Client Access License Only Microsoft 2272075V40VL $19
Windows NT Client Access License, Media
1004FN and Documentation Microsoft 2272075V40VL $24
Microsoft Exchange Server Client Access
Licenses
1004FP Exchange Client Access License Only Microsoft 381-00465 $50
Exchange Client Access License, Media
1004FQ and Documentation Microsoft 381-00465 $57
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004DJ 2004DI $257 3004DI $244 4004DI $232 5004DI $220
1004DK 2004DJ $88 3004DJ $84 4004DJ $80 5004DJ $76
1004FB 2004FB $474 3004FB $450 4004FB $428 5004FB $407
1004FC 2004FC $480 3004FC $456 4004FC $433 5004FC $412
1004FF 2004FF $529 3004FF $503 4004FF $478 5004FF $454
1004FG 2004FG $536 3004FG $509 4004FG $484 5004FG $460
1004FJ 2004FJ $144 3004FJ $137 4004FJ $130 5004FJ $123
1004FK 2004FK $200 3004FK $190 4004FK $180 5004FK $171
1004FL 2004FL $206 3004FL $195 4004FL $186 5004FL $176
1004FM 2004FM $18 3004FM $17 4004FM $17 5004FM $16
1004FN 2004FN $23 3004FN $22 4004FN $21 5004FN $20
1004FP 2004FP $47 3004FP $45 4004FP $43 5004FP $41
1004FQ 2004FQ $54 3004FQ $51 4004FQ $49 5004FQ $46
</TABLE>
<PAGE>
97-D-0001
Section B Page 38 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0004 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Upgrade of MS NT Server NOS with fixed
node licensee
1004GA NT Server v4.0 + 5 clients License, Microsoft 2273275V40VL-5 $532
Media and documentation
1004GB NT Server v4.0 + 10 clients License, Microsoft 2273275V40VL-10 $638
Media and documentation
1004GC NT Server v4.0 + 25 clients License, Microsoft 2273275V40VL-25 $867
Media and documentation
1004GD NT Server v4.0 + 50 clients License, Microsoft 2273275V40VL-50 $1,249
Media and documentation
1004GE NT Server v4.0 + 100 clients License, Microsoft 2273275V40VL-100 $2,014
Media and documentation
1004GF NT Server v4.0 + 250 clients License, Microsoft 2273275V40VL-250 $4,307
Media and documentation
1004GG NT Server v4.0 + 500 clients License, Microsoft 2273275V40VL-500 $8,129
Media and documentation
1004GH NT Server v4.0 + 1000 clients License, Microsoft 2273275V40VL-1000 $15,775
Media and documentation
1004GK Competitive Trade in of 5 user NOS for Microsoft 2273275V40VL-5 $514
5 per-node + 1 server software
1004GL Competitive Trade in of 10 user NOS for Microsoft 2273275V40VL-10 $576
5 per-node + 1 server software
1004GM Competitive Trade in of 25 user NOS for Microsoft 2273275V40VL-25 $758
5 per-node + 1 server software
1004GN Competitive Trade in of 50 user NOS for Microsoft 2273275V40VL-50 $1,062
5 per-node + 1 server software
1004GP Competitive Trade in of 100 user NOS for Microsoft 2273275V40VL-100 $1,671
5 per-node + 1 server software
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004GA 2004GA $505 3004GA $480 4004GA $456 5004GA $433
1004GB 2004GB $606 3004GB $578 4004GB $547 5004GB $520
1004GC 2004GC $824 3004GC $783 4004GC $743 5004GC $706
1004GD 2004GD $1,187 3004GD $1,128 4004GD $1,071 5004GD $1,018
1004GE 2004GE $1,913 3004GE $1,817 4004GE $1,727 5004GE $1,640
1004GF 2004GF $4,092 3004GF $3,887 4004GF $3,693 5004GF $3,506
1004GG 2004GG $7,723 3004GG $7,337 4004GG $6,970 5004GG $6,621
1004GH 2004GH $14,966 3000GH $14,237 4004GH $13,525 5004GH $12,848
1004GK 2004GK $489 3004GK $484 4004GK $441 5004GK $419
1004GL 2004GL $548 3004GL $520 4004GL $494 5004GL $469
1004GM 2004GM $720 3004GM $684 4004GM $550 5004GM $618
1004GN 2004GN $1,009 3004GN $959 4004GN $911 5004GN $865
1004GP 2004GP $1,588 3004GP $1,508 4004GP $1,433 5004GP $1,361
</TABLE>
<PAGE>
97-D-0001
Section B Page 39 of 46
TABLE
PART 1-THE SCHEDULE, SECTION B-SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0094 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1004GQ Competitive Trade in of 250 user NOS Microsoft 2273275V40VL-250 $3,496
for 5 per-node+1 server software
1004GR Competitive Trade in of 500 user NOS Microsoft 2273275V40VL-500 $6,542
for 5 per-node+1 server software
1004GS Competitive Trade in of 1000 user NOS Microsoft 2273275V40VL-1004 $12,631
for 5 per-node+1 server software
SOFTWARE-OPEN Software Open Systems Environment
SYSTEMS software (UNIX)
ENVIRONMENT
1004HA MS Office Professional v4.3 License Microsoft 269-055V43VL $124
and Documentation
1004HB MS Office Professional v4.3 License Only Microsoft 269-055V43VL $122
1004HC MS Office Professional v4.3 License with Microsoft
269-055V43VL $126
CD media and on-line documentation
1004HD MS Office Professional v4.3 License and Microsoft 269-055V43VL $125
Media
UNIX Operating
System
1004HE Open Server Release 5 Enterprise System SCO; Lynnsoft, Microsoft SOF0824,SOF0461, $1,003
Lynnsoft PC Card software v1.0; SCO 050-050V31VL
Merge; Microsoft Windows 3.11; Licenses
and Documentation
1004HF Open Server Release 5 Enterprise System; SCO; Lynnsoft, Microsoft SOF0824,SOF0461, $995
Lynnsoft PC Card software v1.0; SCO Merge; 050-050V31VL
Microsoft Windows 3.11; Licenses Only
1004HG Open Server Release 5 Enterprise System; SCO; Lynnsoft, Microsoft SOF0824,SOF0461, $1,040
Lynnsoft PC Card software v1.0; SCO Merge; 050-050V31VL
Microsoft Windows 3.11; Licenses with
Documentation and Media
1004HH Open Server Release 5 Enterprise System; SCO; Lynnsoft, Microsoft SOF0824,SOF0461, $1,031
Lynnsoft PC Card software v1.0; SCO Merge; 050-050V31VL
Microsoft Windows 3.11; Licenses and Media
1004HJ SCO Retix 2.1 Lan Transport License and SCO SOF0692 $168
online documentation
1004HK SCO Retix 2.1 Lan Transport License Only SCO SOF0692 $168
1004HL SCO Retix 2.1 Lan Transport, License, SCO SOF0693 $184
Duel Media and online documentation
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004GQ 2004GQ $3,323 3004GQ $3,157 4004GQ $2,999 5004GQ $2,849
1004GR 2004GR $8,215 3004GR $5,905 4004GR $5,609 5004GR $5,329
1004GS 2004GS $12,000 3004GS $11,400 4004GS $10,830 5004GS $10,288
1004HA 2004HA $116 3004HA $112 4004HA $106 5004HA $101
1004HB 2004HB $116 3004HB $110 4004HB $105 5004HB $99
1004HC 2004HC $120 3004HC $114 4004HC $108 5004HC $103
1004HD 2004HD $119 3004HD $113 4004HD $107 5004HD $102
1004HE 2004HE $953 3004HE $905 4004HE $860 5004HE $817
1004HF 2004HF $945 3004HF $896 4004HF $853 5004HF $811
1004HG 2004HG $988 3004HG $939 4004HG $892 5004HG $847
1004HH 2004HH $979 3004HH $930 4004HH $884 5004HH $840
1004HJ 2004HJ $159 3004HJ $151 4004HJ $144 5004HJ $137
1004HK 2004HK $159 3004HK $151 4004HK $144 5004HK $137
1004HL 2004HL $175 3004HL $166 4004HL $158 5004HL $150
</TABLE>
<PAGE>
97-D-0001
Section B Page 40 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0004 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
SCO Relix 2.1 LAN Transport Licenses
1004HM and Dual Media SCO SOF0893 $184
Sybase SQL RDBMS SW License and
1004HN documentation (client version) Sybase 14660 $70
Sybase SQL RDBMS SW License Only
1004HP (client version) Sybase 14660 $68
Sybase SQL RDBMS SW License, media
1004HQ and documentation (client version) Sybase 14660 $77
Sybase SQL RDBMS SW License and media
1004HR (client version) Sybase 14660 $74
Sybase SQL RDBMS SW License and
1004HS documentation (server version) Sybase 91070 $107
Sybase SQL RDMS SW License Only (server
1004HT version) Sybase 91070 $105
Sybase SQL RDBMS SW License, media and
1004HU documentation (server version) Sybase 91070 $107
Sybase SQL RDBMS SW License and media
1004HV (server version) Sybase 91070 $105
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1004HM 2004HM $175 3004HM $166 4004HM $158 5004HM $150
1004HN 2004HN $67 3004HN $63 4004HN $60 5004HN $57
1004HP 2004HP $65 3004HP $61 4004HP $58 5004HP $55
1004HQ 2004HQ $73 3004HQ $70 4004HQ $66 5004HQ $63
1004HR 2004HR $70 3004HR $67 4004HR $64 5004HR $60
1004HS 2004HS $101 3004HS $96 4004HS $92 5004HS $87
1004HT 2004HT $99 3004HT $94 4004HT $90 5004HT $85
1004HU 32004HU $101 3004HU $96 4004HR $92 5004HU $87
1004HV 2004HV $99 3003HV $94 4004HV $90 5004HV $85
</TABLE>
<PAGE>
97-D-0001
Section B Page 41 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0005 SERVER SYSTEM
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
PRINTER
1005AA Printer, Impact, Accel 344, 24-pin Advanced Metrix Technology ATM340-344 $372
1005AB RESERVED RESERVED RESERVED
1005AC Adapter Plug, Europe and Italy IDP NW-1WPHS $2
1005AD Adapter Plug, Great Britain IDP NW-5WPHS $2
1005AE Printer, Portable, HP DeskJet 340 Hewlett Packard C2655A $348
Included with Portable Printer:
Rechargeable Battery IDP PTA0076
Battery Recharger Hewlett Packard C3004A
Carrying Case for Portable Printer IDP PTA0097
1005AF Color Option Kit, for HP DeskJet 340 Hewlett Packard C3260A $29
1005AG Battery, Portable Printer IDP PTA0076 $21
1005AH Printer, Color, HP DeskJet 692C Hewlett Packard C4582A $290
1005AJ Lexmark Optra S 1250 Laser Printer, Lexmark 43J1000 $972
12ppm w/4MB RAM
1005AK 4MB Memory Upgrade for Lexmark Printers, Smart Modular SM532013001X4G7 $64
SLINS 1005AJ amd 1005AL
1005AL Lexmark Optra S 1650N Network Laser Lexmark 43J2038 $1,486
Printer, 16 ppm w/8MB RAM and Ethernet
10BaseT Network Adapter
1005AM 8MB Memory Upgrade for Lexmark Printers, Smart Modular SM532923001X4S6 $110
SLINS 1005AJ and 1005AL
1005AN Lexmark Optra SC 1275N Color Laser Lexmark 11C0201 $4,211
Printer, 12 ppm w/32MB RAM and Ethernet
100 Base TX/10 Base T Network Adapter
</TABLE>
<PAGE>
97-D-0001
Section B Page 42 of 46
<TABLE>
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINTER
1005AA 2005AA $353 3005AA $336 4005AA $319 5005AA $303
1005AB 2005AB 3005AB 4005AB 5005AB
1005AC 2005AC $2 3005AC $2 4005AC $2 5005AC $2
1005AD 2005AD $2 3005AD $2 4005AD $2 5005AD $2
1005AE 2005AE $330 3005AE $314 4005AE $298 5005AE $283
1005AF 2005AF $28 3005AF $27 4005AF $25 5005AF $24
1005AG 2005AG $20 3005AG $19 4005AG $18 5005AG $17
1005AH 2005AH $275 3005AH $261 4005AH $248 5005AH $236
1005AJ 2005AJ $923 3005AJ $877 4005AJ $833 5005AJ $792
1005AK 2005AK $61 3005AK $58 4005AK $55 5005AK $52
1005AL 2005AL $1,412 3005AL $1,341 4005AL $1,274 5005AL $1,210
1005AM 2005AM $104 3005AM $99 4005AM $94 5005AM $89
1005AN 2005AN $4,000 3005AN $3,600 4005AN $3,610 5005AN $3,430
</TABLE>
<PAGE>
97-D-0001
Section B Page 42 of 46
TABLE D
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0007
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ------------------ ------------------------------------ ------------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
"Peripherals for these CLIN 7 systems
may be found in CLINS 1-4 of this
contract. Please contact your IDP sales
representative for configuration
suggestions.
ADVANCED
TRAVELER'S One version of the IDP 575 Series
NOTEBOOK Modular Notebook is available for order
as follows:
IDP 575 Series Notebook, 13.3" Active
Matrix TFT Screen, Intel Pentium 233
MMX mobile PU, 64MB of SO DIMM EDO
Memory, 3GB Hard Drive, Windows NT and
1007AA Office 97 $3,510
Motherboard 575, 64-bit PCI Local Bus
Graphics w/2MB video display DRAM, and
Xing MPEG-1, PC Card Type IV slots, 512K
sync burst cache
One ECP/EPP 25-pin parallel port. One
UART 16C550 9-pin serial port. One
universal serial bus (USB) port. NTSC/PAL
TV out jack, HP SIR, wDA and ASKIR
inframed port, 16-bit audio FM synthesizer/
Wave table support with built-in
speaker/headphone, microphone, and line-in
jacks. Windows sound system and SoundBlaster
compatible.
Floppy Drive, 3.5", Removable
CD ROM Drive, 20X, Removable
Pointing Device, Touchpad
Lithium Ion Battery
S6.6 Kbps Modem Smart Modular ST5614DFNAMSR
A/C Adaptor, IDP 575
Carrying Case, Soft
Adaptor Plug, Europe and Italy
Adaptor Plug, Great Britain
Intel Pentium 233 MHz MMX Processor
(Mobile Version) Intel TT8050366233
Display, 3.3" TFT XGA LCD screen
64MB total EDO RAM (16MB on board, SM564028098NWG6
and one 32MB DMM) Smart Modular SM564043094NWG6
1) Toshiba 1) MK-3003MANN
1) IBM 2) DLGA-23080
Hard drive, 3GB (with free upgrade to 3) Hitachi 3) DK226A-32
5.1GB when available)
Ethemet Combo Network Card - 10Mbps SMC 80208T
Xing MPEG 1 Software Xing LB8021
Microsoft Client License for NT NOS Host Microsoft 2272675V40VL
Microsoft Exchange Client (Email) S/W Microsoft 381-00465
& License
Office Professional 97 License, CD ROM
Based Media and On-Line Documentation Microsoft 353-00220
64MB SO DIMM EDO Memory Upgrade - FIC
Replaces 32MB DIMM module for a total
1007BA of 96MB total RAM Smart Modular SMC564088574N6AA $483
32MB SO DIMM EDO Memory Upgrade -
107BB UIC. One 32MB DIMM. Smart Modular SMC564088574N6AA $295
64MB SO DIMM EDO Memory Upgrade -
107BC UIC. One 64MB DIMM. Smart Modular SM564088094NWG6 $788
<CAPTION>
OY1 OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- --------------- ------------ ------------- ---------- ------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1007AA 2007AA $3,335 3007AA $3,168 4007AA $3,009 5007AA $2,859
1007BA 2007BA $468 3007BA $445 4007BA $423 5007BA $402
1007BB 2007BB $280 3007BB $266 4007BB $253 5007BB $240
1007BC 2007BC $749 3007BC $711 4007BC $676 5007BC $642
</TABLE>
<PAGE>
97-D-0001
Section B Page 43 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0007
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1007BD SMC 10/100Mbs Card Bus Network Card SMC 8032DT $0
(FIC) (10/100 network card is a
substitution for the 10/10 Mbps card
in the notebook)
SINGLE
PENTIUM II
COMPUTERS
1007AB IDP 750 Series Desktop, Intel Pentium II $3,010
300, with Diamond AGP video card, 64MB
of SDRAM DIMM Modules, 8GB EIDE Hard
Drive, Windows NT
Single Pentium II Motherboard, Intel
440LX Chipsel, 2 serial ports, 2
parallel ports, Ultra DMA/33 EIDE
controller, 2 USB connectors, up to
4EIDE devices, 3PCI/1ISA/1 Shared slots
(5 usable slots) PS/2 connector. Supports
one Pentium II processor. 3 memory total
memory slots with one remaining. Maximum
memory expandable to 384MB. Intel BEAL3UM
On-board SoundBlaster compatible 16-bit
audio system featuring Yamaha OPL3-SA
audio chipsel
Intel AL440LX Motherboard Intel BEAL3UM
Total 64MB SDRAM (2) 32MB SDRAM DIMM Smart Modular SM564044074N6AA
Modules (1) CPU, Pentium II 300 Mhz, Intel 1) 8055P300512
with 512K cache
6.4GB EIDE Hard Drive 1) Western Digital 1) AC36400
2) Seagate 2) ST36451A
Floppy Drive (3.5") 1.44MB 1) Sony 1) MPF-920
2) Alps 2) OF334H911A
3) Teac 3) FD-235HF
4MB SGRAM AGP Video Card Diamond Fire 1400 Pro/A-OEM
PC Card Reader (PCMCIA) Front Accessible 1) SCM 1) SBI-D2P
2) Greystone 2)GS-320
PCI Network Adapter 10 Base T/10 Base 2, SMC 8432BTA
w/RJ45, BNC and AUI connectors
Monitor, 17" 0.26mm Color - up to 1) Goldstar 1) 7B
1280x1024
CD ROM, 24x IDE 1) Goldstar 1) CRD-8240B
2) Toshiba 2) XM-6102B
(2) Speakers 12 watts 1) JAZZ 1) J-340
2) JBL 2) Media 100
3) JBL 3) Media 2V2
Microphone Quickshot W5838-B
Windows 95 Keyboard IDP SKR-1104ICPS
PS/2/Serial Mouse IDP SMF-24981
Microsoft Client License for NT NOS Host Microsoft 2272075V40VL
Microsoft Exchange Client (Email) S/W Microsoft 381-00465
& License
Office Professional 97 License, CD ROM Microsoft 353-00220
Based Media and On-Line Documentation
Adapter Plug, Europe and Italy IDP NW-1WPHS
Adapter Plug, Great Britain IDP NW-5WPHS
1007BE 32MB Memory Upgrade SDRAM DIMM Module- Smart Modular SMC564048074N6AA $203
FIC For SLIN 1007AB
1007BF 32MB Memory Upgrade SDRAM DIMM Module- Smart Modular SMC564044074N6AA $203
UIC For SLIN 1007AB
1007BG 64MB Memory Upgrade SDRAM DIMM Module- Smart Modular SMC564088574N6AA $464
FIC For SLIN 1007AB
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1007BD 2007BD $0 3007BD $0 4007BD $0 5007BD $0
SINGLE
PENTIUM II
COMPUTERS
1007AB 2007AB $2,860 3007AB $2,717 4007AB $2,581 5007AB $2,452
1007BE 2007BE $193 3007BE $183 4007BE $174 5007BE $165
1007BF 2007BF $193 3007BF $183 4007BF $174 5007BF $165
1007BG 2007BG $441 3007BG $419 4007BG $398 5007BG $378
</TABLE>
<PAGE>
97-D-0001
Section B Page 44 of 46
TABLE
PART 1 - THE SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP V
CLIN 0007
International Data Products
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1007BH 64MB Memory Upgrade SDRAM DIMM Module - Smart Modular SM564068574N6AA $464
UIC. For SLIN 1007AB
1007BJ Video Upgrade - FIC (Factory Installed Diamond FIRE1800PRO/A-OEM $67
Component) For SLIN 1907AB; Diamond 8MB
SGRAM AGP Video card - replaces Diamond
4MB SGRAM AGP Video Card at factory
1007BK Video Upgrade - UIC (User Installed Diamond FIRE1800PRO/A-OEM $227
Component); Diamond 8MB SGRAM AGP Video
Card
1007BL PCI 10/100Mbps network adapter w/RJ45 SMC 9432TX $0
connector (FIC) (10/100 network card is
a substitution for the 10/10 Mbps card
in the workstation)
ADVANCED IDP Four IDP NT Qued Capable Servers with
SERVER Dual Pentium Pro 200 MHz, 512K Cache
available summarized as follows:
Features common to all four IDP Quad
Pentium Pro Servers as follows:
(2) Intel Pentium PRO 200MHz 512k cache Intal PPRO200512
Quad Pentium Pro Motherboard, 2 serial Seagate ST34572WC
ports, 2 parallel port, Dual Channel PCI
IDE, 2 USB connections, up to 4EIDE
devices, 6 PCI/4 EISA slots (9 usable slots)
PS/2 connector. Two on-board Fast Wide
(20MB/sec) Fast-20 (40MB/sec) SCSI
Controllers (Adaptec 7860). Supports
up to four Pentium Pro processors. Memory
expandable to 2GB and 16 memory slots.
(5) 4.55GB Ultra SCSI Wide (SCA) Hard
Drive
PCI 10/100Mbps network adapter SMC 9432TX
w/RJ45 connector
PCI Network Adapter 10 Base T/10 SMC 8432BTA
Base 2, w/RJ45, BNC and AUI connectors
PS/2 Win95 104-key Keyboard IDP
PS/2/Serial Mouse IDP SMF-24981
CD ROM 24x Internal IDE 1) Goldstar 1)CRD-82480
2) Toshiba 2) XM-61028
Monitor, 15" Color - up to 1280x1024 1) Goldstar 1) 56w
2) IDP 2) 56i
Adapter Plug, Europe and Italy IDP NW-1WPHS
Adapter Plug, Great Britain IDP NW-5WPHS
HP Openview Professional Suite V 1.02 Hewlett Packard D4939A#ABA
1007AC INTEL AP 450GX Small Server by IDP IDP ALPCD200512C $16,561
configured as follows:
(supports up to Quad Pentium PRO
processors) NT Server v4.0
1) Smart Modular SM532324004X6S6 $16,561
Memory, 512MB EDO RAM ((4) 128 MB 2) Advantage A3236-16X4-56T
SIMMs)
BGB, DAT Tape Back Up Unit Seagate STD28000N
Windows NT Server 4.0 License Microsoft (Select 2273275V40VL
Distribution)
Windows NT Server 4.0 CD-ROM Media Microsoft (Select
with Online Documentation Distribution)
Client Access License for Windows Microsoft (Select
NT Server is included in IDP Workstation. Distribution)
Client AccessLicense for Windows NT Microsoft (Select
Server is included in IDP Workstation. Distribution)
Arcserve 6.5 for Windows NT Server Cheyenne NTFFAR650SEW
(S/S Edition)
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1007BH 2007BH $441 3007BH $419 4007BH $398 5007BH $376
1007BJ 2007BJ $64 3007BJ $60 4007BJ $57 5007BJ $55
1007BK 2007BK $216 3007BK $205 4007BK $195 5007BK $185
1007BL 2007BL $0 3007BL $0 4007BL $0 5007BL $0
1007AC 2007AC $16,230 3007AC $15,743 4007AC $14,956 5007AC $14,208
</TABLE>
<PAGE>
97-D-0001
Section B Page 45 of 46
TABLE B
PART SCHEDULE, SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
DESKTOP
CLIN0007
INTERNATIONAL DATA PRODUCTS
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1007AD INTEL AP450GX Medium Server by IDP IDP ALPCD200512C $21,404
configured as follows:
(supports up to Quad Pentium PRO
processors) NT Server v4.0
1) Smart Modular SM532324004X656
Memory, 512MB EDO RAM ((4) 126 MB SIMMs) 2) Advantage A3236-16X4-66T
HP Surestore 144GB DAT, 6 TAPE Juke Hewlett Packard 24X6E
Box Autoloader
RAID Controller IDP CRX-CTR2AU
Windows NT Server 4.0 License Microsoft (Select 2273275V40VL
Distribution
Windows NT Server 4.0 CD-ROM Media with Microsoft (Select
Online Documentation Distribution)
Client AccessLicense for Windows NT Microsoft (Select
Server is included in IDP Workstation Distribution
Arcserve 6.5 for Windows NT Server Cheyenne NTFAR650SEW
(S/S Edition)
1007AE INTEL AP450GX Large Server by IDP ALPCD200512C $34,900
configured as follows:
(supports up to Quad Pentium PRO
processors) NT Server v4.0
1) Smart Modular SM532324004X6S6
Memory, 1GB EDO ((8) 128MB SIMMs) 2) Advantage A3236-16X4-66T
8MM 220/440GB Tape Library Exabyte 935404-255
RAID Controller IDP CRX-CTR2AU
Windows NT Server 4.0 License Microsoft (Select 2273275V40VL
Distribution)
Windows NT Server 4.0 CD-ROM Media with Microsoft (Select
Online Documentation Distribution
Client AccessLicense for Windows NT Microsoft (Select
Server is included in IDP Workstation. Distribution
Arcserve 6.5 for Windows NT Server Cheyenne NTFFAR650SEW
(S/S Edition)
1007AF INTEL AP450GX Large Server by IDP IDP ALPCD200512C $27,350
configured as follows:
(supports up to Quad Pentium PRO
processors) SCO OpenServer Enterprise
with 512-use client license
1) Smart Modular SM532324004X6S6
Memory, 1GB EDO expandable to 2GB 2) Advantage A3236-16X4-66T
((8) 128MB SIMMs)
8MM 220/440GB Tape Library Exabyte 935404-255
RAID Controller IDP CRX-CTR2AU
SCO Openserver Enterprise Server SCO SA261-UX74-50
R5.04 5-user CD
SCO Openserver Enterprise 512-User SCO UX261-0512-5.0
License Pack
1007BM Reserved
1007BN Reserved
1007BP Reserved
1007BQ Reserved
1007BR Processor Upgrade - Intel Dual Processor Intel PALCPA2X200512 $3,473
Module with 2 Pentium Pro 200Mhz 512K
Cache Processors - FIC (Factory Installed
Component) For SLINS 1007AC - 1007AF
1007BS Reserved
1007BT 1400 VA Smart UPS with PowerChute Plus APC SU1400NET $416
Software
1007BU 2200 Smart UPS with Powerchute Plus APC SU2200NET $884
software
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1007AD 2007AD $20,976 3007AD $20,347 4007AD $19,329 5007AD $16,363
1007AE 2007AE $34,202 3007AE $33,176 4007AE $31,517 5007AE $29,941
1007AF 2007AF $26,803 3007AF $25,999 4007AF $24,899 5007AF $23,464
1007BR 2007BR $3,299 3007BR $3,134 4007BR $2,976 5007BR $2,829
1007BT 2007BT $585 3007BT $556 4007BT $528 5007BT $502
1007BU 2007BU $840 3007BU $796 4007BU $758 5007BU $720
</TABLE>
<PAGE>
97-D-0001
Section B Page 46 of 46
<TABLE>
<CAPTION>
BASE YEAR
SLIN OFFEROR DESCRIPTION OEM OEM # UNIT PRICE
- ---------------- ----------------------------------------- ---------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
1) Seagate 1) ST19171WC
1007BV 9.0GB SCSI SCA Hard drive (FIC) 2) Seagate 2) ST39173WC $735
1) Seagate 1) ST1182731WC
1007BW 19.0GB SCSI SCA Hard drive (FIC) 2) IBM 2) 59H6595 $1,874
</TABLE>
<TABLE>
<CAPTION>
OY1 UNIT OY2 OY2 UNIT OY3 OY3 UNIT OY4 OY4 UNIT
SLIN OY1 SLIN PRICE SLIN PRICE SLIN PRICE SLIN PRICE
- ---------------- ------------ --------------- ------------ ------------- -------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1007BV 2007BV $696 3007BV $663 4007BV $830 5007BV $599
1007BW 2007BW $1,780 3007BW $1,691 4007BW $1,807 5007BW $1,526
</TABLE>
<PAGE>
Exhibit 10.14
PAGE 2
SOL#N00140-98-C-H189
This award document constitutes acceptance of your offer dated 18 Sep 97, as
supplemented by your letters of 1 Dec 97 and 30 Dec 97, submitted in response to
Solicitation N00140-97-R-3135 dated 10 Jul 97 for IT-21 Program at the
CINCLANTFLT Norfolk, VA as amended by Amendments 0001 dated 6 Aug 97, 0002 dated
22 Aug 97, 0003 dated 5 Sep 97, 0004 dated 8 Sep 97, 0005 dated 12 Sep 97 and
0006 dated 12 Sep 97.
Representations, Certifications, Other Statements, Instructions, Conditions and
Notices to Offerors Sections on pages 30 through 43 of the solicitation are
incorporated by reference.
