As filed with the Securities and Exchange Commission
on December 23, 1998
Registration No. 333-_______
SECURITIES AND EXCHANGE
COMMISSION Washington,
D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF
1933
TSI TELSYS CORPORATION
(Exact name of registrant as specified
in its charter)
Delaware 3663
Application Pending
(State or other (Primary SIC Code Number)
(I.R.S.
Employer
jurisdiction of
Identification No.)
incorporation or
organization)
7100 Columbia Gateway
Drive
Columbia, Maryland
21046
(410) 872-3900
(Address, including zip code, and telephone number,
including
area code,
or registrant's principal
executive office)
Joseph T. Pisula
President and Chief Executive
Officer 7100 Columbia
Gateway Drive Columbia,
Maryland 21046
(410) 872-3900
(Name, address, including zip code, telephone number,
including
area code,
of agents for service)
Copies to:
Elizabeth R. Hughes
William Kean
Venable, Baetjer and Howard, LLP Clark,
Drummie & Company
1800 Mercantile Bank & Trust Bldg. 40
Wellington
Row
2 Hopkins Plaza Saint
John, New
Brunswick E2L 4S3
Baltimore, Maryland 21201
(504) 633-3800
(410) 244-7400
Approximate date of commencement of proposed sale to
the
public: As soon
as practicable after this Registration Statement is
declared effective.
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
Proposed
Proposed
Maximum
Maximum
Amount of
Title of Securities Amount to be Offering Price
Aggregate Registration
to be Registered Registered Per Share
Offering
Price(1) Fee
Common Stock,
par value $.01 9,754,202 $1.41
$13,753,425
$3,823.45
(1) Estimated solely for the purpose of calculating
the amount of the
registration fee, pursuant to Rule 457, based upon the
average
of the high and low prices of the Common Shares
reported on
the Montreal
Exchange on December 17, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON
SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
TSI TELSYS CORPORATION
7100 Columbia Gateway
Drive Columbia,
Maryland 21046
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE
HELD__________, 1999
TO THE SHAREHOLDERS OF TSI TELSYS CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of
shareholders
(the
"Special Meeting") of TSI TelSys Corporation (the
"Company"), will be held at
the offices of the Company at 7100 Columbia Gateway
Drive, Columbia, Maryland,
at 1:00 p.m. local time on _______, _________, 1999
for the following purposes:
1. To approve the proposed reduction and change in
authorized
share capital
by (a) reducing the authorized number of Common Shares
from 100,000,000 shares
to 40,000,000 shares and changing their designation to
U.S. $.01 par value
Common Shares, (b) canceling the unissued Senior
Preferred Shares, Series 1 as
a series of shares and reducing the authorized number
of Senior Preferred
Shares from 100,000,000 to 2,000,000 shares and
changing their designation to
U.S. $5.00 par value Preferred Shares and (c)
canceling the Junior Preferred
Shares as a class of share (the "Reclassification").
2. To approve the proposed discontinuance of the
Company from
the Province
of New Brunswick, Canada and continuance to the State
of Delaware, United
States (the "Continuance").
3. To approve an amendment to the Company's Key
Employee Stock Option
Incentive Plan (the "Plan") to reduce certain
restrictions on the number of
options which can be granted under the Plan.
4. To increase the size of the Board of Directors
from six to seven members
and to elect _______ to the Board of Directors of the
Company.
5. To consider and transact such other business as
may
properly and
lawfully come before the Special Meeting or any
adjournment thereof.
The text of the resolutions to be submitted at the
Special
Meeting are
enclosed as Appendix "D" of the proxy
statement/prospectus and the particulars
are more fully set forth therein.
Only shareholders of record of the Common Shares
at the close of business
on ________ 1999, shall be entitled to notice of the
Special Meeting. If you
are unable to attend the Special Meeting in person,
please complete, sign and
date the enclosed form of proxy and return the same in
the enclosed return
envelope provided for the purpose within the time and
to the location set out
in the proxy accompanying this notice.
By Order of the
Board of Directors
____________, 1999
Garry Bahsler,
Secretary
Columbia, Maryland
<PAGE>
TSI TELSYS
CORPORATION
7100 Columbia
Gateway
Drive
Columbia,
Maryland
9,754,202 Shares of
Common Stock
Special Meeting of
Shareholders
_________
, 1999
PROXY
STATEMENT/PROSPECTUS
The Board of Directors of TSI TelSys Corporation, a
New Brunswick business
corporation (the "Company"), has approved:
* a reduction and change in authorized share capital
to be effected by (a)
reducing the authorized number of Common Shares, no
par value (the "Common
Shares") from 100,000,000 shares to 40,000,000 shares
and changing their
designation to U.S. $.01 par value Common Shares, (b)
canceling the unissued
Senior Preferred Shares, Series 1 as a series of
shares and reducing the
authorized number of Senior Preferred Shares from
100,000,000 to 2,000,000
shares and changing their designation to U.S. $5.00
par value Preferred Shares
and (c) canceling the Junior Preferred Shares as a
class of shares (the
"Reclassification");
* the discontinuance of the Company from the Province
of New Brunswick, Canada,
and continuance to the State of Delaware, United
States (the "Continuance");
* an amendment to the Company's Key Employee Stock
Option Incentive Plan (the
"Plan Amendment"); and
* an increase in the size of the Board of Directors
from six to seven members
and the nomination of _______ to the Board of
Directors.
The Company is delivering this proxy
statement/prospectus to you as its
proxy statement in connection with a special meeting
of shareholders of the
Company (the "Special Meeting") called to seek
approval of the Reclassification, the Continuance,
the Plan Amendment and the increase in size
of the Board of Directors from six to seven and the
election of _______ to the
Board of Directors. The Special Meeting will be held
at the offices of the
Company at 7100 Columbia Gateway Drive, Columbia,
Maryland, at 1:00 p.m. local
time on _______, _________, 1999. After the
Reclassification and the
Continuance, the Company will operate the business of
the Company as a Delaware
corporation.
The Company is also delivering this proxy
statement/prospectus to you as a
prospectus of the Company with respect to 9,754,202
shares of common stock,
U.S. $.01 par value of the continued corporation (the
"Continued Common
Stock").
The Company's Common Shares are listed for trading on
the
Montreal
Exchange. Upon completion of the Reclassification and
the Continuance, the
Continued Common Stock will continue to be listed on
the Montreal Exchange,
subject to the satisfaction of certain conditions
imposed by the Montreal
Exchange.
This proxy statement/prospectus and the accompanying
proxy
forms are first
being mailed to shareholders of the Company on or
about _______, 1999.
The background, structure and terms of the
Reclassification, the
Continuance and the Plan Amendment are discussed in
detail in this proxy
statement/prospectus. You should read the entire
proxy statement/prospectus
and its appendices carefully, especially the risk
factors beginning on page 4,
before you decide how to vote.
Neither the Securities and Exchange Commission
nor any state securities
commission has approved or disapproved of the
Continued Common Stock to be
issued in connection with the Continuance or
determined if this proxy
statement/prospectus is truthful or complete. Any
representation to the
contrary is a criminal offense. As well, no
securities commission or similar
authority in Canada has in any way passed upon the
merits of the transactions
described herein and any representation to the
contrary is an offense.
We have not authorized anyone to give you information
that
differs from
the information in this proxy statement/prospectus.
If you receive any
different information, you should not rely on it.
The information contained in this proxy
statement/prospectus speaks as of
the date below. You should not infer that the
information has not changed from
that date.
The date of this proxy statement/prospectus is
_____, 1999.
<PAGE>
TABLE OF CONTENTS
SUMMARY
1
RISK FACTORS
4
THE SPECIAL MEETING
8
THE RECLASSIFICATION
10
THE CONTINUANCE
11
CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF
THE RECLASSIFICATION
AND THE CONTINUANCE
13
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO THE SHAREHOLDERS OF THE
RECLASSIFICATION AND THE CONTINUANCE
16
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO THE COMPANY 21
DIFFERENCES BETWEEN THE DELAWARE AND THE NEW
BRUNSWICK CORPORATE LAW 21
CANADIAN SECURITIES LAW CONSEQUENCES
27
AMENDMENT TO THE COMPANY'S KEY EMPLOYEE STOCK OPTION
INCENTIVE PLAN 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
29
BUSINESS
33
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
37
DESCRIPTION OF SECURITIES
37
MANAGEMENT
38
INCREASE IN SIZE OF THE BOARD AND ELECTION OF
ADDITIONAL DIRECTOR 42
PRINCIPAL SHAREHOLDERS
42
CERTAIN TRANSACTIONS
43
LEGAL MATTERS
43
EXPERTS
43
FINANCIAL STATEMENTS
F-1
APPENDIX "A" Certificate of Domestication
APPENDIX "B" Certificate of Incorporation of
Continued Company APPENDIX "C" Bylaws of Continued
Company
APPENDIX "D" Text of Special Resolutions
APPENDIX "E" Dissenters' Rights Under New Brunswick
Business Corporations Act
<PAGE>
SUMMARY
This summary highlights selected information from
this proxy statement/prospectus and may not contain
all of the information that is
important to you. To understand the Reclassification,
Continuance and Plan
Amendment fully and for a more complete description
of the legal terms, you
should read carefully the entire document and the
documents we have referred to
you. Unless otherwise indicated, all information
contained in this proxy
statement/prospectus reflects a 5 for 1 consolidation
of the Company's Common
Shares on August 31, 1998.
The Company
TSI TelSys Corporation (the "Company"), through its
100%
owned U.S.
operating subsidiary TSI TelSys, Inc., a Maryland
corporation ("TSI"), designs,
manufactures and markets high-performance, modular
telemetry processing and
simulation systems and provides related engineering
services to international
scientific, military, and commercial ground station
and platform integrators and
operators. The Company has been active in the
telemetry business since
September 1995. Upon successful completion of the
Reclassification and
Continuance, the Company will be domesticated in
Delaware. The principal
executive offices of the Company will continue to be
located at 7100 Columbia
Gateway Drive, Columbia, Maryland. The Company's
telephone number at its
principal office is (410) 872-3900.
The Special Meeting
Date, Time and Place of the Special Meeting
The Company will hold the Special Meeting at the
offices of
the Company at
7100 Columbia Gateway Drive, Columbia, Maryland,
at 1:00 p.m. local time on
_____________, 1999.
Purposes of the Meeting
At the Special Meeting, you will be asked to consider
and
vote upon:
* a reduction and change in authorized share capital
to be effected by (a)
reducing the authorized number of Common Shares, no
par value (the "Common
Shares") from 100,000,000 shares to 40,000,000 shares
and changing their
designation to $.01 par value Common Shares (b)
canceling the unissued Senior
Preferred Shares, Series 1 as a series of shares,
reducing the authorized
number of Senior Preferred Shares from 100,000,000 to
2,000,000 shares and
changing their designation to U.S. $5.00 par value
Preferred Shares and (c)
canceling the Junior Preferred Shares as a class of
shares (the "Reclassification");
* the discontinuance of the Company from the Province
of New Brunswick, Canada,
and continuance to the State of Delaware, United
States (the "Continuance");
* an amendment to the Company's Key Employee Stock
Option Incentive Plan (the
"Plan Amendment"); and
* an increase in the size of the Board of Directors
from six to seven members
and the election of _______ to the Board of Directors
of the Company.
Reasons for the Continuance
In general, the Company is being continued and
domesticated
into the State
of Delaware in order to become a U.S. domestic
corporation which management
believes will result in an increase of business
opportunities within the U.S.
defense related and intelligence communities. The
Company currently has no
business operations in Canada. Management believes
that the Company's internal
procedures will be simplified in the areas of
accounting, tax, and general
operations because after the Continuance both the
Company and its U.S.
operating subsidiary, TSI, would be incorporated in
the U.S. pursuant to
Delaware and Maryland law, respectively.
<PAGE>
Reasons for the Reclassification
The State of Delaware imposes an annual franchise fee
on
companies
incorporated in the state of Delaware. If the
current no par value share
structure of the Company were to remain in place upon
the Company becoming a
Delaware corporation, the Company would have to pay a
substantial annual
Delaware franchise fee. By changing the designation
of all classes of shares
from no par value to par value shares and by reducing
the number of authorized
shares of all classes, management has determined that
the annual franchise fee
would be significantly reduced.
Reasons for the Amendment to the Company's Key
Employee Stock Option Incentive
Plan
The Board of Directors has approved the removal
of certain limitations on
the granting of options under the Company's Key
Employee Stock Option Incentive
Plan in order to enable the Company to continue to
attract and compensate
additional executive officers and directors.
Recommendations to the Shareholders
The Company's Board of Directors believes that
it is in your best interest
and recommends that you vote for the proposals to
approve the Reclassification,
Continuance, the Plan Amendment, and the increase in
the size of the Board of
Directors from six to seven members and the election
of ______ to the Board of
Directors.
Record Date
You will be entitled to notice of the Special
Meeting if you owned Common
Shares as of the close of business on _______, 1999
(the "Record Date"). On
the Record Date, there was a total of 9,754,202
Common Shares outstanding and
entitled to notice of the Special Meeting.
Quorum
Two holders of Common Shares entitled to vote,
present in
person or
represented by proxy, will constitute a quorum at the
Special Meeting.
Matters Relating to Voting
Each holder of record of Common Shares is entitled to
one
vote for each
Common Share registered in his or her name. The
Reclassification must be
approved by at least two-thirds of the votes cast by
holders of Common Shares
represented in person or by proxy at the Special
Meeting. The Continuance must
be approved by at least two-thirds of the votes cast
by holders of Common
Shares including the Company's majority shareholder,
and by the affirmative
vote of a majority of the holders of Common Shares,
excluding the Company's
majority shareholder, represented in person or by
proxy at the Special
Meeting. Each issued share carries the right to vote
for the Reclassification and
Continuance whether or not it otherwise carries the
right to vote. The Plan
Amendment must be approved by the majority of the
votes cast by holders of
Common Shares, other than votes attaching to 5,421,352
Common Shares
beneficially owned by insiders and their associates to
whom Common Shares may
be issued pursuant to the Plan, represented in person
or by proxy at the
Special Meeting. The increase of the size of the
Board of Directors and the
election of _______ to the Board of Directors requires
the affirmative vote of
a majority of the holders of Common Shares.
Abstentions will be counted as
shares that are present and entitled to vote at the
Special Meeting for
purposes of determining the presence of a quorum, but
an abstention as to any
particular matter does not constitute a vote "for" or
"against" and will be
disregarded in calculating the votes cast as to such
matter. "Broker non-votes" (i.e., where a broker or
nominee submits a proxy
specifically indicating the lack of discretionary
authority to vote on a
matter), if any, will be treated in the same manner as
abstentions.
<PAGE>
Right to Dissent
If you are a holder of Common Shares, you have the
right to
dissent in
connection with the Continuance and be paid the fair
value of your Common
Shares if you object to the Continuance and the
Continuance becomes
effective. In order to exercise these dissenters
rights you must strictly
follow the procedures required by New Brunswick law,
including the requirement
to file a written objection notice before the Special
Meeting.
Any deviation
from these requirements may result in the loss of your
dissenter's rights.
Please be aware that if you own Common Shares
registered in the name of a
broker, custodian, nominee or other intermediary, only
the registered owner of
such Common Shares is entitled to dissent. You should
carefully review "Right
of Dissent" beginning on page 11.
Risk Factors
A number of factors, including the Company's lack
of capital, need for
additional financing, lack of profitable operations
and competition should be
considered prior to your vote in connection with the
matters to be voted upon
at the Special Meeting. You should review carefully
"Risk Factors" beginning
on page 4.
Regulatory Matters
The Company's Common Shares are listed for trading on
the
Montreal
Exchange. The Reclassification, the Continuance and
the Plan Amendment must
be approved by the Montreal Exchange. The Montreal
Exchange has granted
conditional approval for the Reclassification, the
Continuance and the Plan
Amendment. Upon completion of the Reclassification
and the Continuance, the
Continued Common Stock will continue to be listed on
the Montreal Exchange,
subject to the satisfaction of certain conditions
imposed by the Montreal
Exchange.
Tax Considerations
The Company has concluded that under Canadian Tax
legislation, the
Reclassification will not cause shareholders of the
Company to be considered to
have disposed of their Common Shares or to have
realized a taxable capital gain
or capital loss. The Company has also concluded that
there will be no deemed
dividend as a result of the Reclassification. The
shareholders will not be
deemed to have disposed of their shares or to have
realized a taxable capital
gain or capital loss as a result of the Continuance.
The Company will be
deemed to have disposed of all of its property as a
result of the Continuance,
but management has concluded that it will not create
any Canadian tax
liability. The Company is not obtaining a tax ruling
from Revenue Canada as to
the tax consequences of the Reclassification and
Continuance, and the Company
cannot assure you that such conclusion would be
accepted by Revenue Canada.
You should carefully review "Certain Canadian Federal
Income Tax Consequences
of the Reclassification and the Continuance" beginning
on page 13.
The Company has concluded that the Reclassification
and
Continuance will
qualify as a reorganization for U.S. federal income
tax purposes, which means
you may recognize taxable gain only if you receive
cash as a result of in the
Reclassification and Continuance. The Company is not
obtaining a ruling from
he Internal Revenue Service about the income tax
consequences of the
Reclassification and Continuance, and the Company
cannot assure you that its
conclusions about tax consequences would be accepted
by the Internal Revenue
service. You should carefully review "Certain United
States Federal Income Tax
Consequences of the Continuance" beginning on page 16.
Tax matters are very complicated, and the tax
consequences of the
Reclassification and the Continuance will depend on
facts of your own tax
situation. You should consult your own tax advisors
for a full understanding
of the tax consequences of the Reclassification and
the Continuance to you.