<PAGE>
Page 3
SOL# N00140-98-C-H189
SCHEDULE OF SUPPLIES/SERVICES AND PRICES (continuation of Block 20, Page 1,
hereto)
<TABLE>
<CAPTION>
CLIN DESCRIPTION QTY U/I UNIT PRICE TOTAL AMT
- ---- ---------------- ---- --- ----------- ---------
<S> <C> <C> <C> <C> <C>
0001 Lease of Desktops I/A/W IT-21 Specification
and SOW contained in Section C, for the period
from the date of shipment I/A/W delivery
schedule through 30 Sep 1998
0001AA I/A/W Delivery Schedule 170 EA 7.86 MO $20,910.00 $164,352.60
of CLIN 0001 by 5 Feb 1998
0001AB I/A/W Delivery Schedule 170 EA 7.61 MO $20,910.00 $159,125.10
of CLIN 0001 by 12 Feb 1998
0001AC I/A/W Delivery Schedule 170 EA 7.36 MO $20,910.00 $153,897.60
of CLIN 0001 by 19 Feb 1998
0001AD I/A/W Delivery Schedule 170 EA 7.11 MO $20,910.00 $148,670.10
of CLIN 0001 by 26 Feb 1998
0001AE I/A/W Delivery Schedule 170 EA 6.87 MO $20,910.00 $143,651.70
of CLIN 0001 by 5 Mar 1998
TOTAL CLIN 0001 $769,697.10
0002 Lease of Servers 7.86 MO $28,675.00 $225,385.50
I/A/W IT-21 Specification and
SOW contained in Section C
for the period from the date of
shipment (5 Feb 1998) I/A/W delivery schedule
through 30 Sep 1998
0003 Lease of Switching & Hubbing 7.86 MO $63,021.00 $495,345.06
Modules I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from the date of
shipment (5 Feb 1998) I/A/W delivery schedule
through 30 Sep 1998
0004 Lease of Black & White
Laser Printers
I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from the date of
shipment I/A/W delivery schedule
through 30 Sep 1998
0004AA I/A/W Delivery Schedule 200 EA 7.86 MO $4,880.00 $38,356.80
of CLIN 0004 by 5 Feb 1998
0004AB I/A/W Delivery Schedule 200 EA 7.61 MO $4,880.00 $37,136.80
of CLIN 0004 by 12 Feb 1998
0004AC I/A/W Delivery Schedule 200 EA 7.36 MO $4,880.00 $35,916.80
<PAGE>
Page 4
SOL# N00140-98-C-H189
of CLIN 0004 by 19 Feb 1998
0004AD I/A/W Delivery Schedule 200 EA 7.11 MO $4,880.00 $34,696.80
of CLIN 0004 by 26 Feb 1998
0004AE I/A/W Delivery Schedule 200 EA 6.87 MO $4,880.00 $33,525.60
of CLIN 0004 by 5 Mar 1998
TOTAL CLIN 0004 $179,632.80
0005 Lease of Entry-Level Thermal Inkjet
Color Printers, I/A/W IT-21
Specification and SOW contained in Section C,
for the period from the date of shipment
I/A/W delivery schedule through 30 Sep 1998
0005AA I/A/W Delivery Schedule 200 EA 7.86 MO $2,520.00 $19,807.20
of CLIN 0005 by 5 Feb 1998
0005AB I/A/W Delivery Schedule 200 EA 7.61 MO $2,520.00 $19,177.20
of CLIN 0005 by 12 Feb 1998
0005AC I/A/W Delivery Schedule 200 EA 7.36 MO $2,520.00 $18,547.20
of CLIN 0005 by 19 Feb 1998
0005AD I/A/W Delivery Schedule 200 EA 7.11 MO $2,520.00 $17,917.20
of CLIN 0005 by 26 Feb 1998
0005AE I/A/W Delivery Schedule 200 EA 6.87 MO $2,520.00 $17,312.40
of CLIN 0005 by 5 Mar 1998
TOTAL CLIN 0005 $92,761.20
0006 Lease of High-End Color Laser
Printers, I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from the date of
shipment I/A/W delivery schedule
through 30 Sep 1998
0006AA I/A/W Delivery Schedule 200 EA 7.86 MO $895.00 $7,034.70
of CLIN 0006 by 5 Feb 1998
0006AB I/A/W Delivery Schedule 200 EA 7.61 MO $895.00 $6,810.95
of CLIN 0006 by 12 Feb 1998
006AC I/A/W Delivery Schedule 200 EA 7.36 MO $895.00 $6,5873.20
of CLIN 0006 by 19 Feb 1998
0006AD I/A/W Delivery Schedule 200 EA 7.11 MO $895.00 $6,363.45
of CLIN 0006 by 26 Feb 1998
0006AE I/A/W Delivery Schedule 200 EA 6.87 MO $895.00 $6,148.65
of CLIN 0006 by 5 Mar 1998
TOTAL CLIN 0006 $32,944.95
OPTION 1:
- ---------
0007 Lease of Laptops 7.86 MO $29,4000.00 $231,084.00
I/A/W IT-21
Specification and SOW
<PAGE>
Page 5
SOL #N00140-98-C-H189
contained in Section C,
for the period from the date of
shipment (5 Feb 1998) I/A/W delivery schedule
through 30 Sep 1998
0008 Lease of Docking Stations 7.86 MO $2,300.00 $18,078.00
I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from the date of
shipment (5 Feb 1998) I/A/W delivery schedule
through 30 Sep 1998
Total CLINs 0001 through 0006 $1,795,766.61
Total CLINs 0001 through 0008 $2,044,928.61
FIRST OPTION YEAR
OPTION 2:
0009 Lease of Desktops 12 MO $84,150.00 $1,0009,800.00
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 1998
through 20 Sep 1999
0010 Lease of Severs 12 MO $28,675.00 $344,100.10
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from Oct 1998
though 30 Sep 1999
0011 Lease of Switching & Hubbing 12 MO $63,021.00 $756,252.00
Modules I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1998 through 30
Sep 1999
0012 Lease of Black & White 12 MO $24,400.00 $292,800.00
Laser Printers
I/A/W IT-21 Specification and
SOW contained in Section C for
the period from 1 Oct 1998
through 30 Sep 1999
0013 Lease of Entry-Level Thermal Inkjet 12 MO $12,600.00 $151,200.00
Color Printers, I/A/W IT-21
Specification and SOW
<PAGE>
Page 6
SOL# NOO140-98-C-H189
contained in Section C,
for the period from 1 Oct 1998
through 30 Sep 1999
0014 Lease of High-End Color Laser 12 MO $4,475.00 $53,700.00
Printers, I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1998 through 30 Sep 1999
OPTION 3
0015 Lease of Laptops 12 MO $24,00.00 $288,000.00
I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from 1 Oct
1998 through 30 Sep 1999
0016 Lease of Docking Stations 12 MO $2,300.00 $27,600.00
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 1998
through 30 Sep 1999
Total CLINs 0009 through 0014 $2,607,852.00
Total CLINs 0009 through 0016 $2,923,452.00
SECTION OPTION YEAR
OPTION 4
0017 Lease of Desktops 12 MO $73,100.00 $877,200.00
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 1999
through 30 Sep 2000
0018 Lease of Servers 12 MO $28,675.00 $344,100.00
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 1999
through 30 Sep 2000
0019 Lease of Switching & Hubbing 12 MO $63,021.00 $756,252.00
Modules I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1999 through
30 Sep 2000
<PAGE>
Page 7
SOL# N00140-98-C-H189
0020 Lease of Black & White 12 MO $24,400.00 $292,800.00
Laser Printers
I/A/W IT-21 Specification and
SOW contained in Section C, for
the period from 1 Oct 1999 through
30 Sep 2000
0021 Lease of Entry-Level Thermal 12 MO $12,600.00 $151,200.00
Inkjet Color Printers, I/A/W
IT-21 Specification and SOW
contained in Section C, for the
period from 1 Oct 1999 through
30 Sep 2000
0022 Lease of High-End Color Laser 12 MO $4,475.00 $53,700.00
Printers, I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1999 through
30 Sep 2000
OPTION 5:
0023 Lease of Laptops 12 MO $21,800.00 $261,600.00
I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1999 through 30
Sep 2000
0024 Lease of Docking Stations 12 MO $2,300.00 $27,600.00
I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 1999 through 30
Sep 2000
Total CLINs 0015 through 0022 $2,475,252.00
Total CLINs 0015 through 0024 $2,764,452.00
THIRD OPTION YEAR
OPTION 6:
0025 Lease of Desktops 12 MO $73,100.00 $877,200.00
I/A/W IT-21 Specification and
SOW contained in Section C, for
the period from 1 Oct 2000 through 30
Sep 2001
<PAGE>
Page 8
SOL# N00140-98-C-H189
0026 Lease of Servers 12 MO $28,675.00 $344,100.00
I/A/W IT-21 Specification and
SOW contained in Section C, for
the period from 1 Oct 2000
through 30 Sep 2001
0027 Lease of Switching & Hubbing 12 MO $63,021.00 $756,252.00
Modules I/A/W IT-21
Specification and SOW contained
in Section C, for the period from
1 Oct 2000 through 30 Sep 2001
0028 Lease of Black & White 12 MO $24,400.00 $292,800.00
Laser Printers
I/A/W IT-21 Specification and
SOW contained in Section C, for
the period from 1 Oct 2000 through
30 Sep 2001
0029 Lease of Entry-Level Thermal 12 MO $12,600.00 $151,200.00
Inkjet Color Printers,
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct
2000 through 30 Sep 2001
0030 Lease of High-End Color Laser 12 MO $4,475.00 $53,700.00
Printers, I/A/W It-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 2000 through
30 Sep 2001
OPTION 7
- --------
0031 Lease of Laptops 12 MO $21,800.00 $261,600.00
I/A/W IT-21
Specification and SOW
contained in Section C, for
the period from 1 Oct
2000 through 30 Sep 2001
0032 Lease of Docking Stations 12 MO $2,300.00 $27,600.00
I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 2000 through 30
Sep 2001
<PAGE>
Page 9
SOL# N00140-98-C-H189
Total CLINs 0025 through 0030 $2,475,252.00
Total CLINs 0025 through 0032 $2,764,452.00
FOURTH OPTION YEAR
OPTION 6:
0033 Lease of Desktops 12 MO $73,100.00 $877,200.00
I/A/W IT-21 Specification
and SOW contained in
Section C, for the period
from 1 Oct 2001 through 30
Sep 2002
0034 Lease of Servers 12 MO $28,675.00 $344,100.00
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 2001
through 30 Sep 2002
0035 Lease of Switching & Hubbing 12 MO $63,021.00 $756,252.00
Modules I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from 1 Oct 2001
through 30 Sep 2002
0036 Lease of Black & White 12 MO $24,400.00 $292,800.00
Laser Printers
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct 2001
through 30 Sep 2002
0037 Lease of Entry-Level Thermal 12 MO $12,600.00 $151,200.00
Inkjet Color Printers,
I/A/W IT-21 Specification and
SOW contained in Section C,
for the period from 1 Oct
2001 through 30 Sep 2002
00038 Lease of High-End Color Laser 12 MO $4,475.00 $53,700.00
Printers, I/A/W IT-21
Specification and SOW contained
in Section C, for the period
from 1 Oct 2001 through 30
Sep 2002
<PAGE>
Page 10
SOL# N00140-98-CH189
OPTION 9:
0039 Lease of Laptops 12 MO $21,800.00 $261,600.00
I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from 1 Oct
2001 through 30 Sep 2002
0040 Lease of Docking Stations 12 MO $2,300.00 $27,600.00
I/A/W IT-21
Specification and SOW
contained in Section C,
for the period from 1 Oct
2001 through 30 Sep 2002
Total CLINs 0033 through 0038 $2,475,252.00
Total CLINs 0033 through 0040 $2,764,452.00
</TABLE>
<PAGE>
Page 11
SOL# N00140-98-C-H189
COMPONENT MONTHLY UNIT LEASE PRICE
<TABLE>
<CAPTION>
Monthly U/P Total
CLIN Description Quantity Each Monthly U/P
<S> <C> <C> <C> <C>
0001 Desktops 850 $123.00 $104,550.00
0002 Servers 25 $1,147.00 $28,675.00
0003 Switching/Hubbing (to include the following):
-ATM Uplink Module w/APIM to FNB and INB 9 $2,326.00 $20,934.00
-Fast Ethernet Switch Module w/11 RJ45 ports
and 1 FEPIM 9 $723.00 $6,507.00
-ATM Port Interface Modules 18 $39.00 $702.00
-Multimode fiber User Configurable Fast
Ethernet Port Interface Module 9 $14.00 $126.00
-MMAC Plus Smart Switch 10/100 Module
24 Port RJ71; two RJ45 ports; one SC
Multimode port; one EPIM 48 $724.00 $34,752.00
0004 Black and White Laser Printers 400 $61.00 $24,400.00
0005 Entry-Level Thermal Inkjet Color Printers 200 $63.00 $12,600.00
0006 High-End Color Laser Printers 25 $179.00 $4,475.00
OPTION 1:
007 Laptops 200 $147.00 $29,400.00
008 Docking Stations 100 $23.00 $2,300.00
OPTION 2
0009 Desktops 850 $99.00 $84,150.00
0010 Servers 25 $1,147.00 $28,675.00
0011 Switching/Hubbing (to include the following):
-ATM Uplink Module w/ APDM to FNB 9 $2,326.00 $20,934.00
-Fast Ethernet Switch Module w/11 RJ45 porte
and 1 FE PIM 9 $723.00 $6,507.00
-ATM Port Module 18 $39.00 $702.00
-Multimode User Configurable Fast
Ethernet Port Interface Module 9 $14.00 $126.00
-MMAC Plus Smart Switch 10/100 Module
24 Port RJ71; two RJ45 ports; one SC
Multimode port; one EPIM 48 $724.00 $34,752.00
0012 Black and White Laser Printers 400 $61.00 $24,400.00
0013 Entry-Level Thermal Inkjet Color Printers 200 $63.00 $12,600.00
0014 High-End Color Laser Printers 25 $179.00 $4,475.00
OPTION 3:
0015 Laptops 200 $120.00 $24,000.00
0016 Decking Stations 100 $23.00 $2,300.00
</TABLE>
<PAGE>
Page 12
SOL#N00140-98-C-H189
COMPONENT MONTHLY UNIT LEASE PRICE
<TABLE>
<CAPTION>
Monthly U/P Total
CLIN Description Quantity Each Monthly U/P
OPTION 4:
<S> <C> <C> <C> <C>
0017 Desktops 850 $ 86.00 $ 73,100.00
0018 Servers 25 $1,147.00 $ 28,675.00
0019 Switching/Hubbing (to include the following):
-ATM Uplink Module w/ APDM to FNB 9 $2,326.00 $ 20,934.00
-Fast Ethernet Switch Module w/11 RJ45 porte
and 1 FE PIM 9 $ 723.00 $ 6,507.00
-ATM Port Module 18 $ 39.00 $ 702.00
-Multimode User Configurable Fast
Ethernet Port Interface Module 9 $ 14.00 $ 126.00
-MMAC Plus Smart Switch 10/100 Module
24 Port RJ71; two RJ45 ports; one SC
Multimode port; one EPIM 48 $ 724.00 $ 34,752.00
0020 Black and White Laser Printers 400 $ 61.00 $ 24,400.00
0021 Entry-Level Thermal Inkjet Color Printers 200 $ 63.00 $ 12,600.00
0022 High-End Color Laser Printers 25 $ 179.00 $ 4,475.00
OPTION 5:
0023 Laptops 200 $ 109.00 $ 21,800.00
0024 Docking Stations 100 $ 23.00 $ 2,300.00
OPTION 6
0025 Desktops 850 $ 86.00 $ 73,100.00
0026 Servers 25 $1,147.00 $ 28,675.00
0027 Switching/Hubbing (to include the following):
-ATM Uplink Module w/ APDM to FNB 9 $2,326.00 $ 20,934.00
-Fast Ethernet Switch Module w/11 RJ45 porte
and 1 FE PIM 9 $ 723.00 $ 6,507.00
-ATM Port Module 18 $ 39.00 $ 702.00
-Multimode User Configurable Fast
Ethernet Port Interface Module 9 $ 14.00 $ 126.00
-MMAC Plus Smart Switch 10/100 Module
24 Port RJ71; two RJ45 ports; one SC
Multimode port; one EPIM 48 $ 724.00 $ 34,752.00
0028 Black and White Laser Printers 400 $ 61.00 $ 24,400.00
0029 Entry-Level Thermal Inkjet Color Printers 200 $ 63.00 $ 12,600.00
0030 High-End Color Laser Printers 25 $ 179.00 $ 4,475.00
OPTION7:
0031 Laptops 200 $ 109.00 $ 21,800.00
0032 Docking Stations 100 $ 23.00 $ 2,300.00
</TABLE>
<PAGE>
Page 13
SOL#N00140-98-C-H189
<TABLE>
<CAPTION>
Monthly U/P Total
CLIN Description Quantity Each Monthly U/P
OPTION 8
<S> <C> <C> <C> <C>
0033 Desktops 850 $ 86.00 $ 73,100.00
0034 Servers 25 $1,147.00 $ 28,675.00
0035 Switching/Hubbing (to include the following):
-ATM Uplink Module w/APTM to FNB and INB 9 $2,326.00 $ 20,934.00
-Fast Ethernet Switch Module W/11 R45 ports 9 $ 723.00 $ 6,507.00
- and 1 FEPIM
-ATM Port Interface Modules 18 $ 39.00 $ 702.00
-Multimode fiber User Configurable
Fast Ethernet 9 $ 14.00 $ 126.00
Port Interface Module MMAC Plus Smart Switch;
- 10/100 Module, 24 Port RJ71; two RJ45 ports; one
- SC Multimode port; one EPIM 48 $ 724.00 $ 34,752.00
0036 Black and White Laser Printers 400 $ 61.00 $ 24,400.00
0037 Entry-Level Thermal Inkjet Color Printers 200 $ 63.00 $ 12,600.00
0038 High-End Color Laser Printers 25 $ 179.00 $ 4,475.00
OPTION 9
0039 Laptops 200 $ 109.00 $ 21,800.00
0040 Docking Stations 100 $ 23.00 $ 2,300.00
</TABLE>
<PAGE>
Page 14
SOL # N00140-98-C-H189
DELIVERIES AND PERFORMANCE
PERIODS OF PERFORMANCE
<TABLE>
<S> <C>
Base Period: 6 Jan 1998 through 30 Sep 1998
Option 1: 6 Jan 1998 through 30 Sep 1998
Option 2: 1 Oct 1998 through 30 Sep 1999
Option 3: 1 Oct 1998 through 30 Sep 1999
Option 4: 1 Oct 1999 through 30 Sep 2000
Option 5: 1 Oct 1999 through 30 Sep 2000
Option 6: 1 Oct 2000 through 30 Sep 2001
Option 7: 1 Oct 2000 through 30 Sep 2001
Option 8: 1 Oct 2001 through 30 Sep 2002
Option 9: 1 Oct 2001 through 30 Sep 2002
</TABLE>
APPOINTMENT OF CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (FISC DET PHILA)
(OCT 1992)
(a) The Contracting Officer hereby designates the following individual
as Contracting Officer's Technical Representative(s) (COTR) for this contract:
NAME: Ms. Dorothy Hennigan
CODE: N62
MAIL ADDRESS: Chief, U.S. Atlantic Fleet (N6)
(CINCLANTFLT)
1562 Mitscher Ave; Suite 250
Norfolk, VA 23551-2487
TELEPHONE NUMBER: (757) 322-3998
(b) In the absence of the COTR named above, responsibilities and
functions assigned to the COTR shall be the responsibility of the alternate
COTR acting on behalf of COTR. The Contracting Officer hereby appoints the
following individual as the alter COTR:
N/A
(c) The COTR will act as the Contracting Officer's representative for
technical matters, providing technical direction and discussion as necessary
with respect to the specification or statement of work, and monitoring the
progress and quality of contractor performance. The COTR is not an
Administrative Contracting Officer and does not have authority to take any
action, either directly or indirectly, that would change the pricing,
quantity, quality, place of performance, delivery schedule, or any other
terms and conditions of the contract (or delivery order), or to direct the
accomplishment of effort which goes beyond the scope of the statement of work
in the contract (or delivery order).
<PAGE>
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT PAGES
2. Amendment/Modification no. P0003
3. Effective Date 20 Jan 98
4. Requisition/Purchase Req. No. N00060-97RC-OIT21
5. Project No N/A
(if applicable)
6. Issued By FISC Norfolk Detachment Philadelphia
700 Robinns Avenue; Bldg. 2B
Philadelphia, PA 19111-5083
02P22A KKB POC Ms. K Brown
(215)697-9635
7. Administered by (if other than Item 6 CODE S2101A
DCMC BALTIMORE
200 TOWSONTOWN BLVD., WEST
TOWSON, MD 21204-5299
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code)
IDP
20 Firstfield Road
Gathersburg, MD 20878
CODE 45815 FACILITY CODE
9A AMENDMENT OF SOLICITIATION
9B DATED (SEE ITEM 11)
10A MODIFICATION OF NOO140-98-C-11189
10B DATED (SEE ITEM 13) 6 JAN 96
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
/ / The above numbered solicitation is amended as set forth in item 14. The
hour and date specified for receipt of Offers is extended is not extended
Offers must acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation or as amended, by one of the following methods:
(a) By completing items *8 and 15, and returning 3 copies of the amendment; (b)
By acknowledging receipt of this amendment on each copy of the offer submitted;
or (c) By separate letter or telegram which includes a reference to the
solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT OT BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND
DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by birture of this
amendment you desire to change an offer already submitted, such change may be
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour
and date specified.
12. ACCOUNTING AND APPROPRIATION DATA (If required)
N/A
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE
CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
/ / A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify Authority) THE
CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO.
IN THE ITEN 10A
/X/ B. THE ABOVE NUMBER CONTRACT/ORDER IS MODIFIED TO REFLECT THE
ADMINISTRATIVE CHANGES (such as changes in payment office,
appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE
AUTHORITY OF FAR 43.103(s)
/ / C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED IN TO PURSUAN TO AUTHORITY
OF:
/ / D. OTHER(Specify type of modification and authority)
E. IMPORTANT: Contractor /X/ is not / / is required to sign this
document and return one
copy to the issuing
office.
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF headings,
including solicitation/contract subject matter where feasible.)
1. The Contract Administration Plan for the contract is hereby
incorporated and provided as Attachment 1
Except as provided herein, all terms and conditions of the document referenced
in item 9A or 10A, as heretofore changed, remains unchanged and in full force
and effect.
15A NAME AND TITLE OF THE SIGNER (Type of Print)
15B CONTRACTOR/OFFEROR
15C DATE SIGNED
16A NAME AND TITLE OF CONTRACING OFFICER (Type or Print)
J. J. SWIZEWSKI, CONTRACTING OFFICER
16B UNITED STATES OF AMERICA
By:/s/------------------
(Signature of person authorized to sign)
16C DATE SIGNED 1/20/98
STANDARD FORM 30 (REV 10-83)
Prescribed by GSA
FAR (48CFR)52.243
<PAGE>
N00140-98-C-H189/P00003
NAVREGCONTCENINST 4330.1B
CONTRACT ADMINISTRATION PLAN (CAP)
FOR FIXED PRICE CONTRACTS
In order to expedite the administration of this contract, the following
delineation of duties is provided. The names, addresses and phone numbers for
these officers or individuals are included elsewhere in the contract award
document. The office or individual designated as having responsibility should be
contacted for any questions, clarifications, or information regarding the
administration function assigned.
1. The Procuring Contract Office (PCO) is responsible for:
a. All pre-award duties such as solicitation, negotiation and award of
contracts
b. Any information or questions during the pre-award stage of the
procurement
c. Freedom of Information inquires.
d. Changes in contract terms and/or conditions
e. Post award conference
2. The Contract Administration Office (CAO) is responsible for matters
specified in the FAR 42.302 and DFARS 42.302 except those areas otherwise
designated as the responsibility of the Contracting Officer's Representative
(COR) or someone else herein.
3. The paying office is responsible for making payment of proper invoices
after acceptance is documented.
4. The Contracting Officer's Representative (COR) is responsible for the
interface with the contractor and performance of duties such as those set
forth below. it is emphasized that only the PCO/CAO has the authority to
modify the terms of the contract. In no event will any understanding,
agreement, modification, change order, or other matter deviating from the
terms of the basic contract between the contractor and any other person be
effective or binding on the Government. If in the opinion of the contractor
an effort outside the scope of the contract is requested, the contractor
shall promptly notify the PCO in writing. The contractor may take no action
unless the PCO or CAO has issued a contractual change. The COR duties are as
follows:
Attachment I
<PAGE>
NAVREGCONTCENINST 4330.13 NOO140-98-C-H189/P00003
a. Technical Interface
(1) The Cor is responsible for all Government technical interface
concerning the contractor and furnishing technical instructions to the
contractor. These instructions may include: technical
advice/recommendations/clarifications or specific details relating to
technical aspects of contract requirement; milestones to be met within the
general terms of the contract or specific subtasks of the contract; or, any
other interface of a technical nature necessary for the contractor to perform
the work specified in the contract or order. The COR is the point of contact
through whom the contractor can relay questions and problems or a technical
nature to the PCO.
(2) The COR is prohibited from issuing any instruction which would
constitute a contractual change. The COR shall not instruct the contractor
how to perform. If there is any doubt whether technical instructions
contemplated fall within the scope of work, contact the PCO for guidance
before transmitting the instructions to the contractor.
b. Contract Surveillance
(1) The COR shall monitor the contractor's performance and progress
under the contract. in performing contract surveillance duties, the COR should
exercise extreme care to ensure that he/she does not cross the line of personal
services. The COR must be able to distinguish between surveillance (which is
proper and necessary) and supervision (which is not permitted). Surveillance
becomes supervision when you go beyond enforcing the terms of the contract. If
the contractor is directed to perform the contract services in the specific
manner, the line is being crossed. In such a situation, the COR's actions would
be equivalent to using the contractor's personnel as if they were government
employees and would constitute transforming the contract in to one for personal
services
(2) The COR shall monitor contractor performance to see that
inefficient or wasteful methods are not being used. If such practices are
observed, the COR is responsible for taking reasonable and timely action to
alert the contractor and the PCO to the situation.
(3) The COR will take timely action to alert the PCO to any potential
performance problems. If performance schedule slippage is detected, the COR
should determine the factors causing the delay and report them to the PCO, along
with the contractor's proposed actions to eliminate or overcome these factors
and recover the slippage. Once a recover plan has been put in place, the COR is
responsible for monitoring the recovery and keeping the PCO advised of progress.
2
<PAGE>
NAVREGIOTCENTINST 4330.13 NOO140-98-C-H189-P00003
c. Invoice Review and Approval/Inspection and Acceptance
(1) The COR is responsible for quality assurance of services performed
and acceptance of the services or deliverables. The COR shall expeditiously
review copies of the contractor's invoices or vouchers, certified of performance
and all other supporting documentation to determine the reasonableness of the
billing. In making this determination, the COR must take into consideration all
documentary information available and any information developed from personal
observations.
(2) The COR must indicate either complete or partial concurrence with
the contractor's invoice/voucher by executing the applicable certificate of
performance furnished by the contractor. The COR must be cognizant of the
invoicing procedures and prompt payment due dates detailed elsewhere in the
contract.
(3) The COR will provide the PCO and the CAO with copies of acceptance
documents such as Certificates of Performance.
d. Contract Modifications. The COR is responsible for developing the
statement of work for change orders or modifications and for preparing an
independent government cost estimate of the effort described in the proposed
statement of work.
e. Administrative Duties
(1) The COR shall take appropriate action on technical correspondence
pertaining to the contract and for maintaining files on each contract. This
includes all modifications, government cost estimates, contractor
involves/vouchers, certificates of performance, DD 250 forms and contractor's
status repots.
(2) The COR shall maintain files on all correspondence relation to
contractor performance, whether satisfactory or unsatisfactory, and on trip
reports for all government personnel visiting the contractors place of business
for the purpose of discussing the contract.
(3) The COR must take prompt action to provide the PCO with any
contract or technical code request for change, deviation or waiver, along with
the supporting analysis or other required documentation.
3
<PAGE>
NAVREGCONTCENINST 4330.13 NOO140-98-C H189-P00003
f. Government Furnished Property When government property is to be furnished
to the contractor, the COR will take the necessary steps to insure that it is
furnished in a timely fashion and in proper condition for use. The COR will
maintain adequate records to ensure that property furnished is returned
and/or that material has been consumed in the performance or work.
g. Security. The COR is responsible for ensuring that any applicable security
requirements are strictly adhered to.
h. Standards of Conduct. The COR is responsible for reading and complying
with all applicable agency standards of conduct and conflict of interest
instructions.
i. Written Report/Contract Completion Statement.
(1) The COR is responsible for the timely preparation and submission to
the PCO, of a written, annual evaluation of the contractors performance. The
report shall be submitted with 30 days prior to the exercise of any contract
option and 60 days after contract completion. The report shall include a written
statement as to the use made of any deliverables furnished by the contractor.
(2) For contracts where delivery orders are issued, one consolidated
report which addresses all actions under the contract may be submitted.
5. The Technical Assistant (TA), if appointed, is responsible for
providing routine administration and monitoring assistance to the COR. The TA
does not have the authority to provide any technical direction or clarification
to the contract. Duties that may be performed by the TA are as follows:
a. Identify contractor deficiencies to the COR.
b. Review contract/deliver order deliverables, recommend
acceptance/rejection, and provide the COR with documentation to support the
recommendation.
c. Assist in preparing the final report on contractor performance for
the applicable contract/delivery order in accordance with the format and
procedures prescribed by the COR.
d. Identify contract noncompliance with reporting requirements to the
COR
e. Evaluate the contractor's proposals for the specific delivery orders
and identify, for the COR, any potential problems, areas of concern, or issues
to be discussed during negotiations.
4
<PAGE>
N00140-98-C=H189/P00003 NAVAREGCONTCENINST 4330.13
f. Review contractor status and progress reports, identify deficiencies
to the COR, and provide the COR with recommendations regarding acceptance,
rejection, and/or Government technical clarification requests.
g. Review invoices for the appropriate mix of types and quantities of
labor, materials, and other direct costs, and provide the COR with
recommendations to facilitate COR certification of the invoice.
h. Provide the COR with timely input regarding technical clarifications
for the statement of work, possible technical direction to provide the
contractor, and recommend corrective actions.
i. Provide detailed written reports of any trip, meeting, or
conversation to the COR subsequent to any interface between the TA and
contractor
5
<PAGE>
CONTRACTOR INVOICE REVIEW FORM
From: (Applicable COR)
To: (Applicable PCO/ACO and DCAA)
Subj: INVOICE REVIEW OF CONTRACT NO. ____________
(also identify delivery order number(s) as applicable)
Encl: (1) Invoice No.___________
Check Appropriate Statement:
1. _______ Enclosure (1) submitted under the subject contract
(deliver order has been reviewed and the labor hours, labor
mix, material (if any), travel, and other direct costs
identified therein appear consistent and reasonable for the
effort performed during the period covered by the invoice.
2. _____ Enclosure (1) submitted under the subject contract (delivery order)
has been reviewed and the following discrepancies/deficiencies are noted:
-----------------------------
Contracting Officer's Representative
(signature and date)
6
<PAGE>
N00140-98-C-H189/P00003
SAMPLE REPORT OF CONTRACTOR'S PERFORMANCE
MEMORANDUM
From: (Applicable COR)
To: (Applicable PCO or Ordering Officer)
Subj: CONTRACTING OFFICER'S REPRESENTATIVE (COR) REPORT OF CONTRACTOR'S
PERFORMANCE ON CONTRACT NUMBER _______ (OR DELIVERY ORDER
_________ ISSUED UNDER CONTRACT NUMBER ________________)
Ref: (a) navregcontcen 4205.1A
1. A performance report on (Name of Contractor) for subject contract for the
period ______________ to _________ is provided per reference (a).
2. Type of contract: _________________ (COST REMIBURSTMENT, INDEFINITE
DELIVERY/INDEFINITE QUANTITY, ETC.)
3. Were all deliverable reports received in a timely manner?
Yes _____ No______ Were they acceptable? Yes _____ No _____.
If no, to either question, explain.
4. Were all the proposed Key Personnel used? Yes _____ No______
If no, explain.
5. Were all tasks completed in a timely manner? Yes _____ No ______
If no, explain.
6. Comment on the quality of the contractor's performance (be specific).
For Cost Reimbursement, Firm Fixed-Price Level of Effort, or Indefinite
Delivery/Indefinite Quantity type contracts, address the following questions:
7. For each contract line item, list the hours proposed and the hours used in
each labor category as follows;
CLIN _________
Labor Category Hours Proposed Hours Actually Used
7
<PAGE>
NOO140-98C-H189/P00003
Subj: CONTRACTING OFFICER'S REPRESENTATIVE (COR) REPORT OF CONTRACTOR'S
PERFORMANCE ON CONTRACT NUMBER ______________ (OR DELIVERY ORDER
____________ISSUED UNDER CONTRACT NUMBER ______________)
8. Were the hours and mix of labor categories actually used consistent with
efficient and cost effective performance? Yes ___________ No____________ If
no, explain.
9. Were travel, material and other direct charges required for performance?
Yes _______ No ________ Were the costs reasonable for the effort received?
Yes ________ No _________ If no, explain.
---------------------------------
Signature of COR
8
<PAGE>
Exhibit 10.15
NORTHTECH
BUSINESS PARK
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
1. LEASE OF PREMISES ................................................ 1
2. DEFINITIONS ...................................................... 1
3. EXHIBITS AND ADDENDA ............................................. 2
4. DELIVERY OF POSSESSION ........................................... 3
5. RENT ............................................................. 3
6. INTERST AND LATE CHARGES ......................................... 4
7. SECURITY DEPOSIT ................................................. 4
8. TENANT'S USE OF THE PREMISES ..................................... 4
9. SERVICES AND UTILITIES ........................................... 5
10. CONDITION OF THE PREMISES ........................................ 5
11. CONSTRIOTION, REPAIRS AND MAINTENANCE ............................ 5
12. ALTERATIONS AND ADDITIONS ........................................ 6
13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY ........................ 6
14. RULES AND REGULATIONS ............................................ 6
15. CERTAIN RIGHTS RESERVED BY LANDLORD .............................. 7
16. ASSIGNMENT AND SUBLETTING ........................................ 7
17. HOLDING OVER ..................................................... 8
18. SURRENDER OF PREMISES ............................................ 8
19. DESTRUCTION OR DAMAGE ............................................ 8
20. EMINENT DOMAIN ................................................... 8
21. INDEMNIFICATION .................................................. 9
22. TENANT'S INSURANCE ............................................... 9
23. WAIVER OF SUBROGATION ............................................ 9
24. SUBORDINATION AND ATTORNMENT ..................................... 9
25. TENANT ESTOPPEL CERTIFICATES ..................................... 10
26. TRANSFER OF LANDLORD'S INTEREST .................................. 10
27. DEFAULT .......................................................... 10
28. BROKERAGE FEES ................................................... 12
29. NOTICES .......................................................... 12
30. GOVERNMENT ENERGY OR UTILITY CONTROLS ............................ 12
32. QUIET ENJOYMENT .................................................. 12
33. OBSERVANCE OF LAW ................................................ 12
34. FORCE MAJEURE .................................................... 12
35. CURING TENANT'S DEFAULTS ......................................... 12
36. SIGN CONTROL ..................................................... 12
37. HAZARDOUS SUBSTANCES ............................................. 13
38. PARKING .......................................................... 14
39. MISCELLANEOUS ................................................... 14
40. WAIVER OF JURY TRIAL ............................................. 15
EXHIBIT "A" ........................................................... 17
EXHIBIT "B" ........................................................... 18
EXHIBIT "C" ........................................................... 19
EXHIBIT "D" ........................................................... 26
</TABLE>
<PAGE>
NORTHTECH BUSINESS PARK
This lease between Real Estate Income Partners III, Limited Partnership,
("Landlord"), and International Data Products, Corp. ("Tenant"), is dated, for
reference purposes only, January 6, 1995.
1. LEASE OF PREMISES
In consideration of the Rent (as defined at Article 5) and the provisions of
this Landlord leases to Tenant and Tenant leases from Landlord the Premises
shown on the floor plan attached hereto as Exhibit "A", and further described
at section 2h. The Premises are located within the Building and Project
described in Section 2i. Tenant shall have the non-exclusive right (unless
otherwise provided herein) in common with Landlord, other tenants, subtenants
and invitees, to use of the Common Areas (as defined at Section 2f).
2. DEFINITIONS
As used in this Lease, the following terms shall have the following meanings:
a. Commencement date: January 6, 1995.
b. Expiration Date; February 29, 2000, unless otherwise sooner terminated in
accordance with the provisions of this Lease.
c. Term: The period commencing on the Commencement Date and expiring at
midnight on the Expiration Date.
d. Total Base Rent: $2,224,179.12
e. Monthly Installments of Base Rent:
Period Monthly Base Rent
January 6, 1995 through & including February 28, 1995 $0.00
March 1, 1995 through & including February 29, 1996 $25,170.75
March 1, 1996 through & including February 28, 1997 $32,035.50
March 1, 1997 through & including February 28, 1998 $38,900.25
March 1, 1998 through & including February 28, 1999 $42,332.63
March 1, 1999 through & including February 29, 2000 $46,909.13
f. Common Areas: The Building lobbies, common corridors and hallways,
restrooms, parking areas, stairways, and other generally understood public
or common areas to the extent the same are not a part of the Premises.
Landlord shall have the right to regulate or restrict the use of the
Common Areas.
g. Parking: Tenant shall be permitted to park 219 cars on a non-exclusive
basis in the areas(s) designated by Landlord from time to time for
parking.
h. Premises: That portion of the Building containing approximately 54,918
square feet of Rentable Area, shown on Exhibit "A", located in and known
as NorthTech Business Park, Suite 100-200.
i. Project: The building of which the Premises are a part (the "Building")
located at 20 Firstfield Road, Gaithersburg, Maryland 20878 and any other
buildings or improvements on the real property (the "Property"), further
depicted on Exhibit "B", and known as NorthTech Business Park.
j. Rentable area: As to both the Premises and the Project, the respective
measurements of floor area as may from time to time be subject to lease by
Tenant and all tenants of the Project, respectively, as determined by
Landlord and applied on a consistent basis throughout the Project.
k. Security Deposit: $46,909.13
<PAGE>
l. Landlord's Mailing Address: Real Estate Income Partners III, 27611 La Paz
Road, P.O. Box 30009, Laguna Niguel, California 92607-0009, Attn: Asset
Manager.
With a copy to the Building Manager:
Birtcher Property Services, 8605 Westwood Center Drive, Suite 206, Vienna,
Virginia 22182.
Tenant's Mailing Address: 20 Firstfield Road, Gaithersburg, Maryland
20878.
m. State: The State of Maryland.
n. Tenant's Proportionate Share: The parties agree that Tenant's initial pro
rata share as described in Section 5.2b (1)(a) is 100%. Such share is a
fraction, the numerator of which is the Rentable Area of the Premises, and
the denominator or which is the Rentable Area of the Building, as
determined by Landlord from time to time. The parties further agree that
Tenant's initial pro rata share of the operating cost component of Project
Operating Costs as described in Section 5.2b(1)(b) is 33.6%. Such share is
a fraction, the numerator of which is the Rentable Area of the Premises,
and the denominator of which is the Rentable Area of the Project, as
determined by Landlord form time to time. If the area of the Premises, of
the Building or of the Project change, Tenant's appropriate pro rata share
shall be adjusted accordingly.
o. Tenant's Use Clause: Assembly of notebook personal computers and computer
hardware and related office use.
o. Broker(s)
Landlord's: Carey Winston Company
Tenant's: Manekin Corporation
In the event that Carey Winston Company represents both Landlord and Tenant,
Landlord and Tenant hereby confirm that they were timely advised of the dual
representation and that they consent to the same, and that they do not expect
said broker to disclose to either of them the confidential information of the
other party.
3. EXHIBITS AND ADDENDA
The exhibits and addenda listed below (unless lined out) are incorporated by
reference in this Lease:
a. Exhibit "A" - Floor Plan showing the Premises.
b. Exhibit "B" - Site Plan of the Project
c. Exhibit "C" - Landlord's Work.
d. Exhibit "D" - Rules and Regulations.
e. Addenda:
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4. DELIVERY OF POSSESSION
"Delivery of possession" shall be deemed to occur on the Commencement Date.
5. RENT
5.1 Payment of Base Rent. Tenant agrees to pay the Base Rent for the
Premises. The monthly installments of Base Rent set forth at section
2e shall be payable in advance on or before the first day of each
calendar month of the Term. If the Term begins (or ends) on other
than the first (or last) day of a calendar month, the Base Rent for
the partial month shall be prorated on a per diem basis. Tenant shall
pay Landlord the first Monthly Installment of Base Rent when Tenant
executes the Lease.
5.2 Project Operating Costs.
a. Effective as of March 1, 1995, Tenant agrees to pay to Landlord as
Rent, Tenant's Proportionate Share of all costs, expenses and
obligations attributable to the Project and its operating, all as
provided below.
b. During each calendar year during the Term, Tenant shall pay to
landlord, in addition to the Base Rent and all other payments due
under this Lease, an amount equal to Tenant's Proportionate Share
of Project Operating Costs in accordance with the provisions of
this Section 5.2b.
(1) The term "Project Operating Costs" shall include all those
items described in the following subparagraphs (a) and (b).
(a) All taxes, assessments, water and sewer charges and other
similar governmental charges levied on or attributable to the
Building or Project or their operation, including without
limitation, (i) real property taxes or assessments due and
payable against the Building or Project, (ii) assessments or
charges due and payable against the Building or Project by
any redevelopment agency or any front foot benefit charges,
(iii) any tax measured by gross rental received from the
leasing of the Premises, Building or Project, excluding any
net income, franchise, capital stock, estate or inheritance
taxes imposed by the State or federal government or their
agencies, branches, branches or departments; provided that if
at any time during the Term any governmental agency entity
levies, assesses or imposes on Landlord any (1) general or
special, ad valorem or specific excise, capital levy or other
tax, assessment, levy or charge directly on the Rent received
under this Lease or on the rent received under any other
leases of space in the Building or Project, (2) any license
fee, excise or franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rent, or
(3) any transfer, transaction, or similar tax, assessment,
levy or charge based directly or indirectly upon the
transaction represented by this Lease or such other lease, or
(4) any occupancy, use per capita or other tax, assessment,
levy or charge based directly or indirectly upon use or
occupancy of Premises or other premises within the building
or Project, then any such taxes, assessments, levies and
charges shall be deemed to be included in the term Project
Operating Costs. Project Operating Costs shall also include
all costs incurred by Landlord in protesting the amount or
real property taxes or assessments levied against the
Building or Project, including without limitation, reasonable
attorney's fees.
(b) Operating costs incurred by Landlord in maintaining and
operating the Building and Project, including without
limitation the following: costs of (1) utilities; (2)
supplies; (3) insurance (including public liability, property
damage, earthquake, and fire and extended coverage insurance)
for the full replacement cost of the Building and Project as
required by Landlord or ites lenders for the Project; (4)
services of independent contractors; (5) compensation
(including employment taxes and fringe benefits) of all
persons who perform duties connected with the operation,
maintenance, repair or overhaul of the Building or Project ,
and equipment, improvements and facilities located within the
Project, including, without limitation engineers, janitors,
painters, floor waxers, window washers, security and parking
personnel and gardeners (but excluding persons performing
services not uniformly available to or performed for
substantially all Building or Project tenants); (6) operation
and maintenance of room for delivery and distribution of mail
to tenants of the Building or Project as required by the U.S.
Postal Service (including, without limitation, an amount
equal to the fair market rental value of the mail room
premises); (7) management of the Building or Project ,
whether managed by Landlord or an independent contractor
(including, without limitation, an amount equal to the fair
market rental value of any on-site manager's office); (8)
rental expenses for (or a reasonable depreciation allowance
on) personal property used in the maintenance, operation or
repair of the Building or Project; (9) costs, expenditures or
charges (whether capitalized or not) required by any
governmental or quasi-governmental authority; (10)
amortization of capital expenses (including financing costs)
(i) required by a governmental entity for energy conservation
or life safety purposes, or (ii) made by Landlord which are
reasonably intended to reduce Project Operating Costs; and
(11) any other costs or expenses incurred by Landlord under
this Lease and not otherwise reimbursed by tenants of the
Project.
(2) Tenant's Proportionate Share or Project Operating Costs shall
be payable by Tenant to Landlord as follows:
(a) Each calendar year, Tenant shall pay Landlord an amount
equal to Tenant's Proportionate Share of the Project
Operating Costs incurred by Landlord in maintaining and
operating the Building and Project.
(b) To provide for current payments of Tenant's Proportionate
Share of the Project Operating Costs payable during each
calendar year, as estimate by Landlord from time to time.
Such payments shall be made in monthly installments,
commending on the first day of the month following the month
in which Landlord notifies Tenant of the amount it is to pay
hereunder and continuing until the first day of the month
following the month in which Landlord gives Tenant a new
notice of estimated Project Operating Costs. It is the
intention hereunder to estimate from time to time the amount
of the Project Operating Costs for each calendar year and
Tenant's Proportionate Share thereof, and then to make an
adjustment in the following year based on the actual Project
Operating Costs incurred for the preceding calendar year.
(c) On or before April 1 of each calendar year (or as soon
thereafter as is practical), Landlord shall deliver to Tenant
a statement setting forth Tenant's proportionate share of
Project Operating Costs for the preceding calendar year. If
Tenant's Proportionate Share of the actual Project Operating
Costs for the previous calendar year exceed the total of the
estimate monthly payments made by Tenant for such year,
Tenant shall pay Landlord the amount of the deficiency within
ten (10) days of the receipt of the statement. If such total
exceeds Tenant's Proportionate Share of the actual Project
Operating Costs for such calendar
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year, then Landlord shall credit against Tenant's next
ensuing monthly installment(s) of additional rent an amount
equal to the difference until the credit is exhausted. If a
credit is due from Landlord on the Expiration Date, Landlord
shall pay Tenant the amount of the credit. The obligations of
Tenant and Landlord to make payments required under this
Section 5.2 shall survive the Expiration Date.
(d) Tenant's Proportionate Share of Project Operating Costs
in any lease year having less than 365 days shall be prorated
on a per diem basis.
(e) If any dispute arises as to the amount of additional rent
due hereunder, Tenant shall have the right after reasonable
notice and at reasonable times to inspect Landlord's
accounting records at Landlord's accounting office and, if
after such inspection Tenant still disputes the amount of
additional rent owed, a certification as to the proper amount
shall be made by Landlord's certified public accountant,
which certification shall be final and conclusive. Tenant
agrees to pay the cost of such certification unless it is
determined that Landlord's original statement overstated
Project Operating Costs by more than 5%.
5.3 Definition of Rent. All costs and expenses which Tenant assumes or
agrees to pay to Landlord under this Lease shall be deemed additional
rent (which, together with the Base Rent is sometimes referred to as
the "Rent"). The Rent shall be paid to the Building manager (or other
person) as set forth in Section 2), or at such place, as Landlord may
from time to time designate in writing without any prior demand
therefor and without deduction or offset, in lawful money of the
United States of America.