<PAGE>
RISK FACTORS
Shareholders of the Company should carefully consider
the
following risk
factors, in addition to the other information
contained in this proxy
statement/prospectus, in connection with their
decision to approve the
Reclassification and the Continuance. This proxy
statement/prospectus contains
forward-looking statements. The words "anticipate,"
"believe," "expect,"
"plan," "intend," "estimate," "project," "will,"
"could," "may," and similar
expressions are intended to identify forward-looking
statements. Such
statements reflect the Company's current views with
respect to future events
and financial performance and involve risks and
uncertainties, including
without limitation the risks described below. Should
one or more of these
risks or uncertainties occur, or should underlying
assumptions prove incorrect,
actual results may vary materially and adversely from
those anticipated,
believed, estimated or otherwise indicated.
Lack of Capital and Need for Additional Financing
The Company had negative working capital of
$3,287,847 as of October 2,
1998. On August 6, 1998, First Union National Bank
demanded repayment of a $5
million loan owing by TSI. The loan had been
collateralized by a standby
letter of credit issued by Arab-Malaysian Bank Berhad
of Malaysia and
facilitated by the Company's majority shareholder. On
August 21, 1998, Arab-
Malaysian Bank Berhad of Malaysia repaid the loan to
First Union National Bank.
The loan has been reflected on the Company's financial
statements
as a current
loan payable. The terms of repayment of the loan have
not yet been determined.
See "Management's Discussion and Analysis of Financial
Condition and Results of
Operations-Liquidity and Capital Resources" on page
29. If ArabMalaysian Bank
Berhad of Malaysia demands repayment of the loan,
there is no assurance that
the Company will be able to secure additional
financing, if necessary, to repay
the loan or to generate sufficient cash flow to meet
the Company's cash needs.
The Company's ability to obtain financing and the cost
to the Company are
uncertain. To the extent that the Company raises
additional capital by issuing
securities, dilution may result to the Company's
shareholders. There can be no
assurance that the Company will be able to raise
additional capital and the
inability of the Company to obtain such financing, or
generate funds from
operations sufficient to meet the Company's needs,
could have a material
adverse effect on the Company's business, financial
condition or results of
operations.
No Profit from Operations
The Company has incurred significant losses and
management
expects that
the Company will continue to incur operating losses
for the foreseeable
future. The Company may not become profitable in the
future.
Products are Subject to Rapid Technological Change
The Company operates in a highly competitive
market which is subject to
rapid technological change. Any of the Company's
products could become
obsolete at any time due to rapid technological
changes and the Company may be
unable to update its products quickly enough to remain
competitive. To the
extent that the Company is unable to keep pace with
technological advances and
enhancements comparable to and competitive with those
made by others in the
industry, the Company's products may become obsolete.
See "Business" on page
33.
<PAGE>
Dependence on Professional Staff
The Company's success will depend in part upon
its ability to attract,
retain, train and motivate highly skilled employees,
particularly in the area
of systems engineering and software and hardware
development. There is
significant competition for employees with the
technology skills
required to
perform the services and create the products the
Company offers. The Company
cannot be certain that it will be successful in
retaining and attracting a
sufficient number of highly skilled and qualified
employees in the future.
None of the Company's employees (other than certain
officers of the Company
and its subsidiaries) are subject to non-competition
agreements. The loss of
any of the Company's key technical personnel or the
Company's inability in the
future to attract key employees could have a material
adverse effect on the
Company's business, financial condition or results of
operations.
Control by Existing Shareholders
Currently and upon completion of the
Reclassification and the Continuance,
Abrar Group International Sdn. Bhd. will own
approximately 53% of the
outstanding Common Shares and will continue to be able
to control the outcome
of shareholder votes, including votes concerning the
election of directors, the
amendment of provisions in the Company's governing
documents and the approval
of other significant corporate transactions. Dr. Wan
Muhamad Hasni Wan
Sulaiman, the Chairman of the Board of the Company, is
the Chairman of the
Board and majority shareholder of Abrar Group
International Sdn. Bhd.
Dependence on NASA and NEC Corporation
Contracts or subcontracts funded by the National
Aeronautics and Space
Administration ("NASA") accounted for 98% of the
Company's revenues for fiscal
year 1996, 51% of revenues for fiscal year 1997 and
43% of revenues for the
nine months ended October 2, 1998. The Company expects
that NASA funded
contracts are likely to continue to account for a
significant portion of the
Company's revenues in the foreseeable future.
Accordingly, the Company's
financial performance could be adversely affected by
the changing of NASA's
procurement practices and policies. Although the
Company is currently focusing
on expanding its commercial and military sales, a
relatively small number of
large NASA contracts are likely to continue to account
for a significant
percentage of the Company's revenues in the future.
The Company's inability to
replace those contracts when they expire could have a
material adverse effect
on the Company's business, financial condition or
results of operations.
Similarly, subcontracts from NEC Corporation of Japan
accounted for 30% of the
Company's revenues for fiscal year 1997 and 39% of
revenues for the nine months
ended October 2, 1998. The contracts with NEC
Corporation are scheduled to
expire in fiscal 1999 and the Company's inability to
replace these contracts
when they expire could have a material adverse effect
on the Company's
business, financial condition or results of
operations.
Possible Charge Against Earnings due to Fixed Price
Contracts
Substantially all of the Company's contracts are
for a fixed price. This
subjects the Company to substantial risks relating to
unexpected cost increases
and other factors outside the control of the Company.
The Company may fail to
anticipate technical problems, estimate costs
accurately or control costs
during performance of a fixed price contract any of
which may reduce the
Company's profit or cause a loss under such contracts.
In addition, the
Company recognizes revenues from the manufacture of
customer specific
development contracts on a percentage of completion
basis. Accordingly,
contract price and cost estimates on fixed price
contracts are reviewed
periodically as the work progresses and adjustments
proportionate to the
percentage of completion are reflected in income in
the period when such
estimates are revised. To the extent that these
adjustments result in a loss or
a reduction or elimination of previously reported
profits with respect to a
project, the Company would recognize a charge against
current earnings which
could be material and which could have a material
adverse effect on the
Company's business, financial condition or results of
operations.
When the Company employs subcontractors, the Company
is at risk if any of its
subcontractors do not perform their contracts with the
Company. Similarly,
when the Company acts as a subcontractor, the Company
is at risk if the prime
contractor does not perform its contract.
<PAGE>
Risks Associated with Management of Growth
The Company's revenues increased 48% during 1997
compared to 1996 and 136%
during the nine-month period ended October 2, 1998
compared to the nine-month
period ended October 3, 1997. Continued growth could
place a significant
train on the Company's limited personnel, management,
financial controls and
financial and other resources. The Company's ability
to manage any future
expansion effectively will require the Company to
attract, retain, train,
motivate and manage new employees successfully, to
integrate new management and
employees into the Company's overall operations and to
continue to improve the
Company's operational, financial and management
systems and controls and
facilities. The Company's failure to manage any
expansion effectively could
have a material adverse effect on the Company's
business, financial condition
or results of operations.
Risks Associated with Competition
The Company faces significant competition. In
addition to
direct
competition with other subcontractors of similar size,
there are several large
aerospace contractors which act as primary contractors
and which also develop
ground station systems in-house. The Company acts as a
subcontractor to these
primary contractors and, therefore, some of its
competitors are also current or
potential customers. Such large aerospace contractors
are much larger and have
greater financial and other resources than the
Company. There can be no
assurance that the Company will be able to compete
effectively with these
companies or maintain them as customers while
competing with them on other
projects.
Dependence on Remote Sensing Satellite Industry
Currently, substantially all of the Company's revenues
are
derived from
products and services related to remote sensing
satellite applications. Should
the satellite industry take a substantial downturn and
the number of remote
sensing satellites deployed be materially reduced, the
Company's new business
opportunities would be limited significantly.
Risks Associated with International Operations
Outside of the United States, the Company
currently conducts business in
Japan and Europe, and plans to expand into additional
countries. There are
certain risks inherent in conducting international
business, including:
* exposure to currency fluctuations;
* longer payment cycles;
* greater difficulties in accounts receivable
collection;
* potential difficulties in complying with a variety
of foreign laws;
* unexpected changes in regulatory requirements;
* difficulties in staffing and managing foreign
operations;
* political instability; and
* potentially adverse tax consequences.
Any one or more of such factors could have a material
adverse effect on the
Company's international operations and, consequently,
on the Company's
business, results of operations or financial
condition.
Limited Protection of Proprietary Technology
The Company relies on a combination of
copyrights, trademark and trade
secret laws and non-disclosure and licensing
agreements to protect the
Company's proprietary rights to its products. The
Company has six patent
applications pending in the United States and has
applied for international
protection of one of these. There can be no assurance
that patents will be
issued from any of the Company's pending applications
or that claims allowed
on any patents, if granted, will be sufficiently broad
to protect the Company's
technology. There can also be no assurance that any
patents the Company will
hold will provide the Company with proprietary
protection.
Additionally, the laws of certain foreign countries
may not
protect the
Company's proprietary rights to the same extent as do
the laws of the United
States. Although the Company continues to implement
protective measures and
intends to defend its proprietary rights, there can be
no assurances that these
measures will be successful. The Company believes,
however, that because of
the rapid pace of technological change in the data
communications and
telecommunications industries, the legal protections
for the Company's products
are less significant factors in the Company's success
than the knowledge,
ability and experience of the Company's employees, the
frequency of product
enhancements and the timeliness and quality of support
services the Company
provides.
<PAGE>
Volatility of Stock Price
The market price of securities of technology companies
are
volatile. In
addition, the stock market in recent years has
experienced volatility that
often has been unrelated or disproportionate to the
operating performance of
particular companies. Many factors that have
influenced trading prices, such
as actual or anticipated operating results, growth
rates, changes in estimates
by analysts, market conditions in the industry,
announcements by competitors,
regulatory actions and general economic conditions,
will vary from
period to
period. Any such event would likely result in a
material adverse effect on the
market price of the Common Shares. See " Market for
Common Stock and Related
Stockholder Matters" on page 37.
Variability of Quarterly Operating Results
The Company's revenues and earnings may fluctuate from
quarter to quarter
based on a number of factors including:
* number, size and scope of projects;
* equipment purchases and our other expenditures;
* bid and proposal efforts undertaken;
* delays;
* employee utilization rates;
* adequacy of provisions for losses;
* accuracy of estimates of resources required to
complete ongoing projects; and
* general economic conditions.
In addition, demand for the Company's products and
services in each of the
markets the Company serves can vary significantly from
quarter to quarter due
to revisions in customer budgets or schedules and
other factors beyond the
Company's control. Due to all of the foregoing
factors, it is possible that in
some future period the Company's results of operations
will fall below the
expectations of securities analysts and investors. In
this event, the market
price of the Common Shares could fall substantially.
Absence of Dividends on Common Shares
The Company has never declared or paid cash
dividends on its Common Shares
and the Company anticipates that future earnings, if
any, will be retained for
development of the Company's business.
Disclosure Relating To Low-Priced Stocks
The Securities and Exchange Commission (the
"Commission") has adopted
rules that regulate broker-dealer practices in
connection with transactions in
"penny stocks." Penny stocks are equity securities
with a price of less than
U.S. $5.00 (other than securities registered on
certain national securities
exchanges or quoted on the NASDAQ system, provided
that current price and
volume information with respect to transactions in
such securities is provided
by the exchange or system). The Company's Common
Shares are currently
considered penny stocks. The penny stock rules
require a brokerdealer, prior
to a transaction in a penny stock not otherwise exempt
from the rules, to
deliver a standardized risk disclosure document that
provides
information about
penny stocks and the nature and level of risks in the
penny stock market. The
broker-dealer also must provide the customer with
current bid and offer
quotations for the penny stock, the compensation of
the brokerdealer and its
salesperson on the transaction, and monthly account
statements showing the
market value of each penny stock held in the
customer's account. The bid and
offer quotations, and the broker dealer and
salesperson compensation
information, must be given to the customer orally or
in writing prior to
effecting the transaction and must be given to the
customer in writing before
or with the customer's confirmation. These
disclosure requirements may have
the effect of reducing the level of trading activity
on the Montreal Exchange
for the Company's Common Shares and shareholders may
find it difficult to sell
their Common Shares.
<PAGE>
Year 2000 Compliance
Many existing computer systems and applications and
other control devices use
only two digits to identify a year in the date field,
without considering the
impact of the upcoming change in the century. As a
result, such systems and
applications could fail or create erroneous results
unless corrected so that
they can process data related to the Year 2000. This
issue of Year 2000
compliance is pertinent to the products which the
Company markets and to the
Company's IT systems, its non-IT systems and the
systems of any third parties
with whom the company has a material relationship.
The Company created a Year 2000 Plan in the third
quarter of fiscal 1998.
Based upon the Company's current assessment of its
Year 2000 readiness, the
Company plans to have its IT infrastructure and non-IT
infrastructure Year
2000 compliant by June 30, 1999 fiscal quarter. The
Company
has incurred minimal costs to date and does not expect
that any additional
costs to modify its IT infrastructure or its non-IT
infrastructure to be Year
2000 compliant will be material to its business,
financial condition or results
of operations. However, there can be no assurance
that the timing of June 30, 1999 will be achieved and
that the costs will not be material. The Company does
not expect any material disruption in its operations
as a result of a failure
by the Company to be compliant. As part of the
Company's Year 2000 efforts,
the Company intends to develop a contingency plan to
manually
process
accounting and other functions which are currently
computerized.
As part of its Year 2000 Plan, the Company has
initiated communications with
its key third party suppliers to determine the extent
to which the Company may
be vulnerable to such parties failure to be Year 2000
compliant in products and
services which they supply to the Company. The
Company currently has limited
information concerning the compliance status of its
suppliers. In the event
that any of the Company's significant suppliers do not
successfully and timely
achieve Year 2000 compliance, the Company's business,
financial condition and
results of operations could be materially affected.
The Company intends to
develop a contingency plan which would include the
identification of potential
new suppliers which would be Year 2000 compliant
however, there can be no
assurance that such suppliers would be available to
the Company. There is also
no certainty that the Company's key customers will be
Year 2000 compliant. In
the event that some or all of its customers are not
compliant, the Company
could suffer a loss in new orders and a delay in
shipping existing orders.
This would have a material adverse effect on the
Company's operations, revenue,
and cash flow. Further, the Company would find it
difficult to develop
contingency plans to replace non-compliant customers
because of the relatively
few numbers of customers which operate in the
Company's market.
Based upon the Company's current assessment, the
Company plans to have its
products Year 2000 compliant by June 30, 1999. The
Company has incurred minimal costs to date and at the
current time, it does not expect that the total cost
to have its products Year 2000 compliant will be
material however, there can be no assurance that such
costs will not become material.
No assurance can be given that unanticipated or
undiscovered Year 2000
compliance problems would not have a material adverse
effect on the Company's
business, financial condition or results of
operations.
<PAGE>
THE SPECIAL MEETING
Date, Time and Place of the Special Meeting
The Company will hold the Special Meeting at the
offices of
the Company at
7100 Columbia Gateway Drive, Columbia, Maryland, 21046
at 1:00 p.m. local time
on _____________, 1999.
Purposes of the Meeting
At the Special Meeting, holders of record of Common
Shares
will consider
and vote upon the Reclassification, the Continuance,
the Plan Amendment and the
increase in the size of the Board of Directors from
six to seven members and
the election of _________ to the Board of Directors.
Solicitation of Proxies and Voting Requirements
The cost of soliciting proxies on behalf of the
Company,
including the
cost of preparing and mailing the notice of the
Special Meeting and this proxy
statement/prospectus, will be paid by the Company.
Solicitation will be
primarily by mailing this proxy statement/prospectus
to all shareholders of the
Company entitled to vote at the Special Meeting.
Proxies may be solicited by
officers of the Company personally, but at no
compensation in addition to their
regular compensation as officers. The Company may
reimburse brokers, banks and
others holding shares in their names for others for
the cost of forwarding
proxy materials and obtaining proxies from their
principals.
Only the holders of record of Common Shares at the
close of
business on
_______, 1999 (the "Record Date") are entitled to
notice of the Special Meeting
or at any adjournment thereof. On the Record Date,
9,754,202 Common Shares
were issued and outstanding. Each holder of record of
Common Shares is
entitled to one vote for each Common Share registered
in his or her name.
Special Meeting materials will be mailed to the
registered holders of Common
Shares by the Company. Beneficial shareholders will
receive materials from
intermediaries who hold shares of Common Shares on
their behalf. These
materials will be delivered to the intermediaries by
the Company for
redistribution to the beneficial shareholders.
Two holders of Common Shares entitled to vote, present
in
person or
represented by proxy, will constitute a quorum at the
Special Meeting.
Abstentions will be counted as Common Shares that are
present and entitled to
vote at the Special Meeting for purposes of
determining the presence of a
quorum, but an abstention as to any particular matter
does not constitute a
vote "for" or "against" and will be disregarded in
calculating the votes cast
as to such matter. "Broker non-votes" (i.e., where a
broker or nominee submits
a proxy specifically indicating the lack of
discretionary authority to vote on
a matter), if any, will be treated in the same manner
as abstentions.
<PAGE>
Appointment and Revocation of Proxies
The proxies are being solicited on behalf of
the Board of Directors of the
Company.
The proxy for the Special Meeting must each be signed
by an
individual
holder of Common Shares, or by his attorney authorized
in writing executed by
the shareholder. If the shareholder is a corporation,
such proxy must either
be under its common seal or signed by a duly
authorized officer, or if the
shareholder is a partnership, it must be signed by
either a general partner,
managing partner or duly authorized officer of the
partnership.