5.4 Rent Control. If the amount of Rent or any other payment due under
this Lease violates the terms of any governmental restrictions on
such Rent or payment, then the Rent or payment due during the period
of such restrictions shall be the maximum amount allowable under
those restrictions. Upon termination of the restrictions, Landlord
shall, to the extent it is legally permitted, recover from Tenant the
difference between the amounts received during the period of the
restrictions and the amounts Landlord would have received had there
been no restrictions.
5.5 Taxes Payable by Tenant. In addition to the Rent and any other
charges to be paid by Tenant hereunder, Tenant shall reimburse
Landlord upon demand for any and all taxes payable by Landlord (other
than net income taxes) which are not otherwise reimbursable under
this Lease, whether or not now customary or within the contemplation
of the parties, where such taxes are upon, measured by or reasonably
attributable to (a) the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the
Premises, or the cost or value of any leasehold improvements made in
the or to the Premises by or for Tenant, regardless of whether title
to such improvements is held by Tenant or Landlord; (b) the gross or
net Rent payable under this Lease, including, without limitation, any
rental or gross receipts tax levied by any taxing authority with
respect to the receipt of the Rent hereunder; (c) the possession,
leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion thereof; or (d)
this transaction or any document to which Tenant is a party creating
or transferring an interest or an estate in the Premises. If it
becomes unlawful for Tenant to reimburse Landlord for any costs as
required under this Lease, the Base Rent shall be revised to net
Landlord the same net rent after imposition of any tax or other
charge upon Landlord as would have been payable to Landlord but for
the reimbursement being unlawful.
6. INTEREST AND LATE CHARGES
If Tenant fails to pay when due any Rent or other amounts or charges which
Tenant is obligated to pay under the terms of this Lease, the unpaid
amounts shall bear the interest at the lesser of fifteen percent (15% )
per annum or the maximum rate then allowed by law. Tenant acknowledges
that the late payment of Rent will cause Landlord to lose the use of that
money and incur costs and expenses not contemplated under this Lease,
including, without limitation, administrative and collection costs and
processing and accounting expenses, within ten (10) days from the date it
is due, Tenant shall pay Landlord's late charge equal to five percent (5%)
of such compensation to Landlord for the loss suffered from such
nonpayment by Tenant. Acceptance of any interest or late charge shall not
constitute a waiver of Tenant's default with respect to such nonpayment by
Tenant nor prevent Landlord from exercising any other rights or remedies
available to Landlord under this Lease.
7. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord the Security Deposit set forth at
Section 2K upon the execution of this Lease, as security for Tenant's
faithful performance of its obligations under this Lease. Landlord and
Tenant agree that the Security Deposit may be commingled with funds of
Landlord and Landlord shall have no obligation or liability for payment of
interest on such deposit. Tenant shall not mortgage, assign, transfer or
encumber the Security Deposit without the prior written consent of
Landlord and any attempt by Tenant to do so shall be void, without force
or effect and shall not be binding upon Landlord.
If Tenant fails to pay any Rent or other amount when due and payable under
this Lease, or fails to perform any of the terms hereof, Landlord may
appropriate and apply or use all or any portion of the Security Deposit
for Rent payment or any other amount then due and unpaid, for payment of
any amount for which Landlord has become obligated as a result of Tenant"
default or breach, and for any loss or damage sustained by Landlord as a
result of Tenant's default or breach, and Landlord may so apply or use
this deposit without prejudice to any other remedy Landlord may have by
reason of Tenant's default or breach. If Landlord so uses any of the
Security Deposit, Tenant shall, within ten (10) days after written demand
therefor, restore the Security Deposit to the full amount originally
deposited; Tenant's failure to do so shall constitute an act of default
hereunder and Landlord shall have the right to exercise any remedy
provided for at Article 27 hereof. Within fifteen (15) days after the term
(or any extension thereof) has expired or Tenant has vacated the Premises,
whichever shall last occur, and provided Tenant is not then in default on
any of its obligations hereunder, Landlord shall return the Security
Deposit to Tenant, or if Tenant has assigned its interest under this
Lease, to the last assignee of Tenant. If Landlord sells its interest in
the Premises, Landlord may deliver this deposit to the purchaser of
Landlord's interest and thereupon be relieved of any further liability or
obligation with respect to the Security Deposit.
8. TENANT'S USE OF THE PREMISES
Tenant shall use the Premises solely for the purposes set forth in
Tenant's Use Clause. Tenant shall not use or occupy the Premises in
violation of law or any covenant, condition or restriction affecting the
Building or Project or the certificate of occupancy issued for the
Building or Project, and shall, upon notice from Landlord, immediately
discontinue any use of the Premises which is declared by an governmental
authority having jurisdiction to be a violation of law or the certificate
of occupancy issued for the governmental authority having jurisdiction to
be a violation of law or the certificate of occupancy issued for the
Building or Project, and shall, upon notice from Landlord, immediately
discontinue any use of the Premises which is declared by an governmental
authority having jurisdiction to be a violation of law or the certificate
of occupancy. Tenant, at Tenant's own cost and expense shall comply with
all laws, ordinances, regulations, rules and/or any directions of any
governmental agencies or authorities having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, impose
any duty upon Tenant or Landlord with respect to the Premises or its use
or occupation. A judgment of any court of competent jurisdiction or the
admission by Tenant in any action or proceeding against Tenant that Tenant
has violated any such laws, ordinances, regulations, rules and/or
directions in the use of the Premises shall be deemed to be a conclusive
determination of that fact as between Landlord and Tenant. Tenant shall
not do or permit to be done anything which will invalidate or increase the
cost of any fire, extended coverage or other insurance policy covering the
Building or Project and/or property located therein, and shall comply with
all rules, orders, regulations, requirements and recommendations of the
Insurance Services Office or any other organization performing a similar
function. Tenant shall promptly upon demand reimburse Landlord for any
additional premium charged for such policy by reason of Tenant's failure
to comply with the provisions
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of this Article. Tenants shall not do or permit anything to be done in
or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or Project, or
injure or annoy them, or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises.
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises.
9. SERVICES AND UTILITIES
Tenant shall make arrangements directly with the telephone company,
electrical company and other public utilities servicing the Premises for
telephone service, electrical current and power and other utilities in the
Premises desired by Tenant. Tenant shall pay the entire cost of all
telephone service, electricity consumed within the Premises, maintenance
of light fixtures and replacement of lights, bulbs, tubes , ballasts and
starters. Tenant acknowledges that the cost of providing hot water to and
heating and air conditioning the Premises is included in Tenant's utility
charges and Tenant shall have full responsibility for the payment thereof.
Landlord shall in no event be liable or responsible to Tenant for any
loss, damage or expense which Tenant may sustain or incur if either the
quality or character of telephone service, electrical service or other
utilities serving the Premises is changed or is no longer suitable for
Tenant's requirements. Tenant's use of electric current shall never exceed
the capacity of existing wiring, insulation or feeders to the Building or
the Premises, and Tenant shall make no alterations or additions to the
electrical equipment and/or appliances without the prior written consent
of Landlord in each instance. Tenant shall not connect any apparatus with
electric current, except through existing electrical outlets in the
Premises.
Landlord agrees to furnish water to the Premises (if applicable), and to
provide water, electricity and heating, ventilation and air conditioning
("HVAC") to the Common Areas during generally recognized business days,
and during hours determined by Landlord in its sole discretion. Landlord
shall also maintain and keep lighted the Common Areas, common entries and
restrooms in the Building. Landlord shall not be in default hereunder or
be liable for any damages directly or indirectly resulting from, nor shall
the Rent be abated by reason of (i) the installation, use or interruption
of use of any equipment in connection with the furnishing of any of the
foregoing services, (ii) failure to furnish or delay in furnishing such
services any such services where such failure or delay is caused by
accident or any condition or event beyond the reasonable control of
Landlord, or by the making of necessary repairs or improvements to the
Premises, Building or Project, or (iii) the limitation, curtailment or or
rationing of, or restrictions on, use of water, electricity, gas or any
other form of energy serving the Premises, Building or Project. Landlord
shall not be liable under any circumstances for a loss of or injury to
property or business, however occurring , through or in connection with or
incidental to failure to furnish any such services.
Tenant shall not consume water in excess of that usually furnished or
supplied for the use of premises as general office space (as determined by
Landlord) without first procuring the written consent of Landlord, which
Landlord may refuse, and in the event of consent, Landlord may have
installed a water meter in the Premises to measure the amount of water
consumed. The cost of any such meter and of its installation, maintenance
and repair shall be paid for by the Tenant and Tenant agrees to pay to
Landlord promptly upon demand for all such water consumed as shown by said
meter, at the rates charged for such services by the local public utility
plus any additional expense incurred in keeping account of the water so
consumed. If a separate meter is not installed, the excess cost for such
water shall be established by an estimate made by a utility company hired
by Landlord at Tenant's expense.
Nothing contained in this Article shall restrict Landlord's right to
require at any time separate metering of utilities furnished to the
Premises. In the event utilities are separately metered, Tenant shall say
promptly upon demand for all utilities consumed at utility rates charged
by the local public utility plus any additional expense incurred by by
Landlord in keeping account of the utilities so consumed. Tenant shall be
responsible for the maintenance and repair of any such meters at its sole
cost.
10.CONDITION OF THE PREMISES
Tenant's taking possession of the Premises shall be deemed conclusive
evidence that as of the date of taking possession the Premises are in good
order and satisfactory condition, except for such matters as to which
Tenant gave Landlord notice on or before the Commencement Date. No promise
of Landlord to alter, remodel, repair or improve the Premises, the
Building, Project or this Lease (including, without limitation, the
condition of the Premises, the Building or the project) have been made to
Tenant by Landlord or its Broker or Sales Agent. TENANT AGREES THAT IT
ACCEPTS THE PREMISES IN ITS "AS IS" CONDITION. Tenant shall perform
certain tenant improvements in accordance with the Work Letter attached as
Exhibit "C".
11.CONSTRUCTION, REPAIRS AND MAINTENANCE
a. Landlord's Obligations. Landlord shall maintain in good order, condition
and repair the Building, Common Areas and all other portions of the
Premises not the obligation of Tenant or of any other tenant in the
Project. Landlord shall furnish solely the following, the cost and expense
of all which shall be included within the term Project Operating Costs as
defined in Section 5.2:
(1) Landlord shall cause cold water to be piped to the Project and to
the Premises (if applicable);
(2) Landlord shall cause removal of snow accumulations from the parking
lot and sidewalks and cutting of the grass in the Common Areas
designated pursuant to Section 11b hereof;
(3) Landlord shall cause to be provided lighting for the exterior of
the Project and of the Common Areas in the Project; and
(4) Landlord shall cause to be maintained, repaired and replaced, when
necessary, the heating and air conditioning, water and all other
mechanical equipment, systems and fixtures applicable to the
Common Areas whether located on the roof to the Premises or in the
Premises. Landlord shall not be liable for damages, by abatement
of rent or otherwise, for failure to furnish, or delay in
furnishing, any one or more of the above, which failure or delay
is caused, in whole or in part, by war, insurrection, civil
disturbance, riots, acts of God, governmental action, repairs,
improvements, alterations, strikes, lockouts or picketing (whether
legal or illegal), inability to obtain electricity, fuel or
supplies, accidents, casualties, acts caused directly or
indirectly by Tenant (or Tenant's agents, representatives,
employees, licensees or invitees) any other act or cause beyond
the reasonable control of Landlord. Any such failure or delay in
furnishing the above shall be without any liability of Landlord to
Tenant and shall not be deemed to be an eviction or disturbance in
any manner of Tenant's use and possession of the Premises or
relieve Tenant from its obligation to pay all Rent when due, or
from any other obligation hereunder.
b. Common Areas. Tenant, its employees, agents and invitees, shall have the
nonexclusive right in common with Landlord and other tenants of the
Building or Project, and their respective employees, agents and invitees,
to the use of any and all driveways, common parking areas and other common
areas that may be designated by Landlord. Such use shall be subject to the
rules and regulations of the Landlord, and Tenant shall not obstruct or
store anything in any Common Area or allow any objectionable noises or
odors to emit from the Premises, or create or maintain a nuisance in any
Common Area, or shall not distribute, solicit or canvass any occupants of
the Building or Project.
c. Tenant's Obligations.
(1) Except for services frunished by Landlord pursuant to Article 9
hereof, Tenant at Tenant's sole expense shall maintain the
Premises in good order, condition and repair, including the
interior surfaces of the ceilings, walls and floors, all doors,
all interior windows, all plumbing, pipes and fixtures,
eelectrical wiring, switches and fixtures, building standard
furnishings and special items and equipment installed by or at the
expense of Tenant.
(2) Tenant shal be responsible for all repairs and alterations in and
to the Premises, Building and Project and the facilities and
systems thereof, the need for which arises out of (i) Tenant's use
or occupancy of the Premises, (ii) the installation,
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removal, use or operation of Tenant's Property (as defined in
Article 13) in the Premises, (iii) the moving of Tenant's Property
into or out of the building, or (iv) the act, omission, misuse or
negligence of Tenant, its agents, contractors, employees or
invitees.
(3) If Tenant fails to maintain the Premises in good order, condition
and repair, Landlord shall give Tenant notice to do such acts as
are reasonably required to so maintain the Premises. If Tenant
fails to promplty commence wuch work and diligently prosecute it
to completion, then Landlord shall have the right to do such acts
and expand such funds at the expense of Tenant as are reasonably
required to perform such work. Any amount so expended by Landlord
shall be paid by Tenant promptly after demand with interest, from
the date of such work, at the lesser of fifteen percent (15%) per
annum or the maximum rate than allowed by law. Landlord shall have
no liability to Tenant for any damage, inconvenience, or
interference with the use of the Premises by Tenant as a result of
performing any such work.
d. Compliance with Law. Landlord and Tenant shall each do all acts required
to comply with all applicable laws, ordinances, and rules of any public
authority relating to their respective maintenance obligations as set
forht herein. Landlord shall be responsible for compliance with the
requirements of Title III of the Americans with Disabilities Act of 1990
with respect to physical accessibiility to, within and about the Building
an dProject of which the Premises are apart. Tenant shall be responsible
for said compliance within the Premises, after the Commencemtn Date.
e. Waiver by Tenant. Tenant expressly waives the benefits of any statute now
or hareafter in effect which would otherwise afford the Tenant the right
to make repaiurs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the Premises in good order, condition and
repair.
f. Load and Equipment Limits. Tenants shall not place a load upon any floor
of the Premises which exceeds the load per square foot which such floor
was designed to carry, as determined by Landlord or Landlor's structural
engineer. The cost of any such determination made by Landlord's structural
engineer shall be paid for b Tenant upon demand. Tenant shall not install
business machines or mechanical equipment which cause noise or vibration
to such a degree as to be objectionable to landlord or other Building
tenants.
g. Except as otherwise expressly provided in this Lease, Landlord shall have
no liablility to Tenant nor shall Tenant's obligations under this Lease be
reduced or abated in any manner whatsoever by reason of any inconvenience,
annoyance, interruption or injury to business arising from Landlord's
making any repairs or changes which Landlord is required or permitted by
this Lease or by any other tenant's lease or required by law to make in or
to any portion of the Project, Building or the Premises. Landlord shall
nevertheless use reasonable efforts to minimize any interference with
Tenant's business in the Premises.
h. Tenant shall give Landlord prompt notice of any damage to or defective
condition in any part of appurtenance of the Building's mechanical,
electrial, plumbing, HVAC or other systems serving, located in, or passing
through the Premises.
12.ALTERATIONS AND ADDITIONS
a. Tenant shall not make any additions, alterations, or improvements to the
Premises other than those described in the Work Letter attached hereto as
Exhibit "C" without obtaining the prior written consent of Landlord.
Landlord's consent may be withheld in Landlord's sole discretion or may be
conditioned on Tenant's removing any such additions, alterations or
improvements upon Landlord's election at or before the expiration of the
Term and restoring the Premises to the same condition as on the date
Tenant took possession. All work with respect to any addition, alteration
or improvement shall be done in a good ant workmanlike manner by properly
qualified and licensed personnel approved by Landlord, and such work shall
be diligently prosecuted to completion. Landlord may, at Landlord's
option, require that any such work will be performed by Landlord's
contractor, in which case the cost of such work shall be paid for before
commencement of the work. Tenant shall pay to Landlord upon completion of
any such work by Landlord's contractor, an administrative fee of fifteen
percent (15%) of the cost of the work. Landlord's review or any plans in
specification or consent to additions, alterations or improvements shall
not be construed as a warranty or certification that such plans and
specification or such additions, alterations or improvements are adequate
for any purpose or comply with applicable laws, ordinances, or
regulations, nor shall Landlor's approval or consent relieve Tenant from
the obligation of complying with such applicable laws, ordinances and
regulations.
b. Tenant shall pay the costs of any work done on the Premisies pursuant
to Section 12a, and shall keep the Premisies, Building and Project free
and clear of liens of any kind. Tenant shall indemnify, defend against
and keep Landlord free and harmless from all liability, loss, damage,
costs, attorneys' fees and any other expense incurred on account of
claims by any person performing work or furnishing materials or
supplies for Tenant or any person claiming under Tenant.
Tenant shall keep the Tenant's leasehold interest, and any additions or
improvements which are or become the property of Landlord under this
Lease, free and clear of all attachment or judgment liens. Befor ethe
actual commencement of any work for which a claim or lien may be filed,
Tenant shall give the Landlord notice of the intended commencement date a
sufficient time before that dat to enable Landlord to post notices of
non-responsibility or any other notices which Landlord shall have the
right to enter the Premises and post such notices at any reasonable time.
c. Landlord may require, at Landlord's sole option, that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond in amount equal
to at least one and one-half (1 1/2) times the total estimated cost of any
additions, alterations or improvements to be made in or to the Premises,
to protect Landlord against any liability for mechanic's and materialmen's
liens and to insure timely completion of the work. Nothing contained in
this Section 12c shall relieve Tenant of its obligation under Section 12b
to keep the Premises, Building and Project free of all liens.
d. Unless their removal is required by Landlord as provided in Section 12a,
all additions, alterations and improvements made to the Premises shall
become the property of Landlord and be surrendered with the Premises upon
the expiration of the Term; provided, however, Tenant's equipment,
machinery and trade fixtures which can be removed without damage to the
Premises shall remain the property of Tenant and may be removed, subject
to the provisions of Section 13b.
13.LEASEHOLD IMPROVEMENTS: TENANT'S PROPERTY
a. All fixtures, equipment, improvements and appurtenances attached to or
built into the Premises at the commencement of or during the Term, whether
or not by or at the expense of Tenant ("Leasehold Improvements"), shall be
and remain a part of the Premises, shall be the property of Landlord and
shall not be removed by Tenant, except as expressly provided in Sections
12a, 12d or 13b.
b. All moveable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment located in the
Premises and acquired by or for the account of Tenant, without expense to
Landlord, which can be removed without damage to the Building, and all
furniture, furnishings and other articles of moveable personal property
owned by tenant and located in the Premises (collectively "Tenant's
Property") shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the Term; provided that if any of
Tenant's Property is removed, Tenant shall proptly repair any damage to
the Premises or to the Building resulting from such removal.
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14.RULES AND REGULATIONS
Tenant agrees to comply with (and cause its agents, contractors, employees
and invitees to comply with) the rules and regulations attached hereto as
Exhibit "D" and with such reasonable modifications thereof and additions
thereto as Landlord may from time to time make. Landlord shall not be
responsible for any violation of said rules and regulations by other
tenants or occupants of the Building or Project.
15.CERTAIN RIGHTS RESERVED BY LANDLORD
Landlord reserves the following rights, exercisable without liability to
Tenantfor (a) damage or injury to property, person or business, (b)
causing an actual or constructive eviction from the Premises, or
(c)disturbing Tenant's use or possession of the Premises:
a. To name the Building and Project and to change the name or street
address of the Building or Project;
b. To install and maintain all signs on the exterior and interior of the
Building and Project;
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes;
d. At any time during the Term, and on reasonable prior notice to Tenant,
to inspect the Premises, and to show the Premises to any prospective
purchaser or morgagee of the Project, or to any assignee of any
mortgage on the Project, to prospective tenants, or to others having an
Interest in the Project or Landlord; and
e. To enter the Premises for the purpose of making inspections, repairs,
alterations, additions or improvements to the Premises or the Building
(including, without limitation, checking, calibrating, adjusting or
blancing controls and other parts of the HVAC system), and to take all
steps as may be necessaryor desirable for the safety, protection,
maintenance or preservation of the Premises or the Building or
Landlord's interest therein, or as may be necessary or desirable for
the operation or improvement of the Building or in order to comply with
laws, orders or requirements of governmental or other authority.
Landlord agrees to use its good faith reasonable efforts (except in an
emergency) to minimize interference with Tenant's business in the
Premises in the course of any such entry.
16.ASSIGNMENT AND SUBLETTING
No assignment of this Lease or sublease of all or any part of the Premises
shall be permitted, except as provided in this Article 16.
a. Tenant shall not, without the prior written consent of Landlord, assign
or hypothecate this Lease or any interest herein or sublet the Premises
or any part thereof, or permit the use of the Premises by any party
other than Tenant. Any of the foregoing acts without such consent shall
be void and shall, at the option of Landlord, terminate this Lease.
This Lease shall not, nor shall any interest of Tenant herein, be
assignable by operation of law without the written consent of Landlord.
b. If at any time or from time to time during the Term Tenant desires to
assign this Lease or sublet all or any part of the Premises, Tenant
shall give notice to Landlord setting forth the terms and provisions of
the proposed assignment or sublease, and the identity of the proposed
assignee or subtenant. Tenant shall promptly supply Landlord with such
information concerning the business background and financial condition
of such proposed assignee or subtenant as Landlord may reasonably
request. Landlord shall have the option, exercisable by notice given to
Tenant within ten (10) business days after Tenant's notice is given,
either to sublet such space from Tenant at the rental and on the other
terms set forth in this Lease for the term set forth in Tenant's
notice, or, in the case of an assignment, to terminate this Lease.
Subject to the other provision in the Article 15, if Landlord does not
exercise such option, Tenant may assign the Lease or sublet such space
to such proposed assignee or subtenant on the following further
conditions:
(1) Landlord shall have the right to approve such proposed assignee or
subtenant, which approveal shall not be unreasonably withheld;
(2) The assignment or sublease shall be on the same terms set forth in
the notice given to landlord;
(3) No assignment or sublease shall be valid and no assignee or
sublessee shall take possession of the Premises until an executed
counterpart of such assignment or sublease has been delivered to
Landlord;
(4) No assignee or sublessee shall have a further right to assign or
sublet except on the terms herein contained: and
(5) Fifty percent (50%) of any sums or other economic consideration
received by Tenant as a result of such assignment or subetting,
however denominated under the assignment or sublease, shich exceed,
in the agregate, (i) the total sums which Tenant is obligated to pay
Landlord under this Lease (prorated to reflect obligations alocable
to any portion of the Premises subleased), plus (ii) any real estate
brokerage commissions or fees payable in connection with such
assignment or subletting, shall be paid to Landlord as additional
rent under this Lease without affecting or reducing any other
obligations Tenant hereunder;
(6) Tenant shall not then be in default beyond the time herein
provided, if any, to cure such default; and
(7) Tenant shall be prohibited from negotiating with a person or
entity whith whom Landlord is then negoatiating to lease space in
the Building or Project, including any existing tenant in the
Building or Project with whom Landlord is then negotiating to
lease additional or expansion space in the Building or Project.
c. Notwithstanding the provisions of paragraphs a and b above, Tenant may
assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent and without extending any recapture or termination
option to Landlord, to any corporation which contraols, is contraolled by
or is under common control with Tenant, or to any corporation resulting
form a merger or consolidation with Tenant, or to any person or entity
which acquires all the assets of Tenant's business as a going concern,
provided that (i) the assignee or sublessee assumes, in full, the
obligations of Tenant under this Lease, (ii) Tenant remains fully liable
under this Lease, and (iii) the use of the Premises under Article 8
remains unchanged.
d. No subletting or assignment shall release Tenant of Tenant's obligation
under this Lease or alter the primary liability of Tenant to pay the
Rent and to perform all other obligation to be performed by Tenant
hereunder. The acceptance or Rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting. In the event of default by an
assignee or subtenant of Tenant or any successor of Tenant in the
performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting rememdies against
such assignee, subtenant or successor. Landlord may consent to
subsequent assignments of the Lease or subletting or amendments or
madifications to the Lease with assignees of Tenant, without notifying
Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto and any such actions shall not relieve Tenant of
liability under this Lease.
e. If Tenant assigns the Lease or sublets the Premises or requests the
consent of Landlord to any assignment or subletting or if Tenant
requests the consent of Landlord for any act that Tenant proposes to
do, then Tenant shall, upon demand, pay Landlord
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an administrative fee of One Hundred Fifty and 00/100 Dollars ($150.00)
plus any attorney's fees reasonably incurred by Landlord in connection
with such act or request.
f. Any transfer, by operation of law or otherwise, of Tenant's interest in
the Lease (in whole or in part) or of a fifty percent (50%) or greater
interest in Tenant (whether stock, partnership interest or otherwise)
shall be deemed an assignment of this lease within the meaning of this
Section 16. The issuance of shares of stock to other than the existing
shareholders is ddemed to be a transfer of that stock for the purposes of
this Section 16. If, during the Term of this Lease, there is a transfer of
less than a fifty percent (50%) interest in Tenant, then any other
transfer of an interest in Renant which, when added to the total
percentage interest previously transferred, totals a transfer of greater
than fifty percent (50%) interest in Tenant shall be deemed an assignment
of Tenant's interest in this Lease within the meaning of this Section 16.
17.HOLDING OVER
If after expiration of the Term, Tenant remains in possession of the
Premises with Landlord's permission (express or implied), Tenant shall
become a tenant from month to month only, upon all the provisions of this
Lease (except as to Term and Base Rent), but the Tenant shall pay for each
month of such hold-over period a fair rental value equal to one hundred
fifty percent (150%) of the Monthly Installments of Base Rent payable by
Tenant at the expiration of the Rem, which amount shall be payable on a
quantum merit basis and not a rent. Such monthly rent shall be payable in
advance on or before the first day of each month. If either party desires
to terminate such month to month tenancy, it shall give the other party
not less than thirty (30) days advance written notice of the date of
termination. TENANT HEREBY WAIVES ANY NOTICE OT QUIT OR VACATE THE
PREMISES.
18.SURRENDER OF PREMISES
a. Tenant shall peaceably surrender the Premises to Landlord on the
Expiration Date, or upon earlier termination of this Lease, in
broom-clean condition an in as good condition as when Tenant took
possession, except for (i) reasonable wear and tear, (ii) loss by fire
or other casualty, and (iii) loss by condemnation. Tenant shall remove
Tenant's Property on or before the Expiration Date and promptly repair
all damage to the Premises or Building caused by such removal.
b. If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any of Tenant's Property left on the
Premises shall be deemed to be abandoned, and, at Landlord's option,
title shall pass to Landlord under this Lease as by a bill of sale. If
Landlord elects to remove all or any part of such Tenant's Property,
the cost of removal, including repairing any damage done to the
Premises or Building caused by such removal, shall be paid by Tenant.
On the Expiration Date Tenant shall surrender all keys to the Premises.
19.DESTRUCTION OR DAMAGE
a. If the Premises or the portion of the Building necessary for Tenant's
occupancy is damaged by fire, earthquake, act of God, the elements of
other casualty, Landlord shall, subject to the provisions of this
Article, promptly repair the damage, if such repairs can, in Landlord's
option, be completed within ninety (90) days. If Landlord determines
that repairs can be completed within ninety (90) days, this Lease shall
remain in full force and effect, except that if such damage is not the
result of the negligence or willful misconduct of Tenant is Tenants
agents, employees, contractors, licensees or invitees, the Base Rent
shall be abated to the extent Tenant's use of the Premises is impaired,
commencing with the date of damage and continuing until completion of
the repairs required of Landlord under Section 19d.
b. If in Landlord's opinion, such repairs to the Premises or portion of
the Building necessary for Tenant's occupancy cannot be completed
within ninety (90) days, Landlord may elect, upon notice to Tenant
given within thirty (30) days after the date of such fire or other
casualty, to repair such damage, in which event this Lease shall
continue in full force and effect but the Base Rent shall be partially
abated as provided in Section 19a. If Landlord does not so elect to
make such repairs, this Lease shall terminate as of the date of such
fire or other casualty.
c. If any other portion of the Building or Project is totally destroyed or
damaged to the extent that in Landlord's opinion repair thereof cannot
be completed within ninety (90) days, Landlord may elect, upon notice
to Tenant given within thirty (30) days after the date of such fire or
other casualty, to repair such damage, in which event this Lease shall
continue in full force and effect but the Base Rent shall be partially
abated as provided in Section 19a. If Landlord does not so elect to
make such repairs, this Lease shall terminate as of the date of such
fire or other casualty.
d. If the Premises are to be repaired under this Article, Landlord shall
repair at its cost any injury or damage to the Building and building
standard work in the Premises. Tenant shall be responsible at its sole
cost and expense for the repair, restoration and replacement of any
other Leasehold Improvements and Tenant's Property. Landlord shall not
be liable for any loss of business, inconvenience or annoyance arising
from any repair or restoration of any portion of the Premises, building
or Project as a result of any damage from fire or other casualty.
e. Landlord and Tenant hereby acknowledge that the provisions of this
Article 19 are interested to be the sole and exclusive provisions
applicable in the event of any fire, casualty or unavoidable accident
to the Premises or the Building, and that the same are provided in lieu
of the operation of Md. Real Prop. Code Ann. 8-112 (as the same may be
amended and any successor provision thereto).
20.EMINENT DOMAIN
a. If the whole of the building or Premises is lawfully taken by
condemnation or in any other manner for any public or ???-public
purpose this Lease shall terminate as of the date of such taking, and
Rent shall be prorated to such date. If less than the whole of the
building or Premises is so taken, this Lease shall be unaffected by
such taking provided that (i) tenant shall have the right to terminate
this Lease by notice to Landlord given within ninety (90) days after
the date of such taking if twenty percent (20%) or more of the Premises
is taken and the remaining area of the Premises is not reasonably
sufficient for Tenant to continue operation of its business, and (ii)
Landlord shall have the right to terminate this Lease by notice to
Tenant given within ninety (90) days after the date of such taking. If
either Landlord or Tenant so elects to terminate this Lease, the Lease
shall terminate on the thirtieth (30th) day after either such notice.
The Rent shall be prorated to the date of termination. If this Lease
continues in force upon such partial taking, the Base Rent and Tenant's
Proportionate Share shall be equitably adjusted according to the
remaining Rentable Area of the Premises and Project.
b. In the event of any taking, partial or whole, all of the proceeds of
any award, judgment or settlement payable by the condemning authority
shall be the exclusive property of Landlord, and Tenant hereby assignee
to Landlord all of its right, title and interest in any award, judgment
or settlement from the condemning authority. Tenant, however, shall
have the right, to the extent that Landlord's award is not reduced or
prejudiced, to claim from the condemning authority (but net from
Landlord) such compensation as may be reservable by Tenant in its own
right for relocation expenses and damage personal property.
c. In the event of a partial taking of the Premises which does not result
in a termination of this Lease, Landlord shall restore the remaining
portion of the Premises as nearly as practicable to its condition prior
to the condemnation or taking, but only is the extent of building
standard work. Tenant shall be responsible at its sale cost and
expenses for the repair, restoration and replacement of any other
Leasehold improvements and Tenant's Property.
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21.INDEMNIFICATION
a. To the extent permitted by applicable law, Tenant shall indemnify and
hold Landlord harmless against and from liability and claims of any
kind for loss or damage to property of Tenant or any other person, or
for any injury to or death of any person, arising out of: (1) Tenant's
use and occupancy of the Premises, or any work, activity or other
things allowed or suffered by Tenant to be done in, on or about the
Premises; (2) any breach or default by Tenant of any of Tenant's
obligations under this Lease; or (3) any negligent or tortious act or
omission of Tenant, its agents, employees, invitees or contractors.
Tenant shall at Tenant's expense, and by counsel satisfactory to
Landlord, defend Landlord in any action or proceeding arising from any
such claim and shall indemnify Landlord against all costs, attorneys'
fees, expert witness fees and any other expenses incurred in such
action or proceeding. As a material part of the consideration for
Landlord's execution of this Lease, Tenant hereby assumes all risk of
damage or injury to any person or property in the Premises from any
cause other than Landlord's gross negligence or willful misconduct to
the extent permitted by law. The provisions of this Section 21a shall
survive the expiration or sooner termination of this Lease.
b. Landlord shall not be liable for injury or damage which may be
sustained by the person or property of Tenant, its employees, invitees
or customers, or any other person in the Premises, caused by or
resulting from fire, steam, electricity, gas, water or rain which may
leak or flow from or into any part of the Premises, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, and
the like whether such damage or injury results from conditions arising
upon the Premises or upon other portions of the Building or Project or
from other sources. Landlord shall not be liable for any damages
arising from any act or omission of any other tenant of the Building or
Project.
22.TENANT'S INSURANCE
a. All insurance required to be carried by Tenant hereunder shall be
issued by responsible insurance companies acceptable to Landlord and
Landlord's lender and qualified to do business in the State. Each
policy shall name Landlord, and at Landlord's request any mortgages of
Landlord, as an additional insured, as their respective interests may
appear. Each policy shall contain (i) a cross-liability endorsement,
(ii) a provision that such policy and the coverage evidenced thereby
shall be primary and non-contributing with respect to any policies
carried by Landlord and that any coverage carried by Landlord shall be
excess insurance, and (iii) a waiver by the insurer of any right of
subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment
under such policy or by reason of any act or omission of Landlord, its
agents, employees or representatives. A copy of each paid up policy
(authenticated by the insurer) or certificate of the insurer evidencing
the existence and amount of each insurance policy required hereunder
shall be delivered to Landlord before the date Tenant is first given
the right of possession of the Premises, and thereafter within thirty
(30) days after any demand by Landlord therefor. Landlord may, at any
time and from time to time, inspect and/or copy any insurance policies
required to be maintained by Tenant hereunder. No such policy shall be
cancelable, except after twenty (20) days written notice to Landlord
and Landlord's lender. Tenant shall furnish Landlord with renewals or
"binders" of any such policy at least ten (10) days prior to the
expiration thereof. Tenant agrees that if Tenant does not take out and
maintain such insurance, Landlord may (but shall not be required to)
procure said insurance on Tenant's behalf and charge the Tenant the
premiums together with twenty-five percent (25%) handling charge,
payable upon demand. Tenant shall have the right to provide such
insurance coverage pursuant to blanket policies obtained by the Tenant,
provided such blanket policies expressly afford coverage to the
Premises, Landlord, Landlord's mortgages and Tenant as required by this
Lease.
b. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall
procure, pay for and maintain in effect policies of casualty insurance
covering (i) all Leasehold improvements (including any alterations,
additions or improvements as may be made by Tenant pursuant to the
provisions of Article 12 hereof), and (ii) trade fixtures, merchandise
and other personal property from time to time, providing protection
against any peril included within the classification "Fire and Extended
Coverage" together with insurance against sprinkler damage, vandalism
and malicious mischief. The proceeds of such insurance shall be used
for the repair or replacement of the property so insured. Upon
termination of this Lease following a casualty as set forth herein, the
proceeds under (i) shall be paid to Landlord, and the proceeds under
(ii) above shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall
procure, pay for and maintain in effect workers' compensation insurance
as required by law and comprehensive public liability and property
damage insurance with respect to the construction of improvements on
the Premises, the use, operation or condition of the Premises and the
operations of Tenant in, on or about the Premises, providing personal
injury and broad form coverage for not less than Two Million Dollars
($2,000,000.00) combined single limit for bodily injury, death and
property damage liability..
23.WAIVER OF SUBROGATION
Landlord and Tenant each hereby waive all rights of recovery against the
other and against the officers, employees, agents and representatives of
the other, on account of loss by or damage to any person or the waiving
party's property or the property of others under its control, to the
extent that such loss or damage is insured against under any fire and
extended coverage insurance policy which either may have or is required to
have in force at the time of the loss or damage. Landlord and Tenant shall
each obtain from their respective insurers under all policies of fire,
theft, public liability, worker's compensation, and other insurance
maintained during the Term of this Lease covering the Building, or any
portion of it, or operations in it, a waiver of all rights of subrogation
that the insurer of one party might have against the other party. Landlord
and Tenant shall each indemnify the other against any loss or expense,
including reasonable attorney's fees, resulting from the failure to obtain
this waiver.
24.SUBORDINATION AND ATTORNMENT
This Lease is and shall be subject and subordinate to the lien of any
mortgage (which term "mortgage" shall include both construction and
permanent financing and shall include deeds of trust, ground leases and
similar security agreements) which may now or hereafter encumber or
otherwise affect the land and Building of which the Premises form a part,
or Landlord's leasehold interest therein), and to all and any renewals,
extensions, modifications, recastings or refinancing thereof; provided,
however that Landlord's mortgagee may elect, at its sole election, that
any mortgage held by such mortgagee shall be subordinate, in whole or in
part, to this Lease.
Within ten (10) days after written request of Landlord, or any mortgagee
or deed of trust beneficiary of Landlord, or ground lessor of Landlord,
Tenant shall, in writing, subordinate its rights under this Lease to the
lien of any mortgage or deed of trust, or to the interest of any lease in
which Landlord is leasee, and to all advances made or hereafter to be made
thereunder. However, before signing any subordination agreement , Tenant
shall have the right to obtain from any lender or lessor or Landlord
requesting such subordination, on a non-disturbance agreement in writing
providing that, as long as Tenant is not in default hereunder, this Lease
shall remain in effect for the full Term. The holder of any security
interest may, upon written notice to Tenant, elect to have this Lease
prior to its security interest regardless of the time of the granting or
recording of such security interest.
In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of a lease in which Landlord is lessee, Tenant shall attorn to
the purchaser, transferee or lessor as the case may be, and recognize that
party as Landlord under this Lease, provided such party acquires and
accepts the Premises subject to this Lease.
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Within ten (10) days after written request from Landlord, Tenant shall
execute and deliver to Landlord or Landlord's designee a written statement
certifying (a) that this Lease is unmodified and, if true, in full force
and effect, or is in full force and effect as modified, and stating the
modifications; (b) the amount of Base Rent and the date to which Base Rent
and additional rent have been paid in advance; (c) the amount of any
security deposited with Landlord; (d) that Landlord is not in default
hereunder or, if Landlord is claimed to be in default, stating the nature
of any claimed default, and (e) such other matters relating to this Lease
as Landlord shall request. Any such statement may be relied upon by a
purchaser, assignee or lender. Tenant's failure to execute and deliver
such statement within the time required shall at Landlord's election be a
default under this Lease and shall also be conclusive upon Tenant that:
(1) this Lease is in full force and effect and has not been modified
except as represented by Landlord; (2) there are no uncured defaults in
Landlord's performance and that Tenant has no right of offset,
counter-claim or deduction against Rent; and (3) not more than one month's
Rent has been paid in advance.
26.TRANSFER OF LANDLORD'S INTEREST
In the event of any sale or transfer by Landlord of the Premises, Building
or Project, and assignment of this Lease by Landlord, Landlord shall be
and is hereby entirely freed and relieved of any and all liability and
obligations contained in or derived from this Lease arising out of any
act, occurrence or omission relating to the Premises, Building, Project or
Lease occurring after the consummation of such sale or transfer, providing
the purchaser shall expressly assume all of the covenants and obligations
of Landlord under this lease. If any security deposit or prepaid Rent has
been paid by Tenant, Landlord may transfer the security deposit or prepaid
Rent to Landlord's successor and upon such transfer, Landlord shall be
relieved of any and all further liability with respect thereto.
27.DEFAULT
27.1 Events of Defaults The occurrence of any one or more of the following
matters constitutes a Default by Tenant under this Lease:
a. Failure by Tenant to pay any Rent or any other moneys required to
be paid Tenant under this Lease within three (3) days after such
payment is due and payable;
b. Failure by Tenant to observe or perform any of the covenants with
respect to assignment and subletting set forth in Article 16;
c. Faire by Tenant to comply with Tenant's obligations set forth in
Article 37;
d. Failure by Tenant to cure, immediately after receipt of notice
Landlord, any hazardous condition which Tenant has created in
violation of law or this Lease;
e. Failure by Tenant to observe or perform any other covenant,
agreement, condition or provision of this Lease, if such failure
continues for thirty (30) days after notice thereof from Landlord
to Tenant;
f. The levy upon, under writ of execution or the attachment by legal
process of, the leasehold interest of Tenant, or the filing or
creation of a lien with respect to such leasehold interest, which
lien shall not be released or discharged within ten (10) days from
the date of such filing.
g. Tenant vacates or abandons the Premises or fails to take
possession of the Premises when available for occupancy (the
transfer of a substantial part of the operations, business and
personnel of Tenant to some other location being deemed, without
limiting the meaning of the term "vacates or abandons," to be a
vacation or abandonment within the meaning of this clause),
whether or not Tenant thereafter continues to pay Rent due under
this Lease;
h. Tenant becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they mature, or makes an assignment
for the benefit of creditors, or applies for or consents to the
appointment of a trustee or receiver for Tenant or for the
substantial part of its property;
i. A trustee or receiver is appointed for Tenant or for the major
part of its property and is not discharged within sixty (60) days
after such appointment; or
j. Any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding for relief under any
bankruptcy law, or similar law for the relief of debtors, is
instituted (j) by Tenant or (ii) against Tenant and is allowed
against it or is consented to buy it or is not dismissed within
sixty (60) days after such institution.
27.2 Rights and Remedies of Landlord If a Default occurs, Landlord shall have
the rights and remedies hereinafter set forth, which shall be distinct,
separate and cumulative and shall not operate to exclude or deprive
Landlord of any other right or remedy allowed it by law:
a. Landlord may terminate this Lease by giving to Tenant notice of
Landlord's election to do so, in which event the Term of this
Lease shall end, and all right, title and Interest of Tenant
hereunder shall expire, on the date stated in such notice;
b. Landlord may terminate the right of Tenant to possession of the
Premises without terminating this Lease by giving notice to Tenant
that Tenant's right to possession shall end on the date in such
notice, whereupon the right of Tenant to possession of the
Premises or any part thereof shall cease on the date stated in
such notice; and
c. Landlord may enforce the provisions of the Lease and may enforce
and protest the rights of Landlord hereunder by a suit or suits in
equity or at law for the specific performance of any sevenant or
agreement contained herein, or for the enforcement of any other
appropriate legal or equitable remedy, including recovery of all
moneys due or to become due from Tenant under any of the
provisions of the Lease.
d. Landlord's rights and remedies hereunder are cumulative. In the
event of a breach by Tenant, Landlord shall have all rights and
remedies provided by law.
27.3 Rights to Re-Enter. If Landlord exercises either of the remedies
provided in Sections 27.2a or b. Tenant shall surrender possession
and vacate the Premises and immediately deliver possession thereof to
Landlord, and Landlord may re-enter and take complete and peaceful
possession of the Premises, with due process of law, full and
complete license to do so being hereby granted to Landlord, and
Landlord may remove all occupants and property therefrom, using such
force as may be necessary, without being deemed guilty in any manner
of trespass, eviction or forcible entry and detainer and without
relinguishing Landlord's right to Rent or any other right given to
Landlord hereunder or by operation of law.
27.4 Current Damages. If Landlord terminates the right of Tenant to
possession of the Premises without terminating the Lease, Landlord
shall have the right to immediate recovery of all amounts then due
hereunder. Such termination of possession shall not release Tenant,
in whole or in part, from Tenant's obligation to pay Rent hereunder
for the full Term, and Landlord shall have the right, from time to
time, to recover from Tenant, and Tenant shall remain liable for, all
Base Rent and any other sums accruing
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as they become due under the lease during the period from the date
of such notice of termination of possession to the stated end of
the term. In any case, Landlord may relet the Premises or any part
thereof for the account of Tenant for such rent, for such time
(which may be for a term extending beyond the Term of this Lease)
and upon such terms as Landlord shall determine and may collect the
rents from such reletting. Landlord shall not be required to
accept any tenant offered by Tenant or to observe any instructions
given by Tenant relative to such reletting. Also, in any such
case, Landlord may make repairs, alterations and additions in or to
the Premises and redecorate the same to the extent deemed by
Landlord necessary or desirable and in connection therewith change
the locks to the Premises, and Tenant upon demand shall pay the
cost of all of the foregoing together with Landlord's expenses of
reletting. The rents from any such reletting shall be applied
first to the payment of the expenses of re-entry, redecoration,
repair and alterations and the expenses of reletting and second to
the payment of Rent herein provided to be paid by Tenant. Any
excess or residue shall operate only as an offsetting credit
against the amount of Rent due and owing as the same thereafter
becomes due and payable hereunder, and the use of such offsetting
credit to reduce the amount of Rent due Landlord, if any, shall not
be deemed to give Tenant any right, title or interest in or to such
excess or residue and any such excess or residue shall belong to
Landlord solely, and in no event shall Tenant be entitled to a
credit on its indebtedness to Landlord in excess of the aggregate
sum (including Base Rent and any other changes) which would have
been paid by Tenant for the period for which the credit to Tenant
is being determined, and no Default occurred. No such re-entry or
repossession, repairs, alterations and additions, or reletting
shall be construed as an eviction or ouster of Tenant or as an
election on Landlord's part to terminate this Lease, unless a
written notice of such intention is given to Tenant, or shall
operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, and Landlord, at any time and from time to
time, may sue and recover judgment for any deficiencies remaining
after the application of the proceeds of any such reletting.
27.5 Final Damages. If this Lease is terminated by Landlord pursuant to
Section 27.2a, Landlord shall be entitled to recover form Tenant all
Rent accrued and unpaid for the period up to and including such
termination date, as well as all other additional sums payable by
Tenant, or for which Tenant is liable or for which Tenant has agreed
to indemnify Landlord under any of the provisions of this Lease, which
may be then owing and unpaid, and all costs and expenses, including
court costs and attorneys' fees incurred by Landlord in the
enforcement of its rights and remedies hereunder, and, in addition,
Landlord shall be entitled to recover as damages for loss of the
bargain and not as a penalty (a) the unamortized portion of Landlord's
contribution to the cost of tenant improvements and alterations, if
any, installed by either Landlord or Tenant pursuant to this Lease or
any Workletter, (b) the aggregate sum which at the time of such
termination represents the excess, if any of the present value of the
aggregate rents which would have been payable after the termination
date had this Lease not been terminated, including, without
limitation, Base Rent at the annual rate or respective annual rates
for the remainder of the term provided for in Section 2e of this Lease
or elsewhere herein and the amount projected by Landlord to represent
any other charges for the remainder of the Term pursuant to Article 5
of this Lease, over the then present value of the then aggregate fair
rental value of the Premises for the balance of the Term, such present
worth to be computed in each case, on the basis of a five percent (5%)
per annum discount from the respective dates upon which such rentals
would have been payable hereunder had this Lease not been terminated,
and (c) any damages in addition thereto, including reasonable
attorneys' fees and court costs, which Landlord sustains as a result
of the breach of any of the covenants of this Lease other than for the
payment of Rent.
27.6 Anticipatory Breach. Nothing contained herein shall prevent the
enforcement of any claim Landlord may have against Tenant for
anticipatory breach of the unexpired Term of this Lease. In the event
of a breach or anticipatory breach by Tenant of any of the covenants
or provisions hereof, Landlord shall have the right of injunction and
the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not provided for
herein.
27.7 Removal of Personal Property. All property of Tenant removed from the
Premises by Landlord pursuant to any provision of this Lease or
applicable law may be handled, removed or stored by Landlord at the
cost and expense of Tenant, and Landlord shall not be responsible in
any event for the value, preservation or safekeeping thereof. Tenant
shall pay Landlord for all expenses incurred by Landlord with respect
to such removal and storage so long as the same is in Landlord's
possession or under Landlord's control. All such property not removed
from the Premises or retaken from storage by Tenant within thirty (30)
days after the end of the term, however terminated, at Landlord's
option , shall be conclusively deemed to have been conveyed by Tenant
to Landlord as by bill of sale without further payment or credit by
Landlord to Tenant.
27.8 Attorneys' Fees. Tenant shall pay all of Landlord's costs, charges
and expenses, including court costs and attorneys' fees, incurred in
enforcing Tenant's obligations under this Lease, incurred by Landlord
in any action brought by Tenant in which Landlord is the prevailing
party, or incurred by Landlord in any litigation, negotiation or
transaction in which Tenant causes Landlord, without Landlord's fault,
to become involved or concerned.
27.9 Assumption or Rejection in Bankruptcy. If Tenant is adjudged
bankrupt, or a trustee in bankruptcy is appointed for Tenant, Landlord
and Tenant, to the extent permitted by law, agree to request that the
trustee in bankruptcy determine within sixty (60) days thereafter
whether to assume or to reject this Lease.
27.10 Default Under Other Leases. If the term of any lease, other than this
Lease, for any space in the Project under which Tenant is now or
hereafter the tenant, shall be terminated or terminable after the
making of this Lease because of any default by Tenant under such other
lease, such fact shall empower Landlord, at Landlord's sole option, to
terminate this Lease by notice to Tenant or to exercise any of the
rights or remedies set forth in Section 27.2
27.11 WAIVER OF TENANT'S RIGHT OF REDEMPTION. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TENANT HEREBY WAIVES ANY AND ALL RIGHTS OF REDEMPTION
AND RIGHTS TO CURE ANY DEFAULT HEREUNDER (HOWSOEVER DENOMINATED) NOW
OR HEREAFTER GRANTED TO TENANT PURSUANT TO APPLICABLE LAW. NO
ACCEPTANCE BY LANDLORD OF ANY MONIES OWED BY TENANT TO LANDLORD SHALL
CONSTITUTE A WAIVER OF THE PROVISIONS OF THIS ARTICLE 27 NOR SHALL ANY
REFUSAL BY LANDLORD TO ACCEPT ANY TENDER BY TENANT OF ANY SUMS OWED BY
TENANT TO LANDLORD, IN CONNECTION WITH ANY PURPORTED EXERCISE OF ANY
RIGHT OF REDEMPTION OR RIGHT TO CURE TO WHICH TENANT WOULD OTHERWISE
BE ENTITLED, CONSTITUTE A TERMINATION OF THIS LEASE OR A RELEASE OF
TENANT FROM ANY LIABILITY HEREUNDER.
27.12 CERTAIN WAIVERS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE AND
EXCEPT AS SPECIFICALLY PROVIDED TO THE CONTRARY PURSUANT TO APPLICABLE
LAW, TENANT HEREBY EXPRESSLY WAIVES THE SERVICE OF ANY NOTICE TO CURE
OR VACATE OR TO QUIT THE PREMISES AND WAIVES THE SERVICE OF ANY OTHER
NOTICE OR DEMAND PRESCRIBED BY ANY CURRENT OR FUTURE STATUTE OR OTHER
APPLICABLE LAW.
27.13 Landlord's Default. If Landlord fails to perform any covenant,
condition or agreement contained in this Lease, or if any
representation or warranty is materially false, within thirty (30)
days after receipt of written notice from Tenant specifying such
default, or if such default cannot reasonably be cured within thirty
(30) days, if Landlord fails to commence to cure within that thirty
(30) day period, then Landlord shall be liable to Tenant for any
damages sustained by Tenant by reason of any actual physical damage to
Tenant's personal property at the Premises or injury to persons caused
by Landlord's breach; provided, however, it is expressly understood
and agree that if Tenant obtains a money judgement against Landlord
resulting from any default or other claim arising under this Lease,
that judgement shall be satisfied only out of the rents, issues,
profits and other income actually received on account of Landlord's
right, title and interest in the Premises, Building or Project, and no
other real, personal or mixed property of Landlord (or of any of the
partners which comprise Landlord, if any) wherever situated, shall be
subject to levy to satisfy such judgment. If, after notice to
Landlord of default, Landlord (or any first mortgagee or first deed of
trust beneficiary of Landlord) fails to cure the default as provided
herein, then Tenant shall have the right to cure that default at
Landlord's expense. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against
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any payments of Rent or any other charges due and payable under this
Lease, except as otherwise specifically provided herein.
28. BROKERAGE FEES
Tenant warrants and represents that it has not dealt with any real
estate broker or agent in connection with this Lease or its
negotiation except those noted in Section 2p. Tenant shall indemnify
and hold Landlord harmless from any cost, expense or liability
(including costs of suit and reasonable attorneys' fees) for any
compensation, commission or fees claimed by any other real estate
broker or agent in connection with this Lease or its negotiating by
reason of any alleged act of Tenant.
29. NOTICES
All notices, approvals and demands permitted or required to be given
under this Lease shall be in writing and deemed duly served or given
if personally delivered or sent by certified or registered U.S. mail,
postage prepaid, and addressed as follows: (a) if to Landlord, to
Landlord's Mailing Address and to the Building manager, and (b) if to
Tenant, to Tenant's Mailing Address; provided, however, notices to
Tenant shall be deemed duly served or given if delivered or mailed to
Tenant at the Premises. Landlord and Tenant may from time to time by
notice to the other designate another place for receipt of future
notices.
30. GOVERNMENT ENERGY OR UTILTY CONTROLS
In the event of imposition of federal, state or local government
controls, rules, regulations, or restrictions on the use or
consumption of energy of other utilities during the Term, both
Landlord and Tenant shall be bound thereby. In the event of a
difference in interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord
shall have the right to enforce compliance therewith, including the
right of entry into the Premises to effect compliance.
32. QUIET ENJOYMENT
Tenant, upon paying the Rent and performing all of its obligations
under this Lease, shall peaceably and quietly enjoy the Premises,
subject to the terms of this Lease and to any mortgage, lease, or
other agreement to which this Lease may be subordinate.
33. OBSERVANCE OF LAW
Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall, at its
sole cost and expense, promptly comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements now in
force or which may herafter be in force, and with the requirements of
any board of fire insurance underwriters or other similar bodies now
or hereafter constituted, relating to, or affecting the condition, use
of occupancy of the Premises, excluding structural changes not related
to or affected by Tenant's improvements or acts. The judgment of any
court or competent jurisdiction or the admission of Tenant in any
action against Tenant, whether Landlord is a party thereto or not,
that Tenant has violated any law, ordinance or governmental rule,
regulation or requirement shall be conclusive of that fact as between
Landlord and Tenant.
34. FORCE MAJEURE
Any prevention, delay or stoppage of work to be performed by Landlord
or Tenant which is due to strikes, labor disputes, inability to obtain
labor, materials, equipment or reasonable substitutes thererfor, acts
of God, governmental restrictions or regulations or controls, judicial
orders, enemy or hostile government actions, civil commotion, fire or
other casualty, or others causes beyond the reasonable control of the
party obligated to perform hereunder, shall excuse performance of the
work by that party for a period equal to the duration of that
prevention, delay of stoppage. Nothing in this Article 34 shall
excuse or delay Tenant's obligation to pay Rent or other charges under
this Lease.
35. CURING TENANT'S DEFAULTS
If tenant defaults in the performance of any of its obligations under
this Lease, Landlord may (but shall not be obligated to) without
waiving such default, perform the same for the account at the expense
of Tenant. Tenant shall pay Landlord all costs of such performance
promptly upon receipt of a bill therefor.
36. SIGN CONTROL
Tenant shall not affix, paint, erect or inscribe any sign, projection,
awning, signal or advertisement of any kind to any part of the
Premises, Building or Project, including without limitation, the
inside or outside of windows or doors, without the written consent of
Landlord. Landlord shall have the right to remove any signs or other
matter, installed without Landlord's permission , without being liable
to Tenant by reason of such removal, and to charge the cost of removal
to Tenant as additional rent hereunder payable within ten (10) days of
written demand by Landlord. Notwithstanding the aforementioned,
Tenant shall be permitted to install building signage of not more than
100 square feet. This right is subject to Landlord's approval of
size, color, location and materials used as well as subject to all
applicable city and country codes and regulations.
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37. HAZARDOUS SUBSTANCES
37.1 Defined Terms
a. "Claim" shall mean and include any demand, cause of action,
proceeding or suit for any one or more of the following: (i)
actual or punitive damages, losses, injuries to person or
property, damages to natural resources, fines penalties,
interest, contribution or settlement, (ii) the costs of site
investigations, feasibility studies, information requests, health
or risk assessments, or Response (as hereinafter defined)
actions, and (iii) enforcing insurance, contribution or
indemnification agreements.
b. "Environmental Laws" shall mean and include all federal, state
and local statutes, ordinances, regulations and rules relation to
environmental quality, health, safety, contamination and
clean-up, including, without limitation, the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Clean Water Act , 33 U.S.C.
Section 1251 et seq., and the Water Quality Act of 1987; the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7
U.S.C. Section 136 et seq.; the Marine Protection, Research, and
Sanctuaries Act, 33 U.S.C. Section 1401 et seq.; the National
Environmental Policy Act, 42 U.S.C. Section 4321 et seq.; the
Noise Control Act, 42 U.S.C. Section 4901 et seq; the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq.; as amended by the Hazardous and
Solid Waste Amendments of 1984; the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERLA"), 42 U.S.C.
Section 9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act, the Emergency Planning and Community
Right-to-Know Act, and Radon Gas and Indoor Air Quality Research
Act; the Toxic Substances Control Act ('TSCA"), 15 U.S.C. Section
2601 et seq.; the Atomic Energy Act, 42 U.S.C. Section 2011 et
seq., and the Nuclear Waste Policy Act of 1982, 42 U.S.C. Section
10101 et. seq.; and state superlien and environmental clean-up
statutes, with implementing regulations and guidelines, as
amended from tome to tome. Environmental Laws shall also include
all state, regional, country, municipal and other local laws,
regulations, and ordinances insofar as they are equivalent or
similar to the federal laws recited above or purport to regulate
Hazardous Materials (as hereinafter defined).
c. "Hazardous Materials" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product or constituent regulated under
CERCLA; oil and petroleum products and natural gas, natural gas
liquids, liquefied natural gas and synthetic gas usable for fuel;
pesticides regulated under the FIFRA; asbestos and
asbestos-containing materials, PCBs, and other substances
regulated under the TSCA; source material, special nuclear
material, by-product material and any other radioactive materials
or radioactive wastes, however produced, regulated under the
Atomic Energy Act or the Nuclear Wasted Policy Act; chemicals
subject to the OSHA Hazard Communication Standard, 29 C.F.R.
Section 1910. 1200 et seq., and industrial process and pollution
control wastes, whether or not hazardous within the meaning of
RCRA; any substance whose nature and/or quantity of existence,
use, manufacture, disposal or effect render it subject to
federal, state or local regulation, investigation, remediation,
or removal as potentially injurious to public health or welfare.
d. "Use" means to manage, generate, manufacture, process, treat,
store, use, re-use, refine, recycle, reclaim, blend or burn for
energy recovery, incinerate, accumulate speculatively, transport,
transfer, dispose of , or abandon Hazardous Materials.
e. "Release" or "Released" shall mean any actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing
of Hazardous Materials into the environment, as "environment" is
defined in CERCLA.
f. "Response"or "Respond" shall mean action taken in compliance with
Environmental Laws to correct, remove, remediate, cleanup,
prevent, mitigate, monitor, evaluate, investigate, assess or
abate the Release of a Hazardous Material.
37.2 Tenant's Obligations with Respect to Environmental Matters. During
the term of this Lease, (a) Tenant shall comply at its own cost with
all Environmental Laws; (b) Tenant shall not Use, or authorize the Use
of, any Hazardous Materials on the Premises, including installation of
any underground storage tanks, without prior written disclosure to and
approval by the Landlord, except for small quantities ordinarily used
by office tenants in ordinary office equipment, such as copying
machines, typewriters and personal computers; but only to the extent
permitted by law; (c) Tenant shall not take any action that would
subject the Premises to permit requirements under RCRA for storage,
treatment or disposal of Hazardous Materials; (d) Tenant shall not
dispose of Hazardous Materials in dumpsters provided by Landlord for
tenant use; (e) Tenant shall not discharge Hazardous Materials into
Project drains or sewers; (f) Tenant shall not cause or allow the
Release of any Hazardous Materials on, to, or from the Project; and
(g) Tenant shall arrange at its own cost close-up for the lawful
transportation and off-site disposal of all Hazardous Materials that
it generates.
37.3 Copies of Notices. During the term of this Lease, Tenant shall
provide Landlord promptly with copies of all summons, citations,
directives, information inquires or requests, notices of potential
responsibility, notices of violation or deficiency, orders or decrees,
Claims, complaints, investigations, judgments, letters, notices of
environmental liens or Response actions in progress and other
communications, written or oral, actual or threatened, from the United
Statues Environmental Protection Agency, Occupational Safety and
Health Administration, or other federal, state or local agency or
authority, or any other entity or individual, concerning (a) any
Release of a Hazardous Material on, to or form the Premises; (b) the
imposition of any lien on the Premises; or (c) any alleged violation
of or responsibility under Environmental Laws. Landlord and
Landlord's beneficiaries, agents and employees shall have the right to
enter the Premises and conduct appropriate inspections or tests in
order to determine Tenant's compliance with Environmental Laws.
37.4 Tests and Reports. Upon written request by Landlord, Tenant shall
provide Landlord without the results of appropriate reports and tests,
with transportation and disposal contracts for Hazardous Materials,
with any permits issued under Environmental Laws, and with any other
applicable documents to demonstrate that Tenant complies with all
Environmental Laws relating to the Premises.
37.5 Tenant's Obligation to Respond. If Tenant's Use of Hazardous
Materials at the Premises (a) gives rise to liability or to a Claim
under any Environmental Law, (b) causes a significant public health
effect, or (c) creates a nuisance, Tenant shall promptly take all
applicable action in Response.
37.6 Indemnification. Tenant shall indemnify, defend, and hold harmless
Landlord, its beneficiaries, its lenders, any managing agents and
leasing agents of the Premises, and their respective agents,
representatives partners, officers, directors and employees from and
against any and all Claims arising from or attributable to any breach
by Tenant of any of its warranties, representations or covenants in
the Article. Tenant's obligations hereunder shall survive the
termination or expiration of this Lease.
37.7 Owner's Representation and Warranty. Real Estate Income Partners
Limited Partnership, represents and warrants that Real Estate Income
Partners Limited Partnership, has not used or disposed, nor has Real
Estate Income Partners Limited Partnership, authorized its agents to
use or dispose of hazardous materials on the Premises in violation of
law.
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38. PARKING
a. Parking Rules and Regulations. Tenant shall observe and abide by
all parking rules and regulations created or imposed from time to
time by Landlord. If Tenant commits, permits or allows any
activity prohibited by the rules and regulations, Landlord shall
have the right, without notice and in addition to any other
available rights and remedies, to remove, tow or physically
incapacitate the vehicle involved at Tenant's cost and expense,
payable immediately upon demand.
b. Changes by Landlord. Landlord reserves the right as it deems
reasonably necessary to change or alter the parking, its layout
or access thereto, and to restrict, expand or reduce the size of
the parking spaces. Tenant acknowledges and agrees, however,
that the parking spaces at the Project may change, either
temporarily or permanently, as a result of governmental acts, or
acquirements (including a taking by eminent domain or a sale in
lieu thereof) or as a result of facts or circumstances not within
Landlord's control.
c. Waiver and Release. The right to park granted hereunder is
solely for the convenience and accommodation of Tenant, and does
not constitute a bailment or create the relationship of bailor
and bailee. Tenant waives and releases Landlord from any
responsibility or liability for loss or damage to any person or
property respecting use of the parking by Tenant, its employees
or invitees.
d. No charge or parking during the term of this Lease. Landlord
agrees that there shall be no charge to Tenant for Tenant's
parking spaces during the original Term of this Lease.
39. MISCELLANEOUS
a. Accord and Satisfaction: Allocation of Payments. No payment by
Tenant or receipt by Landlord of a lesser amount than the Rent
provided for in this Lease shall be deemed to be other than on
account of the earliest Rent due, nor shall any endorsement or
statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of the Rent or pursue any
other remedy provided for in this Lease. In connection with the
foregoing, Landlord shall have the absolute right in its sole
discretion to apply any payment received from Tenant to any
account or other payment of Tenant then not current and due or
delinquent.
b. Addends. If any provision contained in a Rider to this Lease is
inconsistent with any other provision herein, the provision
contained in the Rider shall control, unless otherwise provided
in the Rider.
c. Attorney's Fees. If any action or proceeding is brought by
either party against the other pertaining to or arising out of
this Lease, the finally prevailing party shall be entitled to
recover all costs and expenses, including reasonable attorneys'
fees, incurred on account of such action or proceeding.
d. Captions, Articles and Section Numbers. The captions appearing
within the body of this Lease have been inserted as a matter of
convenience and for reference only and in no way define, limit or
enlarge the scope or meaning of this Lease. All references to
Article and Section numbers refer to Articles and Sections in
this Lease.
e. Changes Requested by Lender. Neither Landlord or Tenant shall
unreasonably withhold its consent to changes or amendments to
this Lease requested by the lender on Landlord's interest, so
long as these changes do not alter the basic business terms of
this Lease or otherwise materially diminish any rights or
materially increase any obligations of the party from whom
consent to such change or amendment is requested.
f. Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of Maryland.
g. Consent. Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no claim, and hereby waives the right
to any claim against Landlord for money damages by reason of any
refusal, withholding or delaying by Landlord of any consent,
approval or statement of satisfaction, and in such event,
Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any
right to such consent, etc. Additionally, unless otherwise
specifically provided herein, Landlord may grant or refuse its
consent to any item in its sole discretion.
h. Authority. If Tenant is a corporation or partnership, each
individual signing this Lease on behalf of Tenant represents and
warrants that he is duly authorized to execute and deliver this
Lease on behalf of the corporation, and that this Lease is
binding on Tenant in accordance with its terms. Tenant shall, at
Landlord's request, deliver a certified copy of a resolution of
its board of directors authorizing such execution.
i. Counterparts. This Lease may be executed in multiple
counterparts, all of which shall constitute one and the same
Lease.
j. Execution of Lease; No Option: The submission of this Lease to
Tenant shall be for examination purposes only, and does not and
shall not constitute a reservation of or option for Tenant to
lease, or otherwise create any interest of Tenant in the Premises
or any other premises within the Building or Project. Execution
of this Lease by Tenant and its return to Landlord shall not be
binding on Landlord notwithstanding any time interval, until
Landlord has in fact signed and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations.
In order to induce Landlord to enter into this Lease, Tenant
agrees that it shall promptly furnish Landlord, from time to
time, upon Landlord's written request, with financial statements
reflecting Tenant's current financial condition. Tenant
represents and warrants that all financial statements, records
and information furnished by Tenant to landlord in connection
with this Lease are true, correct and complete in all respects.
Landlord shall use good faith reasonable efforts to keep Tenant's
financial statements, records and information confidential,
however, Tenant acknowledges that such financial statements,
records and information may be disclosed to Landlord's employees,
agents, and representatives, (including property manager and
asset manager) as well as investors, lenders, buyers, prospective
investors, prospective lenders and prospective buyers of the
Project.
l. Further Assurances. The parties agree to promptly sign all
documents reasonably requested to give effect to the provisions
of this Lease.
m. Mortgagee Protection. Tenant agrees to send by certified or
registered mail to any mortgagee or deed of trust beneficiary of
Landlord whose address has been furnished to Tenant, a copy of
any notice of default served by Tenant on Landlord. If Landlord
fails to cure such default within the time provided for in this
Lease, such mortgagee or beneficiary shall have an additional
thirty (30) days to cure such default; provided that if such
default cannot reasonably be cured within that thirty (30) day
period, then such mortgagee or beneficiary shall have such
additional time to cure the default as is reasonably necessary
under the circumstances.
n. Prior Agreements; Amendments. This Lease contains all of the
agreements of the parties with respect to any matter covered or
mentioned in this Lease, and no prior agreement or understanding
pertaining to any such matter shall be effective for any purpose.
No provisions of this Lease may be amended or added to except by
an agreement in writing signed by the parties or their respective
successors in interest.
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o. Recording. Tenant shall not record the Lease without the prior
written consent of Landlord. Tenant, upon the request of
Landlord, shall execute and acknowledge a "short form" memorandum
of this Lease for recording purposes.
p. Severability. A final determination by a court of competent
jurisdiction that any provision of this Lease is invalid shall
not affect the validity of any other provision, and any provision
so determined to be invalid shall, to the extent possible, be
construed to accomplish its intended effect. In the event that
any material provision (or any material part of any provision)
contained in this Lease shall for any reason be held to be
invalid, unlawful or unenforceable in any respect, Landlord and
Tenant shall, at Landlord's election, amend this Lease so as to
render every provision hereby fully valid, lawful and enforceable
in all respect, and so as to result in a revised lease with
equivalent economic and legal substance as if no provision or
portion of this Lease had been declared invalid, unlawful or
unenforceable.
q. Successors and Assigns. This Lease shall apply to and bind the
heirs, personal representatives, and permitted successors and
assigns of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or
remedy of Landlord upon any default by Tenant shall impair such
right or remedy or be construed as a waiver of such default.
The receipt and acceptance by Landlord of delinquent Rent shall
not constitute a waiver of any default.
No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the
expiration of the Term. Only a written notice from Landlord to
Tenant shall constitute acceptance of the surrender of the
Premises and accomplish a termination of the Lease.
Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or
render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and
shall not be a waiver of any other default concerning the same or
any other provision of the Lease.
40. WAIVER OF JURY TRIAL
LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ON ALL MATTERS
ARISING OUT OF THIS LEASE OR USE AND OCCUPANCY OF THE PREMISES, EXCEPT
CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE. IF LANDLORD COMMENCES
ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT, TENANT WILL NOT
INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY COUNTERCLAIM IN ANY
SUCH PROCEEDING. TENANT HEREBY CONSTITUTES AND IRREVOCABLY APPOINTS
ANY ATTORNEY OF ANY COURT OF RECORD TO BE THE TRUE AND LAWFUL ATTORNEY
OF TENANT, AND, IN THE NAME, PLACE AND STEAD OF THE TENANT (a) TO
APPEAR FOR AND ON BEHALF OF TENANT IN ANY COURT OF RECORD AT ANY TIME
IN ANY ACTION OR ACTIONS BROUGHT AGAINST THE TENANT FOR THE
ENFORCEMENT OF ANY RIGHT OF THE LANDLORD HEREUNDER, (b) TO WAIVE THE
ISSUANCE OF SERVICE OF PROCESS AND TRIAL BY JURY, AND (c) FROM TIME TO
TIME, TO CONFESS JUDGMENT OR JUDGMENTS IN FAVOR OF THE LANDLORD AND
AGAINST TENANT FOR ANY RENT OR OTHER CHARGES DUE HEREUNDER AND
INTEREST THEREON, AND FOR THE COSTS OF SUIT AND REASONABLE ATTORNEYS'
FEES IN FAVOR OF LANDLORD, AND TO RELEASE ALL ERRORS THAT MAY OCCUR OR
INTERVENE IN SUCH PROCEEDINGS, AND TO CONSENT THAT EXECUTION OF ANY
JUDGMENT OR DECREE IN FAVOR OF LANDLORD AND AGAINST TENANT MAY ISSUE
FORTHWITH.
15
<PAGE>
<PAGE>
TENANT LANDLORD
International Data Products, Corp. Real Estate Income Partners III,
Limited Partnership
By: /s/ George D. Fuster By: Birtcher Investments
- ----------------------------
Its: President Its: Authorized Agent
- ----------------------------
Date: 1/25/95 By: /S/ Michael S. Buzar
- ---------------------------- ----------------------------
Michael S. Buzar
By: /s/ Oscar Fuster Its: Senior Vice President
- ----------------------------
Its: VP & Secretary Date: 1/31/95
- ---------------------------- ----------------------------
Date: 1/25/95
- ----------------------------
16
<PAGE>
EXHIBIT "A"
To Lease dated January 6, 1995
By and between
REAL ESTATE INCOME PARTNERS III, Limited Partnership, as Landlord, and
International Data Products, Corp., as Tenant
FLOOR PLAN
[GRAPHIC]
<PAGE>
EXHIBIT "A"
To Lease dated January 6, 1995
By and between
REAL ESTATE INCOME PARTNERS III, Limited Partnership, as Landlord, and
International Data Products, Corp., as Tenant
FLOOR PLAN
[GRAPHIC]
<PAGE>
EXHIBIT "B"
To Lease dated January 6, 1995
By and between
REAL ESTATE INCOME PARTNERS III, Limited Partnership, as Landlord, and
International Data Products, Corp., as Tenant
SITE PLAN
[GRAPHIC]
<PAGE>
EXHIBIT "C"
To Lease dated January 6, 1995
by and between
REAL ESTATE INCOME PARTNERS III, Limited
Partnership, as Landlord, and International
Data Products, Corp., as Tenant
WORK LETTER
THIS WORKLETTER AGREEMENT ("Workletter") is executed simultaneously with that
certain Lease Between Real Estate Income Partners III, as Landlord, and
International Data Products, Corp., as Tenant Relating to demised premises
("Premises"), which Premises are more fully identified in the Lease. Capitalized
Terms used herein, unless otherwise defined in this Workletter, shall have the
respective meanings assigned To them in the Lease.
For and in consideration of the agreement it lease the demised premises and the
mutual covenants contained Herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. Delivery of Premises. Landlord delivered the Premises to Tenant pursuant
to that Temporary Occupancy Agreement dated January 6, 1995 and Tenant accepted
the Premises in its "as is" condition.
2. Work. Tenant, at its sole cost and expense, shall perform or cause to be
performed the work (the "Work") in the Premises provided for in the Plans (as
defined in Paragraph 3 hereof) submitted to and approved by Landlord, provided,
however, that Tenant's work shall not include Tenant's furniture, furnishings,
equipment or other interior decor. Tenant's Work shall be instructed in a good
and workmanlike fashion, in accordance with the requirements set forth herein
and in compliance with all applicable laws, ordinances, rules and other
governmental requirements. Tenant shall commence the construction of the Work
promptly following compellation of the pre-construction activities provided for
in Paragraph 3 below and shall diligently proceed with all such construction.
Tenant shall coordinate its work so as to avoid interference with any work being
performed by or on behalf of Landlord and other tenants in the Project.
3. Preconstruction Activities:
(a) As soon as reasonably possible, but in no event later than February 15,
1995, Tenant shall submit the following information and items to Landlord for
Landlord's review and approval:
(i) a detailed construction schedule containing the major
components of the Work and the time required for
each, including the scheduled commencement date of
construction of the Work, milestone dates and the
estimated date of completion of construction;
(ii) an itemized statement of the estimated construction
cost, including permits and architectural and
engineering fees;
(iii) evidence satisfactory to Landlord of Tenant's ability
to pay the cost of the Work as and when payments
become due. Such evidence shall be in the form of an
unconditional written commitment from a responsible
leader to pay for the Work or evidence of current net
assets in the form of cash, cash equivalents or other
liquid assets of Tenant which have been and will
continue to be segregated for payment of the Work
when due;
(iv) the names and addresses of Tenant's contractors (and
the contractors' subcontractors) to be engaged by
Tenant for the Work ("Tenant's Contractors").
Landlord has the right to approve or disapprove
Tenant's Contractors. Tenant shall not employ as
Tenant's Contractors any persons or entities
disapproved by Landlord. If Landlord has
affirmatively approved only certain contractor(s)
and/or subcontractors(s) from Tenant's list, Tenant
shall employ as Tenant's contractors only those
persons or entities
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<PAGE>
as approved. Landlord hereby approves Kerr/Mast
Construction Group, Inc. Landlord may, at its
election, designate a list of approved contractors
for performance of work, involving electrical,
mechanical, plumbing or life-safety systems, from
which Tenant must select its contractors for such
Work;
(v) certified copies of insurance policies or
certificates of insurance as hereinafter described.
Tenant shall not permit Tenant's Contractors to
commence work until the required insurance has been
obtained and certified copies of policies or
certificates have been delivered to Landlord:
(vi) payment and performance bonds for all of Tenant's
Contractors naming Landlord as a duel obligee; and
(vii) the Plans for the Work, which Plans shall be subject
to Landlord's approval in accordance with Paragraph 3
(b) below.
Tenant will update such information and items by notice to Landlord of any
changes.