A shareholder executing the enclosed form of proxy has
the
power to revoke
it by an instrument in writing executed by the
shareholder or by his or her
attorney authorized in writing, or, where the
shareholder is a corporation, by
a duly authorized officer or attorney of the
corporation. The instrument of
revocation must be delivered either to the records
office of the Company
located at P.O. Box 6850 Station A, Saint John, New
Brunswick, Canada, E2L 4S3,
at any time up to and including the last business day
preceding the day of the
Special Meeting or any adjournment thereof, or to the
Chairman of the Special
Meeting on the day of the Special Meeting or any
adjournment thereof, before
any vote in respect of which the proxy is to be used
shall have been taken.
Voting of Shares and Exercise of Discretion of Proxies
The Common Shares represented by a proxy will be voted
or
withheld from
voting by the proxy holder in accordance with the
instructions of the
shareholder. If the shareholder specifies a choice
with respect to any matter
to be acted upon, the Common Shares will be voted
accordingly. In the absence
of any instructions in a proxy, it is intended that
such proxy will be utilized
to vote in favor of the motions proposed to be made at
the Special Meeting
authorizing the Reclassification, the Continuance, the
Plan Amendment and the
increase in the size of the Board of Directors from
six to seven members and
the election of ___________ to the Board of Directors.
The accompanying instruments of proxy confer
discretionary
authority on
the persons named therein with respect to amendments
or variations to matters
identified in the notice of Special Meeting and with
respect to other matters
which may properly come before the Special Meeting.
For those shareholders
voting against the proposals contained in the proxy
for the Special Meeting,
the discretionary authority of those named therein
will not be voted to adjourn
any meeting. At the date hereof, management of the
Company knows of no such
amendments, variations or other matters to come before
the Special Meeting
other than the matters referred to in the notice of
the Special Meeting.
<PAGE>
THE RECLASSIFICATION
In connection with the proposed Continuance, the
shareholders of the
Company are being asked to consider, and, if thought
fit, to pass a number of
resolutions in accordance with Section 113 of the New
Brunswick Business
Corporations Act (the "NBBCA"), which will change the
designation of Common
Shares and Senior Preferred Shares from no par value
to par value shares, which
will reduce the number of authorized Common Shares and
Senior Preferred Shares,
and which will cancel the Senior Preferred Shares,
Series 1 as a series of
shares and cancel the Junior Preferred Shares as a
class of share. The
Special Resolutions must be approved by at least two
thirds of the votes cast
by holders of Common Shares represented in person or
by proxy at the Special
Meeting.
Specifically, the following three special resolutions
are
being proposed:
1. A special resolution to change the
designation of the no par value
Common Shares of the Company to U.S. $.01 par value
common shares and to reduce
the authorized Common Shares from 100,000,000 to
40,000,000 shares. There are
currently 9,754,202 Common Shares issued and
outstanding.
2. A special resolution to cancel the Senior
Preferred
Shares, Series 1 as
a series of shares, change the designation of the no
par value Senior Preferred
Shares of the Company to U.S. $5.00 par value
Preferred Shares and to reduce the
authorized Senior Preferred Shares from 100,000,000 to
2,000,000 shares. There
are currently no Senior Preferred Shares issued and
outstanding.
3. A special resolution to cancel the 100,000,000
Junior
Preferred Shares
as an authorized class of shares of the Company.
There are currently no Junior
Preferred Shares issued and outstanding.
The State of Delaware imposes an annual franchise fee
on
registered
Delaware companies. If the current no par value share
structure of the Company
was to remain in place upon the Company becoming a
Delaware corporation, the
Company would have to pay a substantial annual
Delaware franchise fee. By
changing the designation of all classes of shares from
no par value to par
value shares and by reducing the number of authorized
shares of all classes,
management has determined that the annual franchise
fee would be significantly
reduced.
The proposed changes to the capital structure of
the Company would be
completed while the Company remains a New Brunswick
business corporation before
the Continuance. Assuming that the shareholders
approve the Continuance, the
Company would then seek appropriate regulatory
approval to be discontinued from
New Brunswick and be continued into the State of
Delaware under the revised
capital structure. If approved, the Board of
Directors will be given the
absolute discretion by the shareholders to evoke the
implementation of the
proposed changes to the capital structure of the
Company without further
approval of or notice to the shareholders. The text
of the special resolutions
is attached under Appendix D.
It is anticipated that the Reclassification will
become
effective before
the Continuance and as soon as practicable after the
Special Meeting. The
resolutions provide that the Board of Directors will
be given the absolute
discretion to terminate the Reclassification if the
Board of Directors abandons
the Continuance. See the "Continuance."
<PAGE>
THE CONTINUANCE
Shareholders of the Company will be asked to
consider and, if thought fit,
pass a special resolution authorizing the
discontinuance of the Company from
the Province of New Brunswick, Canada in accordance
with Section 127 of the
NBBCA and the continuance of the Company into the
State of Delaware, United
States. The text of the special resolution is
attached under Appendix D.
If at least two holders of record of Common Shares on
the Meeting Record Date
are represented in person or by proxy at the Special
Meeting, and if: (i) the
Continuance is approved by at least two-thirds of the
votes cast by holders of
Common Shares including the Company's majority
shareholder, (ii) the
Continuance is also approved by the affirmative vote
of a majority of the
holders of Common Shares, excluding the Company's
majority shareholder,
represented in person or by proxy at the Special
Meeting and (iii) regulatory
approval is obtained, the Continuance will result in a
change in the Company's
jurisdiction of incorporation from the Province of New
Brunswick, Canada to the
State of Delaware, United States and will also result
in the adoption of a new
certificate of incorporation for the Company, which
will govern the Company
under Delaware law. If approved by the shareholders
and subject to requisite
regulatory approval, it is anticipated that the
Continuance will become
effective on or about _______, 1999, or as soon as
practicable after the
Special Meeting. The Board of Directors of the
Company will be given the
absolute discretion by shareholders of the Company to
abandon the application
to discontinue the corporation under the NBBCA and the
Continuance of the
Company under the Delaware General Corporation Law
(the "DGCL") at any time
without further approval or notice to the
shareholders.
General
In general, the Company is being continued and
domesticated
into the State
of Delaware in order to become a U.S. domestic
corporation which management
believes will result in the increase of business
opportunities within the U.S.
defense related and intelligence communities. The
Company currently has no
business operations in Canada. Management believes
that the Company's internal
procedures will be simplified in the areas of
accounting, tax, and general
operations because after the Continuance both the
Company and its U.S.
subsidiary, TSI, would be incorporated in the U.S.
pursuant to Delaware and
Maryland law, respectively.
For those shareholders who are opposed to the
Continuance,
dissenters'
rights are set forth by law. See "Right of Dissent" on
page 11.
In addition,
shareholders may make an application for an oppression
remedy under Section 141
or 166 of the NBBCA.
Right of Dissent
The holders of Common Shares have the right to dissent
in
connection with
the Continuance. Each of the Company's shareholders
is entitled to dissent and
be paid the fair value of such shareholder's Common
Shares if the
shareholder
objects to the Continuance and the Continuance becomes
effective in accordance
with Section 131 of the NBBCA. A shareholder may
dissent only with respect to
all of the Common Shares held by the shareholder on
behalf of any one
beneficial owner and registered in the shareholder's
name. A shareholder is not
entitled to dissent from the resolution with respect
to any Common Shares
beneficially owned by one owner if the shareholder
votes any Common Shares
beneficially owned by that owner in favor of the
resolution that is adopted. In
order to dissent, a shareholder must send to the
Company at 7100 Columbia
Gateway Drive, Columbia, Maryland, 21046, U.S.A.,
attention: Mr. Paul R.
Sevigny, Chief Financial Officer, on or before the
date of the Special Meeting,
a written objection (an "Objection Notice") to the
Continuance in respect of
which the shareholder proposes to dissent at or before
the Special Meeting. A
vote against the Continuance or an abstention in
respect thereof does not
constitute such an Objection Notice, but a shareholder
need not vote his Common
Shares against the Continuance in order to dissent in
respect of the
Continuance. Similarly, the revocation of a proxy
conferring authority on the
proxy holder to vote in favor of the Continuance does
not constitute an
Objection Notice in respect of the Continuance, but
any such proxy granted by a
shareholder who intends to dissent should be validly
revoked. Within 10 days
following the date of the Special Meeting, the Company
will deliver to each
shareholder who has filed an Objection Notice in
respect of the resolution
passed at the Special Meeting, except a shareholder
who voted for the
Continuance resolution or has withdrawn his Objection
Notice at the address
specified for such purpose in the Objection Notice, a
notice stating the
special resolution authorizing the Continuance has
been adopted.
<PAGE>
Persons who are beneficial owners of Common
Shares registered in the name
of a broker, custodian, nominee or other intermediary
who wish to dissent
should be aware that only the registered owner of such
Common Shares is
entitled to dissent. A registered holder such as a
broker who holds Common
Shares as nominee for beneficial owners, some of whom
desire to dissent, must
exercise dissent rights on behalf of such beneficial
owners with respect to the
Common Shares held for such beneficial holders. In
such case, the
objection notice should set forth the number of Common
Shares to which it
relates.
Within 20 days after he or she receives notice or
learns that the
resolution in respect of the Continuance has been
approved, a
dissenting
shareholder must send to the Company written notice
containing the shareholder's name and address, the
number of Common Shares in respect of which
he dissents and a demand for payment of the fair value
of such Common Shares.
Not later than 30 days after sending such notice, a
dissenting shareholder is
then required to send to the Company the certificates
representing the Common
Shares in respect of which he dissents. Not later
than 14 days after receiving
such notice or the effective day of the Continuance,
whichever is later, the
Company shall send to each dissenting shareholder who
sent such written notice,
a written offer (the "Offer to Purchase") to pay him
an amount considered by
the Board of Directors of the Company to be the fair
value of such Common
Shares as of the close of business on the day before
the resolution approving
the Continuance was adopted accompanied by a statement
showing how the fair
value was determined. Every Offer to Purchase Common
Shares made to a holder
of Common Shares who dissents to the Continuance shall
be on the same terms as
every other Offer to Purchase made to other dissenting
shareholders of the
Company.
A dissenting shareholder may accept the Company's
Offer to
Purchase in the
amount of the Company's Offer to Purchase, but an
Offer to Purchase lapses if
not accepted within 30 days after it has been made.
If the Offer to Purchase
has not been accepted, an application may be made to
the Court of Queen's Bench
of New Brunswick (the "Court") by the Company within
15 days, or by any
dissenting shareholder, within a further 20 days or
any such further period the
Court may allow, to fix the fair value of the Common
Shares held by the
dissenting shareholder. All dissenting shareholders
whose Common Shares have
not been purchased by the Company will be joined as
parties to the application
and will be bound by the decision of the Court. The
Court order will fix the
fair value of the Common Shares of all dissenting
shareholders who are parties
to the application, give judgment in that amount
against the Company in favor'
of each of the dissenting shareholders and fix the
time within which the
Company must pay the amount to the dissenting
shareholders.
Except where the dissenting shareholder withdraws his
dissent, or the Board
of Directors abandons the Continuance, a dissenting
shareholder ceases to have
any rights as a shareholder of the Company other than
the right to be paid the
fair value of his Common Shares. The Company will not
make a payment to a
dissenting shareholder if there are reasonable grounds
for believing that: (a)
the Company is or would after the payment be unable to
pay its liabilities as
they become due or (b) the realizable value of the
Company's assets would
thereby be less than the aggregate amount of its
liabilities. If either of
these tests cannot be met, the Company shall within 10
days of the Court order
or acceptance of an Offer to Purchase, send a notice
to each dissenting
shareholder that the Company cannot lawfully pay
dissenting shareholders for
the Common Shares. Once this notice is received, a
dissenting shareholder may,
by written notice delivered to the Company within 30
days after receiving the
Company's notice, withdraw his Objection Notice, in
which case the dissenting
shareholder is returned his full rights as a
shareholder or retains his status
as a claimant against the Company to be paid as soon
as the Company is lawfully
able to do so or, in liquidation, to be ranked
subordinate to the rights of the
creditors of the Company but in priority to its
shareholders.
If approved, the Board of Directors of the Company
will be
given the
absolute discretion by shareholders of the Company to
abandon the application
to discontinue the Company under the NBBCA and the
Continuance of the Company
under the DGCL at any time without further approval or
notice to the
shareholders.
The foregoing is only a summary of the rights of
dissenting
shareholders
and is qualified in its entirety by the provisions of
section 131 of the NBBCA,
a copy of which is attached as Appendix "E." Any
shareholder desiring to
exercise a right of dissent should seek legal advice
and his or her failure to
comply strictly with the provisions of that section
may prejudice that right.
The right of shareholders to dissent is not exclusive
of any other rights
available to shareholders generally, such as rights in
respect of a corporate
director's duties of good faith and care under the
NBBCA, or otherwise.
Approval of the Continuance under the NBBCA
Under the NBBCA, a proposed Continuance is subject to
approval by the
Company's shareholders and the Director appointed
under the NBBCA (the
"Registrar"). The Company expects to be able to
satisfy the requirements of
the Registrar regarding the Continuance.
<PAGE>
CERTAIN CANADIAN FEDERAL INCOME TAX
CONSEQUENCES OF THE
RECLASSIFICATION AND THE
CONTINUANCE
General
In the opinion of Clark, Drummie & Company,
Canadian counsel to the
Company, the following is a summary of the principal
Canadian federal income
tax considerations under the Income Tax Act (Canada)
(the "Canadian Tax Act")
with respect to the Reclassification and the
Continuance generally applicable
to the Company and to shareholders of the Company who,
for purposes of the
Canadian Tax Act, hold their Common Shares as capital
property, deal at arm's
length with the Company, and are not affiliated with
the Company. This summary
does not apply to a shareholder who is or will be a
foreign affiliate within
the meaning of the Canadian Tax Act or who holds more
than 10 percent of the
Common Shares. The Common Shares will generally be
considered to be capital
property to a shareholder unless such Common Shares
are held in the course of
carrying on a business, acquired in a transaction
considered to be an adventure
in the nature of trade or held as "mark-to-market"
property for the purposes of
the Canadian Tax Act. Shareholders should consult
their own tax advisors
regarding whether, as a matter of fact, they hold
their Common Shares as
capital property for the purposes of the Canadian Tax
Act. Shareholders who do
not hold their shares as capital property should
consult their own tax advisors
regarding their particular circumstances and, in the
case of certain "financial
institutions" (as defined in the Canadian Tax Act),
the potential application
to them of special "mark-to-market" rules in the
Canadian Tax Act. This summary
is based on the current provisions of the Canadian Tax
Act, the regulations
thereunder, the Canada-United States Income Tax
Convention, 1980, as amended
(the "Tax Treaty"), and counsel's understanding of the
current administrative
practice published by Revenue Canada, Customs, Excise
and Taxation ("Revenue
Canada"). This summary does not take into account or
anticipate any changes in
the law, whether by judicial, administrative or
legislative action
or decision,
nor does it take into account provincial, territorial
or foreign income tax
legislation or considerations, which may differ from
the Canadian federal
income tax considerations described herein. No advance
income tax ruling has
been obtained from Revenue Canada to confirm the tax
consequences of any of the
transactions described herein.
This summary is based on the assumptions that:
(a) the Common Shares will remain listed on
the Montreal Exchange up
to the effective date of the Continuance;
(b) after the effective date of the Continuance,
the
management of the
Company will not reside in Canada at any time; and
(c) the Common Shares may not reasonably be
considered to derive their
value, directly or indirectly, primarily from
portfolio investment in shares,
debt or any other similar properties.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT
INTENDED TO BE, NOR SHOULD
IT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE
TO ANY PARTICULAR
SHAREHOLDER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED
HEREIN IN THEIR PARTICULAR
CIRCUMSTANCES.
<PAGE>
The Reclassification
Revenue Canada, in an Interpretation Bulletin, has
stated
that the
reclassification of shares from no par value to par
value by itself will not be
considered to be a disposition of the shares. Under
this interpretation,
shareholders of the Company will not be considered to
have realized a taxable
capital gain or loss by reason only of the
Reclassification. The Reclassification will also have
no effect on the adjusted cost base to
shareholders of their Common Shares. The management of
the Company, in
consultation with its professional advisors, has
reviewed the paidup capital of
the Company and has advised counsel that there will be
no increase in the paid-
up capital of the Company as a result of the
Reclassification. There will be no
deemed dividend resulting from the Reclassification.
The Continuance
The Company
Upon completion of the Continuance, the Company will be
deemed to have
disposed of all of its property for proceeds of
disposition equal
to the fair
market value thereof immediately prior to the
Continuance. The Company will be
subject to tax on any income and net taxable capital
gains arising thereby. The
Company will also be subject to an additional tax at
the rate of five percent
on the amount by which the fair market value of the
Company's assets, net of
liabilities, exceeds the paid-up capital of the
Company's issued and
outstanding shares, except that if one of the main
reasons for the Company
changing its residence to the United States was to
reduce the amount of such
additional tax or Canadian withholding tax, the rate
of such tax would be 25
percent. Provided the management of the Company does
not reside in Canada at
any time thereafter, the Company will not be resident
in Canada after the
Continuance. The management of the Company, in
consultation with its
professional advisors, has reviewed the Company's
assets, liabilities and paid-
up capital and has advised counsel that no Canadian
federal taxes should be due
and payable by the Company under the Canadian Tax Act
as a result of the
Continuance. This conclusion is based in part on a
valuation to be completed by
KPMG LLP Chartered Accountants of the Company's
principal asset and certain
other factual matters, and counsel can express no
opinion on such matters of
factual determination. No opinion has been sought in
this matter, and facts
underlying the Company's assumptions and conclusions
may also change prior to
the effective date of the Continuance. The Company has
not applied to Canadian
federal tax authorities for a ruling as to the amount
of federal taxes payable
by the Company under the Canadian Tax Act as a result
of the Continuance and
does not intend to apply for such a ruling given the
factual nature of the
determinations involved. There can be no assurance
that the Canadian federal
tax authorities will accept the valuation or the
positions that the Company has
adopted with respect to the Canadian federal tax
treatment of such amounts.