(b) As used herein, the term "Plans" shall mean full and detailed
architectural and engineering plans and specifications cover the Work
(including, without limitation, architectural, mechanical and electrical working
drawings for the Work). The Plans shall be subject to Landlord's approval and
the approval of all local governmental authorities requiring approval, if any.
Landlord shall give its approval or disapproval (giving general reasons in case
of disapproval) of the Plans within five (5) days after the receipt thereof by
Landlord. Landlord agrees not to unreasonably withhold its approval of said
Plans; provided, however, that Landlord shall not be deemed to have acted
unreasonably if it withholds its consent because, in Landlord's opinion: (i) the
Work is likely to affect adversely Building systems, the structure of the
Building or the safety of the Building or project and their occupants; (ii) the
Work would increase Landlord's ability to furnish services to Tenant or other
tenants in the Project; (iii) the work would increase the cost of operating the
Building; (iv) the Work would violate any governmental laws, rules or
ordinances; or (v) the Work contains or uses hazardous or toxic materials; or
(vi) the Work would adversely affect the appearance of the Building or Project.
The foregoing reasons, however, shall not be exclusive of the reasons for which
Landlord may withhold consent, whether or not such other reasons are similar to
or dissimilar from the foregoing. Landlord shall cooperate with Tenant by
discussing or reviewing preliminary plans and specifications, at Tenant's
Request prior to completion of the full, final detailed Plans, in order to
expedite preparation of the final Plans submitted by Tenant, Tenant shall,
within three (3) days thereafter, submit to Landlord for its approval the Plans
as amended in accordance with the changes so required. The Plans shall also be
revised, and the Work shall be changed, to incorporate any work required in the
Premises by any local governmental field inspector. Landlord's approval of the
Plans shall in no way be deemed to be acceptance or approval of any element
therein contained which is in violation of any applicable laws, ordinance,
regulations or other governmental requirements.
(c) No Work shall be undertaken or commenced by Tenant in the Premises
until:
(i) the Plans have been submitted to and approved by Landlord;
(ii) all necessary building permits have been obtained by Tenant:
(iii) all required insurance coverages have been obtained by Tenant.
(Failure of Landlord to receive evidence of such coverage upon
commencement of the Work shall not waive Tenant's obligations
to obtain such coverages.);
(iv) proper provision, which is satisfactory to Landlord, has been
made by Tenant for payment in full of the cost of the Work;
(v) items required to be submitted to Landlord prior to
commencement of construction of the Work have been so
submitted and have been approved, where required;
(vi) the construction escrow referred to in Paragraph 10 hereof has
been established and
20
<PAGE>
(vii) Landlord has given written notice that the Work can proceed
subject to such reasonable conditions as Landlord may impose.
4. DELAYS. IN THE EVENT TENANT FAILS TO DELIVER OR DELIVER IN SUFFICIENT
AND ACCURATE DETAIL THE INFORMATION REQUIRED UNDER PARAGRAPH 3 ON OR BEFORE THE
RESPECTIVE DATES SPECIFIED IN SAID PARAPGRAPH, OR IN THE EVENT TENANT, FOR ANY
REASON, FAILS TO COMPLETE THE WORK ON OR BEFORE THE SCHEDULED COMMENCEMENT DATE
OF THE TERM OF THE LEASE, TENANT SHALL BE RESPONSIBLE FOR RENT AND ALL OTHER
OBLIGATIONS AS SET FORTH IN THE LEASE FROM THE SCHEDULED DATE FOR THE
COMMENCEMENT DATE UNDER THE LEASE, REGARDLESS OF THE DEGREE OF COMPLETION OF THE
WORK ON SUCH DATE, AND NO SUCH DELAY IN COMPLETION OF THE WORK ON SUCH DATE, AND
NO SUCH DELAY IN COMPLETION OF THE WORK SHALL RELIEVE TENANT OF ANY OF ITS
OBLIGATIONS UNDER SAID LEASE.
5. Charges and Fees,Subject to Paragraph 9 below, Tenant shall be
responsible for all costs and expenses attributable to the Work including
supervisory fee to Landlord in an amount equal to $15,000.00, which shall be
retained by Landlord, as Landlord's administrative and overhead expense and a
fee for completed space plans in an amount equal to 5,500.00.
6. Change Orders. All changes to the final Plans requested by Tenant must
be approved by landlord in advance in the implementation of such changes as part
of the Work. All delays caused by Tenant- initiated change order review process,
are solely the responsibility of Tenant and shall cause no delay in the
commencement of the Leas or the rental and other obligations therein set forth.
7. Standards of Design and Construction and Conditions of Tenant's
Performance. All work done in or upon the Premises by Tenant shall be done
according to the standards set forth in the Paragraph 7, except as the same may
be modified in the Plans approved by or on behalf of Landlord and Tenant.
(a) Tenant's Plans and all design and construction of the Work shall comply
with all applicable statutes, ordinances, regulations, laws, codes and
industry standards, including, but not limited to, requirements of
Landlord's fire insurance underwriters. Approval by Landlord of the Plans
shall not constitute a waiver of this requirement of assumption by Landlord
of responsibility for compliance. Where several sets of the foregoing laws,
codes and standards must be met, the strictest shall apply where not
prohibited by another law, code or standard.
(b) Tenant shall obtain, at its own cost and expense, all required building
permits and, when construction has been completed, shall obtain, at its own
cost and expense, an occupancy permits for the Premises, which permit shall
be delivered to Landlord. Tenant's failure to obtain such permits shall not
cause a delay in the commencement of the Lease or rental and other
obligations therein set forth.
(c) Tenant's Contractors shall be licensed contractors, possessing good
labor relations, capable of performing quality workmanship and working in
harmony with Landlord's contractors and subcontractors and with other
contractors and subcontractors in the Building. All work shall be
coordinated with any other construction or other work in the Building or
Project in order not to affect adversely construction work being performed
by or for Landlord or its tenants, it being understood that, in the event
of any conflict, Landlord and its contractors and subcontractors shall have
priority over Tenant and Tenant's Contractors.
(d) Landlord shall have the right, but not the obligation, to perform on
behalf of and for the account of Tenant, subject to reimbursement by
Tenant, any work (i) which Landlord deems to be necessary of an emergency
basis, (ii) which pertains to structural components, building systems or
the general utility systems for the Building, (iii) which pertains to the
erection of temporary safety barricades or signs during construction, or
(iv) which pertains to patching of the Work and other work in the Building.
(e) Tenant shall use only new, first-class materials in the Work, except
where explicitly shown otherwise in the Plans approved by Landlord and
Tenant. Tenant shall obtain warranties of at least one (1) year's duration
from the completion of the Work against defects in workmanship and
materials on all performed and equipment installed in the Premises as part
of the Work.
21
<PAGE>
(f) Tenant and Tenant's Contractors, in performing work, shall not
interfere with other tenants and occupants of the Project. Tenant and
Tenant's Contractors shall make all efforts and take all steps appropriate
to construction activities undertaken so as not to interfere with operation
of the Project and shall, in any event, comply with all reasonable rules
and regulations existing from time to time at the Building. Tenant and
Tenant's Contractors shall take all precautionary steps to minimize dust,
noise and construction traffic and to protect their facilities and the
facilities of others affected by the Work and to properly police same.
Construction equipment and materials are to be kept within the Premises,
and delivery and loading of equipment and materials shall be done at such
locations and at such time as Landlord shall direct so as not to burden the
construction or operation of the Building or Project.
(g) Landlord shall have the right to order Tenant or any of Tenant's
Contractors who violate the requirements imposed on Tenant or Tenant's
Contractors in performing work to cease work and remove its equipment and
employees from the Building or Project. No such action by Landlord shall
delay the commencement of the Lease or the rental and other obligations
therein set forth.
(h) Utility costs or charges for ant service (including) HVAC, hoisting or
freight elevator and the like) to the Premises shall be the responsibility
of Tenant and shall be paid for by Tenant at Landlord's rates. Tenant shall
apply and pay for all utility maters required. Tenant shall pay for all
support services provided by Landlord's contractors. Tenant shall arrange
and pay for the removal of construction debris and shall not place debris
in the Building's or Project's waste containers.
(i) Tenant shall permit access to the Premises, and the Work shall be
subject to inspection, by Landlord and Landlord's architects, engineers
contractors and other representatives at all times during the period in
which the Work is being constructed and installed and following completion
of the Work.
(j) Tenant shall proceed with its work expeditiously, continuously and
efficiently, and shall use its best efforts to complete the same as soon as
reasonably possible. Tenant shall notify Landlord upon completion of the
Work and shall furnish Landlord and Landlord's title insurance company with
such further documentation as may be necessary under Paragraphs 9 and 10
below.
(k) Tenant shall have no authority to deviate from the Plans in performance
of the Work, except as authorized by Landlord and its designated
representative in writing. Tenant shall furnish Landlord "as-built"
drawings of the Work within thirty (30) days after completion of the Work.
(l) Landlord shall have the right to run utility lines, pipes, conduits
ductwork and component parts of all mechanical and electrical systems where
necessary or desirable through the Premises, to repair alter, replace or
remove the same, and to require Tenant to install maintain proper access
panels thereto.
(m) Tenant shall impose on and enforce all applicable terms with this
Workletter Agreement against Tenant's architect and Tenant's Contractors.
8. Insurance and Indemnification.
(a) In addition to any insurance which may be required under the Lease,
Tenant shall secure, pay for and maintain or cause Tenant's Contractors secure,
pay for and maintain during the continuance of construction and fixturing work
within the Building or Premises, insurance in the following minimum coverages
and limits of liability:
(i) workers' compensation and employers' liability insurance with
limits of not less than $500,000.00, or such higher amounts as
may be required from time to time by any employee benefit acts
or other statutes applicable where the work is to be
performed, and in any event sufficient to protect Tenant's
Contractors from liability aforementioned acts;
(ii) comprehensive or commercial general liability insurance
(including contractors' protective liability) in an amount not
less than $2,000,000.00 per occurrence whether involving
bodily injury liability
22
<PAGE>
(or death resulting thereform) or property damage liability or
a combination thereof with a minimum aggregate limit of
$2,000,000.00 and with umbrella coverage with limits not less
than $10,000,000.00. Such insurance shall provide for
explosion and collapse, completed operations coverage and
broad form blanket contractual liability coverage and shall
insure Tenant's Contractors against any and all claims for
bodily injury, including death resulting thereform, and damage
to the property of others and arising from its operations
under the contracts whether such operations are performed by
Tenant's Contractors or by anyone directly or indirectly
employed by any of them;
(iii) comprehensive automobile liability insurance, including the
ownership, maintenance and operation of any automotive
equipment, owned, hired or nonowned, in an amount not less
than $500,000.00 for each person in oneaccident and
$1000,000.00 for injuries sustained by two or more persons in
any one accident, and property damage liability in an amount
not less than $1,000,000.00 for each accident. Such insurance
shall insure Tenant's Contractors against any and all claims
for bodily injury, including death resulting thereform, and
damage to the Property of others arising form its operations
under the contracts, whether such operations are performed by
Tenant's Contractors or by anyone directly or indirectly
employee by any of them;
(iv) "all risk" builder's risk insurance upon the entire Work to
the full insurable value thereof. This insurance shall include
the interests of Landlord and Tenant (and their respective
contractors and subcontractors of any tier to the extent of
any insurable interest therein) in the Work and shall insure
against the perils of fire and extended coverage and shall
include "all risk" builder's risk insurance for physical loss
or damage including, without duplication of coverage, theft,
vandalism and malicious mischief. If portions of the Work are
stored off the site of the Building or in transit to said site
are not covered under said "all risk" builder's risk
insurance, then Tenant shall effect and maintain similar
property insurance on such portions of the Work. Any loss
insured under said "all risk" builder's risk insurance is to
be adjusted with Landlord and Tenant and made payable to
Landlord as trustee for the insureds, as their interests may
appear.
All policies (expect the worker's compensation policy) shall be endorsed to
include as additional insured parties Landlord and its beneficiaries, their
partners, directors, officers, employees and agents, Landlord's contractors,
Landlord's architects, and such additional persons as Landlord may designate.
The waiver of subrogation provisions Contained in the Lease shall apply to all
insurance policies (except the workers' compensation policy) to be obtained by
Tenant pursuant to this Paragraph. The insurance policy endorsements shall also
provide that all additional insured parties shall be given thirty (30) days'
prior written notice of any reduction, cancellation for nonrenewal of coverage
(except that ten (10) days' notice shall be sufficient in the case of
cancellation for nonpayment of premium) and shall provide that the insurance
coverage afforded to the additional insured parties thereunder shall be primary
to any insurance carried independently by said additional insured parties.
Additionally, where applicable, each policy shall contain a cross-liability and
severability of interest clause.
(b) Without limitation of the indemnification provisions contained in the
Lease, to the fullest extent permitted by law Tenant agrees to indemnify,
protect, defend and hold harmless Landlord, Landlord's contractors and
Landlord's architects and their partners, directors, officers, employees and
agents, from and against all claims, liabilities, losses, damages and expenses
of whatever nature arising out of or in connection with the Work or the entry of
Tenant or Tenant's Contractors into the Project, the Building and the Premises,
including, without limitation, mechanics' liens or the cost of any repairs to
the Premises, Building or Project necessitated by activities of Tenant or
Tenant's Contractors and bodily injury to persons or damage to the property of
Tenant, its employees, agents, invitees Or licensees or others. It is understood
and agreed that the foregoing indemnity shall be in addition to the insurance
Requirements set forth above and shall not be in discharge of or in substitution
for same or any other indemnity or Insurance provision of the Lease.
23
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9. Landlord's Contribution: Excess Amounts.
(a) Upon completion of the work, Tenant shall furnish Landlord with final
waivers of liens and contractors' affidavits, in such form as may be required by
Landlord and Landlord's title insurance company, from all parties performing
labor or supplying materials or services in connection with the Work showing
that all of said parties have been compensated in full and waiving all liens in
connection with the Premises and Building. Tenant shall submit to Landlord a
detailed breakdown of Tenant's total construction costs, together with such
evidence of payment as is reasonably satisfactory to Landlord.
(b) Upon completion of the Work and Tenant's satisfaction of all
requirements set for herein, Landlord shall make a dollar contribution in the
amount of Four Thousand Six Hundred Fifty- Nine and No/100 Dollars ($400,659.00)
("Landlord's Contribution") for application to the extent Thereof to the cost of
the Plans, the Work and Tenant's actual. Documented costs to complete its
physical move (the "Moving Expenses"). If such cost of the Plans, the Work and
the Moving Expenses exceeds Landlord's Contribution, or if the Moving Expense
exceed One and No/100 Dollars ($1.00) per rentable square foot, Tenant solely
shall have responsibility for the payment of Such excess cost. If the cost of
the Plans, the Work and the Moving Allowance is less than Landlord's
Contribution, Landlord shall be entitled to retain such excess amount.
Notwithstanding Anything herein to the contrary, Landlord may deduct from
Landlord's Contribution any amounts due to Landlord or its architects or
engineers under this Workletter.
10. Construction Escrow. Prior to commencement of any construction or payment to
Tenant or to any of Tenant's Contractors, Tenant shall establish a construction
escrow or other payment procedure acceptable to Landlord at a title insurance
company designated by Landlord providing for payment to Tenant's Contractors and
payment of all other costs associated with the Work as the Work progresses, upon
the title insurance company's satisfactory review of lien waivers and sworn
statements from the Tenant's Contractors and other applicable parties and upon
the title insurance company's willingness to issue title insurance over
mechanics' lien relating to Tenant's contacts and the Work to the date of each
draw. Tenant shall pay for the Work when required under its contracts for the
Work and shall not permit the Premises or the Building to become subject to any
lien on account of labor, material or services furnished to Tenant. Tenant
shall, from time to time, deposit funds into the construction escrow in amounts
sufficient to pay the costs of the Work. Tenant may not withdraw funds except to
pay Tenant's Contractors, unless Landlord has consented To such withdrawal of
funds by Tenant and shall also provide that if Tenant fails to pay for the Work
when Due or if any mechanics' lien is filed in connection with the Work,
Landlord may use and withdraw the funds in the escrow to pay for the Work or
remove the lien without Tenant's consent. Tenant shall provide such contractor's
affidavits, partial and final waivers of lien, architect's certificates and any
additional documentation (including, without limitation, Tenant or contractor
personal undertakings) which may be requested by Landlord, such title insurance
company or any holder of a mortgage on the Building in connection with said
escrow or consistent with any other title insurance requirements concerning the
Work.
11. Miscellaneous.
(a) Except as expressly set forth herein or in the Lease,
Landlord has no agreement with Tenant and has no obligation to do any
work with respect to the Premises.
(b) If the plans for the Work require the construction and
installation of more fire hose cabinets or telephone/electrical closets
than the number provided in the core of the Building in which the
Premises are located, then Tenant agrees to pay all costs and expenses
arising from the construction and installation of such additional fire
hose cabinets or Telephone/.electrical closets.
(c) Time is of the essence under this Workletter.
(d) Any person signing this Workletter on behalf of Landlord
and/or Tenant warrants and represents he has authority to do so.
(e) If Tenant fails to make any payment relating to the Work
as required hereunder, Landlord, at its option, may complete the work
pursuant to the approved Plans and continue t o hold Tenant liable for
the costs thereof and all other costs due to Landlord. Tenant's failure
to pay any amounts owed by Tenant hereunder when due or Tenant's
failure to perform its obligations hereunder shall also constitute a
default under the Lease, and, Landlord
24
<PAGE>
shall have all the rights and remedies granted to Landlord under the lease
for non-payment of any amounts owed thereunder or failure by Tenant to
perform its obligations thereunder.
(f) Notices under this Workletter shall be given in the same manner as
under the Lease.
(g) The liability of Landlord hereunder or under any amendment hereto
or any instrument or document executed in connection herewith (including,
without limitation, the Lease) shall be limited to and enforceable solely
against Landlord's interest in the Building.
(h) The headings set forth herein are for convenience only.
(i) This Workletter sets forth the entire agreement of Tenant and
Landlord regarding the Work. This Workletter may only be amended if in
writing and duly executed by both Landlord and Tenant.
IN WITNESS WHEREOF, this Workletter is executed as of this 31st day of
January, 1995.
LANDLORD:
REAL ESTATE INCOME PARTNERS III
By: Birzhar Investments
Its: Authorized Agent
By: /s/ [illegible]
---------------------------
Title:
---------------------------
TENANT:
INTERNATIONAL DATA PRODUCTS, CORP.
By: /s/ Oscar Fuster
---------------------------
Title: VP & Secretary
<PAGE>
EXHIBIT "D"
To Lease dated January 6, 1995
by and between
REAL ESTATE INCOME PARTNERS III, Limited Partnership, as Landlord,
and International Data Products, Corp., as Tenant.
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, concourses, ramps, courts,
vestibules, stairways, corridors, or halls shall not be obstructed or
used by Tenant or the employees, agents, servants, visitors or business
of Tenant for any purposes other than ingress and egress to and from the
Premises and for delivery of merchandise and equipment in prompt and
efficient manner, using elevators and passageways designated for
delivery by Landlord.
2. No awnings, air conditioning units, fans or other projections shall be
attached to the Building. No curtains, blinds, shades or screens shall
be attached to or hung in or used in connection with, any window or door
of the Premises or Building, without the prior written consent of
Landlord. All electrical fixtures hung in offices or spaces along the
perimeter of the Premises must be fluorescent, of a quality type, design
and bulb color approved by Landlord unless the prior consent of Landlord
has been obtained for other lamping.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside
of the Premises or Building or inside of the Premises if the same can be
seen from the outside of the Premises without the prior written consent
of Landlord. In the event of the violation of the foregoing by Tenant,
Landlord may remove same without any liability, and may charge the
expense incurred by such removal to Tenant. Interior signs on doors and
directory tablet shall be inscribed, painted or affixed for Tenant by
Landlord and shall be of a size, color and style acceptable to Landlord.
4. The exterior windows and doors that reflect or admit light and air into
the Premises or the halls, passageways or other public places in the
Building, shall not be severed or obstructed by Tenant, nor shall any
articles be placed on the windowsills. No showcases or other articles
shall be put in front or affixed to any part of the exterior of the
Building, not placed in the halls, corridors or vestibules, nor shall
any article obstruct any air-conditioning supply or exhaust without the
prior written consent of Landlord.
5. The electrical and mechanical closets, water and wash closets, drinking
fountains and other plumbing, electrical and mechanical fixtures shall
not be used for any purposes other than those for which they are
constructed, and no sweepings, rubbish, rags, coffee grounds, acids or
other substances shall be deposited therein. All damages resulting from
any misuse of the fixtures shall be borne by the Tenant who, or whose
servants, employees, agents, visitors or licensees, shall have caused
the same. No person shall waste water by interfering or tampering with
the faucets or otherwise.
6. Tenant shall not mark, paint, drill into, or in any way deface any part
of the Premises or the Building. No boring, drilling of nails or screws,
outting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall
not lay floor tile or other similar floor covering in the Premises,
except with the prior approval of Landlord.
7. No portion of the Premises or the Building shall be used or occupied at
any time for manufacturing, for the storage of merchandise, for the sale
of merchandise, goods or property of any kind at auction or otherwise
without the express consent of Landlord, or as sleeping or lodging
quarters.
8. Tenant, Tenant's servants, employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Premises any hazardous
waste, toxic, inflammable, combustible, caustic, poisonous or explosive
fluid, chemical or substance.
9. No bicycles, vehicles, or animals of any kind (other than a seeing eye
dog for a blind person), shall be brought into or kept by Tenant in or
about the Premises of the Building.
10. Tenant shall not use or occupy or permit any portion of the Premises to
be used or occupied as an office for offset printing or for the
possession, storage, manufacture, sale of liquor or narcotics, or as a
barber or manicure shop, a labor office, a doctor's or dentist's office,
a dance or music studio, any type of school, or for any use other than
those specifically granted in the Lease and with the express consent of
the Landlord. Tenant shall not engage or pay any employees on the
Premises, except those actually working for such Tenant on said Premises.
11. Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or Project or its desirability as a building for offices, and
upon written notice from Landlord, Tenant shall refrain from or
discontinue such advertising. In no event shall Tenant, without the
prior written consent of Landlord, use the name of the Building or
Project or use pictures or illustrations of the Building or Project.
12. Any person in the Building will be subject to identification by
employees and agents of Landlord. All persons in or entering Building
shall be required to comply with the security policies of the Building.
Tenant shall keep doors to unattended areas locked and shall otherwise
exercise reasonable precautions to protect property from theft, loss or
damage. Landlord shall not be responsible for the theft, loss or damage
of any property.
13. No additional locks or bolts of any kind shall be placed on any door in
the Building or the Premises and no lock on any door therein shall be
changed or altered in any respect without the consent of the Landlord.
Landlord shall furnish two keys for each lock on exterior doors to the
Premises and shall, on Tenant's request and at Tenant's expense, provide
additional duplicate keys. All keys, either furnished to, or otherwise
procured by Tenant, shall be returned to Landlord upon termination of
this Lease. Landlord may at all times keep a pass key to the Premises.
All entrance doors to the Premises shall be left closed at all times,
and left locked when the Premises are not in use. Tenant shall not copy
any keys.
14. Tenant shall give immediate notice to Landlord in case of theft,
unauthorized solicitation or accident in the Premises or in the Building
or of defects therein or in any fixtures or equipment, or of any known
emergency in the Building.
15. Tenant shall not use the Premises or permit the Premises to be used for
photographic, multilith or multigraph reproductions, except in
connection with its own business and not be a service for others,
without Landlord's prior permission.
16. No freight, furniture or bulky matter of any description will be
received into the Building or Project except in such manner, during such
hours and using such passageways as may be approved by Landlord, and
then only upon having been scheduled at least two (2) working days prior
to the date on which such service is required. Any hand trucks,
carryalls, or similar appliances suited for the delivery or receipt of
merchandise or equipment shall be equipped with rubber tires, side
guards and such other safeguards as Landlord shall require.
17. Tenants, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, leave or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building or Project.
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18. Tenant shall not make excessive noises, cause disturbances or
vibrations or use or operate any electrical or mechanical devices that
emit excessive sound or other waves or disturbances or create
obnoxious odors, any of which may be offensive to the other tenants and
occupants of the Building or Project, or that would interfere with the
operation of any device, equipment, radio, television broadcasting or
reception from or within the Building or elsewhere and shall not place
or install any projections, antennas, aerials or similar devices inside
or outside of the Premises or on the Building with Landlord's prior
written approval.
19. Tenant shall comply with all applicable federal, state and municipal
laws, ordinances and regulations, and building rules and shall not
directly or indirectly make any use of the Premises which may be
prohibited by any of the foregoing or which may be dangerous to persons
or property or may increase the cost of insurance or require additional
insurance coverage.
20. Tenant, its servants, employees, customers, invitees and guests shall,
when using the parking facilities in and around the Building observe
and obey all signs regarding fire lanes, no parking zones, visitor
parking and handicapped zones, and when parking, always park between
designated lines. Landlord reserves the right to tow away, at the
expense of the owners, any vehicle which is improperly parked or parked
in a "No Parking" zone. All vehicles shall be parked at the sole risk of
the owners, and Landlord assumes no responsibilities for damage or loss
of vehicles. There shall be no overnight parking of any kind, without
Landlord's prior written consent, which consent may be granted or
withheld at Landlord's sole discretion.
21. Tenant shall not serve, nor permit the serving of alcoholic beverages
in the Premises unless Tenant shall have procured Host Liquor Liability
Insurance, issued by companies and in amounts reasonably satisfactory
to Landlord, naming Landlord as an additional party insured.
22. The requirements of Tenant will be attended to only upon written
application at the office of the Building. Employees shall not perform
any work or do anything outside of the regular duties unless under
special instructions from the office of Landlord.
23. Canvassing, soliciting and peddling in the Building or Project is
prohibited and Tenant shall cooperate to prevent the same.
24. Except as otherwise explicitly permitted in its lease, Tenant shall not
do any cooking, conduct any restaurant, luncheonette or cafeteria for
the sale or service of food or beverages to its employees or to others,
install or permit the installation or use of any food, beverage,
cigarette, cigar or stamp dispensing machine or permit the delivery of
any food or beverage to the Premises, except by such persons
delivering the same as shall be approved by Landlord.
25. Tenant shall at all times keep the Premises neat and orderly.
26. The regular business hours of the Building shall be between 7:00 a.m.
to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on
Saturdays. The Building shall be closed to the public on Sundays, and
on New Year's Day, President's Day, Memorial Day, Independence Day,
Labor Day, the Thanksgiving holiday and Christmas, and such other
federal or state holidays as Landlord shall elect by notice to the
Tenants.
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Exhibit 10.16
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
PO BOX 362350
SAN JUAN, PUERTO RICO 00936-2350
LEASE CONTRACT
PROJECT NO. T-0609-0-63
LOCATION: GUAYAMA, PUERTO RICO
THIS AGREEMENT ENTERED into on July 15, 1994 BY: AS "LANDLORD", THE PUERTO
RICO INDUSTRIAL DEVELOPMENT COMPANY, AND AS "TENANT", PUERTO RICO INDUSTRIAL
MANUFACTURING OPERATING, CORP.
WITNESSETH
WHEREAS, LANDLORD is the owner of certain landsite and building, identified
in the Epigraph, hereinafter referred to as the Premises.
WHEREAS, LANDLORD has agreed to lease to TENANT, and TENANT has agreed to
hire from LANDLORD the Premises.
NOW THEREFORE, in consideration of the foregoing premises, the parties
herein agree on this lease subject to the following:
TERMS AND CONDITIONS
ONE: LANDLORD hereby demises and lets unto TENANT, and TENANT hereby leases
from LANDLORD the Premises which are fully described in Schedule "A" hereto
annexed and made a apart hereof.
The Premises are subject to the encumbrances, liens and/or restrictions, if
any, that may appear from said Schedule "A". Furthermore, the air rights of the
Premises, are excepted and reserved to LANDLORD.
TWO: Premises shall be used and occupied exclusively in the manufacture of
"Computers and Peripherals". (SIC. #0347, 03572 and 03575).
THREE: TENANT shall hold the Premises for a period of Five (5) years. TENANT
hereby acknowledges that the building herein demised is in need of certain
repairs which LANDLORD undertakes to commence presently after execution hereof;
therefore, the terms of the leases hereunder shall, anything to the contrary
notwithstanding commence on the tenth (10th) working day after the termination
notice sent to TENANT by Certified Mail that the building is ready for
occupancy.
FOUR: Commencing on the first day of the following month after the
commencement term of this, TENANT shall pay to LANDLORD an annual rental of
$2.20 per square foot of gross building area during the term of this lease.
This rental shall be paid in equal monthly installments of $4,190.17.
The monthly installments for rent specified herein, shall be paid in advance
on the first day of each month at LANDLORD'S office, or at any other place that
LANDLORD may notify. In the event that the date of commencement does not fall on
the first of the month, TENANT further agrees to pay the first partial monthly
installments, prior to, or on the date of commencement.
FIVE: The deposit required under the provisions of this contract amounts to
(a) $2,095.04 previously deposited by TENANT to cover the
<PAGE>
reservation period of Project T-0609-0-63 (CR# 13226) shall be credited to
the required deposit and (b) $3,938.80 to be paid by TENANT in certified
check simultaneously with the execution of this Contract.
This deposit shall guarantee the compliance by TENANT of its obligations,
under this Contract, particularly, but not limited to, the payment of rent, the
compliance of the environmental classes herein included and the return of the
Premises in proper condition at the termination of this Lease. On said
termination, if TENANT is not in default of any of the terms and conditions of
this Contract, LANDLORD will return to TENANT the sum of money, if any, held
pursuant to this provision, after LANDLORD'S Environmental office certifies that
there are no environmental deficiencies as a result of TENANT'S manufacturing
operation on the demised Premises.
SIX: TENANT agrees to have on the date of commencement of the term of this
Lease a capitalization of $175,000.000.
Likewise TENANT agrees to install within six (6) months from the same date
manufacturing machinery and equipment with a value of at least $100,000.00.
This shall not include the cost of transportation and installation thereof,
nor its ordinary depreciation after installation, and within eighteen (18)
months from the date of commencement of the term, to employ a minimum of thirty
(30) production workers. The aforementioned levels, shall be maintained
throughout the term of this Lease or any extension thereof.
SEVEN: All notices, demands, approvals, consents and/or communications
herein required or permitted shall be in writing. If by mail should be certified
and to the following addresses, to LANDLORD: PO BOX 362350, SAN JUAN, PUERTO
RICO 00936-2350. To TENANT:
ATT. Maria F. Glinsmann
GENERAL COUNSEL
7-4 Metropolitan Court
Gaithersburg, MD 20878-4000
Phone (301) 590-8123
(301) 590-8100
Fax (301) 590-8133
EIGHT: Net Lease -- This Lease shall be interpreted as a net lease; it being
the exclusive responsibility of TENANT to pay for all operating expenses,
utilities, maintenance, expenses, insurance, taxes or any other costs, expenses
or charges of any nature not specifically assumed by LANDLORD hereunder.
NINE: Warranty as to use -- LANDLORD does hereby warrant that at the time of
the commencement of the term of this Lease, the Premises may be used by TENANT
for the manufacturing purposes herein intended which are deemed consistent with
the design and construction in accordance with the corresponding plans and
specifications.
TEN: Alterations -- TENANT shall make no alterations, additions or
improvements to the Premises without the prior consent of LANDLORD and all such
alterations, additions or improvements made by or for
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TENANT, shall be at TENANT'S own cost and expenses and shall, when made, be
the property of LANDLORD without additional consideration and shall remain upon
and be surrendered with the Premises as a part thereof at the expiration or
earlier termination of this Lease, subject to any right of LANDLORD to require
removal or to remove as provided for hereinafter.
In the event TENANT asks for LANDLORD'S consent for any alteration; LANDLORD
may at its option, require from TENANT to submit plans and specifications for
said alteration. Before commencing any such work, said plans and specifications,
if required, shall be filed with and approved by all governmental agencies
having jurisdiction thereof, and the consent of any mortgagee having any
interest in or lien upon this Lease shall be procured by TENANT and delivered to
LANDLORD if required by the term of the mortgage.
Before commencing any such work, TENANT shall at TENANT'S own cost and
expense, deliver to LANDLORD a General Accident Liability Policy more
particularly described in Article THIRTY (30) hereof, but said policy shall
recite and refer to such work, and in addition thereto, if the estimated cost of
such work, and in addition thereto, if the estimated cost of such work is more
than FIVE THOUSAND DOLLARS ($5,000.00), TENANT shall, at TENANT'S own cost and
expense deliver to LANDLORD a surety bond or a performance bond from a company
acceptable to LANDLORD, or a similar bond or other security satisfactory to
LANDLORD, in an amount equal to the estimated cost of such work, guaranteeing
the completion of such work within a reasonable time, due regard being had to
conditions, free and clear of materialmen liens, mechanics liens or any other
kind of lien, encumbrances, chattel mortgages and conditional bills of sale and
in accordance with said plans and specifications submitted to and approved by
LANDLORD. At LANDLORD'S option TENANT shall provide a blanket-written guarantee
in an amount sufficient to satisfy LANDLORD as to all alterations, changes,
additions and improvements to the Premises in lieu of separate guarantee for
each such project.
TENANT shall pay the increased premium, if any, charged by the insurance
companies carrying insurance policies on said building, to cover the additional
risk during the course of such work.
ELEVEN: Power Substation -- If required by TENANT'S operations, TENANT
shall, at its own cost and expense, construct and /or install a power substation
and connect it to the PUERTO RICO ELECTRICAL POWER AUTHORITY (PREPA)
distribution lines, for voltages up to [number illegible in master] KV; and to
PREPA transmission lines for voltages of 38 KV, all in conformity to PREPA'S
requirements. Such construction shall, in no event, be
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undertaken by TENANT until after LANDLORD has approved the location thereof,
as well as the routing of the power line extension.
TWELVE: Repairs and Maintenance -- TENANT shall, at its own cost and
expense, put, keep and maintain in thorough repair and good order and safe
condition the building and improvements standing upon the Premises at the
commencement of the term hereon or thereafter erected upon the premises, or
forming part of the Premises, and their full equipment and appurtenances, the
sidewalk areas, sidewalk hoists, railing, gutters, curbs and the like in from of
the adjacent to the Premises, and each and every part thereof, both inside and
outside, extraordinary and ordinary, and shall repair the whole and each and
every part thereof in order to keep the same at all times during the term hereof
in thorough repair and good order and safe conditions, whenever the necessity or
desirability therefore may occur, and whether or not the same shall occur, in
whole or in part, by wear, tear, obsolescence or defects, and shall use all
reasonable precautions to prevent waste, damage or injury, except as provided
hereinafter.
LANDLORD and not TENANT, shall be responsible for and shall promptly correct
any defects in the building on the Premises which are due to faulty design, or
to errors of construction not apparent at the time the Premises were inspected
by TENANT for purposes of occupancy by TENANT; this shall not be interpreted to
relieve TENANT of any responsibility or liability herein otherwise provided,
including among others, for structural failure due to the fault or negligence of
TENANT.
TENANT shall also, at TENANT'S own cost and expense, maintain the
landsite in thoroughly clean condition; free from solid waste (which includes
liquid and gaseous waste as defined by the Resource Conservation and Recovery
Act), and the Regulation on Hazardous and Non-Hazardous Waste of the
Environmental Quality Board, as amended, rubbish, garbage and other
obstructions. Specifically, TENANT shall not use said landsite, nor permit it
to be used, as a deposit or as a dump for raw materials, waste materials,
hazardous, toxic or non-toxic substances, or substances of whichever nature.
TENANT shall neither make any excavation for the purpose of storing, putting
away and/or concealing raw materials or waste materials of any kind.
Underground storage of hazardous and /or toxic substances is specifically
prohibited.
TENANT shall not do or cause to be done, nor permit on the Premises anything
deemed extra hazardous, nor shall it store in the Premises flammable or toxic
products of any class or kind without taking the proper precautions and
complying with applicable Federal and Commonwealth laws and regulations.
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In case TENANT needs to store in the landsite raw materials of a hazardous
and/or toxic nature or hazardous and/or toxic wastes, TENANT shall notify
LANDLORD and secure its prior authorization. LANDLORD shall be furnished with a
copy of any permit issued for such storage.
Although it is not intended that TENANT shall be responsible for any
decrease in value of the Premises due to the mere passing of time, or for
ordinary wear and tear of surfaces and other structural members of the building,
nevertheless TENANT shall; (i) replace, with like kind and quality, doors,
windows; electrical, sanitary and plumbing, fixtures; building equipment and/or
other facilities or fixtures in the Premises which through TENANT's use, fault
or negligence, become too worn out to repair during the life of this Lease, (ii)
paint the property inside and outside as required.
In addition to the foregoing, TENANT shall indemnify and safe harmless
LANDLORD from and against any and all cost, expenses, claims, losses, damage, or
penalties, including counsel fees, because of or due to TENANT's failure to
comply with the foregoing, and TENANT shall not call upon LANDLORD for any
disbursement or outlay of money whatsoever, and hereby expressly releases and
discharges LANDLORD of and from any liability or responsibility whatsoever in
connection therewith.
THIRTEEN: Roof Care -- TENANT, without the prior consent of LANDLORD, shall
not: (i) erect or cause to be erected on the roof any billboard, aerial sign, or
structure of any kind, (ii) place any fixture, equipment or any other load over
the roof, (iii) drill any hole on the roof for whichever purpose, (iv) use the
roof for storage, nor (v) correct any leaks whatsoever, this being LANDLORD's
sole responsibility. Furthermore, TENANT shall take all reasonable precautions
to insure that the drainage facilities of the roof are not clogged and are in
good and operable conditions at all times.
FOURTEEN: Floor Loads -- TENANT hereby acknowledges that it has been
informed by LANDLORD that the maximum floor load of the Premises herein demised
is 150 pounds per sq. ft. Therefore, TENANT hereby agrees that in the event the
load of the machinery and equipment to be installed thereat exceeds such maximum
load, it shall, at its own cost and expense, carry out any improvements to the
floor of the Premises which may be necessary to support such additional load, it
being further agreed and understood that construction and/or installation of
such improvements shall not be commenced until after LANDLORD's approval of the
plans to be prepared therefor by TENANT and thereafter,
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<PAGE>
after completion of construction and/or installation of said facilities, they
shall be deemed covered by and subject to the applicable provisions of this
Contract; it being further specifically agreed and understood that upon
termination of this Lease, such facilities shall be removed by TENANT, at its
own cost and expense, or in the alternative, and upon request by LANDLORD,
they shall remain as part of the Premises with no right whatsoever on the
part of TENANT to be reimbursed and/or compensated therefor.
FIFTEEN: Fixtures -- TENANT shall not affix to the ceiling, nor to its
supporting joists or columns, nor to any of its walls, any air conditioning
unit, nor any other fixture, without the prior consent of LANDLORD.
SIXTEEN: Environmental Protection and Compliance -- TENANT agrees, as a
condition hereof, that it will not discharge its solid, liquid or gaseous
industrial and/or sanitary effluent or discharges, either into the sewer
system and/or into any other place until after required authorizations
therefor have been obtained from the Puerto Rico Aqueduct and Sewer
Authority, and/or the Department of Health of Puerto Rico and/or
Environmental Quality Board, and/or any other governmental agency having
jurisdiction thereof and TENANT further agrees and undertakes to pre-treat
any such effluent, prior to discharge thereof as required by the said
Authority, Department and/or governmental agency with jurisdiction, and/ or
to install any equipment or system required, and to fully abide by and comply
with any and all requisites imposed thereby, and upon request by LANDLORD to
submit evidence of such compliance; it being agreed that non-compliance
thereof by TENANT for a period of ninety (90) days after notice shall be
deemed an additional event of default under the provisions hereof provided,
that no construction and/or installation shall be made until LANDLORD has
approved of it.
TENANT shall also, at TENANT'S own cost and expense, construct and maintain
Premises, processes and/or operating procedures in compliance with the terms,
conditions and commitments specified in any Environmental Impact Statement,
Environmental Assessment or any other analogous document produced by the
Commonwealth of Puerto Rico, Economic Development Administration/LANDLORD as
lead agency, or by any other governmental agency in connection with the approval
or operation of the project.
TENANT shall also serve LANDLORD with a copy of any lawsuit, notice of
violation order to show cause or any other regulatory or legal action against
TENANT in any environmental [material missing in master]
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TENANT shall also serve LANDLORD with a copy of any permit granted to TENANT
for air emissions, water discharge, solid waste generation, storage, treatment
and/or disposal, and for any hazardous and /or toxic waste raw materials or
by-products used or generated, stored, treated and/or disposed or any other
endorsement, authorization or permit required to be obtained by TENANT.
TENANT shall also serve LANDLORD with a copy of any filing or notification
to be filed by TENANT with any regulatory agency or any environmentally related
case or issue, especially in any situation involving underground or surface
water pollution, hazardous and/or toxic waste spillage and ground contamination.
The notification to LANDLORD shall take place not later than the actual filing
of the pertinent documents with the regulatory agency.
SEVENTEEN: Improper Use -- TENANT, during the term of this Lease and of any
renewal or extension thereof, agrees not to use or keep or allow the leased
Premises or any portion thereof to be used or occupied for any unlawful purpose
or in violation of this Lease or of any certificate of occupancy or certificate
of compliance covering or affecting the use of the Premises or any portion
thereof, and will not suffer any act to be done or any condition to exist on the
Premises or any portion thereof, or any article to be brought thereon, which may
be dangerous, unless safeguarded as required by law, or which may in law,
constitute a nuisance, public or private, or which may make void or voidable any
insurance then in force on the leased Premises.
EIGHTEEN: Government Regulations -- TENANT agrees and undertakes to abide by
and comply with any and all rules, regulations and requirements of the Planning
Board of Puerto Rico, the Department of Health, the Environmental Quality Board,
the Environmental Protection Agency (EPA), where applicable and/or of any other
governmental agency, having jurisdiction thereon applicable to TENANT's
operations at the Premises and/or products to be manufactured thereat, and if
requested by LANDLORD, TENANT shall submit evidence of such compliance; it being
agreed and understood that noncompliance with any and all such rules,
regulations and requisites shall be deemed an additional event of default under
the provisions of this Contract, unless remedied within thirty (30) days after
receipt of notice thereof.
Any and all improvements to the Premises required by any governmental
agency, having jurisdiction hereon so as to carry TENANT's operations in
accordance with the regulations and requisites thereof, shall be at TENANT's own
cost and expense, except for any
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improvements that may be required as a result of any violation by LANDLORD
that may exist at the effective date hereof other than violations caused by
TENANT or TENANT's agents.
TENANT further agrees and undertakes to install in the Premises, at its
own costs and expense, such devices as may be necessary to prevent any
hazard, which may be caused or created by its operations from affecting the
environmental integrity of the landsite or causing any nuisance to adjacent
TENANTS and/or the community in general; it being agreed and understood that
creating or causing any such nuisance, shall be deemed an additional event of
default under the provisions of this Contract.
TENANT further agrees and undertakes to abide by and comply with any and all
rules, regulations and requisites of the Fire Department relative to the use and
storage of raw materials, finished products and/or inflammable materials, and/or
of any other governmental agency, having jurisdiction thereon applicable to
TENANT's operations at the Premises, and if requested by LANDLORD, TENANT shall
submit evidence of such compliance; it being agreed and understood that
noncompliance by TENANT with any of the aforementioned rules, regulations and
requisites shall be deemed, in each of such cases, an additional event of
default under the provisions of this Contract, unless remedied within thirty
(30) days after receipt of notice thereof.
If as a consequence of the foregoing dispositions, TENANT needs to make
alterations to the Premises, the same shall be done subject to the dispositions
of Article TEN hereof.
NINETEEN: Use Permit -- TENANT agrees to abide by and comply with any and
all conditions and requisites included in the Use Permit which may be issued by
the Puerto Rico Permits and Regulations Administration (ARPE), and if requested
by LANDLORD , shall submit evidence of such compliance; it being agreed and
understood that noncompliance by TENANT with any and all such conditions and
requisites and/or the cancellation of the said Use Permit shall, in each of such
cases, be deemed an additional event of default under the provisions of this
Contract.
TWENTY: Inspection -- TENANT shall permit LANDLORD or LANDLORD's agents
to enter the Premises at all reasonable time for the purpose of inspecting
the same, or of making repairs that TENANT has neglected or refused to make
as required by the terms, covenants and conditions of this Lease, and also
for the purpose of showing the Premises to persons wishing to purchase the
same, and during the year next preceding the expiration of this Lease, shall
permit inspection thereof by or on
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behalf of prospective TENANTS. If, at a reasonable time, admission to the
Premises for the purposes aforesaid cannot be obtained, or if at any time an
entry shall be deemed necessary for the inspection or protection of the
property, or for making any repairs, whether for the benefit of TENANT or
LANDLORD, LANLORD's agents or representatives may enter the Premises by
force, or otherwise, without rendering LANDLORD, or LANDLORD's agents or
representative liable to any claim or cause of action or damage by reason
thereof, and accomplish such purpose.
The provisions contained in this Article are not to be construed as an
increase of LANDLORD's obligations under this Lease; it being expressly agreed
that the right and authority hereby reserved does not impose, nor does LANDLORD
assume, by reason thereof, any responsibility or liability whatsoever for the
repair, care of supervision of the Premises, or any building, equipment or
appurtenance on the Premises.
TWENTY ONE: LANDLORD's entry for repairs and alterations -- LANDLORD
reserves the right to make such repairs, changes, alterations, additions or
improvements in or to any portion of the building and to the fixtures and
equipment which are reputed part thereof as it may deem necessary or desirable
and for the purpose of making the same, to use the street entrances, halls,
stairs and elevators of the building, provided that there be no unnecessary
obstruction of TENANT's right of entry to and peaceful enjoyment of the
Premises, and TENANT shall make no claim for rent abatement compensation or
damages against LANDLORD by reason of any inconvenience or annoyance arising
therefrom.
TWENTY TWO: LANDLORD excused in certain instances -- If, by reason of
inability to obtain and utilize labor, materials or supplies, or by reason of
circumstances directly or indirectly the result of any state of war, or of
emergency duly proclaimed by the corresponding governmental authority, or by
reason of any laws, rules, orders, regulations or requirements of any
governmental authority now or hereafter in force or by reason of strikes or
riots, or by reason of accidents, in damage to or the making of repairs,
replacements or improvements to the building or any of the equipment thereof,
or by reason of any other cause reasonable beyond the control of LANDLORD,
LANDLORD shall be unable to perform or shall be delayed in the performance of
any covenant to supply any service, such non-performance or delay in
performance shall not be ground to any claim against LANDLORD for damages or
constitute a total or partial eviction, constructive or otherwise. It being
agreed and understood that the time for completion of any such construction,
shall be extended for a period of time equal to the number of days of any
such delay.
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TWENTY THREE: Quiet Enjoyment -- TENANT on paying the full rent and keeping
and performing the conditions and covenants herein contained, shall and may
peaceable and quietly enjoy the Premises for the term aforesaid, subject,
however, to the terms of this Lease and to the mortgages hereinafter mentioned.
TWENTY FOUR: Leasehold Improvements -- If leasehold improvements made by or
for the benefit of TENANT in the Premises at his request or other personal
property to TENANT are assessable or taxable and a tax liability is imposed to
TENANT or LANDLORD, it is understood that it shall be the sole responsibility of
TENANT to pay such taxes and in no event shall such taxes be the liability of or
be transferable to LANDLORD. In the event that by operation of law, such taxes
became a liability of LANDLORD, TENANT shall pay such taxes as they become due
and payable and shall promptly reimburse LANDLORD for any payments or expenses
incurred or disbursed by LANDLORD by reasons of any such assessment. Said amount
shall be due and payable, as additional rent, with the next installment of rent.
In the event that TENANT fails to make this payment when due, it shall be
subject to the dispositions of Article THIRTY SEVEN hereof.
TWENTY FIVE: Stoppage of Operations -- It is understood by the parties
hereto that this Lease is made by LANDLORD in furtherance of the
industrialization plans of the Commonwealth of Puerto Rico, and it is
accordingly understood that TENANT will use all reasonable efforts while this
Lease is in effect to maintain a manufacturing operation upon the Premises, but
nothing contained in this paragraph shall be deemed to require TENANT to
maintain such an operation otherwise than in accordance with sound principles of
business management, or (without limiting the generality of the foregoing) to
prevent TENANT from curtailing such operation or from shutting it down, whenever
and as often as TENANT may, in the exercise of sound business judgment, deem
such action advisable. However, TENANT shall give to LANDLORD notice of any
necessary or convenient curtailment and/or shut-down, at least seven (7) days
prior to the date fixed therefor except in cases of an emergency shut-down, in
which case such notice shall be given at the earliest possible time. No
curtailment of operations or shut-down in accordance with the provisions of this
paragraph shall constitute a default under the provisions of this Contract which
will enable LANDLORD to terminate it, unless such plants shall have been
shut-down for a period of six (6) consecutive months. A shut-down on account of
unforeseeable event or events which although foreseeable could not be
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prevented, shall not constitute a breach of this agreement. Nothing in this
paragraph contained shall relieve TENANT from the payment of rent during the
period of any shut-down or curtailments of operations.
TWENTY SIX: Assignment and Subletting -- TENANT shall not assign, this Lease
nor let or sublet the Premised or any part thereof except to its parent company,
to a wholly owned subsidiary, to an affiliate of TENANT, wholly owned by
TENANT's parent company or to a cooperation to be organized by TENANT. In any of
these cases, TENANT shall promptly notify LANDLORD of said assignment or
subletting, it being agreed and understood that no such assignment or subletting
shall; (i) reduce or, in any way, affect the obligations of TENANT under this
Lease, nor (ii) release TENANT from liability under this Lease.
TWENTY SEVEN: Successors in Interest -- This Lease Contract and every
provision thereof, shall bind and inure to the benefit of the legal
representatives, successors and assigns on the parties. However, the term
"LANDLORD", as used in this Contract, so far as any covenants or obligations
on the part of LANDLORD under this Lease are concerned, shall be limited to
mean and include only the owner or lessor, at the time in question, of the
Premises, so that in the event hereafter of a transfer of the title to the
Premises, whether any such transfer be voluntary or by operation of law or
otherwise, the person, natural or juridical, by whom any such transfer is
made, shall be and hereby is entirely freed and relieved of all personal
liability as respects the performance of the covenants and obligations of
LANDLORD under this Lease from and after the date of such transfer.
TWENTY EIGHT: No Representation by LANDLORD -- LANDLORD, LANDLORD's agents
or employees, or the agents, executives or employees of the Economic Development
Administration, have made no representations or promises with respect to the
Premises except as herein expressly set forth and no rights, easements or
licenses are acquired by TENANT by implication or otherwise except as expressly
set forth in the provisions of this Contract. The taking possession of the
premises by TENANT, shall by conclusive evidence, as against TENANT, that TENANT
accepts same "AS IS" and that said Premises, particularly the building which
forms a part of the same, were in good and satisfactory condition at the time
such possession was so taken.
TWENTY NINE: Damages -- LANDLORD shall not be responsible for any latent
defect or change of conditions in the Premises resulting in damage to the same,
or the property or person therein, except to the
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extent of LANDLORD's gross negligence, and provided such claims or loss is
not covered by insurances herein required from TENANT. TENANT shall promptly
notify LANDLORD of any damage to or defects in the Premises, particularly in
any part of the building's sanitary, electrical, air-conditioning or other
systems located in our passing through the Premises, and the damage or
defective conditions, subject to the provisions of Article TWENTY ONE (21)
hereof, shall be remedied by LANDLORD with reasonable diligence.
THIRTY: General Liability Insurance -- TENANT shall indemnify, have harmless
and defend LANDLORD and agents, servants and employees of LANDLORD against and
from any and all liability, fines, suits, claims, demands, expenses, including
attorneys' fees, and actions of any kind or nature arising by reason of injury
to person or property including the loss of use resulting thereof or, violation
of law occurring in the Premises occasioned in whole or in part by any negligent
act or omission on the part of TENANT or an employee (whether or not acting
within the scope of his employment), servant, agent, licensee, visitor, assignor
or undertenant of TENANT, or by any neglectful use or occupancy of the Premises
or any breach, violation or non-performance of any covenant in this Lease on the
part of TENANT to be observed or performed.
Pursuant to the foregoing, TENANT shall, maintain during the term of this
lease, at its own cost and expense, a Comprehensive General Liability Policy.
Said policy shall: (i) be for a combined single limit of no less than
$500,000.00 per accident, (ii) hold LANDLORD harmless against any and all
liability as hereinbefore stated, and (iii) the care, custody & control
exclusion shall be deleted from this coverage. LANDLORD may require additional
reasonable limits of public liability insurance and coverages, when changing
circumstances so require.
THIRTY ONE: Property Insurance -- TENANT recognizes that the rent provided
for herein does not include any element to indemnify, repair, replace or make
whole TENANT, his employees, servants, agents, licensees, visitors, assignees,
or undertenant for any loss or damage to any property or injury to any person in
the Premises.
Accordingly, during the term of this Lease, TENANT shall keep the building
standing upon the Premises at the commencement of the term hereof or thereafter
erected upon the Premises, including all equipment appurtenant to the Premises
and all alterations, changes, additions and improvements, insured for the
benefit of LANDLORD and TENANT as their
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respective interest may appear, in an amount at least equal to the
percentages stated below (as LANDLORD may from time to time determine). The
basis of the Property Insurance shall be Replacement Cost and the coverage an
"All Risks" Property Insurance Policy. Coverages included in the All Risks
Form:
1. Fire -- "Building & Contents Form"
(a) Building -- 100% of insurable value exclusive of
foundations
(b) Contents -- All equipment appurtenant to the
Premises to the Premises (State value of Policy)
2. ADDITIONAL COVERAGES UNDER THE FIRE POLICY
(a) Extended Coverage Endorsement -- 100% of insurable
value exclusive of foundations
(b) Earthquake -- 100% of insurable value including
foundations
(c) Vandalism and Malicious Mischief Endorsement
(d) Improvements and Betterments -- For all alterations,
changes, additions and improvements
3. LANDSITE AND FLOOD WHENEVER APPLICABLE AND/OR NECESSARY
4. Boiler and Machinery (if any) -- 100% of insurable value
5. Pollution Liability Policy -- if necessary.
THIRTY TWO: Multifactory Building Specific Dispositions -- In the event that
the Premises constitute a section or sections of an industrial building and
landsite in which other operations are conducted by other TENANTS: (i) the
insurance coverage herein required, shall be acquired by LANDLORD for the whole
of the industrial building and TENANT shall reimburse LANDLORD, for its
proportionate share in the total cost of said policies, (ii) if, because of
anything done, caused or permitted to be done, permitted or omitted by TENANT,
the premium rate for any kind of insurance affecting the Premises shall be
increased, TENANT shall pay to LANDLORD the additional amount which LANDLORD may
be thereby obligated to pay for such insurance, and if LANDLORD shall demand
that TENANT remedy the condition which caused the increase in the insurance
premiums rate, TENANT will remedy such conditions within five (5) days after
such demand, and (iii) the insurance policies required in the preceding Articles
THIRTY (30) & THIRTY ONE (31) shall be endorsed to include a waiver of
subrogation against TENANT. All amounts to be reimbursed by TENANT under this
Article, shall be due and payable, as additional rent, with the next
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installment of rent. In the event that TENANT fails to make this payment,
when due, it shall be subject to the dispositions of Article THIRTY-SEVEN
(37) hereof.
THIRTY THREE: Additional Dispositions about Insurance -- All the Insurance
policies herein required from TENANT, shall be taken in form and substance
acceptable to LANDLORD with insurance companies duly authorized to do business
in Puerto Rico, having an "A" or a higher financial rating according to Best's
Insurance Report and shall include LANDLORD as additional insured. TENANT shall
instruct the corresponding insurer to deliver such policies or certified copies
of Certificates of Insurance, in lieu of, directly to LANDLORD. LANDLORD
reserves the right not to deliver possession of the Premises to TENANT, unless,
and until two (2) days after such original policies, or certified copies or
certificates have been deposited with LANDLORD.
Furthermore, said polices, shall: (i) provide that they may not be
cancelled by the insurer for nonpayment of premium or otherwise, until at
least thirty (30) days after services of notice by registered or certified
mail of the proposed cancellation upon LANDLORD, and (ii) be promptly renewed
by TENANT upon expiration and TENANT shall, within thirty (30) days after
such renewal, deliver to LANDLORD adequate evidence of the payment of
premiums thereon. If such premiums or any of them shall not be so paid,
LANDLORD may procure the same in the manner set forth for governmental
agencies, and TENANT shall reimburse LANDLORD any amount so paid. This
reimbursement being due and payable with the next installment of rent. In the
event that TENANT fails to make this payment when due, it shall be subject to
the dispositions of Article THIRTY SEVEN (37) hereof. It is expressly agreed
and understood, that payment by LANDLORD of any such premiums shall not be
deemed to waive or release the default in the payment thereof by TENANT nor
the right of LANDLORD to take such action as may be available hereunder as in
the case of default in the payment of rent.
Upon the commencement of the term hereof, TENANT shall pay to LANDLORD the
apportioned unearned premiums on all such policies of insurance then carried by
LANDLORD in respect of the Premises in the event TENANT continues with the
insurance policies placed in LANDLORD.
TENANT shall not violate nor permit to be violated any of the conditions or
provisions of any of said policies, and TENANT shall so perform and satisfy the
requirements of the companies writing such policies that at all times companies
of good standing and acceptable to LANDLORD shall be willing to write and
continue such insurance.
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TENANT shall cooperate with LANDLORD in connection with the collection of
any insurance monies that may be due in the event of loss and shall execute and
deliver to LANDLORD such proofs of loss and other instruments that may be
required for the purpose of facilitating the recovery of any such insurance
monies, and in the event that TENANT shall fail or neglect so to cooperate or to
execute, acknowledge and deliver any such instrument, LANDLORD, in addition to
any other remedies, may as the agent or attorney-in fact of TENANT, execute and
deliver any proof of loss or any other instruments as may seem desirable to
LANDLORD and any mortgagee for the collection of such insurance monies. This
shall not be interpreted as any waiver of the obligations of TENANT under
Articles THIRTY, THIRTY ONE, THIRTY TWO and THIRTY THREE hereof or exclusively
in favor of LANDLORD under Article THIRTY NINE hereof.
THIRTY FOUR: Waivers -- The receipt by LANDLORD of the rent, additional
rent, or any other sum or charges payable by TENANT with or without knowledge of
the breach of any covenant of this Contract, shall not be deemed a waiver of
such breach. No act or omission of LANDLORD or its agents during the term of
this Lease shall be deemed an acceptance of a surrender of the Premises and no
agreement to accept a surrender of the Premises shall be valid unless it be made
in writing and subscribed by LANDLORD. This Contract contains all the agreements
and conditions made between the parties hereto with respect to the Premises and
it cannot be changed orally. Any additions to, or charges in this Lease must be
in writing, signed by the party to be charged.
Failure on the part of LANDLORD to act or complain of any action or
nonaction on the part of TENANT shall not be deemed to be a waiver of any of its
respective rights hereunder nor constitute a waiver at any subsequent time of
the same provision. The consent or approval by LANDLORD to, or of any action by
the other requiring consent or approval, shall not be deemed to waive or render
unnecessary the consent or approval by LANDLORD of any subsequent similar act.
THIRTY FIVE: Reinstatement -- No receipt of monies by LANDLORD for TENANT
after the termination or cancellation hereof in any lawful manner shall
reinstate, continue or extend the term hereof or affect any notice theretofore
given to TENANT, or operate as a waiver of the right of LANDLORD to enforce the
payment of rent, additional rent, or other charges then due or thereafter
falling due, or operate as a waiver of the right of LANDLORD to recover
possession of the Premises by proper suit, action, proceeding or remedy; it
being agreed that,
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after the service of notice to terminate or cancel this Lease, and the
expiration of the time therein specified, if the default has not been cured
in the meantime, or after the commencement of suit, action or summary
proceedings or of any other remedy, or after a final order, warrant of
judgment of the possession of the Premises, LANDLORD may demand, receive and
collect any monies then due, or thereafter becoming due, without in any
manner affecting such notice, proceeding, suit, action, order, warrant or
judgment; and any and all such monies so collected shall be deemed to be
payments for the use and occupation of the Premises, or at the election of
LANDLORD, on account of TENANT's liability hereunder. Delivery or acceptance
of the keys to the Premises, or any similar act, by the LANDLORD, or its
agents or employees, during the term hereof, shall not be deemed to be a
delivery or an acceptance of a surrender of the Premises unless LANDLORD
shall explicity consent to it, in the manner set forth hereinbefore.
THIRTY SIX: Subordination and Attornment -- This Lease is and shall be
subject and subordinate to all liens, or mortgages which may now or hereafter
affect the Premises and to all renewals, modifications, consolidations,
replacements and extensions thereof and, although this subordination
provision shall be deemed for all purposes to be automatic and effective
without any further instrument on the part of TENANT, TENANT execute any
further instrument requested by LANDLORD to confirm such subordination.
TENANT further covenants and agrees that if by reason of a default upon
the part of LANDLORD of any mortgage affecting the Premises, the mortgage is
terminated or foreclosed by summary proceedings or otherwise, TENANT will
attorn to the mortgagee or the purchaser in foreclosure proceedings, as the
case may be, and will recognize such mortgage or purchaser, as the TENANT's
landlord under this Lease. TENANT agrees to execute and deliver, at any time
and from time to time, upon the request of LANDLORD or of the mortgagee or
the purchaser in foreclosure proceedings, as the case may be, any reasonable
instrument which may be necessary or appropriate to evidence such attornment.
TENANT further waives the provision of any statute or rule of law now or
hereafter in effect which may give or purport to give TENANT any right of
election to terminate this lease or to surrender possession of the Premises
demised hereby in the event any such proceeding is brought by the holder of
any such mortgage, and TENANT'S obligations hereunder shall not be affected
in any way whatsoever by any such proceeding.
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TENANT, covenants and agrees, upon demand of the holder of any mortgage duly
recorded or recordable in the corresponding Registry of the Property or of any
receiver duly appointed by the foreclose any such mortgage, to pay to the holder
of any such mortgage or to such receiver, as the case may be, all rent becoming
due under this Lease after such demand, provided such holder of any such
mortgage or any such receiver complies with the obligations of LANDLORD under
this Lease.
TENANT, upon request of LANDLORD or any holder of any mortgage or lien
affecting the Premises, shall form time to time, deliver or cause to be
delivered to LANDLORD or such lien holder or mortgage, within ten (10) working
days from date of demand a certificate duly executed and acknowledged in form
for recording, without charges, certifying, if true, or to extent true, that
this Lease is valid and subsisting and in full force and effect and LANDLORD is
not in default under any of the terms of the Lease.
THIRTY SEVEN: Late Payments and Payment by LANDLORD -- In the event that (i)
TENANT makes late payment, or fails to make payments to LANDLORD, in whole or in
part, of the rent, or of the additional rent, or of any of the other payments of
money required to be paid by TENANT to LANDLORD, as stipulated in this Lease,
when and as due and payable; or if (ii) LANDLORD, without assuming any
obligation to do so, after any notice or grace period provided hereunder,
performs or causes to be performed, at the cost and expense of TENANT, any of
the acts or obligations agreed to be performed by TENANT, as stipulated in this
Lease, and TENANT fails to refund LANDLORD any amounts of money paid or incurred
by LANDLORD in performing or causing the performance of such acts or
obligations, when and as due and payable, TENANT undertakes and agrees to pay
LANDLORD as additional rent, interest on such lately paid or unpaid rents,
additional rent, and/or on such other payments of money required to be paid,
and/or on any such amounts of money required to be refunded, from and after the
date when payment thereof matured or became due and payable, until full payment,
at the rate of twelve (12%) per cent per annum, or if such 12% interest, is
unlawful, then and in such event, at the highest maximum prevailing rate of
interest on commercial unsecured loans as fixed by the Board of Regulatory Rates
of Interest and Financial Charges, created under Law #1, approved October 15,
1973 (10 LPRA 998), as amended, or by any successor statute or regulation
thereof.
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THIRTY EIGHT: Abatement--If any substantial service or facility to be
provided by LANDLORD is unavailable for a period of time exceeding thirty (30)
days and LANDLORD has been notified of the same, should time unavailability of
such service render all or any portion of the Premises untenable, TENANT after
the aforesaid thirty (30) days shall be entitled to an abatement of a portion of
the rent that shall reflect that portion of the Premises which is untenable,
provided the damage to the service or facility is not attributable to the act or
neglect of TENANT or the employees, servants, licensees, visitors, assigns or
undertenants of TENANT.
THIRTY NINE: Fire or other Casualty -- If before or during the term of this
Lease, the Premises shall be damaged by fire or other casualty, LANDLORD after
written notice thereof is given by TENANT, shall repair the same with reasonable
dispatch after notice to it of the damage, due allowances being made for any
delay due to causes beyond the LANDLORD'S reasonable control, provided, however,
that LANDLORD shall not be required to repair or replace any furniture,
furnishings or other personal property which TENANT may have placed or installed
or which it may be entitled or required to remove from the Premises. LANDLORD
shall proceed with due diligence to obtain the corresponding insurance
adjustment of the loss and TENANT shall fully cooperate with LANDLORD and assist
in the adjustment of the loss. Until such repairs are completed, and provided
such damage or other casualty is not attributable to the act or neglect of
TENANT or other casualty is not attributable to the act or neglect to TENANT or
the employees, servants, licensees, visitors, assigns or undertenants of TENANT,
the rent required to be paid pursuant to Article FOUR hereof, shall be abated in
proportion to the part of the Premises which are untenable. If the building, be
so damaged that LANDLORD shall decide to demolish and/or to reconstruct the
building, in whole or in part, LANDLORD may terminate this Lease by notifying
TENANT within a reasonable time after such damage of LANDLORD'S election to
terminate this Lease, such termination to be effective immediately if the term
shall not have commenced or on a date to be specified in such notice if even
during the term. In the event of the giving of such notice during the term of
this Lease, the rent shall be apportioned and paid up to the time of such fire
or other casualty if the Premises are damaged, or up to the specified date of
termination if the Premises are not damaged and LANDLORD shall not be otherwise
liable to TENANT for the value of the unexpired term of this Lease.
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FORTY: Default Provisions -- If, during the term of this Lease, TENANT
shall: (i) apply for or consent in writing to, the appointment of a receiver,
trustee or liquidator of TENANT or of all or substantially all of its assets or
(ii) seek relief under the Bankruptcy Act, or admit in writing its inability to
pay its debts as they become due, or (iii) make a general assignment for the
benefit of this creditors, or (iv) file a petition case or an answer seeking
relief (other than a reorganization not involving the liabilities of TENANT) or
arrangement with creditors, or take advantage of any insolvency law, or (v) file
and answer admitting the material allegations of a case filed against it in any
bankruptcy, reorganization or insolvency proceeding or, if an order, judgement
or decree shall be entered by any court of competent jurisdiction on the
application of TENANT or creditor adjudicating TENANT a bankruptcy,
reorganization or insolvency proceeding or, if an order, judgement or decree
shall be entered by any court of competent jurisdiction on the application of
TENANT or creditor adjudicating TENANT a bankrupt or insolvent, or approving a
petition seeking reorganization of TENANT (other than a reorganization not
involving the liabilities of TENANT) or appointment of a receiver, trustee or
liquidator of TENANT, or decree, shall continue stayed and in effect for any
period of sixty (60) consecutive days, the term of this Lease and all right,
title and interest of TENANT hereunder shall expire as fully and completely as
if that day were the date herein specifically fixed for the expiration of the
term, and TENANT hereunder shall expire as fully and completely as if that day
were the date herein specifically fixed for the expiration of the term, and
TENANT will then quit and surrender the Premises to LANDLORD, but TENANT shall
remain liable as hereinafter provided.
If, during the term of this Lease: (I) TENANT shall default in fulfilling
any of the covenants of this Lease other than the covenants for the payment
of rent or additional rent or of any other standing contract with LANDLORD or
(ii) if, during the term of this Lease TENANT shall abandon, vacate, or
remove form the Premises the major portion of the goods, wares, equipment, or
furnishings usually kept on said premises, of (iii) this Lease, without the
prior consent of LANDLORD, shall be encumbered, assigned or transferred in
any manner in whole or in part or shall, by operation of law, pass to or
devolve upon any third party, except as herein provided, or (iv0 if TENANT is
in violation of laws rules and regulations regarding minimum wages of its
employees, or of any other law, rules and regulations applicable to his
operations, but which have not been specifically mentioned in this Lease,
LANDLORD may give to TENANT notice of any such default or the happening of
any event referred to above and if at the expiration of thirty (30) days
after the service of such a notice the default or event upon which said
notice was based shall continue to exist, or in the case of a default which
cannot with due diligence be
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cured within a period of thirty (30 days, if TENANT fails to proceed
promptly after the service of such notice and with all due diligence to cure
the same and thereafter to prosecute the curing of such default with all due
diligence (it being intended that in connection with a default not
susceptible of being cured with due diligence within thirty (30) days that
the time of TENANT within which to cure the same shall be extended for such
period as may be necessary to complete the same with all due diligence),
LANDLORD may give the TENANT a notice of expiration of the term of this Lease
as of the date of the service of the term of this Lease and all right, title
and interest of TENANT hereunder shall expire as full and completely as if
that day were the date herein specifically fixed for the expiration of the
term, and TENANT or any party holding under his will then quit and surrender
the premises to LANDLORD, but TENANT shall remain liable as hereinafter
provided.
If, (i) TENANT shall default in the payment of the rent, the additional
rent, or of any other payment as required under this Lease and such default
shall continue for ten (10) working days after notice thereof by LANDLORD, of
(ii) if the default of the payment of the rent, continues for thirty (30) days
from the date any such payment became due and payable (AUTOMATIC DEFAULT
TERMINATION), OR (III) IF THIS Lease shall terminate as in Paragraph one and two
of this Article provided, this Lease shall terminate and TENANT will then quit
and surrender the Premises to LANDLORD or LANDLORD'S agents and servants may
immediately or ant any time thereafter re-enter the Premises and remove all
persons and all or any property therefrom, whether by summary dispossess
proceedings or by any suitable action or proceeding at law, or with the license
and permission of TENANT, which shall under this Contract be deemed given upon
expiration of the strict thirty (30) days notice period of subdivision of
paragraph Two of the Article, without LANDLORD being liable to indictment,
prosecution or damages therefor and repossess and enjoy the Premises with all
additions, alterations and improvements.
If TENANT shall fail to take possession of the Premises within ten (10) days
after the commencement of the term of this Lease, or if TENANT shall vacate and
abandon the Premises, LANDLORD shall have the right, at LANDLORD'S option, to
terminate this Lease and the term hereof, as well as all the right, title and
interest of TENANT hereunder, by giving TENANT five (5) days notice in writing
of such
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intention, and upon the expiration of the time fixed in such latter notice,
if such default be not cured prior thereto, this lease and the term hereof,
as well as all the right, title and interest of TENANT hereunder, shall
wholly cease and expire in the same manner and with the same force and effect
(except as to TENANT'S liability) as if the date fixed by such latter notice
were the expiration of the term herein originally granted; and TENANT shall
immediately quit and surrender to LANDLORD the Premises and each and every
part thereof and LANDLORD in this Article or any other Article of this Lease
to terminate this Lease, the exercise of any such right by LANDLORD during
the term hereby granted, shall terminate any extension or renewal of the term
hereby granted and any right on the part to TENANT thereto.
Upon the termination of this Lease by reason of any of the foregoing
event, or in the event of the termination of this Lease by summary dispossess
proceedings or under any provisions of law, now or at any time hereafter, in
force by reason of , or based upon, or arising out of a default under or
breach of this Lease on the part of TENANT, or upon LANDLORD recovering
possession of the premises in the manner or in any of the circumstances
whatsoever, whether with or without legal proceedings, by reason of, or based
upon, or arising our of a default under or breach of this Lease on the part
to TENANT, LANDLORD, at its option, but without assuming any obligation to do
so in any case, may at any time, and from time to time, relet the Premises or
any part or parts thereof for the account of TENANT or otherwise on such
terms as LANDLORD may elect, including the granting of concessions, and
receive and collect the rents therefor, applying the same at a rental not
higher than the one stipulated in this Contract, first to the payment of such
reasonable expenses as LANDLORD may have incurred in recovering possession of
the Premises, including reasonable legal expenses, and for putting the same
into good order or condition or preparing or altering the same for re-rental,
and expenses, commissions and charges paid, assumed, or incurred by LANDLORD
in and about the reletting of covenants of TENANT hereunder. Any such
reletting herein provided for, may be for the remainder of the term of this
Lease or for a longer or shorter period or at a higher or lower rental. In
any such case, whether or not, the Premises or any part thereof be relet,
TENANT shall
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pay to LANDLORD the rent required to be paid by TENANT up to the
time of such termination of this Lease, and/or the full rent provided for in
the agreement for any holdover of such period after termination and up to the
surrender or recovery of possession of the Premises by LANDLORD, as the case
may be, and thereafter TENANT covenants and agrees, to pay to LANDLORD until
the end of the term of this Lease as originally demised the equivalent of any
deficiency amount of all the rent reserved herein, less the net avails of
reletting, if any, as specified hereinabove in this Article and the same
shall be due and payable by TENANT to LANDLORD as provided herein, that is to
say, TENANT shall pay to LANDLORD the amount of any deficiency then existing.
FORTY ONE: LANDLORD'S Remedies -- In the event TENANT shall default in the
performance of any of the terms, covenants or provisions herein contained,
LANDLORD may, but without the obligation to do so, perform the same for the
account of TENANT and any amount paid or expense incurred by LANDLORD in the
performance of the same shall be repaid by TENANT on demand. In the event of a
breach or threatened breach by TENANT of any of the covenants, conditions or
provisions hereof, LANDLORD shall have the right of injunction to restrain the
same, and the right to invoke any remedy allowed by law or in equity as if
specific remedies, indemnity or reimbursement were not herein provided for. The
rights and remedies given to LANDLORD in this Lease are distinct, separate and
cumulative, and no one of them, whether or not exercised by LANDLORD, shall be
deemed to be a waiver, or an exclusion of any of the others.
FORTY TWO: Notice of Default -- Anything in this Lease to the contrary
notwithstanding, it is specifically agreed that there shall be no enforceable
default against LANDLORD under any provisions of this lease, unless notice of
such default be given by TENANT to LANDLORD in which TENANT shall specify the
default or omission complained of, and LANDLORD shall have thirty (30) days
after receipt of such notice in which to remedy such default, or if said default
or omission shall be of such a nature that the same cannot be cured within said
period, then the same shall not be an enforceable default if LANDLORD shall have
commenced taking the necessary steps to cure or remedy said default within the
said thirty (30) days and diligently proceeds with the correction therof.
22
<PAGE>
<PAGE>
FORTY THREE: Capitalization - For the purpose of this Contract,
specifically of Article SIX, Capitalization includes the total owner's equity
sources (preferred stock, common stock and surplus accounts) plus long-term
debts, it being agreed and understood that the amortization of any such debt
shall in no way diminish the amount originally determined as capitalization.
FORTY FOUR: Disclosure of Information - TENANT agrees to furnish to
LANDLORD within ninety (90) days after the expiration of each fiscal year of
TENANT, an annual statement certified by an indpendent Certified Public
Accountant showing as of the end of each such fiscal year: (i) TENANT'S paid-in
capital, (ii) long-term debts and capitalization as required by Articles SIX and
FORTY THREE hereof, (iii) investment in machinery and its capacity to provide
employment, (iv) taxes (including Social Security taxes) paid, and (v) any other
information as required by this Lease.
In the event such statement is not filed with LANDLORD as herein provided,
LANDLORD may obtain such information from TENANT at TENANT'S expense, and for
such purpose TENANT shall make available LANDLORD'S designated representatives,
its books of accounts and other necessary data and facilities, all of which
shall be provided and made available at TENANT'S principal office in Puerto
Rico.