Accordingly, there can be no assurance that the
Canadian federal tax
authorities will conclude after the effective date of
the Continuance that no
Canadian federal taxes are due under the Canadian Tax
Act as a result of the
Continuance or that the amount of Canadian federal
taxes claimed or found to be
due will not be significant.
<PAGE>
Shareholders resident in Canada
The following portion of the summary applies to
shareholders of the
Company who are resident in Canada for the purposes of
the Canadian Tax Act.
Shareholders of the Company will not be considered to
have
disposed of
their Common Shares or to have realized a taxable
capital gain or loss by
reason only of the Continuance. The Continuance will
also have no effect on
the adjusted cost base to shareholders of their Common
Shares.
Following the Continuance, dividends received by a
shareholder on shares
of the Common Shares will be subject to U.S.
withholding taxes and will be
included in computing income and will generally not be
deductible in computing
taxable income of a shareholder that is a corporation,
and, in the case of a
shareholder who is an individual, such dividends will
not receive the gross-up
and dividend tax credit treatment generally applicable
to dividends on shares
of taxable Canadian corporations.
Dissenting Shareholders. Although the matter is not
free
from doubt,
officials of Revenue Canada have taken the position
that generally amounts paid
to dissenting shareholders should be treated as
proceeds of disposition of his
or her Common Shares and not as a deemed dividend
under section 84 of the
Canadian Tax Act. Accordingly, the dissenting
shareholder would recognize a
capital gain (or a capital loss) to the extent that
the amount received, net of
any reasonable costs of disposition, exceeds (or is
less than) the adjusted
cost base of the Common Shares to the holder. If a
holder is a corporation, any
capital loss arising on the disposition of Common
Shares may in certain
circumstances be reduced by the amount of any
dividends which have been
received on such shares. Analogous rules apply to a
partnership or trust of
which a corporation is a member or beneficiary. A
shareholder will be required
to include three-quarters of any capital gain (a
"taxable capital gain") in
computing his or her income for purposes of the
Canadian Tax Act and will be
entitled to deduct three-quarters of any capital loss
only against taxable
capital gains in accordance with the detailed
provisions of the Canadian Tax
Act in that regard.
<PAGE>
Shareholders not resident in Canada
The following portion of this summary is limited
to shareholders who, for
purposes of the Canadian Tax Act hold the Common
Shares as capital property
and: (i) are not resident or deemed to be resident in
Canada at any time when
they held or hold Common Shares; and (ii) do not use
or hold and are not deemed
to use or hold their Common Shares in the course of
carrying on a business in
Canada.
Shareholders will not be considered to have
disposed of their Common
Shares or to have realized a taxable capital gain or
loss by reason only of the
Continuance. The Continuance will also have no effect
on the adjusted cost base
to shareholders of their Common Shares. After the
effective date of the
Continuance, dividends received by a shareholder on
Common Shares will not be
subject to Canadian withholding tax.
Provided that a Common Share is not "taxable Canadian
property" to a
shareholder at the time of disposition of such Common
Share, such shareholder
will not be subject to Canadian tax on any capital
gain arising by reason of
the disposition of such Common Share. After the
effective date of the
Continuance, Common Shares will not generally be
taxable Canadian property to a
shareholder at any particular time unless at any time
during the five-year
period that ends at the particular time the
shareholder (together with persons
not dealing at arm's length with the shareholder)
owned 25 percent or more of
the shares of any class of the Company and more than
50 percent of the fair
market value of the Common Shares was derived directly
or indirectly from one
or any combination of real property situated in
Canada, Canadian resource
properties and timber resource properties. For the
purposes of this test, a
shareholder and any person not dealing at arm's length
with a shareholder will
be considered to own any share that the shareholder or
person has a right to
acquire.
Dissenting Shareholders. Although the matter is not
free from doubt, the amount
paid to a dissenting shareholder should be treated as
proceeds of disposition
of his or her Common Shares. Such shareholder should
consult his or her own
tax advisors in this regard.
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO SHAREHOLDERS OF
THE CONTINUANCE
General
In the opinion of Venable, Baetjer and Howard, LLP,
United
States counsel
to the Company ("U.S. Counsel"), the following
summarizes the material United
States federal income tax consequences arising from and
relating
to the
Continuance that are generally applicable to
shareholders of the Company that
are United States citizens or residents, domestic
corporations, domestic
partnerships, and estates and trusts not classified as
foreign estates or
trusts (collectively, "U.S. Shareholders"), and to
certain shareholders of the
Company that are not U.S. Shareholders ("non-U.S.
Shareholders"). This summary
is intended for general information only. It does not
discuss all aspects of
United States federal income taxation that may be
relevant to a particular U.S.
Shareholder (including, without limitation, potential
application of the
alternative minimum tax), to a particular non-U.S.
Shareholder, or to certain
types of investors subject to special treatment under
the United States federal
income tax laws (for example, banks, life insurance
companies, taxexempt
organizations, broker-dealers or holders who received
their Common Shares as
compensation). This summary does not discuss any
aspect of state, local or
foreign tax laws, not does it discuss United States
income tax consequences
with respect to current holder and option holders.
This summary is based on U.S. laws, regulations,
rulings and decisions
currently in effect, all of which are subject to
change, possibly with
retroactive effect. No advance income tax ruling has
been or will be sought or
obtained from the U.S. Internal Revenue Service (the
"IRS") regarding the tax
consequences of any of the transactions described
herein. Accordingly, it is
possible that the U.S. federal income tax consequences
of the Continuance may
differ from those described below.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE UNITED
STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE CONTINUANCE.
<PAGE>
Taxation of U.S. Shareholders
The following summary is limited to U.S. Shareholders
(i) who hold Common
Shares as a "capital asset" within the meaning of
Section 1221 of the United
States Internal Revenue Code of 1986 (the "Code"), (ii)
who will
hold Continued
Common Stock after the Continuance as a "capital
asset," (iii) whose ownership,
receipt or disposition of Common Shares is not
attributable to a permanent
establishment in a country other than the United
States for purposes of an
income tax treaty to which the United States is a
party and (iv) who are not
residents of a country other than the United States
for purposes of an income
tax treaty to which the U.S. is a party. U.S.
Shareholders who do not meet one
or more of the foregoing criteria are urged to consult
their tax advisors
regarding their particular United States federal
income tax consequences of the
Continuance.
Based on certain assumptions and representations from
both the Company and
certain principal shareholders of the Company,
including those enumerated
below, the Continuance should, for United States
federal income tax purposes,
qualify as a "reorganization" within the meaning of
Section 368(a) and should
accordingly result in a tax-free, constructive
exchange by the Company
shareholders of their Common Shares for the Continued
Common Stock in a new
domestic corporation (the "Continued Company"). The
assumptions and
representations relied upon in reaching the above
conclusions include, but are
not limited to, the following:
1. The proxy statement/prospectus adequately
reflects the Company's
principal purposes and reasons for the Continuance,
including increased
business opportunities in the U.S.
2. The fair market value of the Continued Common
Stock held by each of the
Continued Company's shareholders immediately following
the effective date of
the Continuance will be approximately equal to the
fair market value of the
Company's shares held immediately prior to the
effective date of the
Continuance.
3. To the best of the knowledge of the management
of the Company, there is
no plan or intention on the part of any shareholder of
the Company to sell or
transfer the Continued Common Stock to the Company
following the Continuance.
4. Immediately following the Continuance, the
shareholders of the Company
will own all of the outstanding Continued Common Stock
and will own such stock
solely by reason of their ownership of the Common
Shares immediately prior to
the Continuance.
5. The Company has no intention of the Continued
Company issuing additional
shares of its stock immediately following the
Continuance.
6. Immediately following the Continuance, the
Continued Company will
possess the same assets and liabilities, except for
assets used to pay
dissenters to the Continuance and assets used to pay
expenses incurred in
connection with the Continuance, as those possessed by
the Company immediately
prior to the Continuance.
7. Assets distributed to shareholders who receive
cash or other property,
assets used to pay expenses, assets used to pay
dissenters to the Continuance,
and all redemptions and distributions (except for
regular, normal dividends)
made by the Company immediately preceding the
Continuance will, in the
aggregate, constitute less than one percent of the net
assets of the Company.
8. Dissenting shareholders will own less than one
percent of the Common
Shares.
9. The Company has no intention of the Continued
Company reacquiring any of
its stock immediately following the Continuance.
10. The Company has no intention of the Continued
Company selling or
otherwise disposing of any of the assets of the
Company acquired pursuant to
the Continuance, except for dispositions made in the
ordinary course of
business.
11. The liabilities of the Company constructively
assumed by the Continued
Company, plus the liabilities, if any, to which the
assets constructively
transferred as a result of the Continuance are
subject, were incurred by the
Company in the ordinary course of its business and are
associated with the
assets constructively transferred.
12. Following the Continuance, the Continued
Company will continue the
historic business of the Company or use a significant
portion of the Company's
historic business assets in a business.
13. The shareholders will pay their respective
expenses, if any, incurred in
connection with the Continuance.
14. The Company is not under the jurisdiction of a
court in a Title 11 or
similar case within the meaning of Section
368(a)(3)(A).
15. The Company will comply with the reporting
requirements of Section
1.367(b)-1(c) of the United States Treasury
regulations (the "Regulations").
<PAGE>
16. The Company is not and has not ever been a
"controlled foreign
corporation" within the meaning of Section 957 (a
"CFC").
17. The Company is not and has not ever been a
"passive foreign investment
company" within the meaning of Section 1297 (a
"PFIC").
General Rule
With respect to a U.S. Shareholder other than a
Corporate Shareholder (as
defined below) or a Section 1248 Shareholder (as
defined below) (collectively,
"Taxable Shareholders"), if, as expected, the
Continuance qualifies as a tax-
free reorganization, the following will be the
material United States federal
income tax consequences:
1. The U.S. Shareholder will recognize no gain or
loss pursuant to the
Continuance;
2. The tax basis of the Continued Common Stock
constructively received
pursuant to the Continuance will be the same as the
basis of the Common Shares
constructively surrendered;
3. The holding period of the Continued Common
Stock will include the holding
period of the Common Shares constructively surrendered
pursuant to the
Continuance; and
4. Any U.S. Shareholder who exercises his rights
under New Brunswick law to
dissent from the Continuance will be treated as if his
Common Shares were
redeemed for cash and will in general recognize a
capital gain or loss in an
amount equal to the difference between the amount of
cash received (less any
amount constituting interest) and the U.S.
Shareholder's basis in the Common
Shares surrendered pursuant to the Continuance.
Special rules may apply to
dissenting Company shareholders that actually or
constructively (pursuant to
Section 318 and the regulations thereunder) own shares
of the Company as to
which dissenters' rights are not being exercised. Any
amount constituting
interest will be taxable as ordinary income.
<PAGE>
Taxable Shareholders
Section 1248 Shareholders
A U.S. Shareholder that satisfies the ownership
requirements of Section
1248(a)(2) or Section 1248(c)(2) (a "Section 1248
Shareholder") will generally
be required to recognize gain (the "Gain") or loss
(the "Loss") in an amount
equal to the difference between the fair market value
of the Continued Common
Stock received pursuant to the Continuance and such
shareholder's basis in the
Common Shares constructively surrendered unless such
shareholder includes in
gross income the "Section 1248 amount" as such term is
defined in Section
1.367(b)-2 of the Regulations and which generally
relates to the Section 1248
Shareholder's distributable share of the Company's
earnings and profits. Only
shareholders of CFCs can be classified as "Section
1248 Shareholders." In
addition, "Section 1248 amounts" accrue only while a
foreign corporation is a
CFC. Accordingly, a foreign corporation that is not
and has never been a CFC
will have no Section 1248 Shareholders and no Section
1248 amounts.
Corporate Shareholders
If a U.S. Shareholder of the Company is a domestic
corporation (a "Corporate
Shareholder"), such Corporate Shareholder will
generally be required to
recognize the Gain or the Loss pursuant to the
Continuance unless such
Corporate Shareholder includes in gross income the
"all earnings and profits
amount" as such term is defined in Section 1.367(b)-2
of the Regulations and
which generally relates to the Corporate Shareholder's
distributable share of
the Company's earnings and profits. Although the
issue is not free from doubt,
the "all earnings and profits amount" should accrue
only while a foreign
corporation is a CFC. Accordingly, a foreign
corporation that is not and has
never been a CFC will have no "all earnings and
profits amounts."
While there can be no assurance with respect to the
classification of the
Company as a CFC, the Company believes and has
represented that it has never
been a CFC at any time at or prior to the Continuance.
In connection with the
transactions contemplated herein, U.S. Counsel will
not be rendering an opinion
with regard to the Company's status as a CFC at any
time at or prior to the
Continuance. Thus, the amount, if any, which a
Taxable Shareholder will
include in gross income as a result of the Continuance
cannot be
predicted with
certainty. Accordingly, Taxable Shareholders are
urged to consult their tax
advisors regarding the United States federal income
tax consequences resulting
from the Continuance.
The Proposed Regulations
Proposed Treasury regulations issued by the Service
(the "Proposed regulations"), while not currently
effective, would significantly alter the
United States federal income tax consequences arising
from the Continuance.
The Proposed Regulations would have the following
effects:
1. U.S. shareholders as defined in Section 951(b)
and foreign corporate
shareholders owned by certain U.S. persons (as defined
in Section 957(c)) would
be required to recognize the Gain or the Loss pursuant
to the Continuance
unless they include in gross income the "all earnings
and profits amount" and
they recognize "exchange gain or loss" as defined in
the Proposed Regulations
and which generally relates to changes in the relative
exchange rates of a U.S.
shareholder's share of a foreign corporation's
functional currency.
2. U.S. persons (as defined in Section 957(c))
that are not U.S.
shareholders as defined in Section 951(b) would be
required to recognize the
Gain (but not the Loss) pursuant to the Continuance.
3. The "all earnings and profits amount" would
include all net positive
earnings and profits, if any, of the Company that
would be attributable to the
surrendered stock and that would be includable in
income as a dividend under
Section 1248 and the regulations thereunder if the
Section 1248 Shareholder had
sold the stock, regardless of whether the Company was
ever a CFC.
As currently proposed, the Proposed Regulations
generally will be effective 30
days after they are finalized. No assurance can be
given, however, as to
whether the Proposed Regulations will be finalized,
the precise terms such
regulations will include or their actual effective
date (which may be sooner
than stated in the Proposed Regulations).
Consequently, U.S. Shareholders are
urged to consult their tax advisors regarding the
potential application of the
Proposed
Regulatio
ns.
<PAGE>
Notice
Requireme
nts
Any U.S. Shareholder that does not recognize income
pursuant to the Continuance
based on the position that the Continuance qualifies
as a tax-free reorganization is required to file a
notice with the IRS on or before the last
day for filing a United States federal income tax
return (taking into account
any extensions of time therefor) for the U.S.
Shareholder's taxable year in
which the Continuance occurs. The notice must contain
certain information
specifically enumerated in Section 7.367(b)-1(c)(2) of
the Regulations, and
U.S. Shareholders are advised to consult their tax
advisors for assistance in
preparing such notice. If a U.S. Shareholder required
to give notice as
described above fails to give such notice, and if the
U.S. Shareholder further
fails to establish reasonable cause for the failure,
then the IRS may
determine, based on all the facts and circumstances,
that the Continuance is
wholly or partially ineligible for non-recognition
treatment. Nevertheless,
the failure of any one U.S. Shareholder to satisfy the
foregoing notice
requirements should not bar other U.S. Shareholders
that do satisfy such
requirements from receiving non-recognition treatment
with respect to the
Continuance.
Passive Foreign Investment Company Considerations
For United States federal income tax purposes, a
foreign corporation generally
will be classified as a PFIC for any taxable year
during which either (i) 75
percent or more of its gross income is passive income
(as defined for United
States federal income tax purposes) or (ii) on average
for such taxable year, 50
percent or more of its assets (by value) produce or
are held for the production
of passive income. For purposes of applying the
foregoing tests, all or some
of the assets and gross income of a foreign
corporation's subsidiaries may be
attributed to such foreign corporation. In addition,
if a foreign corporation
met or meets any of the foregoing tests in a
particular taxable year, it could,
under certain circumstances, remain a PFIC even in
subsequent years in which it
no longer met the tests.
If the Company was a PFIC prior to the Continuance and
a U.S. Shareholder has
not made a qualified electing fund election (a "QEF
Election"), then (i) the
U.S. Shareholder would be required to recognize the
Gain upon the Continuance
and to allocate the Gain ratably over the U.S.
Shareholder's holding period for
such Common Shares, (ii) the amount allocated to each
year other
than (x) the
year of the Continuance or (y) any year prior to the
beginning of the first
taxable year of the Company in the U.S. Shareholder's
holding period in which
the Company was a PFIC, would be subject to tax at the
highest rate applicable
to individuals or corporations, as the case may be,
for the taxable year to
which such income is allocated, and an interest charge
would be imposed upon
the resulting tax attributable to each such year
(which charge would accrue
from the due date of the return for the taxable year
to which such tax was
allocated), and (iii) amounts allocated to (x) the
year of the Continuance and
(y) any year prior to the beginning of the first
taxable year of the Company in
the U.S. Shareholder's holding period in which the
Company was a PFIC would be
taxable as ordinary income.
A U.S. Shareholder who either (i) made a QEF Election
for the first taxable
year of the Company in the U.S. Shareholder's holding
period in which the
Company was a PFIC, or (ii) (a) made a QEF Election
for a subsequent year and
(b) elects to include certain amounts in his taxable
income, will not be
required to recognize the Gain upon the Continuance
even if the Company is
classified as a PFIC.
While there can be no assurance with respect to the
classification of the
Company as a PFIC, the Company believes and has
represented that it did not
constitute a PFIC during any taxable year ending at or
prior to the
Continuance. In connection with the transactions
contemplated herein, U.S.
Counsel will not be rendering any opinion regarding to
the Company's status as a
PFIC. Because the United States federal tax
consequences to a U.S. Shareholder
under the PFIC provisions may be significant, U.S.
Shareholders of Common Shares
are urged to discuss those consequences with their tax
advisors.
<PAGE>
Taxation of Non-U.S. Shareholders
The following summary is applicable to non-U.S.
Shareholders (i) who hold
Common Shares as "capital assets" within the meaning
of Section 1221, (ii) who
will hold Continued Common Stock as "capital assets,"
(iii) who do not actually
or constructively own (and have not at any time in the
preceding five-year
period actually or constructively owned) five percent
or more (by vote or
value) of the stock of the Company, (iv) whose
ownership, receipt
or
disposition of Common Shares or Continued Common Stock
is not attributable
either to the conduct of a trade or business in the
United States or to a
permanent establishment in the United States, and (v)
who are not residents of
the United States for purposes of United States
federal income tax law or an
income tax treaty to which the United States is a
party. Non-U.S. Shareholders
who do not meet one or more of the foregoing criteria
are urged to consult
their tax advisors regarding their particular United
States federal income tax
consequences.
Income Tax
If, as expected, the Continuance qualifies as a
reorganization, then a non-U.S.
Shareholder generally should have the same United
States federal income tax
consequences as those described above for a U.S.
Shareholder regarding non-
recognition of gain or loss, tax basis and holding
period. Except as set forth
in the following paragraph, a non-U.S. Shareholder
generally will not be
required to file a notice with the IRS with respect to
the Continuance.
A non-U.S. Shareholder generally will not be subject
to United States federal
income tax on gain recognized, if any, pursuant to the
Continuance unless (i)
the gain is effectively connected with the conduct of
a trade or business
within the United States by the non-U.S. Shareholder,
(ii) in the case of a
non-U.S. Shareholder who is a nonresident alien
individual and holds the Common
Shares as a capital asset, such non-U.S. Shareholder
is present in the United
States for 183 or more days in the taxable year and
certain other circumstances
are present or (iii) the non-U.S. Shareholder is
subject to tax pursuant to the
provisions of the Code applicable to certain United
States expatriates. A non-
U.S. Shareholder that would be subject to United
States federal income tax on
such gains and does not recognize income pursuant to
the Continuance based on
the position that the Continuance is eligible for non-
recognition treatment
will be required to file a notice (as described above
in the section discussing
the taxation of U.S. Shareholders) with the IRS.
Estate Tax
Continued Common Stock owned (or treated as owned) by
an individual may be
includable in his or her gross estate for United
States federal estate tax
purposes and thus may be subject to United States
federal estate tax, unless an
applicable estate tax treaty provides otherwise.
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO THE
COMPANY
This summary is based upon United States laws,
regulations, rulings and
decisions currently in effect, all of which are
subject to change, possibly
with retroactive effect. No advance income tax ruling
has been or will be
sought or obtained from the IRS regarding the tax
consequences of any of the
transactions described herein. Accordingly, it is
possible that the United
States federal income tax consequences of the
Continuance may differ from those
described below.
As described in more detail in the first section
above, based on certain
assumptions and representations, the Continuance
should qualify as a tax-free
reorganization within the meaning of Section 368(a).
Consequently, the Company
should recognize no gain or loss pursuant to the
Continuance. Following the
Continuance, the Company will be subject to United
States federal income
taxation on its worldwide net taxable income (if any),
subject to any
applicable foreign tax credits available for income
taxed in other jurisdictions, whereas, prior to the
Continuance, the Company has been taxable
only on United States source income and on income
considered to be effectively
connected with a trade or business of the Company
conducted within the United
States.
<PAGE>
DIFFERENCES BETWEEN DELAWARE AND NEW
BRUNSWICK CORPORATE LAW
After the Continuance, shareholders of the Company
will
become subject to
the DGCL and will be governed by the Certificate of
Incorporation filed in
Delaware (the "Delaware Certificate of Incorporation")
and the new Bylaws
adopted in connection therewith (the "Delaware
Bylaws"). The DGCL is similar
in many ways to the NBBCA, to which the Company is now
subject, but differs in
several material respects, including the following:
Vote on extraordinary corporate transactions
Under the NBBCA, continuances, sales of
substantially all of the assets of
a corporation, amendments to the articles of
incorporation and
other
extraordinary corporate actions require authorization
by a special resolution,
meaning a resolution passed by two-thirds of the votes
cast by the shareholders
who voted in respect of that resolution, or by an
instrument signed by all
shareholders entitled to vote on that resolution.
Under the DGCL, mergers or
consolidations require the approval of the holders of
a majority of the
outstanding stock of the corporation entitled to vote
thereon. A sale, lease or
exchange of all or substantially all the property and
assets of a corporation,
and an amendment to the certificate of incorporation
of a corporation also
generally requires the approval of the holders of a
majority of the outstanding
stock entitled to vote thereon.
Bylaw Amendments
Under the NBBCA, either shareholders or directors may
make,
amend or
repeal bylaws (subject to any restrictions under the
articles, bylaws or any
unanimous shareholder agreement), but any such action
of the directors with
respect to the bylaws are subject to confirmation by
resolution passed by a
majority of the votes cast by the shareholders
entitled to vote on that
resolution. Under the DGCL, after a corporation has
received any payment for
any of its stock, the shareholders entitled to vote
thereon, and where
authorized by the certificate of incorporation, the
directors, may adopt, amend
or repeal the bylaws. The Company's Delaware
Certificate of Incorporation will
authorize the Board of Directors of the Company to
adopt, amend or repeal the
Company's Delaware Bylaws.
Amendments to Charter
Under the DGCL, the vote of holders of a majority of
the
outstanding stock
entitled to vote is required to alter, amend, change
or repeal a company's
certificate of incorporation. Under the NBBCA, a
corporation may amend its
articles by a special resolution passed by two thirds
of the votes cast by the
shareholders who vote in respect of the special
resolution. The holders of
shares of a class or, of a series, are entitled to
vote separately as a class
or series upon a proposal specifically affecting such
class or series,
regardless of whether or not such shares of a class or
series otherwise carry
the right to vote. The holders of a series of shares
are entitled to vote
separately as a series only if such series is affected
by an
amendment in a
manner different from the other shares of the same
class.
<PAGE>
Removal of Directors
Directors generally may be removed under the NBBCA by
ordinary resolution,
meaning a resolution passed by a majority of the votes
cast by the shareholders
who voted in respect of that resolution. Directors
generally may be removed,
with or without cause, under the DGCL by holders of a
majority of shares then
entitled to vote at an election of directors.
Directors of an NBBCA corporation
may be removed at any time without cause; directors of
a Delaware corporation
may be removed without cause unless the board is
classified, in which case
directors may be removed for cause only, unless the
certificate of incorporation provides otherwise. The
Company's Delaware Bylaws will provide
that any director may be removed, either with or
without cause, by the
affirmative vote of the holders of record of a
majority of the issued and
outstanding stock entitled to vote thereon.
Quorum of Shareholders
Unless the articles, by-laws or a unanimous
shareholders agreement otherwise
provide, a quorum for a shareholders' meeting under
the NBBCA consists of the
holders of the majority of shares entitled to vote at
a meeting of shareholders
present in person or by proxy. The Company's current
articles provide that a
quorum shall be two shareholders. Under the DGCL, a
quorum consists of a
majority of shares entitled to vote present in person
or represented by proxy
unless the certificate of incorporation or bylaws
provide otherwise, but in no
event may a quorum consist of less than one-third of
shares entitled to vote at
the meeting. The Company's Delaware Bylaws will
provide that a quorum shall
consist of a majority of the shares entitled to vote
present or represented by
proxy.
Notice and Call of Shareholder Meetings
Under the NBBCA, shareholders' meetings may be
called by the board of
directors, who must call a meeting when so requested
by holders of not less
than ten percent (10%) of the issued shares that carry
the right to vote, on
not less than 21 days and not more than 50 days
notice. Under the DGCL, unless
the certificate of incorporation or bylaws authorize
additional persons, only
the board of directors may call a special
shareholders' meeting. Under the
DGCL, written notice of any meeting of stockholders
shall be given not less
than 10 nor more than 60 days before the date of the
meeting to each
shareholder entitled to vote at such meeting (provided
that a minimum of 20
days notice is required for a merger). Under the
Company's Delaware Bylaws,
special meetings of the shareholders may be called by
the Chairman of the Board
of Directors, the President, the Board of Directors or
by the holder(s) of at
least 10 percent of the outstanding Company's Common
Stock entitled to vote at
such meeting, unless otherwise prescribed by statute.
Shareholder Written Consent in Lieu of Meeting
Under the NBBCA, shareholder actions without a
meeting may be taken by
resolution in writing signed by all of the
shareholders entitled to vote. Under
the DGCL, unless otherwise provided in the
corporation's certificate of
incorporation, stockholders may act by written consent
without a meeting if
holders of outstanding stock, having not less than the
minimum number of votes
that would be necessary to take such action at a
meeting at which all shares
entitled to vote thereon were present and voting,
execute a written consent
providing for such action.
<PAGE>
Appraisal Rights
Under the DGCL, a stockholder of a corporation
participating in certain
major corporate transactions may, under varying
circumstances, be entitled to
appraisal rights pursuant to which such stockholder
may receive cash in the
amount of the fair market value of his or her shares
in lieu of the
consideration he or she would otherwise receive in the
transaction. Under the
DGCL, such appraisal rights are not available (i) with
respect to the sale,
lease or exchange of all or substantially all of the
assets of a corporation,
(ii) with respect to a merger or consolidation by a
corporation the shares of
which are either listed on a national securities
exchange or are held of record
by more than 2,000 holders if such stockholders
receive only shares of the
surviving corporation or shares of any other
corporation which are either
listed on a national securities exchange or held of
record by more than 2,000
holders, plus cash in lieu of fractional shares, or
(iii) to stockholders of a
corporation surviving a merger if no vote of the
stockholders of the surviving
corporation is required to approve the merger because
the merger agreement does
not amend the existing certificate of incorporation,
each share of the
surviving corporation outstanding prior to the merger
is an identical
outstanding or treasury share after the merger, and
the number of shares to be
issued in the merger does not exceed 20% of the shares
of the surviving
corporation outstanding immediately prior to the
merger and if certain other
conditions are met.
Shareholders are entitled to dissent and appraisal
rights
under the NBBCA
in connection with any sale of all or substantially
all of the assets of a
corporation outside the ordinary course of business,
for amendments to its
articles of incorporation such as those affecting
share issuance, transferability or ownership of shares
of the class held by a dissenting
shareholder, or amendments to its articles of
incorporation to add, change or
remove any restriction on the business of the
corporation, amalgamation other
than between a holding corporation and its wholly-
owned subsidiary corporation,
or the Continuance. Also, the NBBCA provides rights of
appraisal to
shareholders of a class of shares entitled to vote on
proposals to amend the
articles of incorporation to vary the number of
authorized shares of the class,
effect a reclassification or cancellation of shares of
the class, affect
restrictions, right or privileges attached to such
shares, create a new class
of shares, or constrain the issue or transfer of
ownership of such shares.
Shareholder Register
A Delaware corporation's stock list showing the names,
addresses and the
number of shares registered in the name of each
shareholder may be inspected by
shareholders of record for any purpose reasonably
related to their interests as
shareholders. Under the NBBCA, shareholders,
creditors, and judgment creditors
of a shareholder may inspect the share register.
<PAGE>
Dividends and Distributions
The DGCL and NBBCA treat dividends similarly. The DGCL
permits a
corporation, unless otherwise restricted by the
certificate of incorporation,
to declare and pay dividends out of surplus or, if
there is no surplus, out of
the net profits for the fiscal year in which the
dividend is declared and/or
the preceding fiscal year (provided that the amount of
capital of the
corporation is not less than the aggregate amount of
the capital represented by
the issued and outstanding stock of all classes having
a preference upon the
distribution of assets). In addition, the DGCL
generally provides that a
corporation may redeem or repurchase its shares only
if such redemption or
repurchase would not impair the capital of the
corporation and the capital of
the corporation is not impaired.
Under the NBBCA, a corporation may not declare or pay
a
dividend or redeem
or repurchase its shares if the corporation is, or
would after the payment, be
unable to pay its liabilities as they become due, or
if the realizable value of
the corporation's assets would thereby be less than
the aggregate of its
liabilities and stated capital of all classes.
Number of Directors
The DGCL provides that the number of directors
shall be fixed by, or in
the manner provided in, the bylaws unless the
certificate of incorporation
fixes the number of directors. The NBBCA provides
that the number of directors
of a corporation shall be specified in the bylaws
subject to the articles, and
notwithstanding this provision, a corporation which
has its shares listed on a
prescribed stock exchange shall not have less than
three directors. The
current governing documents of the Company provide
that the number of directors
shall be a minimum of three (3) and a maximum of eight
(8). An increase or
decrease of the number, or a change in the minimum or
maximum number, of
directors is a fundamental change requiring a special
resolution by
shareholders. The Company's Delaware Certificate of
Incorporation will be
silent as to the number of directors. The Company's
Delaware Bylaws will
provide that the Board of Directors may fix the number
of directors to a number
not less than five (5) and not more than fifteen (15).
Director Liability
The DGCL permits the certificate of incorporation of a
Delaware
corporation to contain a provision limiting the
personal liability of a
director to the shareholders or the corporation for
monetary damages for breach
of fiduciary duty, except (i) for any breach of a
director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or
omissions not in good
faith or which involve intentional misconduct or a
knowing violation of laws,
(iii) for paying a dividend or approving a stock
repurchase in violation of
statutory limitations, or (iv) for any transaction
from which a director
derived an improper personal benefit. Such a provision
does not affect a
director's liability under United States federal
securities laws. The Company's
Delaware Certificate of Incorporation will contain
such a provision.
Under the NBBCA, directors of a corporation who vote
for or
consent to a
resolution authorizing the issue of shares for
consideration other than money
are jointly and severally liable to the corporation to
make good any amount by
which the consideration received is less than the fair
equivalent of the money
that the corporation would have received if the shares
had been issued for
money. Directors of a corporation who authorize an
improper purchase,
redemption or other acquisition of shares, authorize
improper payments of
dividends, commissions, financial assistance,
indemnities or other improper
payments to a shareholder are jointly and severally
liable to restore to the
corporation any amounts so distributed or paid and not
otherwise recovered by
the corporation. In addition, directors of a
corporation may be jointly and
severally liable to employees for certain wages and
salaries payable to each
employee for services performed for the corporation.
The NBBCA has no provision
limiting directors' liability as does the DGCL.
The liability limitations will be included in the
Company's
Delaware
Certificate of Incorporation in order to enhance the
ability of the Company to
attract and retain highly qualified people to serve as
outside directors, and
not in response to any resignation, threat of
resignation or refusal to serve
by a director or potential director of the Company.
Furthermore, although the
effect of this provision of the DGCL on the insurance
market generally will be
determined in the future based on the insurance
industry experience, the Board
of Directors of the Company believes that the
inclusion of this provision in
the Company's Delaware Certificate of Incorporation
should help to make
directors' liability insurance available to the
Company in the future. To the
extent that such provision would eliminate litigation
for which the Company
would otherwise be obligated to indemnify directors
for defense or
other costs,
the Company would avoid director indemnification
expense.
There has been no litigation involving the Board
of Directors of the
Company or any of its members which might have been
effected had such a
limitation of liability provision been in effect.
Further, to the best
knowledge of the Company, there is no litigation
pending or threatened against
any director of the Company which would be effected by
such provision of the
Company's Certificate of Incorporation.
<PAGE>
Indemnification of Officers, Directors and Others
The NBBCA authorizes a corporation, except in respect
of an
action by or
on behalf of the corporation or a body corporate to
procure a judgment in its
favor, to indemnify its directors and officers or a
person who acted at the
corporation's request as a director or officer of a
body corporate of which the
corporation is or was a shareholder or creditor, and
his heirs and legal
representatives, against all costs, charges and
expenses including an amount
paid to settle an account or satisfy a judgment,
reasonably incurred by him or
her, in respect of any civil, criminal or
administrative action or proceeding
to which he or she is made a party by reason of being
or having been a director
or officer of that corporation or body corporate,
provided that such individual
(the "indemnitee") acted honestly and in good faith
with a view to the best
interests of the corporation and, in the case of a
criminal or administrative
action or proceeding that is enforced by a monetary
penalty, had reasonable
grounds to believe his or her conduct was lawful. A
corporation may with the
approval of the Court indemnify a person referred to
above in respect of an
action by or on behalf of the corporation or a body
corporate to procure a
judgment in its favor to which he or she is made a
party by reason of being or
having been a director or officer of that corporation
or body corporate against
all costs, charges and expenses reasonably incurred by
him or her in connection
with such action if he or she fulfills the foregoing
conditions.
Under the NBBCA, there is a right of mandatory
indemnification against all
costs, charges and expenses reasonably incurred by him
or her, in respect of
any civil, criminal or administrative action or
proceeding to which he or she
is made a party by reason of being or having been a
director or
officer of that
corporation or body corporate, if the indemnitee was
substantially successful
on the merits in defense of any action or proceeding
that fulfills the
conditions of honesty, and good faith and belief on
reasonable grounds
described in the foregoing paragraph, and is fairly
and reasonably entitled to
indemnity.