FORTY FIVE: Automatic Renewal - In the event TENANT does not vacate the
Premises in the manner and under the conditions hereinbefore provided, within
ninety (90) days after the normal expiration of the term hereof, LANDLORD shall
have the option to be exercised at any time thereafter, to notify TENANT that
the lease herein has been renewed for an additional term of FIVE (5) years from
the date of the last normal expiration of the term hereof and, in such event,
the parties agree that this Contract shall be held to have been renewed and to
continue in full force and effect for such additional term of FIVE (5) years
upon the mere mailing of such notice by LANDLORD to TENANT. This provision shall
in no way prejudice, affect or deny any right which LANDLORD may otherwise have
because, or at the time, of any such termination of the term hereof,
particularly whenever LANDLORD does not exercise such option; it being agreed
and understood that such renewal shall be upon the same terms and conditions
contained herein except that the rental rate to be charged shall be the rate
then currently---
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<PAGE>
being charged by LANDLORD for similar building in the area, but in no event
shall it be less than the rate herein stipulated.
FORTY SIX: Partial Invalidity and Applicable Law - If any term or
provisions of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease and the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and be enforceable to the fullest extent permitted by law. This
Contract is entered into and shall be interpreted in accordance with the laws of
the Commonwealth of Puerto Rico.
FORTY SEVEN: Lease Termination and Holding Over - Upon the expiration or
termination of this Lease:
24
<PAGE>
(ii) TENANT shall remove all hazardous and toxic substances belonging to
TENANT or to a third party. TENANT shall also remove all other property of
TENANT and that of any third parry and failing so to do, TENANT hereby appoints
LANDLORD its agent so that LANDLORD may cause all of the said property to be
removed at the expense and risk of TENANT. TENANT covenants and agrees to give
full and timely observance and compliance to this covenant to remove all its
property and surrender the Premises broom clean. TENANT hereby agrees to pay all
reasonable necessary cost and expenses thereby incurred by LANDLORD. If, as the
sole result of the removal of TENANT'S property any portion of the Additional
Premises or of the building of which they are a part, are damaged, TENANT shall
pay to LANDLORD the reasonable cost of repairing such damages unless due to the
gross negligence of LANDLORD, its agents, servants, employees and contractors.
TENANT'S obligation to observe or perform this covenant shall survive the
expiration or other termination of the term of this Lease.
FORTY EIGHT: Change of Address - TENANT shall promptly notify LANDLORD of
any change in the addresses other than those required from it in Article SEVEN
hereof.
FORTY NINE: TENANT will indemnify LANDLORD for any and all liability, loss,
damages, expenses, penalties and/or fines, and any additional expenses including
any attorney fees LANDLORD may suffer as a result of claims, lawsuits, demands,
administrative orders, costs, resolutions or judgements against it arising out
of negligence and/or failure of TENANT or those acting under TENANT to conform
to the statutes, ordinances, or other regulations or requirements of any
governmental authority, be it Federal, of the Commonwealth of Puerto Rico, its
instrumentalities or public corporations, in connection with he performance of
this Lease.
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<PAGE>
FIFTY: TENANT hereby acknowledges that the building herein demised is in
need of certain repairs which LANDLORD undertakes to commence presently after
execution hereof; therefore, the term of the lease hereunder shall, anything to
the contrary notwithstanding, commence on the tenth. (10th.) working day after
the termination notice sent to TENANT by Certified Mail that the building is
ready for occupancy.
FIFTY ONE: Anything contained in this Contract to the contrary
notwithstanding, in the event that TENANT requires additional volume of water
and/or pressure as is now available within the area wherein the demised premises
are located, it shall be at its own cost and expense the construction and/or
installation of such improvements and/or facilities as may be necessary to or
convenient and/or required by the Puerto Rico Aqueduct and Sewer Authority to
increase such volume and/or pressure; it being agreed and understood, however,
that such construction and/or installation shall in no event be commenced until
after LANDLORD'S written approval has first been requested and obtained.
FIFTY TWO: TENANT hereby acknowledges that in the industrial park there are
other industries; therefore TENANT hereby specifically agrees and undertakes to
take such steps and install such equipment as may be necessary to prevent that
any hazard and/or noise which may be created by its operations may in any way or
manner unduly affect the operations of the other industries and therefore TENANT
hereby releases and saves LANDLORD harmless from any and all claims or demands
arising therefrom or in connection therewith.
FIFTY THREE: TENANT shall, at its own cost and expense, install fire
protection system and shall obtain the endorsement and approval from said Fire
Department for such installation. TENANT must also provide security measures to
prevent or reduce fire hazard due to the storage of inflammable materials and
products.
FIFTY FOUR: TENANT shall procure and obtain a permit for the operation of a
solid waste emission source from the Environmental Quality Board and
authorization for the Office of Solid Waste and/or from the Municipality of
Guayama for the final disposition of wastes.
FIFTY FIVE: TENANT, at its own cost and expense, shall implement the
necessary measures and install the control equipment to maintain the
atmospheric air quality levels in compliance with the environmental
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<PAGE>
laws and regulations of the Environmental Quality Board and the Environmental
Protection Agency, as promulgated by any succeeding law or regulations.
FIFTY SIX: It is hereby agreed and understood that TENANT shall take the
necessary steps to comply with the regulations and law requirements of the
PUERTO RICO OCCUPATIONAL SAFETY AND HEALTH OFFICE (PROSHO).
FIFTY SEVEN: TENANT must comply with the rules and regulations of
pre-treatment established by the Puerto Rico Aqueduct and Sewer Authority, the
Environmental Quality Board and the Environmental Protection Agency related to
the effluent industrial discharge in the sanitary sewer system and their final
disposition. Also, any improvement necessary to provide pre-treatrnent
facilities for the above mentioned effluents shall be at TENANT'S own cost and
expense and in coordination and with the approval of LANDLORD's Engineering and
Maintenance Departments.
FIFTY EIGHT: It is hereby agreed and understood that TENANT, at its own
cost and expense, shall install an air conditioning system in the demised
premises, in the event TENANT needs to use and/or install it in his process.
Such air conditioning system shall be considered as a special facility from
LANDLORD, and it shall be installed in coordination with LANDLORD'S Engineering
and Maintenance Departments.
FIFTY NINE: Anything herein to the contrary notwithstanding, the parties
have agreed and understood that the following special facilities, shall be
utilized by TENANT "AS IS" and "WHERE IS", free of charge, but TENANT shall
repair and maintain said special facilities as provided under the applicable
provisions of the Contract:
a. Iron Grill works in windows and in parking and driveway gates.
b. Cyclone Fence around the perimeter of the lot.
c. Sprinkler System without water tank and pump system
d. Guard House
e. Office Partitions with hung ceiling and vinyl floor tiles and a glass
main entrance door
f. 44 Flourescent lamps - 2 tubes (8'-0")
g. Loading platform
h. Exterior security illumination lamps
i. Galvanized ceiling structures (exterior)
j. Electric Power Sub-station - 3 transformers
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<PAGE>
The above mentioned special facilities shall be deemed an integral part of
the demised premises and as such subject to and covered by the terms and
conditions of this contract as they may be applicable thereto.
SIXTY: LANDLORD shall provide a basic electrical distribution system
consisting of a 200 AMP meterbase, conduits, conductors, receptacles and
junction boxes as indicated in PRIDCO'S Electrical Distribution System Drawings
for indicated building.
SIXTY ONE: TENANT shall, at is own cost and expense, construct and/or
install all necessary equipment required to connect the building's electrical
system to the Puerto Rico Electrical Power Authority's electrical distribution
lines, such connection to be made in compliance with the requirement of PREPA.
SIXTY TWO: TENANT certifies and guarantees that at the date of subscribing
this Contract it has submitted the Corporate Tax Returns Forms during the last
five (5) years and does not have any tax debt pending with the Commonwealth of
Puerto Rico, or is complying with the terms of a payment plan duly approved.
TENANT also certifies and guarantees that at the date of execution of this
contract it has paid unemployment insurance compensation, temporary disability
insurance, and the driver's social security (as applicable); or is complying
with a payment plan duly approved.
TENANT acknowledges that this is an essential condition of the Contract
and if the above certification is incorrect in any of its parts, LANDLORD may
cancel this contract.
SIXTY THREE: LANDLORD reserves the right to audit three leased premises
from time to time during the term of this contract, as LANDLORD may deem
necessary, in order to assess all aspects of the environmental condition of said
premises and TENANT's compliance with all environmental legislation and
regulations, under Commonwealth and federal law; TENANT hereby agrees to provide
access to all areas and structures of the premises for these purposes, upon
LANDLORD's request, and to also provide access to all books, records, documents
and instruments which LANDLORD may deem necessary in order to fully audit the
premises as herein stated, provided that such access shall be limited to the
environmental matters.
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<PAGE>
SIXTY NINE: TENANT agrees to submit to LANDLORD within thirty (30) days
from the date of execution of this Contract: (a) evidence of its registration
in the Department of State of the Commonwealth of Puerto Rico and the name and
address of its resident agent; and (b) a certificate of a resolution of its
Board of Directors either authorizing or ratifying the execution of this
Contract.
IN WITNESS WHEREOF, LANDLORD and TENANT have respectively signed upon
proper authority this Lease, this 15 day of July 1994
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
BY: /s/ ILLEGIBLE
-------------------------------
PUERTO RICO INDUSTRIAL MANUFACTURING OPERATIONS, CORP.
S.S.P. 66-0506009
BY: /s/ Oscar Fuster
-------------------------------
30
<PAGE>
ANNEX "A"
DESCRIPTION OF PARCEL OF LAND
LOT NUMBER 1 AND 3 (GROUPED)
LOCATED AT MACHETE INDUSTRIAL PARK
IN GUAYAMA, PUERTO RICO
SITE FOR PROJECT NO. T-0609-0-63
================================================================================
GENERAL:
Parcel of land, Lots number 1 and 3, located at Machete Industrial Park in
Guayama, Puerto Rico.
It bounds: by the NORTH, with the land owned by Genaro Cautino Bruno; by
the SOUTH, with access street of the same industrial same; by the East, with Lot
No. 5 of the same industrial area; and by the West with State Road P.R. No. 744.
It has a surface area of 7,100 square meters, equivalent to 1.8 "cuerdas".
It is affected by a 12' 6" wide right of way in favor of the Puerto Rico
Electric Power Authority running along its northern boundary.
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<PAGE>
ANNEX "B"
COMPLIANCE REPORT OF WITH
ENVIRONMENTAL REQUIREMENTS
In the period of ___________ to ______________
I. PERMITS
PERMITS NUMBER EXPIRATION RENEWAL DATE
DATE (IF APPLY)
II. COMPLIANCE ACTIONS
REFERENCE/CASE NUMBER DATE RESPONSE OF
DATE OF
III. CERTIFICATION
I certify, under penalty of law, that this document was prepared under my
supervision and direction; and that was based in my investigation by the persons
directly responsible of gathering the information, that the information here
submitted is, according to my best judgment, certain, complete and precise.
INITIAL HERE
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SUPPLEMENT AND AMENDMENT TO LEASE CONTRACT
NOW COMES the PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY (hereinafter
referred to as the "LANDLORD"), and P.R. INDUSTRIAL MANUFACTURING OPERATIONS
CORP., (hereinafter referred to as the "TENANT") and agree to supplement and
amend a certain Lease Contract entered into by them on July 15, 1994 as
subsequently amended (hereinafter referred to as the "Contract") covering
certain landsite and buildings located in Guayama, Puerto Rico, identified as
Project No. T-0609-0-63 (hereinafter referred to as the "Original Premises") in
the following aspects:
ONE: LANDLORD hereby demises and lets unto TENANT, and TENANT hereby leases
from LANDLORD the premises identified as Project No. T0462-0-58 located at
Guayama, Puerto Rico, (hereinafter referred to as the "Additional Premises"),
which are fully described in Schedule "A" hereto annexed and made a part hereof.
TWO: The Additional Premises shall be used and occupied exclusively for
warehousing in connection to TENANT's manufacturing operations being carried out
al Project No. T-0609-0-63 located in Guayama, Puerto Rico.
THREE: Commencing on the first day of the following month after the
delivery of the premises, TENANT shall pay to LANDLORD an annual rental for the
Additional Premises of $2.20 per square foot of gross building area, equivalent
to $2,191.54 monthly during the remaining term of the Contract.
The monthly installments for rent specified herein, shall be paid in
advance on the first day of each month at LANDLORD may notify. In the event that
the date of commencement does not fall on the first of the month, TENANT further
agrees to pay the first partial monthly installments, prior to, or on the date
of commencement.
FOUR: The deposit required under the provisions of this Supplement and
Amendment to Lease Contract shall be complied with by TENANT as hereinafter
specified:
a. The amount of $1,643.67 previously deposited by TENANT to reserve
Project T-0462-0-58 (CR#136137 of 12/95, CR #135365 fo 9/22/95 and CR #134918 of
6/23/95). CR 137254 $1,512.15 6/14/96
b. The amount of $1,512.15 shall be paid by TENANT in certified check with
the execution of this Supplement and Amendment to Lease Contract.
This deposit shall guarantee the compliance by TENANT of its obligations,
under this Supplement and Amendment to Lease Contract, particularly, but not
limited to, the payment of rent, the compliance of any environmental clauses
herein included and the return of the Additional Premises in proper conditions
at the termination of the
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<PAGE>
2
Lease. On said termination, if TENANT is not in default on any of the terms and
conditions of the Contract, LANDLORD will return to TENANT the sum of money, if
any, held pursuant to this provision, after LANDLORD's Environmental Office
certifies that there are no environmental deficiencies as a result of TENANT's
use, occupation or manufacturing operations on the Additional Premises.
FIVE: All notices, demands, approvals, consents and/or communications
herein required or permitted shall be in writing. If by mail should be certified
and to the following addresses, to LANDLORD: P.O. Box 362350, San Juan, Puerto
Rico 00936-2350, to TENANT: Mr. Luis E. Maldonado, P.O. Box 2910, Guayama,
Puerto Rico 00785-2910.
SIX: Anything herein to the contrary notwithstanding, in the event that
TENANT requires additional volume of water and/or pressure as is now available
within the area wherein the Additional Premises are located, it shall be at its
own cost and expense the construction and/or installation of such improvements
and/or required by the Puerto Rico Aqueduct and Sewer Authority to increase
such volume and/or pressure; it being agreed and understood, however, that such
construction and/or installation shall in no event be commenced until after
LANDLORD'S written approval has first been requested and obtained.
SEVEN: TENANT hereby acknowledges that in the industrial park where the
Additional Premises are located there are other industries established;
therefore, TENANT hereby specifically agrees and undertakes to take such steps
and install such equipment as may be necessary to prevent that any hazard and/or
noise which may be created by its operations may in any way or manner unduly
affect the operations of said other industries and therefore TENANT hereby
releases and saves LANDLORD harmless from any and all claims or demands arising
therefrom or in connection therewith.
EIGHT: TENANT shall, at its own cost and expense, install a fire protection
system and shall obtain the endorsement and approval from the Puerto Rico Fire
Department for such installation. TENANT must also provide security measures to
prevent or reduce fire hazards due to the storage of inflammable materials and
products.
NINE: TENANT, at its own cost and expense, shall implement the necessary
measures and install the equipment to control and maintain the atmospheric air
quality levels in compliance with the environmental laws and regulations of the
Environmental Quality Board and the Environmental Protection Agency, as
promulgated or any successor law or regulations.
INITIAL HERE
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<PAGE>
3
TEN: It is hereby agreed and understood that TENANT shall take the
necessary steps to comply with the regulations and law requirements of the
PUERTO RI CO OCCUPATIONAL SAFETY AND HEALTH OFFICE (PROSHO).
ELEVEN: TENANT shall, at is own cost and expense, construct and/or install
all necessary equipment required to connect the building's electrical system to
the Puerto Rico Electrical Power Authority's electrical distribution lines, such
connection to be made in compliance with the requirement of said Authority.
TWELVE: It is hereby agreed and understood that TENANT, at its own cost and
expense, shall install an air conditioning system in the Additional Premises, in
the event TENANT needs to use and/or install it in his process. Such air
conditioning system shall be considered as a special facility, and it shall be
installed in coordination with LANDLORD'S Engineering and Maintenance Offices.
THIRTEEN: Anything herein to the contrary notwithstanding, the parties have
agreed and understood that the following special facilities, shall be utilized
by TENANT "AS IS" and "WHERE IS", free of charge, but TENANT shall repair and
maintain said special facilities as provided under the applicable provisions of
the Contract:
(1) Sprinkler System
The above mentioned special facilities shall be deemed an integral part of
the Additional Premises and as such subject to and covered by the terms and
conditions of the Contract as they may be applicable thereto.
FOURTEEN: TENANT agrees to submit to LANDLORD within thirty (30) days from
the date of execution of this Supplement and Amendment to Lease Contract a
certificate of a resolution of its Board of Directors either authorizing or
ratifying the execution of said Supplement and Amendment to Lease Contract.
FIFTEEN: TENANT must comply with the rules and regulations of pre-treatment
established by the Puerto Rico Aqueduct and Sewer Authority, the Environmental
Quality Board and the Environmental Protection Agency related to the effluent
industrial discharge in the sanitary sewer system and their final disposition.
Also, any improvement necessary to provide pre-treatment facilities for the
above mentioned effluents shall be at TENANT'S own cost and expense and in
coordination and with the approval of LANDLORD's Engineering and Maintenance
Offices.
SIXTEEN: It is hereby agreed and understood that this Supplement and
Amendment to Lease Contract is entered by and between the parties hereto, based
on TENANT's representations that it shall expand its manufacturing operations in
the Original Premises in Guayazma, Puerto Rico. TENANT's projections for said
expansion are that it will
INITIAL HERE
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<PAGE>
4
generate approximately 30 additional employees with a Capitalization of
$60,000.00 and as investment in Machinery and Equipment of $60,000.00.
SEVENTEEN: TENANT hereby acknoledges that the building herein demised is in
need of certain repairs which LANDLORD undertakes to commence presently after
execution hereof.
EIGHTEEN: It is further agreed and understood by the parties herein, that
all other terms and conditions of the Contract which are not inconsistent with
the term and conditions of this Supplement and Amendment, shall remain in full
force and effect.
NINETEEN: All terms and conditions of the Lease Contract executed on July
15, 1994 shall be deemed supplemented and amended to the extend inconsistent
with the terms hereof and shall remain in full force and effect as herein
supplemented and amended.
IN WITNESS WHEREOF, the parties hereto executed this Supplement to Lease
Contract at San Juan, Puerto Rico, this 18th day of June, 1996
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
BY: /s/ ILLEGIBLE
-------------------------------
PUERTO RICO INDUSTRIAL MANUFACTURING OPERATIONS, CORP.
S.S.P. 66-0506009
BY: /s/ ILLEGIBLE
-------------------------------
<PAGE>
SCHEDULE "A"
DESCRIPTION OF BUILDING NO. T-0462-0-58
LOCATED IN GUAYAMA, PUERTO RICO
This is a pitched roof type building consisting of reinforced concrete
foundations, columns and girders supporting 30 ft. long Pacadar joists which in
turn support prestressed concrete boards, covered by 1/2" cellotex insulation
and a 3-ply built-up roofing. This building has no monitor but roof ventilators
are provided.
The structure consists of a main floor 121'-5" x 90'-10" out to out
dimensions with an area of 11,028.57 sq. ft. of manufacturing space; an entrance
porch 14'-0" x 7'-0" for an area of 98 sq. ft., two lean-to 31'-2" x 10'-6" for
an area of 327.28 sq. ft., and 20' x 25' for an area of 500 sq. ft. This gives a
total area of 11,953.85 sq. ft. of covered floor space.
The floor consists of a 4" thick reinforced concrete slab with a monolithic
cement finish on the manufacturing area, janitor's room, storage room and
stairs; quarry tiles on the entrance porch and ceramic tiles on the men and
ladies toilet rooms. Exteriors walls are of concrete blocks plastered and
painted on both sides, except on the front wall which is plastered and painted
together with a stucco finish. Interior walls at the lean-to are plastered and
painted together with a 5,-l1" high sprayed-on glazed finish wainscot at the men
and ladies toilet rooms.
Ceiling is rubbed and painted throughout the building.
Windows are miami louvers throughout the building.
Doors are made of ply wood, except for one flush metal double swing door at
the main entrance; a similar door equipped with antipanic hardware set at the
rear entrance, and one double sliding door at the loading platform.
Clearance in the manufacturing area from finish floor to lowest part of
beams at the side eaves is 12'-0" and 14'-9" at the highest point of the
building.
DESCRIPTION OF PARCEL OF LAND, LOT #2
LOCATED AT MACHETE INDUSTRIAL PARK
GUAYAMA, PUERTO RICO
SITE FOR PROJECT NO. T-0462-0-58
General:
Parcel of land, identified as Lot #2, located at Machete Industrial Park in
Guayama, Puerto Rico.
It bounds: by the North, with the main street of the industrial park; by the
South, with land owned by Genaro Cautino Bruno; by the East, with Lot #4 of
same industrial park; and by the West, with State Road PR-7 44.
It has a surface area of approximately 7,074.71 square meters, equivalent to 1.8
"cuerdas".
It is affected by a 5'-0" wide right of way in favor of the Puerto Rico Electric
Power Authority along its eastern boundary.
INITIAL HERE
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<PAGE>
<TABLE>
Exhibit 10.17
OMB 0990-0115
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AWARD/CONTRACT 1 THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350)
PRIME 1 | 120
- ---------------------------------------------------------------------------------------------------------------------------
2. CONTRACT (Proc. Inst. Ident.) NO. 3. EFFECTIVE DATE 4. REQUISTION/PURCHASE REQUEST, PROJECT NO.
600-95-21451 See Page A-2 See Continuation Sheet, Page A-3
- ---------------------------------------------------------------------------------------------------------------------------
ISSUED BY CODE 6. ADMINISTERED BY (if other than Item 5) CODE
---------------- ----------------
See Continuation Sheet, Page A-2 See Continuation Sheet, Page A-2
- ---------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State, and ZIP Code) 8. DELIVERY
U.S. Small Business Administration FOB Destination
Washington District Office |_| FOB ORIGIN |X| OTHER (See Below)
1110 Vermont Avenue, NW, 9th Floor --------------------------------------
Washington, DC 20043-4500 9. DISCOUNT FOR PROMPT PAYMENT
---------------------------------------
International Data Products Corporation Net 30
20 Firstfield Road --------------------------------------
Gaithersburg, MD 20878 10. SUBMIT INVOICES ITEM
Attention: Ruth Caffrey (4 copies unless other-
- ------------------------------------------------------------------------------------ wise specified) TO THE See Block 12
CODE TIN-52-1328445 FACILITY CODE ADDRESS SHOWN IN
- ---------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE
---------------- ----------------
See Section J. Social Security Administration
Office of Finance
Post Office Box 47
Baltimore, MD 21235
- ---------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETI- 14. ACCOUNTING AND APPROPRIATION DATA
TION:
15 USC 637(a) Section 8(a) See Continuation Sheet, Page A-3
|_| 10 U.S.C. 2304(c)( ) |_| 41 U.S.C. 253(c)( )
- ---------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
PSC 7025 Laptop Computers & Associated Peripherals
1. Equipment 1 lot $438,214 $438,214
2. Software 1 lot 73,937 73,937
3. Outside PPM, No Trouble Found 1 lot NTE 5,000
Calls, etc.
- ---------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $517,151
- ---------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- ---------------------------------------------------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGE(S) (X) SEC. DESCRIPTION PAGE(S)
- ---------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- ---------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM A1-8 X I CONTRACT CLAUSES I1-12
- ---------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS B1-3 PART III - LISTS OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- ---------------------------------------------------------------------------------------------------------------------------
X C DECRIPTION/SPECS/WORK STATEMENT C1-26 X J LIST OF ATTACHMENTS J1-40
- ---------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING D1-2 PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE E1-7 K REPRESENTATIONS, CERTIFICATIONS AND
- ----------------------------------------------------------- X OTHER STATEMENTS OF OFFEREORS K-1
X F DELIVERIES OR PERFORMANCE F1-5
- ---------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA G1-5 L INSTRS. CONDS. AND NOTICES OF OFFERORS
- ---------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS H1-9 M EVALUATION FACTORS FOR AWARD
- ---------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- ---------------------------------------------------------------------------------------------------------------------------
17. |X| CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is 18. |_| AWARD (Contractor is not required to sign this
required to sign this document and return _____ copies to document.) Your offer on Solicitation Number _______,
issuing office.) Contractor agrees to furnish and deliver including the additions or changes made by you which
all items or perform all the services set forth or additions or changes are set forth in full above, is
otherwise identified above and on any continuation sheets hereby accepted as to the items listed above and on any
for the consideration stated herein. The rights and continuation sheets. This award consummates the contract
obligations of the parties to this contract shall be which consists of the following documents: (a) the
subject to and governed by the following documents: (a) Government's solicitation and your offer, and (b) this
this award/contract, (b) the solicitation, if any, and (c) award/contract. No further contractual document is
such provisions, representations, certifications, and necessary.
specifications, as are attached or incorporated by
reference herein. (Attachments are listed herein.)
- ---------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
See Continuation Sheet, Page A-2 See Continuation Sheet, Page A-2
- ---------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY_______________________________________ See Page A-2 BY_______________________________________ See Page A-2
(Signature of person authorized to sign) (Signature of person authorized to sign)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8069 A-1 STANDARD FORM 26 (REV.4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.214(a)
*U.S. GOVERNMENT PRINTING OFFICE: 1989 - 241-175
</TABLE>
<PAGE>
STANDARD FORM 26 - AWARD/CONTRACT
CONTINUATION SHEET/SIGNATURE PAGE
Standard Form (SF) 26, Block Numbers 3, 5, 6, 19A, 19B, 19C, 20A, 20B & 20C
TRIPARTITE AGREEMENT FOR:
Prime Contract Number: 600-95-21451
SBA Contract Number: _____________
Contract Effective Date: _____________
International Data Products Corporation
20 Firstfield Road
Gaithersburg, Maryland 20878
By: /s/ Oscar Fuster 6-26-95
-------------------------------- ------------------------------
Name and Title: Oscar Fuster Date
V.P. Marketing &
Sales
U.S. Small Business Administration
Washington District Office
1110 Vermont Avenue, NW, 9th Floor
Post Office Box 34500
Washington, DC 20043-4500
By: /s/ [ILLEGIBLE] 7-11-95
-------------------------------- ------------------------------
Name and Title: Date
U.S. Social Security Administration
Office of Acquisition and Grants
1710 Gwynn Oak Avenue
Baltimore, Maryland 21207
By: /s/ Marcia Friedman Katz 6-26-95
-------------------------------- ------------------------------
Name and Title: Marcia Friedman Katz Date
Contracting Officer
A-2
<PAGE>
Prices contained on Page A-1 have been derived as follows:
<TABLE>
<CAPTION>
UNIT TOTAL
ITEMS QUANTITY PRICE PRICE
----- -------- ----- -----
<S> <C> <C> <C>
1. DGI Notebook II Series 500 107 ea. $3,880 $415,160
w/MS DOS 6.22 & MS Windows
for Workgroups v3.11
2. DGI Mouse 25 ea. 8 200
3. HP DeskJet 320 78 ea. 293 22,854
4. WordPerfect for Windows 107 ea. 295 31,565
5. Lotus for Windows 107 ea. 281 30,067
6. Laplink for Windows v6.0 107 ea. 115 12,305
7. Outside PPM, No Trouble 1 lot NTE 5,000
Found Calls
Block 4, and Block 14
- ---------------------
Requisition - Accounting and Appropriation Data
R-3800-95-0208 - 2858704, 4003800, 319F, IFAS T205205LO -- $274,527.00
R-3800-95-0208.1 - 2858704, 4003800, 319F, IFAS T205205LO -- $145,176.00
R-3318-95-7903 - 2858704, 4003318, 319F, IFAS 0301-30180 -- $ 97,448.00
TOTAL CONTRACT AMOUNT: $517,151.00
</TABLE>
Award is made in accordance with International Data Products Corporation's
(IDP) proposal dated May 1, 1995 and IDP's Best and Final Offer dated
June 14, 1995.
The prices set forth in Section B of the contract have been derived from
IDP's proposal dated June 14, 1995. Section G-1, "Contract Administration";
Section G-3, "Designation of Government Project Officer"; Section G-8
"Contractor's Remittance or Check Mailing Address"; and Section G-9
"Responsible Official(s) Who Can Receive Notification Of An Improper Invoice
And Answer Questions Regarding The Invoice" have been completed as
applicable. Section I, FAR clause 52.244-1 date was changed to FEB 1995; and
on pages I-1 and I-12, Section I-12 FIRMR clause was changed to read
201-39.5202-3. Section J, Attachment 7 -- "Contract Pricing Proposal Cover
Sheet (Standard Form 1411)" is hereby deleted.
A-3
<PAGE>
SECTION A - SOLICITATION/CONTRACT FORM
A-1 52.219-11 - SPECIAL 8(A) CONTRACT CONDITIONS (FEB 1990)
A-2 52.219-12 - SPECIAL 8(A) SUBCONTRACT CONDITIONS (FEB 1990)
A-3 52.219-14 - LIMITATIONS ON SUBCONTRACTING (JAN 1991)
A-4 52.219-17 - SECTION 8(A) AWARD (FEB 1990)
A-4
<PAGE>
SECTION A - SOLICITATION/CONTRACT FORM
A-1 52.219-11 SPECIAL 8(A) CONTRACT CONDITIONS (FEB 1990)
-----------------------------------------------------
The Small Business Administration (SBA) agrees to the following:
(a) To furnish the supplies or services set forth in this contract
according to the specifications and the terms and conditions hereof
by subcontracting with an eligible concern pursuant to the
provisions of section 8(a) of the Small Business Act, as amended (15
U.S.C. 637(a)).
(b) That in the event SBA does not award a subcontract for all or a part
of the work hereunder, this contract may be terminated either in
whole or in part without cost to either party.
(c) Except for novation agreements and advance payments, delegates to
the Social Security Administration the responsibility for
administering the subcontract to be awarded hereunder with complete
authority to take any action on behalf of the Government under the
terms and conditions of the subcontract; provided, however, that the
Social Security Administration shall give advance notice to the SBA
before it issues a final notice terminating the right of a
subcontractor to proceed with further performance, either in whole
or in part, under the subcontract for default or for the convenience
of the Government.
(d) That payments to be made under any subcontract awarded under this
contract will be made directly to the subcontractor by the Social
Security Administration.
(e) That the subcontractor awarded a subcontract hereunder shall have
the right of appeal from decisions of the Contracting Officer
cognizable under the Disputes clause of said subcontract.
(f) To notify the Social Security Administration Contracting Officer
immediately upon notification by the subcontractor that the owner or
owners upon whom 8(a) eligibility was based plan to relinquish
ownership or control of the concern.
A-5
<PAGE>
A-2 52.219-12 SPECIAL 8(A) SUBCONTRACT CONDITIONS (FEB 1990)
--------------------------------------------------------
(a) The Small Business Administration (SBA) has entered into Contract No.
600-95-21451 with the Social Security Administration to furnish the
supplies or services as described therein. A copy of the contract is
attached hereto and made a part hereof.
(b) International Data Products Corporation, hereafter referred to as
the subcontractor, agrees and acknowledges as follows:
(1) That it will, for and on behalf of the SBA, fulfill and perform
all of the requirements of Contract No. 600-95-21451 for the
consideration stated therein and that it has read and is
familiar with each and every part of the contract.
(2) That the SBA has delegated responsibility, except for novation
agreements and advance payments, for the administration of this
subcontract to the Social Security Administration with
complete authority to take any action on behalf of the
Government under the terms and conditions of this contract.
(3) That it will not subcontract the performance of any of the
requirements of this subcontract to any lower tier subcontractor
without the prior written approval of the SBA and the designated
Contracting Officer of the Social Security Administration.
(4) That it will notify the Social Security Administration
Contracting Officer in writing immediately upon entering an
agreement (either oral or written) to transfer all or part of
its stock or other ownership interest to any other party.
(c) Payments, including any progress payments under this subcontract,
will be made directly to the subcontractor by the Social
Security Administration.
A-3 52.219-14 LIMITATIONS ON SUBCONTRACTING (JAN 1991)
--------------------------------------------------
(a) This clause does not apply to the unrestricted portion of a
partial set-aside.
(b) By submission of an offer and execution of a contract, the
Offeror/Contractor agrees that in performance of the contract in the
case of a contract for--
A-6
<PAGE>
(1) Services (except construction). At least 50 percent of the cost
of contract performance incurred for personnel shall be expended
for employees of the concern.
(2) Supplies (other than procurement from a regular dealer in such
supplies). The concern shall perform work for at least 50 percent
of the cost of manufacturing the supplies, not including the cost
of materials.
(3) General construction. The concern will perform at least 15 percent
of the cost of the contract, not including the cost of materials,
with its own employees.
(4) Construction by special trade contractors. The concern will perform
at least 25 percent of the cost of the contract, not including the
cost of materials, with its own employees.
A-4 52.219-17 SECTION 8(A) AWARD (FEB 1990)
- -------------------------------------------
(a) By execution of a contract, the Small Business Administration
(SBA) agrees to the following:
(1) To furnish the supplies or services set forth in the contract
according to the specifications and the terms and conditions
by subcontracting with the Offeror who has been determined
an eligible concern pursuant to the provisions of section 8(a)
of the Small Business Act, as amended (15 U.S.C. 637(a)).
(2) Except for novation agreements and advance payments,
delegates to the Social Security Administration the
responsibility for administering the contract with
complete authority to take any action on behalf of the
Government under the terms and conditions of the contract;
provided, however that the contracting agency shall give
advance notice to the SBA before it issues a final notice
terminating the right of the subcontractor to proceed with
further performance, either in whole or in part, under the
contract.
(3) That payments to be made under the contract will be made
directly to the subcontractor by the contracting activity.
A-7
<PAGE>
(4) To notify the Social Security Administration Contracting
Officer immediately upon notification by the subcontractor
that the owner or owners upon whom 8(a) eligibility was based
plan to relinquish ownership or control of the concern.
(b) The offeror/subcontractor agrees and acknowledges that it will,
for and on behalf of the SBA, fulfill and perform all of the
requirements of the contract.
A-8
<PAGE>
SECTION B -- SUPPLIES OR SERVICES AND PRICES/COSTS
B-1 DETAILED EQUIPMENT AND SOFTWARE PRICE TABLE
B-2 ON-CALL MAINTENANCE DURING PRINCIPAL PERIOD OF MAINTENANCE PRICE TABLE
B-3 OUTSIDE PRINCIPAL PERIOD OF MAINTENANCE PRICE TABLE
B-4 NO TROUBLE FOUND CALL PRICE TABLE
B-1
<PAGE>
B-1 DETAILED EQUIPMENT AND SOFTWARE PRICE TABLE
Contract Years 1 & 2 Pricing
<TABLE>
UNIT
DESCRIPTION PRICE
----------- -----
<S> <C> <C>
1. DGI Notebook II Series 500C $3,880
2. DGI Mouse $ 8
3. HP DeskJet 320 $ 293
4. MS DOS 6.22 NSP
5. MS Windows for Workgroups v3.11 NSP
6. WordPerfect for Windows $ 295
7. Lotus for Windows $ 281
8. Laplink for Windows v6.0 $ 115
Contract Year 3 Pricing
UNIT
DESCRIPTION PRICE
----------- -----
1. DGI Notebook II Series 500C $3,880
2. DGI Mouse $ 8
3. HP DeskJet 320 $ 283
4. MS DOS 6.22 NSP
5. MS Windows for Workgroups v3.11 NSP
6. WordPerfect for Windows $ 295
7. Lotus for Windows $ 281
8. Laplink for Windows v6.0 $ 115
</TABLE>
B-2
<PAGE>
B-2 ON-CALL MAINTENANCE DURING PRINCIPAL PERIOD OF MAINTENANCE PRICE TABLE
<TABLE>
<CAPTION>
FIXED MONTHLY RATE PER UNIT
--------------------------
DESCRIPTION YR.1 YR.2 YR.3 YR.4 YR.5
----------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
1. DGI Notebook II Series 500C N/C $20 $24 $28 $30
2. DGI Mouse N/C N/A N/A N/A N/A
3. HP DeskJet 320 N/C $13 $17 $18 $20
4. MS DOS 6.22 N/C N/C N/C N/C N/C
5. MS Windows for Workgroups v3.11 N/C N/C N/C N/C N/C
6. WordPerfect for Windows N/C N/A N/A N/A N/A
7. Lotus for Windows N/C N/A N/A N/A N/A
8. Laplink for Windows v6.0 N/C N/A N/A N/A N/A
</TABLE>
B-3 OUTSIDE PRINCIPAL PERIOD OF MAINTENANCE PRICE TABLE
<TABLE>
<CAPTION>
FIXED HOURLY RATE
-----------------
YR.1 YR.2 YR.3 YR.4 YR.5
----------------------------------------
<S> <C> <C> <C> <C> <C>
Weekdays $115 $115 $115 $115 $115
Saturdays $115 $115 $115 $115 $115
Sundays $115 $115 $115 $115 $115
Holidays $115 $115 $115 $115 $115
Minimum Charge $115 $115 $115 $115 $115
Maximum Charge $575 $575 $575 $575 $575
</TABLE>
B-4 NO TROUBLE FOUND CALL PRICE TABLE
FIXED HOURLY RATES YEARS 1 - 5 - $89.00
B-3
<PAGE>
SECTION C--DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
C-1 SCOPE OF WORK
C-2 MANDATORY GENERAL REQUIREMENTS
C-3 MANDATORY EQUIPMENT/SOFTWARE SPECIFICATIONS
C-4 INSTALLATION/DELIVERY
C-5 MAINTENANCE
C-6 FIELD PROVEN EQUIPMENT AND SOFTWARE
C-7 EXISTING FACILITIES
C-8 USED EQUIPMENT
C-9 SOFTWARE SUPPORT
C-10 TECHNOLOGY SUBSTITUTION
C-11 MINIMUM/MAXIMUM QUANTITIES
C-1
<PAGE>
C-1 SCOPE OF WORK
(a) The contractor shall furnish, as required, the hardware, software,
supplies, maintenance and other contractor support services required for
the installation and support of all items supplied under this contract.
Such hardware, software, supplies, maintenance and other contractor
support services shall be supplied in conformance with the terms and
conditions of this contract.