The DGCL provides that a Delaware corporation
has the power generally to
indemnify its directors, officers, employees and other
agents (each, a
"Corporate Agent") against expenses and liabilities
(including amounts paid in
settlement) in connection with any proceeding
involving such person by reason
of his being a Corporate Agent, other than a
proceeding by or in the right of
the corporation, if such person acted in good faith
and in a manner he
reasonably believed to be in or not opposed to the
best interests of the
corporation and, with respect to any criminal
proceeding, such person had no
reasonable cause to believe his conduct was unlawful.
In the case of an action
brought by or in the right of the corporation,
indemnification of a Corporate
Agent against expenses is permitted if such person
acted in good faith and in a
manner he reasonably believed to be in or not opposed
to the best interests of
the corporation; however, no indemnification is
permitted in respect of any
claim, issue or matter as to which such person shall
have been adjudged to be
liable to the corporation, unless and only to the
extent that the Court of
Chancery or the court in which such proceeding was
brought shall determine upon
application that despite the adjudication of
liability, but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to
such indemnification. To the extent that a present or
former director or
officer of a corporation has been successful on the
merits or otherwise in the
defense of such proceeding, whether or not by or in
the right of the
corporation, or in the defense of any claim, issue or
matter therein, the
corporation is required to indemnify such person for
expenses in connection
therewith. Expenses incurred by a Corporate Agent in
connection with a
proceeding may, under certain circumstances, be paid
by the corporation in
advance of the final disposition of the proceeding as
the corporation deems
appropriate. The power to indemnify and advance the
expenses under the DGCL
does not exclude other rights to which a Corporate
Agent may be
entitled to
under the certificate of incorporation, bylaws,
agreement, vote of stockholders
or disinterested directors or otherwise.
The DGCL and the NBBCA permit a corporation to
maintain
insurance on
behalf of an indemnitee against any liability asserted
against such indemnitee
by reason of his or her having been a director or
officer, whether or not the
corporation would have the power to indemnify him or
her against such
liabilities under the applicable provisions of the
respective act. The NBBCA
limits this in that insurance is not available where
the liability relates to a
director's failure to act honestly and in good faith
with a view to the best
interests of the corporation. In addition, the DGCL
provides that the
indemnification rights provided by the provisions
described above are not
exclusive of any rights to indemnification or
advancement of expenses to which
such indemnitee may be entitled under any bylaw,
agreement, vote of
shareholders or disinterested directors or otherwise,
but the NBBCA does not
contemplate such arrangements. The Company's Delaware
Bylaws will match the
provisions of the DGCL.
<PAGE>
Oppression Relief and Equitable Remedies
The NBBCA creates a cause of action for "oppression"
and
"unfairness" with
respect to shareholders, creditors, directors and
officers, and vests the
courts with broad remedial powers in connection
therewith; to rectify the
matters complained of. The DGCL contains no
comparable provision, and the
scope of the equitable powers of the DGCL as defined
by existing case law is
less certain than the scope of the powers in Canada.
Certain differences between the powers granted to
corporations under the
DGCL and the powers granted under the NBBCA may make a
Delaware corporation
somewhat less vulnerable than a corporation governed
by the NBBCA to hostile
takeover attempts. These differences include the
absence of power of
shareholders to call special meetings unless expressly
granted as discussed
above, the power of the directors to ascribe
attributes to a series of
preferred stock authorized by the certificate of
incorporation which give the
series a priority over another series within the
class, and the restrictions on
business combinations discussed below. On the other
hand, because
of such
provisions as the power of shareholders to take action
without a meeting by
less than unanimous consent, the DGCL may, under such
circumstances, facilitate
a hostile takeover attempt.
Business Combinations
The Company will be subject to Section 203 of the DGCL
("Section 203").
In general, Section 203 prevents an "interested
stockholder"
(defined
generally as a person owning 15% or more of the
Company's outstanding voting
stock) from engaging in a "business combination" (as
defined in Section 203)
with the Company for three years following the date
that person became an
interested stockholder unless: (i) before that person
became an interested
stockholder, the Board approved the transaction in
which the interested
stockholder became an interested stockholder or
approved the business
combination; (ii) upon completion of the transaction
that resulted in the
interested stockholders becoming an interested
stockholder, the interested
stockholder owned at least 85% of the voting stock of
the Company outstanding
at the time the transaction commenced (excluding stock
held by directors who
are also officers of the Company and by employee stock
plans in which employee
participants do not have the right to determine
confidentially whether shares
held subject to the plan will be tendered in a tender
or exchange offer); or
(iii) on or following the date on which that person
became an interested
stockholder, the business combination is approved by
the Company's Board and
authorized at a meeting of stockholders by the
affirmative vote of the holders
of at least 66.7% of the outstanding voting stock of
the Company not owned by
the interested stockholder.
Under Section 203, these restrictions do not
apply to certain business
combinations proposed by an interested stockholder
following the announcement
or notification of one of certain extraordinary
transactions which (i) involve
the Company and a person who was not an interested
stockholder during the
previous three years or who became an interested
stockholder with the approval
of a majority of the directors and (ii) is approved or
not approved by a
majority of directors who were directors before any
person became an interested
stockholder in the previous three years or who were
recommended for election or
elected to succeed such directors by a majority of
such directors
then in
office.
The NBBCA does not contain a comparable provision with
respect to business
combinations. However, policies of certain Canadian
securities regulatory
authorities, including Policy 9.1 of the Ontario
Securities Commission ("Policy
9.1"), contain requirements in connection with related
party transactions.
Related party transaction means, generally, any
transaction by which an
issuer, directly or indirectly, acquires or transfers
an asset or acquires or
issues treasury securities or assumes or transfers a
liability from or to, as
the case may be, a related party by any means in any
one or any combination of
transactions. "Related Party" is defined in Policy 9.1
and includes directors,
senior officers and holders of at least 10 percent of
the voting securities of
the issuer.
Policy 9.1 requires more detailed disclosure in the
proxy
material sent to
security holders in connection with a related party
transaction, and, subject
to certain exceptions, the preparation of a form of
valuation of the subject
matter of the related party transaction and any non-
cash consideration offered
therefor and the inclusion of a summary of the
valuation in the proxy material.
Policy 9.1 requires, subject to certain exceptions,
that the minority
shareholders of the issuer separately approve the
transaction, either by simple
majority or two-thirds of the votes cast, depending on
the circumstances.
Shareholder Proposals
Subject to certain restrictions and conditions, the
NBBCA
permits a
shareholder entitled to vote at an annual meeting of
shareholders may (a)
submit to the corporation notice of any matter that he
proposes to raise at the
meeting, hereinafter referred to as a "proposal"; and
(b) discuss at the
meeting any matter in respect of which he would have
been entitled to submit a
proposal. The corporation shall set out the proposal
in the notice of meeting
or attach the proposal thereto and if requested by the
shareholder, the
corporation shall include in the notice of meeting or
attach thereto a
statement by the shareholder of not more than two
hundred words in support of
the proposal, and the name and address of the
shareholder. A proposal may
include nominations for the election of directors if
the proposal is signed by
one or more holders of shares representing in the
aggregate not less than ten
percent of the shares or ten percent of the shares of
a class of shares of the
corporation entitled to vote at the meeting to which
the proposal is to be
presented, but this subsection does not preclude
nominations made at a meeting
of shareholders. The DGCL does not contain a
comparable provision.
<PAGE>
CANADIAN SECURITIES LAW
CONSEQUENCES
After the Reclassification and the Continuance, the
Company
will continue
to be a "reporting issuer" pursuant to the Ontario,
Quebec, and British
Columbia Securities Acts and as such, will be required
to file with the
securities commissions or other regulatory authorities
annual and quarterly
financial statements, proxy circulars, material change
reports and other
similar continuous disclosure documents, and will be
required to send quarterly
and annual financial statements and its proxy circular
to shareholders resident
in those provinces. The Company will fulfill, to the
extent possible, these
obligations by filing or mailing, as the case may be,
the corresponding
documents that it is required to prepare pursuant to
applicable United States
securities legislation but may be required to prepare
further documents for the
purposes of maintaining its reporter issuer status in
the various provinces.
<PAGE>
AMENDMENT TO THE KEY EMPLOYEE STOCK OPTION
INCENTIVE PLAN
The Key Employee Stock Option Incentive Plan of the
Company
(the "Plan")
was adopted by the Board of Directors of the Company
and approved by the
shareholders of the Company effective as of June 15,
1990. The Plan was
amended in March, 1997 to increase the time period for
the exercise of options
from thirty days to ninety days after the termination
of employment. The Plan
was amended in June, 1998 to increase the number of
shares which may be issued
on the exercise of options by 1,536,000 Common Shares
for a total of 2,401,883
Common Shares (adjusted to reflect the 5 for 1 share
consolidation). The Plan
was also amended in June, 1998, to limit the number of
options which may be
granted to "Insiders" (which are generally defined as
executive officers of the
Company and directors of the Company and its
subsidiary TSI) to 10% of the
outstanding Common Shares, to limit the number of
Common Shares to 10% of the
outstanding number of Common Shares which may be
issued to Insiders on the
exercise of options within a one year period, and to
limit the number of Common
Shares to 5% of the outstanding Common Shares which
may be issued to any one
Insider and such Insider's associates within a one
year period. The Plan was
amended on November 12, 1998, to provide for the
issuance of options to
persons or companies engaged to provide ongoing
management or consulting
services to the Company or its subsidiaries.
The Plan permits the granting of options exercisable
to
purchase Common
Shares. Under the terms of the Plan, the exercise
price may not be less than
the market price on the Montreal Exchange at the time
of the grant of the
option. The closing price of the Common Shares on
December 11, 1998 was CDN
$2.40 as reported by the Montreal Exchange. All
employees, directors, and
consultants of the Company and its subsidiaries are
eligible to participate in
the Plan. An aggregate of 2,401,883 shares of the
Company's Common Shares have
been authorized and reserved for issuance under the
Plan, of which 61,667
Common Shares have been issued upon the exercise of
options. As of December
11, 1998, there were options outstanding to purchase
an aggregate of 1,700,101
of the Company's Common Shares which were granted
under the Plan at various
exercise prices between CDN $.52 and CDN $11.45 per
share. The Compensation
Committee of the Board of Directors of the Company
determines who shall be
granted options under the Plan and the terms thereof,
and administers and
amends the Plan.
By resolution dated November 12, 1998, the Board of
Directors of the Company
amended the Plan (i) to remove the 10% limitation on
the number of options
which may be granted to Insiders; (ii) to remove the
10% limitation on the
number of Common Shares which may be issued to
Insiders on the exercise of
options within a one year period; and (iii) to remove
the 5% limitation on the
number of shares which may be issued to any one
Insider and such Insider's
associates within a one year period. The shareholders
of the Company are being
asked to pass a resolution to ratify and confirm the
said resolution of the
Board of Directors of the Company amending the Plan to
remove the limitations
as described above. Pursuant to the rules of the
Montreal Exchange, the
amendment requires the approval of a majority of the
votes cast at the Special
Meeting, other than votes attaching to 5,421,352
Common Shares beneficially
owned by insiders and their associates to whom Common
Shares may be issued
pursuant to the Plan. As of December 11, 1998, there
were outstanding options
issued to employees and consultants to purchase
776,401 Common Shares, and
there were outstanding options issued to Insiders
(currently 10 individuals) to
purchase 923,700 Common Shares for total options to
purchase 1,700,101 Common
Shares. The Company believes that the removal of the
limitations are necessary
to enable the Company to continue to attract and
compensate additional
executive officers and directors.
Certain Canadian Federal Income Tax Considerations.
An optionee employed in
Canada will not recognize any income upon the grant of
an option. Upon the
exercise of the option, however, a Canadian optionee
generally will be required
to include in income under the Income Tax Act (Canada)
(the "ITA") a benefit in
an amount equal to the excess of the fair market value
of the Common Shares on
the date of exercise over the option price. The
taxable amount is included in
the optionee's income for the year in which he
acquires the Common Shares as a
taxable employment benefit. The amount of the benefit
included in income is
added to the adjusted cost base of the Common Shares
acquired for purposes of
determining any subsequent capital gain or loss. Such
officer or employee
generally will be entitled to a deduction in computing
taxable income equal to
one-quarter of the amount of that benefit included in
income. Upon the
disposition of Common Shares, a Canadian resident
optionee generally will
recognize a capital gain (or loss) to the extent that
the proceeds of
disposition exceed (or are exceeded by) the sum of the
adjusted cost base of
the Common Shares and the cost of disposition. The ITA
denies a deduction to
the Corporation in respect of any benefits deemed to
be received in an issue of
Common Shares to employees or officers.
<PAGE>
Certain United States Federal Income Tax
Considerations. Upon the grant of an
option, a U.S. resident optionee will not recognize
any taxable income. A U.S.
resident optionee generally will recognize ordinary
income on the date of the
exercise of the option equal to the excess, if any, of
the fair market value of
the Common Shares on the exercise date over the
exercise price. Any ordinary
income recognized by a U.S. optionee by reason of the
exercise of an option
will constitute wages subject to withholding for
United States federal tax
purposes provided the option was granted in connection
with services as an
employee of the Company or its Subsidiaries. Upon a
sale or other disposition
of Common Shares by a U.S. resident optionee who
acquired the Common Shares
pursuant to the exercise of an option, the U.S.
resident optionee generally
will recognize gain or loss equal to the difference
between the amount realized
on such sale or other disposition and the U.S.
resident optionee's tax basis in
such Common Shares (which would include the exercise
price plus the amount of
any ordinary income recognized on account of the
exercise of the option). If
the Common Shares are held as capital assets, any such
gain or loss will be a
capital gain or loss. In general, a U.S. resident
optionee may elect to claim
either a deduction or, subject to certain limitations,
a credit in computing
his or her United States federal income tax liability
for any Canadian income
tax paid with respect to the exercise of the option or
the sale or disposition
of Common Shares acquired pursuant to the exercise of
an option.
The U.S. income tax treatment of stock options held by
employees who are
neither citizens nor residents of the U.S. depends on
whether the options were
granted with respect to services performed in the U.S.
or outside the U.S. In
general, if the options were granted to such employees
for services performed
outside the U.S., the optionee would not be subject to
income taxation and tax
withholding in the U.S. If, however, the options were
granted to such
employees for services performed in the U.S., the
optionee generally (subject
to certain exceptions) would be subject to income
taxation and tax withholding
in the U.S. upon exercise of the option. The income
subject to taxation would
be the amount by which the fair market value of the
stock received exceeds the
exercise price of the option. If the options were
granted to such employees
partly for services in the U.S. and partly for
services outside the U.S., only
a proportionate amount of this income would be subject
to taxation and tax
withholding in the U.S.
In general, to the extent an optionee is taxed
upon exercise of an option,
the Company, or its subsidiary if the optionee was
employed by the subsidiary,
is entitled to a corresponding tax deduction.
General. The income tax considerations discussed
above relate to outstanding
options and are subject to modification by the Canada-
United States Income Tax
Convention. In addition, the foregoing summary is of
a general nature and is
not intended to be, nor should it be construed to be,
legal or tax advice to
any particular participant in the Plan. This
discussion does not purport to
deal with all aspects of Canadian and United States
federal income taxation
that may be relevant to a participant in the Plan and
does not take into
account Canadian provincial or territorial tax laws,
United States state or
local tax laws, or tax laws of jurisdictions outside
of Canada and the United
States. The preceding is based upon the tax laws of
Canada and the United
States as in effect on the date of this proxy
statement/prospectus, which are
subject to change. Participants should consult their
own tax advisors with
respect to their particular circumstances.
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of
Financial Condition and
Results of Operations contains forward-looking
statements based on management's
current expectations, estimates and projections about
the Company's industry,
management's beliefs and certain assumptions made by
management. These
forward-looking statements involve risks and
uncertainties, and actual results
may differ materially from those anticipated or
expressed in such statements.
Potential risks and uncertainties include, among
others, those set forth under
the "Risk Factors" section of this prospectus. Except
as required by law, the
Company undertakes no obligation to update any forward-
looking statement,
whether as a result of new information, future events
or otherwise.
Overview
The Company's financial statements are
stated in United States
Dollars (US$) and are prepared in accordance with
United States Generally
Accepted Accounting Principles.
The Company was incorporated on September
22, 1987 and was in the
business of the sales and distribution of residential
appliances and cabinets
until March 15, 1996 at which time these operations
were sold and discontinued.
In the 1996 fiscal year, the Company recorded earnings
of $8,681 from these
discontinued operations.
In August, 1994, the Company formed a new
majority owned subsidiary,
TSI, which was incorporated in the State of Maryland.
TSI was formed to
develop a business to design and manufacture and
market highperformance ground
telemetry processing and simulation systems and
related engineering services
based on technology developed at the Goddard Space
Flight Center Microelectronics Systems Branch, a
division of NASA. The core technology was
acquired by TSI pursuant to NASA's commercial
technology transfer program.
Active startup of operations of TSI
commenced during the fourth
quarter of fiscal 1995. On November 10, 1995, the
Company acquired the shares
of TSI which it did not own and which were held by the
minority shareholders,
in exchange for 2,630,000 new Common Shares of the
Company.
<PAGE>
Results of Operations
Nine Months Ended October 2, 1998 Compared with Nine
Months Ended October 3,
1997
The Company's revenue for the nine months
ended October 2, 1998 was
$7,210,262 which represented an increase of 136%
compared to $3,059,968 for
the nine months ended October 3, 1997. The increase
was primarily attributable
to sales to two major customers with large increases
from 1996 to 1997. Sales
to NEC Corporation were $2,799,584 in the first nine
months of 1998 compared to
sales of $1,278,066 during 1997 and sales to Lockheed
Martin Corporation of
$1,156,757 for the first nine months of 1998 compared
to nil for 1997.
Net interest expense for the nine months
ended October 2, 1998 was
$184,688 compared to the net expense of $14,495 for
the nine months ended
October 3, 1997. The increase in interest expense was
the result of net
increased bank borrowings (bank debt less cash, cash
equivalents and term
deposits) which equaled $3,422,902 at October 2, 1998
compared to cash on hand
of $219,143 on October 3, 1997.
The Company's total expenses for the nine
months ended October 2,
1998 were $4,299,373 which represented a decrease of
16% compared
to $5,118,279
for the nine months ended October 3, 1997. General
and administrative expenses
for the nine months ended October 2, 1998 were
$2,194,265 which represented an
increase of 11% compared to $1,979,427 for the nine
months ended October 3,
1997. The increase in 1998 was primarily due to
increases in severance costs
and fees associated with the stand-by letter of
credit. The Company expects
that the percentage rate of increase in general and
administrative expenses
will decrease in 1999. Selling and marketing expenses
for the nine months
ended October 2, 1998 were $1,651,137 which
represented a decrease of 14%
compared to $1,914,608 for the nine months ended
October 3, 1997. The
decrease in selling and marketing expenses was
primarily due to a reduction
in salary costs associated with fewer sales and sales
support personnel. The
Company expects that selling and marketing expenses
will increase in 1999.
Research and development expenses for the
nine months ended October
2, 1998 were $453,971 which represented a decrease of
63% compared to
$1,224,244 for the nine months ended October 3, 1997.
The decrease was
attributable to the reallocation of engineering staff
from research and
development activities to the production of products
and services for customer
orders. The Company expects this to be temporary and
that research and
development expenses will increase in the future as
engineering staff are
reassigned from the production of customer orders to
research and development
projects.
The net loss for nine months ended October
2, 1998 was $2,184,716
which represented a decrease of $2,285,320 or 51%
compared to a net loss of
$4,470,036 for the nine months ended October 3, 1997.
The decrease in the net
loss is primarily attributable to: (i) an increase in
gross margin dollars of
$1,666,047 resulting from the increase in sales
revenue and an increase in
gross margin percentage from 21% to 32% resulting from
improved program
performance, and (ii) the decrease in research and
development expenses during
the period of $770,273 as discussed above.
Year Ended December 31, 1997 Compared To Year Ended
December 31, 1996
The Company's total revenue for the year
ended December 31, 1997 was
$4,215,940, which was an increase of 48% compared to
$2,841,427
for the year
ended December 31, 1996. The increase was the result
of sales to an expanded
customer base.
Net interest expense for the year ended
December 31, 1997 was $13,537
compared to $164,063 in 1996. The decrease in
interest expense resulted from
the increase in bank debt from nil at December 31,
1996 to net bank borrowings
of $1,125,279 (bank debt of $3,407,500 less cash, cash
equivalents and term
deposits of $2,282,221) at December 31, 1997.
The Company's total expenses for the year
ended December 31, 1997
were $7,064,054 which was a 5% increase compared to
total expenses of
$6,713,659 for the year ended December 31, 1996.
Selling and marketing
expenses totaled $2,627,669 in the year ended December
31, 1997 which was a
19% increase compared to expenses of $2,210,256 in the
year ended December
31,
1996. The increase in selling and marketing expenses
was primarily
attributable to increased sales and marketing
activities which were associated
with the increase in sales revenue. Research and
development expenses
decreased by 7% from $1,679,422 in the year ended
December 31, 1996 to
$1,555,707 in the year ended December 31, 1997.
General and administrative
expenses increased by 2% from $2,823,981 in the year
ended December 31,1996 to
$2,880,678 in the year ended December 31, 1997.
The net loss in 1997 was $6,546,167 (loss of
$0.69 per share)
compared to a net loss of $5,483,055 before earnings
of $8,681 from
discontinued operations in 1996 (loss of $0.62 per
share). The net loss
increased by a total of $1,071,793 or 20%. Although
sales revenue increased by
$1,374,513, gross margin dollars decreased by $562,181
and the gross margin
percentage decreased from 37.5% to 12% for the 1997
fiscal year compared to the
1996 fiscal year. This was primarily the result of
poor control of program
costs. The Company has improved its control of
program costs and as a result,
the gross margin on sales has improved to 32% during
the first nine months of
the current fiscal year. The decrease in gross margin
dollars of $562,181
combined with the increased operating costs of
$350,395 and the reduction in
interest income of $150,536 resulted in the increased
loss for the year.
<PAGE>
Liquidity and Capital Resources
The Company's liquidity position at the end
of the nine month period
ended October 2, 1998 shows a current ratio of .58 to
1 with negative working
capital of $3,287,847. This compares to a current
ratio of .73 to 1 and
negative working capital of $1,504,355 at December 31,
1997. The change was
primarily a result of the use of current debt to
finance the Company's
continuing loss from operations.
The Company does not believe that operations
will begin to generate
sufficient positive cash flow during 1999 to meet
operating and capital needs.
If sufficient positive cash flow is not generated, the
Company would need to
seek additional equity or debt financing and there can
be no assurance that the
Company would be able to obtain such financing. On
August 6, 1998, First
Union National Bank, demanded repayment of a
$5,000,000 loan owing to it by the
Company's subsidiary TSI. The loan had been
collateralized by a standby
letter of credit issued by Arab-Malaysian Bank Berhad
of Malaysia and
facilitated by the Company's majority shareholder
Abrar Group International
Sdn. Bhd. of Malaysia. On August 21, 1998, Arab-
Malaysian Bank Berhad repaid
the loan to First Union National Bank. The $5,000,000
obligation to Arab-
Malaysian Bank Berhad has been shown as a current loan
payable on the Company's
October 2, 1998 consolidated balance sheet. Terms of
repayment of the
obligation have not been determined at this time. If
the lender was to demand
repayment of the loan, the Company would need to
refinance the obligation.
There is no assurance that the Company would be able
to obtain such
refinancing.
Cash used in operating activities in 1997
was $6,282,333 compared to
$4,128,512 in 1996. Increases in accounts receivable
and inventory accounted
for uses of cash of $760,363 and $317,573
respectively. An increase in
accounts payable & accrued liabilities provided a
source of cash of $705,146.
Cash used in operating activities in the
first nine months of 1998
was $1,877,849 compared to $4,328,873 in the first
nine months of 1997.
Cash provided from financing activities in
1997 was $6,589,262
compared to $2,253,701 in 1996. During 1997 and 1996,
800,000 and
460,000
share purchase warrants were exercised for proceeds of
$3,489,640 and
$2,043,386 respectively. In addition, 11,000 and
61,667 Common Shares were
issued in 1997 and 1996 for services of $71,739 and
proceeds of $72,644
respectively.
Cash received from financing activities in
the first nine months of
1998 was $1,255,347 compared to cash of $3,262,489
which was provided from
financing activities in the first nine months of 1997.
Cash used in investing activities in 1997
was $684,976 compared to
$1,506,989 in 1996. The primary decrease in 1997 was
a reduction of $611,582
in the purchase of capital assets in 1997compared to
1996.
Cash used in investing activities in the first
nine months of 1998 was
$85,832 compared to $737,284 used in investing
activities in the first nine
months of 1997. The reduction in the use of cash in
the 1998 period compared
to the 1997 period was primarily due to the decrease
of $632,601 in the
purchase of fixed assets. Cash was also provided by
the decrease in software
development costs of $70,718 during the 1998 period
compared to the 1997
period. The Company expects that cash used in
investing activities will
increase during 1999 for the acquisition of computers
and equipment for
additional staff.
<PAGE>
Year 2000 Compliance
Many existing computer systems and applications and
other control devices use
only two digits to identify a year in the date field,
without considering the
impact of the upcoming change in the century. As a
result, such systems and
applications could fail or create erroneous results
unless corrected so that
they can process data related to the Year 2000. This
issue of Year 2000
compliance is pertinent to the products which the
Company markets and to the
Company's IT systems, its non-IT systems and the
systems of any third parties
with whom the company has a material relationship.
The Company created a Year 2000 Plan in the third
quarter of fiscal 1998.
Based upon the Company's current assessment of its
Year 2000 readiness, the
Company plans to have its IT infrastructure and non-IT
infrastructure Year 2000
compliant by June 30, 1999. The Company has incurred
minimal
costs to date and does not expect that any additional
costs to modify its IT infrastructure or its non-IT
infrastructure to be Year 2000 compliant will be
material to its business, financial condition or
results of operations. However, there can be no
assurance that the timing of June 30, 1999 will be
achieved and that the costs will not be material. The
Company does not expect any material disruption in its
operations as a result of a failure by the Company to
be compliant. As part of the Company's Year 2000
efforts, the Company intends to develop a contingency
plan to manually process accounting and other
functions which are currently computerized.
As part of its Year 2000 Plan, the Company has
initiated communications with
its key third party suppliers to determine the extent
to which the Company may
be vulnerable to such parties failure to be Year 2000
compliant in products and
services which they supply to the Company. The
Company currently has limited
information concerning the compliance status of its
suppliers. In the event
that any of the Company's significant suppliers do not
successfully and timely
achieve Year 2000 compliance, the Company's business,
financial condition and
results of operations could be materially affected.
The Company intends to
develop a contingency plan which would include the
identification of potential
new suppliers which would be Year 2000 compliant
however, there can be no
assurance that such suppliers would be available to
the Company. There is also
no certainty that the Company's key customers will be
Year 2000 compliant. In
the event that some or all of its customers are not
compliant, the Company
could suffer a loss in new orders and a delay in
shipping existing orders.
This would have a material adverse effect on the
Company's operations, revenue,
and cash flow. Further, the Company would find it
difficult to develop
contingency plans to replace non-compliant customers
because of the relatively
few numbers of customers which operate in the
Company's market.
Based upon the Company's current assessment, the
Company plans to have its
products Year 2000 compliant by June 30, 1999. The
Company has incurred minimal costs to date and at the
current time, it does not expect that the total cost
to have its products Year 2000 compliant will be
material however, there can be no assurance that such
costs will not become material.
No assurance can be given that unanticipated or
undiscovered Year 2000
compliance problems would not have a material adverse
effect on the Company's
business, financial condition or results of
operations.
<PAGE>
BUSINESS
Overview
The Company, through TSI, a wholly-owned
operating subsidiary incorporated
in the State of Maryland, designs, manufactures and
markets highperformance,
modular telemetry processing and simulation systems
and provides related
engineering services to international scientific,
military, and commercial
ground station and platform integrators and operators.
The Company has been
active in the telemetry business since September 1995.
Until March 1996, the
Company was also a distributor of residential
appliances and cabinetry through
another wholly-owned subsidiary, which was sold in
March 1996. These
operations were sold to two separate purchasers for
notes payable to the
Company aggregating CDN $228,952. The notes are
repayable over a period ending
April 1, 2001. In addition, the Company provided
guarantees, secured by cash
deposits, to the Royal Bank of Canada which total CDN
$156,827 as at November
1, 1998, as security for the existing bank operating
loans of purchasers'
companies. The bank loans are being repaid by the
purchasers' companies over
the period ending April 1, 2001.
The Company was incorporated in the Province
of British Columbia in
September 1987 as "International Contour Technology
Inc." In October 1995, the
Company changed its name to "TSI TelSys Corporation."
In April 1996, the
Company became a New Brunswick company by continuing
into the Province of New
Brunswick. The Company's principal office is located
at 7100 Columbia Gateway
Drive, Columbia, Maryland 21046. The telephone number
is (410) 872-3900.
Company Operations
In August 1994, the Company formed TSI to
develop a business to
design, manufacture and market high-performance
modular telemetry processing
and simulation systems based on technology developed
at the Goddard Space
Flight Center Microelectronics Systems Branch, a
division of NASA. The core
technology was acquired by TSI pursuant to NASA's
commercial technology
transfer program. Active operations began in
September 1995.
<PAGE>
Products
The Company, through TSI, designs, manufactures and
markets
high-
performance, modular telemetry processing and
simulation systems
and related
engineering services to international scientific
military, and commercial
ground station and platform integrators and operators.
The Company's
expertise and products are based on over 200 man years
of collective experience
with microelectronics systems and object-oriented
software supporting space
communications protocols. These products and services
include Data Acquisition
and Simulation Systems, and Engineering Services.
Data Acquisition and Simulation Systems. The
Company's
telemetry
processing and simulation systems are currently
available in three platforms
and three off-the-shelf configurations. The systems
can also be customized to
meet specific customer requirements.
The data acquisition configuration ingests data
from a ground station's
RF processing system and then performs a variety of
processing functions such
as bit synchronization, frame synchronization, Reed
Solomon error checking and
CCSDS service processing. The processed data is then
written to disk or
distributed across a ground network. The simulation
configuration generates
simulated TDM or CCSDS encoded data which is used to
test spacecraft and ground
station components. The dual use configuration enables
a single system to be
used for both functions. Data acquisition and
simulation system performance is
measured in millions of bits per second (Mbps).
Systems can be customized by changing processing and
simulation modules
included and by adding customer specific data
processing, display and handling
features. The Company's products include:
Platforms
* Panther - data rates up to 300 Mbps (9U
VME based system)
* Jaguar - data rates up to 160 Mbps (SGI
O200 / IRIX based system)
* Viper - data rates up to 40 Mbps (SUN
Ultra AX / Solaris based
system)
Configurations
* Data Acquisition
* Simulation
* Dual Use Data Acquisition & Simulation
Engineering Services
The Company provides its customers with complete
installation,
integration, training, maintenance and repair services
through
standard
warranties and maintenance contracts. The Company
also offers related
professional engineering consulting services.
<PAGE>
Marketing
The markets for the Company's products and
services include U.S. and
foreign government space programs, commercial buyers
of space telemetry
products, and research and development projects. The
Company's sales,
marketing, engineering, manufacturing and
administrative operations are located
at the 22,000 sq. ft. corporate headquarters in
Columbia, Maryland. An
additional sales office is located in La Jolla,
California. The Company sells
directly to domestic and foreign ground station and
platform prime contractors
and end users.
The Company utilizes its sales and marketing staff,
program managers and senior
systems engineers to execute its marketing plan. The
sales staff is composed of
a direct domestic and international sales team working
in cooperation with
technical support staff, as well as domestic
representative firms and
international representative firms who promote and
sell the Company's products
and services. These various individuals collect
information from industry,
through industry announcements and existing customer
interaction, to generate
potential new business opportunities. Senior
management evaluates new
opportunities based on several criteria, which include
but are not limited to:
future growth potential, gross margin and engineering
content. The Company also
advertises in various space-related and other industry
publications that are
widely read by the industry. The Company also
participates in several major
trade shows.
The Company primarily pursues business opportunities
that it believes will
leverage either its core technology or its core
engineering talent by offering
a combination of space communications products and
engineering services. The
primary marketing strategy of the Company is to
leverage existing customer
relationships into new business opportunities by
evaluating and anticipating
customers' needs and providing a successful
combination of products and
services for this existing customer base.
As part of its marketing efforts, the Company intends
to extend
its current
core product offerings to include higher performance
systems in anticipation of
market needs in the commercial, government and
military market segments. The
Company believes that its core architectural approach
which is based on
reconfigurable technology and its extensive
space/ground communications
engineering expertise can be effectively used to
develop such higher
performance systems.
Competition
The Company faces two primary types of competition:
direct
competitors and
in-house developers.
Direct Competitors. The Company competes against other
organizations who
offer complete solutions or component subsystem
solutions. Competition is
limited in the market for high data rate telemetry
systems however, there is
significant competition in the market for low data
rate systems primarily from
several small to medium size firms who support a
variety of aeronautic and
space telemetry processing activities. These firms
generally offer specific
products to meet specific needs and do not generally
offer a comprehensive
suite of components and systems supporting the
recently adopted CCSDS space
telemetry data standard protocol. Many of the
Company's competitors are
significantly larger and have greater financial
resources than the Company, and
some of these competitors are divisions or
subsidiaries of large, diversified
companies that have access to the financial resources
of their parent companies.
In-House Developers. Some large prime contractors
have
business units
that develop custom solutions for each project. This
is often less attractive
as more cost effective, commercial-off-the-shelf
solutions such as those
offered by the Company and its competitors have
entered the market. However,
given the industry trend towards consolidation, large
prime contractors may
once again offer in-house solutions developed by a
newly acquired company. A
mitigating factor is the market's willingness to
search for and integrate the
"best-of-class" for a given product category.
<PAGE>
Major Customers
The Company relies heavily on several customers, NASA,
NEC
Corporation of
Japan, Lockheed Martin Corporation and the Boeing
Company. These four
customers accounted for approximately 88% percent of
overall sales for the nine
months ended October 2, 1998. The loss of one or more
customers could have a
material adverse effect on the Company's business,
financial condition and
results of operations.
Proprietary Rights
The Company relies on a combination of
copyrights, trademark and trade
secret laws and non-disclosure and licensing
agreements to establish and
maintain its proprietary rights to its products. The
Company has six patent
applications pending in the United States and has
applied for international
protection of one of these and intends to file
additional applications,
domestically and internationally, as appropriate for
patents covering its
products. There can be no assurance that patents will
be issued from any of
the Company's pending applications or that claims
allowed on any patents, if
granted, will be sufficiently broad to protect the
Company's technology.
There can also be no assurance that any patents issued
to the Company will not
be challenged, invalidated or circumvented, or that
the rights granted
thereunder will provide proprietary protection to the
Company.
Additionally, the laws of certain foreign countries
may not
protect the
Company's proprietary rights to the same extent as do
the laws of the United
States. Although the Company continues to implement
protective measures and
intends to defend it proprietary rights, there can be
no assurances that these
measures will be successful. The Company believes,
however, that because of
the rapid pace of technological change in the data
communications and
telecommunications industries the legal protections
for its products are less
significant factors in the Company's success than the
knowledge, ability and
experience of the Company's employees, the frequency
of product enhancements
and the timeliness and quality of support services
provided by the Company.