(b) These specifications describe the necessary hardware, software and
services used to support notebook computers for Social Security
Administration (SSA) offices nationwide. The equipment will be used to
support distributed data processing (DDP) and automation activities in
all SSA offices (i.e., central office components in Woodlawn and
Baltimore, Maryland; 10 regional offices; 6 program service centers; 74
area director offices; 35 teleservice center offices; and over 1,400
district, branch and hearings offices).
(c) The contractor shall provide the hardware, software, supplies and
services according to the specifications stated in Section C. These
specifications are mandatory and are stated in the terms of minimum
capacities, rates of operation and characteristics required by the
Government. Any additional components necessary to satisfy the specified
performance and configuration requirements must also be identified,
provided and included in the equipment cost tables in Section B.
(d) The contract shall be a firm-fixed price, indefinite quantity contract
with the minimum and maximum quantities identified in Section C-11. The
equipment and software is to be ordered before the end of Contract Year
3.
C-2 MANDATORY GENERAL REQUIREMENTS
(a) Compatibility
The objective of this procurement is to provide DDP and automation
capabilities to SSA offices. The notebook computers shall be
multifunctional. It is SSA's intention to use this equipment with the
software provided in this contract plus commercial off-the-shelf software
and custom developed applications obtained outside this contract. SSA
may connect this equipment with local area networks (LAN) and wide area
networks (WAN). In order for the equipment provided in this contract
to become an integral part of SSA's Information Systems strategy, it is
essential that it have certain operating characteristics. The equipment
C-2
<PAGE>
selected for this contract must be compatible with the IBM PC/AT. This
does not mean that the equipment must be IBM, but that it fully
accommodate hardware and software designed to operate on IBM hardware.
(b) Safety
(1) Shielded Power Supply - All power supplies must be shielded.
(2) FCC Certification - All hardware, where applicable, must meet FCC
requirements for certification of compliance with maximum allowable
radiation limits. The notebook computer, mouse, and printer must
be FCC Class B certified as of the release date of this
solicitation and have FCC stickers displayed externally on the
hardware.
(3) UL Approval - All hardware requiring a 120 volt power source must be
Underwriter's Laboratories (UL) listed (approved) as of the release
date of this solicitation.
C-3 MANDATORY EQUIPMENT/SOFTWARE SPECIFICATIONS
(a) NOTEBOOK COMPUTER
The notebook computer must meet the following specifications:
(1) General Requirements
a. Notebook Computer Configuration
A notebook computer must consist of:
1) A system unit;
2) A display;
3) A fixed disk drive;
4) A diskette drive and diskettes;
5) A keyboard;
6) A carrying case;
7) A battery;
8) An AC adapter (if required);
9) A spare battery, and spare AC adapter;
10) A pointing device;
11) File transfer software and cable;
12) A data/fax modem;
13) A portable, battery powered printer; and
14) Documentation.
C-3
<PAGE>
b. The entire system, including system unit, display, keyboard,
and battery must close into a single unit for transportation.
c. The entire system including system unit, display, fixed disk
drive, diskette drive, keyboard, battery, AC power connection,
pointing device, and carrying case must not exceed ten (10)
pounds in weight.
d. The notebook computer must meet FCC requirements for
certification of compliance with maximum allowable radiation
limits. It must be FCC Class B certified as of the closing
date of this solicitation and have a FCC sticker displayed
externally on the hardware.
e. Documentation
Documentation for the notebook computer shall be delivered at
a ratio of one (1) set of documentation for each notebook
computer. All manuals must be original and phototypeset.
Manuals must be the same quality as those provided by the
manufacturer to its commercial customers. The cost of the
documentation shall be included in the cost of the notebook
computer.
(2) System Unit
a. Processor and Operating System Compatibility
The notebook computer processor must support PC-DOS or
MS-DOS Versions 6.0 and later as well as OS/2 Version
2.1. Applications designed to run under these operating
systems must work properly on the offered hardware
without hardware or software modification. At a minimum,
all notebook computers must support all of the software
included in this contract.
b. Applications Software Compatibility
The notebook computer must support all of the workstation
software included in this contract along with Government
furnished software (i.e., cc:Mail and Organizer).
c. Must include a 15-pin connector for attachment of an
external 256-color SVGA (1024x768) monitor.
C-4
<PAGE>
d. Microprocessor must be an Intel 486DX2 or equivalent and must
operate at a speed of 66 megahertz or greater.
e. Must provide power management features to spin down the hard drive,
turn off the display's backlighting, and slow down the CPU and
clock.
1) Power management features must be user-definable, i.e. must be
able to be turned on and off and set to variable times.
2) When the system resumes full power, it must be returned to the
same state it was in when power management was invoked.
3) Power management features must be able to be invoked
automatically at the preset time or manually invoked to
start immediately.
f. Each notebook computer must be equipped with two PCMCIA (Personal
Computer Memory Card International Association) Type II slots which
are fully compliant with release 2.0 of the PCMCIA standard.
g. Must include an internal day/date time clock with battery backup,
so that date and time is maintained when the system is turned off,
or electrical power fails.
h. Must have a minimum of 16MB of RAM on the motherboard.
i. Must be equipped with a serial port with a connector that is either
an IBM-compatible 9-pin male serial connector or a 25-pin male
connector conforming to EIA RS-232C specifications. This serial
port must use the 16550AFN UART chip.
j. Must be equipped with an enhanced parallel port (EPP) with an
IBM-compatible 25-pin connector that allows connection to devices
that use a Centronics parallel communications interface.
k. Must be equipped with a speaker or functional equivalent.
C-5
<PAGE>
(3) Notebook Computer Display/Adapter Specifications
Each notebook computer must be equipped with an active matrix color
display and adapter that meet the following specifications:
a. Must be an active-matrix color display.
b. The display adapter must interface to the processor through a local
bus.
c. In text mode, the video display must have a minimum of 25 lines
with 80 characters per line.
d. The video display and adapter must be compatible with the IBM Super
Video Graphics Array (SVGA - 1024 X 768) and must contain at least
1Mb of video memory.
e. The video display must be high quality to allow easy viewing and
reading of data from the display.
f. The visible portion of the screen must measure a minimum of eight
and one-half (8.5) inches on the diagonal.
(4) Notebook Computer Fixed Disk Drive
Each notebook computer must contain a fixed disk drive that meets the
following specifications:
a. Must have a minimum formatted capacity of 300MB as validated by the
operating system disk management utility (1MB = 1048576 bytes).
b. Must have a visible in-use indicator.
c. Fixed disk read/write heads must automatically "park" (i.e., move
to a position to avoid physical damage) during normal power-down of
the system.
(5) Notebook Computer Diskette Drive
Each notebook computer must be equipped with a diskette drive that meets
the following specifications:
a. Must have a formatted capacity of 1.44MB.
b. Must have a visible in-use indicator.
C-6
<PAGE>
c. Must read and write 3.5 inch, 1.44MB diskettes. Formatting of
1.44MB diskettes must be performed on the notebook computers
provided.
d. Must read and write 3.5 inch, 720KB diskettes
Formatting of 720KB diskettes must be performed on the notebook
computers provided.
e. Must be compatible with the IBM PS/2 diskette drive. Data exchange
must not require the use of conversion.
(6) Notebook Computer Keyboard
Each notebook computer must be equipped with a keyboard that meets the
following specifications:
a. Capable of generating the full 127 character American Standard Code
for Information Interchange (ASCII) set (decimal characters 1-127)
and the IBM high order ASCII characters (decimal characters
128-255).
b. Standard typewriter style layout (QWERTY) with standard placement
of the Shift and Carriage Return keys.
c. The Pg-Up, Pg-Dn, Home and End keys must be invoked in a single key
stroke (without the need for any other keys).
d. There must be at least twelve (12) user definable function keys.
e. Function key operation must be capable of being redefined by Alt,
Ctrl and Shift Keys.
f. Must have an automatic repeat function for all printable ASCII
characters, cursor controls and backspace functions.
g. A multikey rollover function must be included (i.e., when more than
one key is depressed simultaneously, the effective key is the last
one depressed).
(7) Carrying Case
Must include a carrying case for transporting the notebook computer, AC
adapter (if required), modem, portable printer, and manuals. The
carrying case must include both hand and shoulder straps.
C-7
<PAGE>
(8) Battery
a. Must be equipped with a rechargeable nickel metal hydride, lithium
ion, or lithium polymer battery power supply with a rated life of
at least two and one half (2 1/2) hours without the need for
recharging. The battery must be located such that the user has easy
access to it for replacement.
b. Must be equipped with an indication of low battery power.
(9) AC Adapter
The notebook computer must be capable of operating on a 110 volt, 60
cycles per second alternating current power source. The power cord must
be at least nine (9) feet long.
(10) Battery/Charger Only (1)
Each notebook computer must be supplied with a spare battery, a spare
battery charger, and a spare power supply (if required) to allow
charging of the spare battery while the computer is in use.
(11) Notebook Computer Pointing Device
Each notebook computer must be equipped with a pointing device that
meets the following specifications:
a. The pointing device must be integral to the computer.
b. Must have a minimum of two (2) buttons and a maximum of four (4).
c. Must include a driver for Microsoft Windows that enlarges the
cursor in Graphical User Interface (GUI) mode for easy viewing.
(12) Serial Mouse
A mouse will be ordered configured with some notebooks. It must meet the
following specifications:
a. Ball Type Mouse
Must operate on any flat surface without the need for special pads
or surfaces.
C-8
<PAGE>
b. Resolution
Must have a resolution of at least 400 points per inch.
c. Buttons
Must have at least two (2) and no more than three (3) buttons.
d. Cord Length
Cord length must be at least six (6) feet.
e. Applications Software Compatibility
Must support, at minimum, all of the software provided under this
contract, and Microsoft Windows 3.1.
f. Right/Left Handed Use
Buttons must be re-assignable for right- or left- handed use.
g. Connector
Must include a DB-9 serial connector.
(13) File Transfer Software/Cable
a. Each notebook computer must include software that has the
capability of transferring files across the cables provided to
workstations using both the parallel port and the serial port at a
minimum speed of 115,000 bits per second.
b. Software for both the notebook computer and the workstation shall
be provided.
c. A cable, at least 10 feet long, with 25-ping male connectors on
both ends must be provided for connections using the parallel port.
d. A null-modem cable, at least 10 feet long, with both 9-pin and
25-pin female connectors at both ends must be provided for
connections to other workstations using the serial port.
C-9
<PAGE>
(14) Data/Fax Modem
Must include an asynchronous data/fax modem that interfaces with the
notebook either internally, through the PCMCIA slot, or externally
through the RS-232C port. This modem must meet the following
specifications:
a. Must operate at 14,400, 9600 and 2400 bits per second (bps) for
data and 14,400 and 9600 bps for fax. Must use CCITT v.42 bis,
v.42, v.32, v.32 bis, and v.22 bis standard protocols, and be fully
compatible with the Hayes AT command set.
b. Must support Microcom Networking Protocol (MNP) level 5 data
compression protocol.
c. Provide asynchronous transmission with full duplex operation.
d. Able to both originate and answer calls, and support automatic
dialing via the Hayes AT command set.
e. Must support automatic fallback.
f. Must be compatible with cc:Mail from Lotus Development Corp.
g. Must have minimum diagnostics capabilities which include local and
remote digital-loopback tests.
h. Must have FCC Class B certification as of the closing date of this
solicitation.
i. If internal or PCMCIA, must be configurable to COM1, COM2, and COM3.
j. If the modem is external, it must be powered by both AC and
battery; must be pocket sized; a new, fresh alkaline battery and a
minimum four feet long interface cable must be provided; and a case
must be provided to accommodate the modem, AC adapter, and cable.
k. Documentation for the modem shall be delivered at a ratio of one
(1) set of documentation for each notebook computer. All manuals
must be original and phototypeset. Manuals must be the same quality
as those provided by the manufacturer to its commercial customers.
The cost of the documentation shall be included in the cost of the
notebook computer.
C-10
<PAGE>
(15) Portable Printer
Some of the notebook computers will require printers. The
printers must be portable and meet the following
specifications:
a. Must print the 95-character ASCII subset (decimal
characters 32-126) as well as the IBM extended ASCII
character set (decimal characters 128-254).
b. The printer must have a manufacturer's rated speed of at
least two (2) pages per minute in letter quality mode.
c. Must include at least 48KB of RAM. The memory must be
fully contained and integrated into the printer.
d. Must interface to an IBM-compatible parallel printer port.
e. Must be capable of operating on a 110 volt, 60 cycles per
second alternating current power source.
f. Must be equipped with a rechargeable battery power supply
capable of printing at least 100 text pages without
recharging as rated by the manufacturer.
g. The battery must be recharged whenever the printer is
connected to an AC power source.
h. Must use a print process of plain paper drop on-demand
thermal ink jet printing with an ink jet cartridge that
contains at least 50 jets.
i. Must include a printer cable at least ten (10) feet long to
connect the printer to the notebook computer.
j. Must provide at least the following resident (come
internally installed in the printer, not downloaded) or
cartridge resident fonts. If a font cartridge is required,
it must be provided with each printer. Fonts must include:
1) Courier 10 pitch (portrait and landscape orientation);
2) Font using pitch between 16 and 20 (portrait
orientation);
C-11
<PAGE>
3) Font using pitch between 16 and 20 (landscape
orientation);
4) Proportional spacing sans serif font; and
5) Proportional serif font.
k. All fonts required must support bold, underline,
superscript/subscript, italics and combinations thereof.
l. Just be capable of printing a full page of graphics and/or
text at 300 dots per inch in a single pass with the
equipment provided.
m. Must be capable of printing on overhead transparencies and
labels.
n. Must provide Hewlett-Packard (HP) Printer Control Language
Level 3 (PCL3) emulation.
o. Must support an optional single-bin cut sheet feeder
capable of holding at least 50 sheets.
p. Must accept paper weights from 16 to 24 pounds inclusive.
q. Must have a manufacturer's recommended duty cycle of at
least 500 pages per month.
r. Must have a MTBF of at least 20,000 hours of use, as rated
by the manufacturer.
s. The contractor must provide with each printer, enough
supplies (other than paper) to accommodate the printing of
at least 1500 pages at 5% coverage. The quantities
provided must be based on manufacturer recommended duty
cycle or replacement intervals. All supplies must include
clear instructions on their use and replacement procedures.
t. Must provide manual controls to perform the following
functions:
1) Power on;
2) Online/Offline;
3) Font;
4) Draft;
5) Printout of available fonts;
6) LF/FF; and
7) Change Pen/Menu.
C-12
<PAGE>
u. Printer supplies, including cartridges and other consumable
items, must be available to the Government from
independent suppliers.
v. Must be fully operational with and supported by all of the
software available in this contract. The contractor must
identify and implement any installation options and
drivers necessary to make the printer fully operational
with the software.
w. Printer noise level, as measured by the manufacturer, must be
no greater than 45 dBA (A-weighted sound pressure level)
when measured at a distance of one meter from the front of
the printer.
x. The portable printer must meet FCC requirements for
certification of compliance with maximum allowable
radiation limits. It must be FCC Class B certified as of
the closing date of this solicitation and have an FCC
sticker displayed externally on the hardware.
y. Documentation
Documentation for the printer shall be delivered at a
ratio of one (1) set of documentation for each notebook
computer. All manuals must be original and phototypeset.
Manuals must be the same quality as those provided by the
manufacturer to its commercial customers. The cost of the
documentation shall be included in the cost of the
notebook computer.
(b) Software
(1) Operating System
Each notebook computer must be provided with operating
system software. The software must meet the following
specifications:
a. Disk Operating System
An operating system must be provided that recognizes and
executes the same command set and functions in a manner
identical to one of the following operating systems:
- PC-DOS version 6.1 as published by IBM; or
- MS-DOS version 6.2 as published by Microsoft Corporation.
C-13
<PAGE>
b. Utilities
Utilities equivalent to those included with PC-DOS 6.1 and
MS-DOS 6.2 must be provided. These utilities must include
a virtual disk driver to emulate a disk drive in RAM
(RAMDRIVE), a print spooler to expedite printing
operations (PRINT), an extended memory manager (HIMEM), an
expanded memory emulator (EMM386), a disk caching program
(SMARTDRV), a file/directory/drive backup program, HELP
command, and MORE, SORT and FIND filters.
c. High Memory Loadable
The operating system must be capable of loading into the
high memory area to the extent possible in order to make
maximum conventional memory available for applications
software.
d. Upper Memory Area
The operating system must provide the capability of loading
device driver software and resident programs into the
upper memory area.
e. Hardware Compatible
The operating system must be fully supported by the
hardware.
f. Documentation
Each copy of the operating system must come with a complete
set of documentation. All manuals must be original and
phototypeset. Manuals must be the same quality as those
provided by the manufacturer to commercial customers.
(2) Graphical User Interface (GUI)
The Graphical User Interface must meet the following:
a. For each notebook, the contractor shall provide Microsoft
Windows version 3.1 or Windows for Workgroups 3.11
(standalone).
b. Each copy of Microsoft Windows 3.1 or Windows for
Workgroups 3.11 (standalone) must be complete with all of
the functions and features that are included in the
packaging of the software for commercial customers.
c. Each copy of Microsoft Windows 3.1 or Windows for
Workgroups 3.11 (standalone) must be provided with
C-14
<PAGE>
an original copy of the user's manual.
d. Each copy of Microsoft Windows 3.1 or Windows for
Workgroups 3.11 (standalone) must include drivers for the
following printers:
- Hewlett Packard P320 Deskjet;
- Fujitsu DL3400 and DL3600;
- Hewlett Packard LaserJet Series II;
- Hewlett Packard LaserJet Series III;
- Hewlett Packard LaserJet Series 4; and
- IBM 4019 LaserPrinter E.
(3) Word Processing Software/Windows
Wordperfect from Wordperfect Corporation has been
established as an agency standard at SSA. Wordperfect for
Windows will be ordered configured with each notebook. It
must meet the following specifications:
a. For each order, the contractor shall provide WordPerfect
6.1 for Windows.
b. Each copy of WordPerfect for Windows must be complete with
all of the functions and features that are included in the
packaging of the software for commercial customers.
c. Each copy of WordPerfect for Windows must be provided with
an original copy of the WordPerfect 6.1 for Windows manual.
d. Each copy of WordPerfect for Windows must be provided with
a WordPerfect 6.1 for Windows template. The template must
be of a quality comparable to that provided to commercial
WordPerfect customers.
e. Each copy of WordPerfect for Windows must include, at a
minimum, drivers for the following printer models:
- Hewlett Packard P320 Deskjet;
- Fujitsu DL3400 and DL3600;
- Hewlett Packard LaserJet Series II;
- Hewlett Packard LaserJet Series III;
- Hewlett Packard LaserJet Series 4; and
- IBM 4019 LaserPrinter E.
f. Each copy of WordPerfect for Windows must be provided with
a copy of the WordPerfect 6.1 for Windows tutorial.
C-15
<PAGE>
(4) Spreadsheet Software/Windows
Lotus 1-2-3 from Lotus Development Corporation has been
established as an SSA standard. Lotus 1-2-3 for Windows
may be ordered configured with each notebook. It must meet
the following specifications:
a. For each order, the contractor shall provide Lotus 1-2-3
Release 5.0 for Windows.
b. Each copy of Lotus 1-2-3 for Windows must be complete with
all of the functions and features that are included in the
commercial packaging of the software for commercial customers.
c. Each copy of Lotus 1-2-3 for Windows must be provided with
an original copy of the 1-2-3 Release 5.0 for Windows manual.
d. Each copy of Lotus 1-2-3 for Windows must be provided with
an original copy of the Lotus 1-2-3 Release 5.0 for
Windows quick reference guide. The quick reference card
must be of a quality comparable to that provided to
commercial Lotus 1-2-3 customers.
e. Each copy of Lotus 1-2-3 for Windows must be provided with
a copy of the Lotus 1-2-3 Release 5.0 for
Windows tutorial.
(5) File Transfer Software - See Section C-3 (a) (13)
C-4 INSTALLATION/DELIVERY
(a) Miscellaneous
(1) Equipment from this contract shall be ordered in one of two ways,
at the option of the Government:
a. SYSTEM ORDERS are comprised of a notebook, in addition to
some number of accessories.
b. STANDALONE ORDERS are orders for accessory equipment
separate from a notebook (i.e. HP320 Printer).
(2) Standalone orders shall be shipped or delivered to the site
specified by the Government and installed by the Government with
telephone assistance from the contractor, if required.
C-16
<PAGE>
(3) System orders shall be shipped to the appropriate sites with all
software loaded and operational on the fixed disk.
(4) All orders, except those to SSA headquarters in Woodlawn,
Maryland must be delivered to the building and room location
specified in the delivery order (inside delivery).
(5) Deliveries made to SSA headquarters in Woodlawn, Maryland shall
arrive at the SSA loading dock between the hours of 7:00 a.m. and
noon. The contractor must provide a minimum of one day
pre-shipment notice to the Project Officer or the designated
alternate Project Officer, whose names will be provided in
Section G-3.
(6) Equipment shipped to SSA headquarters in Woodlawn, Maryland shall
be delivered on pallets.
(7) The contractor must provide all necessary cables and connectors.
(b) System Assembly and Burn-in Procedures
(1) Hardware Burn-in
The contractor must assemble and burn-in each system prior to
shipment according to the following procedure:
a. The system hard disk must be initialized with a sector
interleave of 1-to-1.
b. The fixed disk must be formatted with the operating system
and operationally configured, including the display and any
orderable accessory items.
c. The system diagnostics must be run continuously for at
least 24 hours and all detected errors must be resolved
prior to shipment.
d. There shall be no "bytes in bad sectors" (from DOS CHKDSK
command) on any of the system fixed drives delivered.
(2) Software Loading
The operating system, Microsoft Windows, and all additional
software ordered shall be installed on each notebook. The
fixed disk shall be divided into appropriately named
subdirectories for each software item ordered
as part of the system and all software
C-17
<PAGE>
shall be loaded into the subdirectories. Microsoft Windows, when
ordered, shall be configured such that each software item
is contained as a separate, appropriately named "group"
within the Program Manager and is executable from within
Windows.
(3) Packaging and Shipping
a. After successful completion of burn-in and software
loading, the notebook and/or items (including user manuals
and supplies) shall be repacked, using the original packing
materials, for shipment to the SSA site. The system items'
individual boxes shall be packaged for shipment.
b. Shipment of a system or standalone order to each site shall
be in a single parcel. The parcel is defined as a single
box or several boxes that are banded or wrapped together.
The parcel must be clearly labeled. The design of the parcel
must be such that it can be moved easily through a standard
30"-wide, 7'-high doorway and such that it can withstand
normal movement by freight companies. The individual item
boxes must be packed in the shipping parcel in such a way
that they are stationary when the shipping parcel is moved.
Filler boxes should be used to fill space in the shipping
parcel.
c. Each shipping parcel shall have a shipping label placed
externally for easy viewing by the freight company and the
user. The shipping label shall contain the destination
address (including room number), user contact person and
contact telephone number.
d. A separate label containing the internal SSA identification
number in characters which are at least one (1) inch high
for easy identification shall be placed under or above the
shipping label and on each box in the parcel. The SSA
identification number shall be provided by the Government
in the delivery order.
e. The contractor shall attach to the outside of the Picking
Slip parcel an inventory, listing every item (hardware and
software) included in the equipment order.
f. Trucks used for shipping must not exceed 13 feet 1 inch in
height, in order to accommodate the Government's inside
loading docks.
C-18
<PAGE>
g. Equipment not packaged and shipped as required shall be
subject to refusal of delivery by the Government
representative. Refusal of delivery for these purposes
shall not relieve the contractor of its requirements for
timely equipment delivery.
h. The contractor shall provide with each equipment order
three (3) copies of a checklist of all equipment included
in the shipment. This will be used to report
receipt/acceptance data to the Government Project Officer.
The checklist shall list each orderable item shipped and
its serial number, provide space for comments and spaces
for date of receipt and signature of the employee receiving
the order. A stamped envelope addressed to the Government
Project Officer shall be included for mailing the form.
(Address information shall be provided after contract
award.)
i. Installation Problems
The contractor is encouraged to take steps to minimize the
number of deliveries that will not include the correct
hardware and/or software items. In the event that any site
receives an incomplete or incorrect configuration, the
contractor must provide the correct/required configuration
by using one of the following methods. The method selected
shall be at the option of the Government:
1) Making on-site visit to make the configuration conform
to the configuration required by the delivery order;
or
2) Reshipping an entire new configuration; or
3) Reshipping missing or incorrect items.
In all cases, the contractor must provide the correct
configuration within five (5) working days of notification
by the Government that the delivered configuration was
incorrect.
C-19
<PAGE>
(4) Reports
For each equipment order, the contractor shall provide to the
Government Project Officer documentation that the equipment (hardware
and/or software) has been delivered or shipped. This document shall
contain at a minimum, the internal SSA identification number (taken
from the delivery order), the delivery location, the manufacturer,
description and serial number of each item (hardware and software),
and the date the equipment was shipped or delivered. The required
information shall be in a DBMS format defined by the Government and
compatible dBase IV from Borland International, Inc. The information
shall be transmitted to the Government Project Officer using a
mutually agreed upon medium (e.g. electronic mail, diskette) within 15
days of the delivery date of the equipment. The Government shall
provide within 15 days of contract award the required data format,
standardized coding requirements and standardized equipment
descriptions.
(5) Site Visit
a. The Government shall be provided with the opportunity to inspect
the contractor's facility for system assembly and burn-in and to
inspect the final design of the shipping parcels. The Government
shall also inspect the fixed disk setups to ensure that the
software has been properly installed. Such inspection shall take
place after the delivery of test systems to SSA in Woodlawn as
specified in Section E-3(a)(1) and before any equipment is
delivered to user locations.
b. The Government reserves the right to make other site visits to
the contractor's production facility during the life of the
contract.
C-5 MAINTENANCE
(a) On-Call Maintenance Service
(1) The contractor shall provide the Government with on-call maintenance
service on an on-site or replacement basis (i.e., contractor personnel
report to the site of the equipment for replacement), for the SSA
offices listed on Page J-7; or on a depot repair basis (i.e.,
contractor will ship an entire system to replace inoperative equipment
within 24-hours of a service call, and contractor shall pay for all
associated shipping costs for the return of the inoperative equipment
to the contractor's depot service center), for all SSA offices listed
on Pages J-8 through J-34.
C-20
<PAGE>
(2) the contractor shall provide on-call maintenance service at the fixed
monthly charges shown in Section B of this contract during the
Principal Period of Maintenance (PPM), which is defined as Monday
through Friday, 8:00 AM to 5:00 PM local prevailing time, exclusive of
Federal holidays.
(3) On-call maintenance service shall be provided for equipment which may
be located in any of the locations set forth in Section J, Attachment
3.
(4) The contractor shall provide maintenance (labor and parts) at the
prices shown in Section B and shall keep the equipment in good
operating condition. Maintenance service shall not include electrical
work external to the equipment, furnishing supplies, or adding or
removing any devices not supplied by the contractor. It shall not
include repair of damage resulting from accident, transportation
between Government sites, neglect, misuse, failure of electrical
power, air-conditioning, or humidity control or causes other than
ordinary use.
(b) Maintenance Coverage
(1) The contractor shall honor orders for maintenance for periods of one
(1) year or less at the prices shown in Section B.
(2) The effective date of maintenance service shall not be prior to the
expiration of the warranty period prescribed in Section H-5.
(3) During the warranty period, the same level of service as specified
under this Section C-5 of the contract shall be provided by the
contractor.
(c) Remedial Maintenance
(1) Remedial maintenance shall be performed after notification that
hardware and/or software is inoperative. The contractor shall provide
to the Government a single designated point of contact in the form of
a 24-hour toll-free telephone number. The contractor shall make
arrangements to provide an answering service or other continuous
telephone coverage to permit the Government to make such contact seven
days a week. Refer to Section H-12.
(2) Calls for remedial maintenance shall be made by the Government
whenever there is an equipment failure.
C-21
<PAGE>
(3) The contractor shall maintain facilities for receiving maintenance
calls such that Government waiting time (i.e., time spent by
Government employee waiting for contractor personnel to take
information about required maintenance) shall not exceed five
minutes.
(d) Return-To-Operation Time
(1) The contractor shall return the equipment to service within 24 hours
of notification that remedial maintenance is required, excluding
weekends and Federal holidays.
(2) A system shall be considered out of service if any item for which the
contractor is responsible for maintenance is malfunctioning and the
system cannot be used for all of its intended functions.
(3) Equipment shall be considered returned to service when the
contractor's repair order is signed, with date and time, by a
responsible Government employee. In the event that an employee is
not available to sign the order, the contractor must call the
Government Project Officer at a number to be provided. This
telephone number shall be equipped with a voice messaging system
to receive calls 24 hours a day.
(e) Responsibilities of the Contractor
(1) The contractor's responsibilities under maintenance shall include the
replacement of consumable parts for the HP320 DeskJet printer (other
than paper and Ink) as well as replacement of batteries in the
notebooks.
(2) Failed equipment shall be repaired or replaced at the option of the
contractor. If the contractor elects to replace a failed item, it
must be replaced with identical equipment (i.e., identical make and
model).
(3) Only new standard parts or parts equal in performance to new parts
shall be used in effecting repairs. Parts which have been replaced
shall become the property of the contractor.
(4) Equipment repairs shall take place during the Principal Period of
Maintenance except by mutual agreement between the contractor and the
Government.
C-22
<PAGE>
(5) The Government retains the right to interchange items (boards, drives,
monitors, printers, etc.) among the workstations covered, with no
penalty for so doing unless the equipment is damaged. In such cases,
the Government shall be responsible for any damage caused by
Government personnel while interchanging equipment.
(6) The contractor is required to service all equipment covered in this
contract. The Government retains the right to configure systems
included in this contract with components acquired from sources
outside of this contract. The contractor shall not be responsible for
maintenance of such components or any damage caused by their addition
to systems included in this contract.
(7) When it has been determined that a system fixed disk drive is to be
replaced, where possible the contractor shall provide the Government
user an opportunity to perform a fixed disk backup prior to removing
the disk drive to be replaced.
(8) When a system fixed disk drive is replaced with a new unit by the
contractor, the contractor shall erase or otherwise destroy all data
on the replaced unit.
(9) Contractor maintenance engineers must use certified virus-free
diagnostic software when making repairs to ensure that a virus is not
introduced into the workstation or LAN server during service. After
maintenance is performed on a system, the contractor shall run a virus
check on the system to assure it is free from viruses.
(f) Non-Chargeable Maintenance Items
There shall be no additional charges to the Government for:
(1) Remedial maintenance, regardless of when the maintenance is performed;
(2) Replacement parts, unless such parts are required due to the fault or
negligence of the Government;
(3) Time spent by maintenance personnel after arrival at the site
awaiting the arrival of additional maintenance personnel and/or
delivery of parts, etc., after a service call has commenced; and
(4) Any travel expenses, etc. for maintenance personnel.
C-23
<PAGE>
C-6 FIELD PROVEN EQUIPMENT AND SOFTWARE
Each item proposed in response to this solicitation shall be off-the-shelf
and field proven in Government or commercial customer accounts that are
financially independent from the offeror or the offeror's subcontractors
and are not test sites; shall be in an on-going, current production made
by the manufacturer(s) as of the date of the offeror's proposal; and
shall meet the following minimum requirements:
(a) Each item, including hardware and software, provided to meet the
Government's specifications shall have been successfully used by a
minimum of 3 customers by the date of the offeror's proposal.
(b) The total minimum number of installed devices at the 3 or more sites
shall equal or exceed 100 of each item,.
(c) A hardware or software item shall be considered field proven only if:
(1) The make, model and version proposed meets the requirements of
Sections C-6(a) and C-6(b); or,
(2) The item proposed is a commercially available upgrade (as of the
date of the offeror's proposal) to an item that meets the
requirements of Sections C-6(a) and C-6-(b).
C-7 EXISTING FACILITIES
All equipment must operate in a normal office environment using available
facilities as specified below.
(a) Available Power
120 Volt, 60 Cycle, 15 ampere maximum draw and NEMA 5-20
receptacle.
(b) Available Air Conditioning
Equipment must operate within a temperature range of 60-85
degrees Fahrenheit (15.5-32.2 degrees Celsius), and 30%-80%
relative humidity, non-condensing.
(c) Floor Area
Adequate floor space shall be provided by the Government for all
system configurations.
C-24
<PAGE>
(d) Access Doors
The contractor shall be provided adequate access for installation/repair
of all equipment.
C-8 USED EQUIPMENT
All equipment must be new. Used equipment shall not be accepted.
C-9 SOFTWARE SUPPORT
Should any of the software provided under the terms of this contract contain
defects for which the software manufacturer provides repair or replacement to
its customers free of charge, the contractor shall provide said repair or
replacement to the Government free of charge.
Should the manufacturer of any software provided under the terms of this
contract upgrade the product with a new release, the Government shall,
whenever possible, have the option to (a) require the latest release for
subsequent deliveries or (b) require no change in delivered software. Should
the Government require an upgraded release for which the manufacturer has
altered the list price, the unit cost for that item in this contract shall be
subject to renegotiation.
C-10 TECHNOLOGY SUBSTITUTION
Over the delivery period of the contract, it may be in the mutual best
interest of the Government and the contractor to substitute hardware and
software of a newer technology. The following conditions must be satisfied:
(a) The item substituted shall be fully compatible with the originally
proposed item.
(b) The item substituted shall meet or exceed the specifications of the item
previously supplied or the mandatory technical requirements of the
contract, whichever is greater.
(c) The item substituted shall meet all of the marketability requirements of
the solicitation to ensure field-proven and off-the-shelf configurations.
(d) The item substituted shall undergo an acceptance test equal in scope and
duration to the original Phase I acceptance test.
C-25
<PAGE>
(e) The cost of the item substituted shall be equal to or lower than that for
the originally proposed item.
(f) Delivery, installation, and maintenance of the substituted item must meet
or exceed all the terms and conditions of this contract.
(g) The substitution shall be by mutual agreement.
C-11 MINIMUM/MAXIMUM QUANTITIES
The following represent the minimum quantities of supplies which the Government
is obligated to order under the term of the contract as well as the maximum
quantities of supplies which the Government can order under the term of the
contract:
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
HARDWARE
Laptop Notebook Computer 85 571
Mouse 25 130
Printer 68 360
SOFTWARE
Operating System 85 571
Microsoft Windows (GUI) 85 571
WordPerfect for Windows 85 571
Lotus for Windows 85 571
File Transfer Software 85 571
</TABLE>
C-26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS AND
CONSOLIDATED STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR
THE PERIOD ENDING APRIL 30 AND JULY 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1997
<PERIOD-START> NOV-01-1996 NOV-01-1996
<PERIOD-END> APR-30-1997 JUL-31-1997
<CASH> 5,722,833 4,313,702
<SECURITIES> 150,000 150,000
<RECEIVABLES> 3,958,840 3,626,307
<ALLOWANCES> 45,000 15,000
<INVENTORY> 317,719 900,702
<CURRENT-ASSETS> 10,182,629 9,147,597
<PP&E> 213,554 225,618
<DEPRECIATION> 140,745 146,595
<TOTAL-ASSETS> 10,255,438 9,226,620
<CURRENT-LIABILITIES> 3,686,791 2,593,184
<BONDS> 0 0
0 0
0 0
<COMMON> 5,000 5,000
<OTHER-SE> 6,563,647 6,628,436
<TOTAL-LIABILITY-AND-EQUITY> 10,255,438 9,226,620
<SALES> 9,492,429 11,981,962
<TOTAL-REVENUES> 9,492,429 11,981,962
<CGS> 7,670,210 9,545,190
<TOTAL-COSTS> 7,670,210 9,545,190
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,093,535 1,238,424
<INCOME-TAX> 418,320 463,300
<INCOME-CONTINUING> 675,235 775,124
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 675,235 775,124
<EPS-PRIMARY> 0.17 0.18<F1>
<EPS-DILUTED> 0.16 0.17<F1>
<FN>THE EARNINGS PER SHARE AMOUNTS HAVE BEEN RESTATED AS REQUIRED TO COMPLY
WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE".
FOR FURTHER DISCUSSION OF EARNINGS PER SHARE AND THE IMPACT OF STATEMENT NO.
128, SEE NOTE 2 TO DUNN'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED HEREIN.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
DUNN COMPUTER CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--APRIL 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John D. Vazzana and Claudia N. Dunne and
each of them as Proxies and authorizes them to represent and vote all the shares
of common stock of Dunn Computer Corporation, a Delaware corporation, that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to be
held on April 30, 1998 and at any adjournment thereof, as designated for the
items set forth herein and in the Notice of Annual Meeting of Stockholders and
the Proxy Statement/Prospectus dated April 6, 1998.
IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NOT
SPECIFIED, WILL BE VOTED FOR THE PROPOSALS IN ITEMS 1 AND 3 WHICH ARE DESCRIBED
IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND FOR THE ELECTION AS DIRECTOR
OF THE NOMINEES NAMED IN ITEM 2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED
TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF. AT THIS TIME, MANAGEMENT KNOWS OF NO SUCH OTHER BUSINESS.
The Board of Directors recommends a vote FOR the election of the Directors
set forth below and FOR the proposals in Items 1 and 3.
1. Proposal to approve the Merger Agreement
/ / FOR / / AGAINST / / ABSTAIN
2. Election of Directors
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
nominees listed below
Nominees: Thomas P. Dunne, John D. Vazzana, Claudia N. Dunne, VADM E.A.
Burkhalter, Jr. USN (Ret.) and Daniel Sinnott
Instruction: To withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below:
- --------------------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
3. Proposal to amend Dunn's 1997 Stock Option Plan and to adopt the Stock
Option Plan that will, in the Merger, be the successor to Dunn's 1997 Stock
Option Plan
/ / FOR / / AGAINST / / ABSTAIN
Dated: ______________________, 1998
___________________________________
Signature
___________________________________
Signature (if held jointly)
IMPORTANT: Please date and sign
exactly as the name appears herein
and return this proxy in the
enclosed envelope. Persons signing
as executors, administrators,
trustees, etc. should so indicate.
If shares are held jointly, each
joint owner should sign. In the
case of a corporation or
partnership, the full name of the
organization should be used and the
signature should be that of a duly
authorized officer or partner.
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