Certain technology used in the Company's products
is licensed from third
parties, generally on a non-exclusive basis, including
licenses. These license
agreements generally require the Company to fulfill
confidentiality obligations
in order to maintain the licenses. The Company has no
franchise, concession or
royalty agreements.
Research and Development
The markets for high-performance, modular
telemetry processing and
simulation systems is characterized by rapidly
changing technology and
constantly evolving standards. The Company will
continue to invest in research
and development in order to keep pace with and exceed
these technological
changes in these markets. During the nine month
period ending October 2, 1998,
the Company invested $193,971 on research and
development activities for its
products and related services. The Company also
invested approximately
$260,000 during the nine months ended October 2, 1998
in the research and
development of design automation software which would
be intended to be
marketed to designers of integrated circuits and
electronic systems. The
intended software product would be a software compiler
which would automate
certain low level design details to create a hardware
architecture from
functional software. The software is in the
development stage and the Company
is projecting to have a beta version completed during
the first quarter of
1999. There has been no commercial revenue to date
from the sale of the
software.
<PAGE>
Employees
As of November 30,1998, the Company employed 73
persons, of
whom 51 were
engaged in engineering and manufacturing, 8 in sales,
marketing, customer
support and related activities, and 14 in management,
administration and
finance. None of the Company's employees are currently
represented by a labor
union. The Company considers its relations with its
employees to be good.
Legal Proceedings
The Company is not a party to any material legal
proceedings. Available Information
The Company has filed with the Commission a
registration
statement on Form
S-4 together with any amendments thereto (the
"Registration Statement") under
the Securities Act, of which this proxy
statement/prospectus forms a part, with
respect to the shares of Continued Common Stock
offered hereby. This proxy
statement/prospectus does not contain all the
information set forth in the
Registration Statement, certain portions of which have
been omitted pursuant to
the rules and regulations of the Commission. For
further information with
respect to the Company and the Continued Common Stock,
reference is made to the
Registration Statement, including the exhibits and
schedules thereto.
Statements contained in this proxy
statement/prospectus concerning the contents
of any contract or any other document are not
necessarily complete. With
respect to each such contract or document filed as an
exhibit to the
Registration Statement, reference is made to such
exhibit for a more complete
description of the matters involved, and each
statement shall be deemed
qualified in its entirety by such reference to the
copy of the applicable
document filed with the Commission. A copy of the
Registration Statement,
including the exhibits thereto, may be inspected
without charge at the Public
Reference Room of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Further
information on the operations of
the Public Reference Room may be obtained by calling
the Commission at 1-800-
SEC-0330. Copies of the Registration Statement and
the exhibits and schedules
thereto can be obtained from the Public Reference
Section of the Commission
upon payment of prescribed fees. The Commission
maintains an Internet web site
that contains reports, proxy and information
statements and other information
regarding issuers that file electronically with the
Commission. A copy of the
Registration Statement, including the exhibits
thereto, is available on the
Commission's Internet web site. The address of that
site is http://www.sec.gov.
Upon effectiveness of the Registration Statement,
the Company will become
subject to the informational and periodic reporting
requirements of the
Securities Exchange Act of 1934 and in accordance
therewith, will file periodic
reports, proxy statements, and other information with
the Commission. Such
periodic reports, proxy statements, and other
information will be available for
inspection and copying at the public reference
facilities and the Commission's
Internet web site referred to above.
<PAGE>
Facilities
The Company's leases approximately 22,000 square
feet for its headquarters
at 7100 Columbia Gateway Drive, Columbia, Maryland.
The lease
expires November
30, 2005 and the annual payments under the lease are
approximately $201,960 net
of operating costs. The Company also leases
approximately 200 square feet in
La Jolla, California for a sales office. The sales
office lease expires May
31, 1999 and the annual payments under the lease are
approximately $21,120.
The Company believes that its current facilities are
adequate for its existing
needs and that additional suitable space will be
available as required.
<PAGE>
MARKET FOR COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Shares trades in Canadian
Dollars on the Montreal
Exchange located in Montreal, Quebec, Canada. Its
trading symbol is "TSI." The
Common Shares were previously listed on the Toronto
Stock Exchange during the
period July 14, 1989 to November 11, 1995, under the
trading symbol "ICY."
The following table sets forth, for the calendar
periods
indicated, the
range of high and low sale prices for the Common
Shares as reported by the
Montreal Exchange, after giving effect as applicable
to the consolidation of
Company's Common Shares which became effective on
August 31, 1998, wherein five
pre-consolidated shares were exchanged for one post-
consolidated share, and
after having been converted to U.S. dollars.
High
Low
Year Ended December 31, 1998
Fourth Quarter (through November 30, 1998) $1.25
$.27
Third Quarter $1.30
$.38
Second Quarter $1.83
$.62
First Quarter $2.78
$1.23
Year Ended December 31, 1997
Fourth Quarter $4.43
$1.06
Third Quarter $6.57
$2.89
Second Quarter $7.40
$5.12
First Quarter $9.02
$5.60
As of October 13, 1998, the number of registered
holders of Common Shares was
123.
<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of the capital
stock of the Company does
not purport to be complete and is qualified in its
entirety by reference to the
Company's Delaware Certificate of Incorporation and
Delaware Bylaws, copies of
which are attached as Appendix "B" and "C,"
respectively. Furthermore, except
as noted, the following discussion describes the
capital stock of the Company
assuming that the Reclassification and the Continuance
have already been
effected.
General
After completion of the Continuance, the authorized
capital
stock of the
Company will consist of 40,000,000 shares of U.S. $.01
par value Continued
Common Stock of which 9,754,202 shares will be issued
and outstanding; and
2,000,000 shares of U.S. $5.00 par value Continued
Preferred Stock, none of
which will be issued and outstanding.
Common Stock
Subject to the rights of holders of Continued
Preferred Stock then
outstanding, holders of the Company's Continued Common
Stock are entitled to
receive such dividends as may from time to time be
declared by the Board of
Directors of the Company. Holders of the Company's
Continued Common Stock are
entitled to one vote per share on all matters on which
the holders of the
Company's Continued Common Stock are entitled to vote.
Because holders of the
Company's Continued Common Stock do not have
cumulative voting rights, the
holders of a majority of the shares of the Company's
Continued Common Stock
represented at a meeting for the election of directors
can elect all of the
directors. Holders of the Company's Continued Common
Stock have no preemptive
rights to subscribe for any additional securities that
the Company may issue.
All shares of Company's Continued Common Stock to be
outstanding upon
completion of the Reclassification and the Continuance
will be legally issued,
fully paid and nonassessable. Upon the liquidation,
dissolution or winding up
of the Company, holders of the shares of Company's
Continued Common Stock are
entitled to share equally, share-for-share, in the
assets available for
distribution after payment to all creditors of the
Company, subject to the
rights, if any, of the holders of any outstanding
shares of the Continued
Preferred Stock.
Preferred Stock
The Continued Preferred Stock is issuable in series
and the
Board of
Directors of the Company may, before the issue of
shares of any particular
series, alter the Bylaws of the Company to fix the
number of and determine the
designation of the Continued Preferred Stock of that
series and alter the
Bylaws of the Company to create, define and attach the
preferences, special
rights and restrictions attaching to the Continued
Preferred Stock of that
series.
The Continued Preferred Stock ranks in preference over
the
Continued
Common Stock in respect to the payment of dividends
and in the distribution of
assets in the event of liquidation, dissolution or
winding-up of the Company's
affairs.
Warrants
The Company has warrants outstanding which entitle the
holders thereof to
purchase a total of 2,840,000 shares of Continued
Common Stock at a price of
CDN $6.00 per share expiring on November 10, 2000.
<PAGE>
MANAGEMENT
The following table sets forth information
regarding the directors
and executive officers of the Company.
Name Age Position
Dr. Wan Muhamad Hasni Wan Sulaiman 34 Director
and Chairman
of the Board
Joseph T. Pisula 57 Director,
Chief
Executive Officer
and
President
Garry R. Bahsler 47 Director
and Secretary
Paul R. Sevigny 42 Director
and Chief
Financial Officer
Dr. Abdul Rahman Bin Abdullah 42 Director
Azman Hussin 39 Director
The Directors have served in their
respective capacities since their
election and will serve until the next Annual Meeting
of Shareholders or until
a successor is duly elected, unless the office is
vacated in
accordance with
the Delaware Bylaws of the Company.
Dr. Wan Muhamad Hasni Wan Sulaiman has served as
Chairman of the
Board of the Directors of the Company since November
1995. He is also the
Chairman of Abrar Group International Sdn. Bhd., an
investment company based
in Malaysia and the Company's majority shareholder,
and until 1998, he was the
President and Chief Executive Officer of Abrar.
Joseph T. Pisula has been the President and Chief
Executive Officer
of the Company since June 1998. He was the Chief
Executive Officer of Network
Storage Solutions Inc. from 1996 until April 1998.
From 1995 to 1996, he was
the President of Network Imaging Corporation. Prior
thereto, he was the
President and Chief Executive Officer of Digital
Transmission Systems Inc.
Mr. Pisula is a director of SSE Telecom Corp. He was
previously a director of
the Company during 1995 and 1996.
Garry R. Bahsler has served as a director of
the Company since 1987
and has been the Secretary of the Company since
February 1997. Prior thereto,
Mr. Bahsler held various positions with the Company
including President, Vice
President, Chief Financial Officer and Secretary.
Paul R. Sevigny has served as a director of
the Company since January
1998 and has been the Chief Financial Officer of the
Company since June 1998.
From 1997 to 1998, he was the Chief Investment
Officer, Abrar Global Asset
Managers Sdn. Bhd., an asset management company based
in Malaysia. In 1996, he
was a consultant to Abrar Group International Sdn.
Bhd. Prior thereto he was
Associate Director, Morgan Grenfell Asia Holdings
(Pte) Ltd. in Singapore, the
headquarters for the Deutsche Bank/Morgan Grenfell
group of investment banking
and stockbroking entities in Asia.
Dr. Abdul Rahman Bin Abdullah has served as
a director of the Company
since February 1997, and from February 1, 1997 to June
1, 1998, he was the
President of the Company. He is also the Chief
Executive Officer of Abrar
Technology Sdn. Bhd., a Malaysian technology company
and subsidiary of Abrar
Group International Sdn. Bhd., a position he has held
since 1997. From 1996 to
1997, Dr. Abdullah was the General Manager -
Technology Division, Abrar Group
International Sdn. Bhd., an investment company based
in Malaysia. From 1993 to
1996 he was the Information Technology Manager,
Perusahaan
Otomobil Nasional
of Malaysia.
Azman Hussin has served as a director of the
Company since February
1997. He also serves as the Managing Director,
Accurate Network & System
Integration Sdn. Bhd., a systems integration company.
He has held this
position since 1994. Prior thereto, he was the
General Manager of Komputer
Sistem of Malaysia.
<PAGE>
FORMER MANAGEMENT
During 1997 and up to the respective dates
indicated, the following
individuals were officers and/or directors of the
Company:
Name Positions Held Date
Ceased to be
an
Officer/Director
James R. Chesney Director, June
1, 1998 as a
officer
Senior Vice President and and
June 25, 1998
as a
President of TSI
director
Barent S. Wagar Director June
25, 1998
Peter J. Campisi Director,
January 16, 1998
Vice President &
Chief Financial Officer
Rashid Khan Director
January 1, 1998
Indebtedness Of Directors And Officers
As of the date hereof, there was no
indebtedness to the Company or
any of its subsidiaries by any of the directors,
officers, employees and former
directors, officers and employees of the Company and
its subsidiaries.
Directors' Compensation
The Company pays each Director, other than
Directors who are
Executive Officers, the sum of $500 for each meeting
attended in person and the
sum of $250 for each teleconference meeting.
Directors are also reimbursed for
reasonable travel and other out-of-pocket expenses
incurred in connection with
attendance at meetings of the Board of Directors. The
Board of Directors may
award special remuneration to any Director undertaking
any special services on
behalf of the Company other than services ordinarily
required of a Director.
Other than indicated below, no Director received any
compensation for his
services as a Director other than the per meeting rate
described above,
including committee participation and/or special
assignments.
Mr. Barry Wagar, a former director of the Company,
received
the sum of
$44,201 for services rendered during 1997 for a special
assignment while
serving as a director of the Company.
Executive Compensation
The following table presents certain information
concerning
compensation earned for services rendered in all
capacities to the Company for
the years ended December 31, 1996 and 1997 by the Chief
Executive Officer and
each of the other most highly compensated executive
officers of
the Company
whose salaries and bonuses exceeded $100,000 in fiscal
1997 (the "Named
Officers").
<PAGE>
SUMMARY COMPENSATION TABLE
Long-
T
e
r
m
C
o
m
p
e
n-
Annual Compensation sation
Awards Other
Number
All
Annual of Shares
Other
Name and Principal Compen
Underlying
Compen-
Position Year Salary Bonus
sation(1)
Options(5) sation(1)
Dr. Abdul Rahman Bin Abdullah(2)
President 1997 $0 $0 $0
20,000 -
James R. Chesney(3) 1997 $151,811 $0 $0
0 -
Senior Vice President 1996 $135,966 $0 $0
20,000 -
1995 $101,596 $0 $0
0 -
Peter J. Campisi(4) 1997 $139,202 $0 $0
27,000 -
Vice President 1996 $ 48,820 $10,000 $0
40,000 -
and Chief Financial Officer
(1) Amounts do not include perquisites and other
personal
benefits not
exceeding the lesser of $50,000 and 10% of the total
annual salary
and bonus for any of the Named Officers.
(2) Dr. Abdullah was President of the Company until
June 1,
1998.
(3) Mr. Chesney was the Senior Vice President of
the Company
and was the
President of TSI until June 1, 1998.
(4) Mr. Campisi was the Vice President and Chief
Financial
Officer of the
Company and TSI until January 16, 1998.
(5) Adjusted to reflect the 5 for 1 share
consolidation.
OPTION GRANTS IN 1997
The following table presents certain information
concerning
the stock
option grants made to the Named Officers for the
fiscal year ended December 31,
1997.
Percent of
Total
Options
Number of Granted
Shares To
Exercise
Underlying Employees
or Base Options In
Fiscal Price
Expiration
Name Granted (1) Year
(CDN$/Sh)
Date
Dr. Abdul Rahman Bin Abdullah 20,000 4.84%
2.19
Jan. 28, 2002
Peter J. Campisi 20,000 6.54%
2.19
Jan. 16, 1999
7,000
1.62
Jan. 16, 1999
(1) Adjusted to reflect the 5 for 1 share
consolidation.
(2)
The following table presents certain information
concerning
the value of
options for the fiscal year ended December 31, 1997 by
each of the Named
Officers. Except as indicated below, none of the
Named Officers exercised
options during the fiscal year ended December 31,
1997.
<PAGE>
AGGREGATED OPTION EXERCISES 1997 AND YEAR END
OPTION VALUES
Number of Value
of Unexercised In-
Unexercised Shares
the-Money Options at
Underlying Options at
Fiscal Year End
Fiscal Year End
(CDN$)(2)
Unexercisable/
Unexercisable/
Name Exercisable (1)
Exercisable
Dr. Abdul Rahman Bin Abdullah 0/20,000
0
James R. Chesney 0/20,000
0
Peter J. Campisi 41,200 /25,800
0
(1) Adjusted to reflect the 5 for 1 share
consolidation.
(2) Based upon the difference between the exercise
price and the
closing price of the shares on the Montreal Exchange
on December 31, 1997.
Employment Contracts
The contract with Mr. Chesney requires TSI to pay
six months severance in
the event of termination of Mr. Chesney's employment,
other than termination
for cause. The contract also contains a non-
competition clause and a
confidentiality clause. Mr. Chesney resigned as both
the President of TSI and
the Senior Vice President of the Company on June 1,
1998 and accordingly, the
contract expired and no termination payments were
made. The Company continues
to employ Mr. Chesney as a Special Advisor, with such
employment to terminate
on May 31, 1999.
Effective June 1, 1998, the Company entered into a
written
employment
contract with Joseph T. Pisula, as the President and
Chief Executive Officer
of the Company. The contract expires in April 2001.
Under the terms of the
contract, Mr. Pisula will be paid an annual salary of
$240,000. The contract
contains a non-competition covenant and a
confidentiality agreement. In the
event of termination, other than termination for
cause, the Company is
required to pay a severance payment equal to a maximum
of twelve months
salary. In addition to the salary, Mr. Pisula was
awarded options to purchase
487,700 Common Shares of which 307,700 options vest
according to a time-based
schedule and 180,000 options vest according to a
performance-based schedule.
The options have an exercise price of CDN $2.25 per
Common Share and expire at
the earlier of ninety days from the date of
termination or May 31, 2008. The
options also vest according to a schedule of valuation
in the event of a change
of control of the Company or a sale of the operating
business.
The contract
with Mr. Pisula requires the payment of a bonus to Mr.
Pisula in the event of a
change of control of the Company or a sale of the
operating business. The
maximum bonus payable is three quarters of one percent
of the predeal
valuation of the Company's equity or of the pre-deal
valuation of the operating
business. There is no termination or retirement
provision in the event of a
change of control of the Company.
INCREASE IN SIZE OF THE BOARD AND ELECTION OF
ADDITIONAL DIRECTOR
In addition to the above directors,
management proposes that at the
Special Meeting, the size of the Board of Directors be
increased from six to
seven and that Mr. _____ be elected as a Director of
the Company.
The election of ___ to the Board of
Directors requires the affirmative
vote of a majority of the holders of Common Shares.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain
information regarding the
beneficial ownership of the Company's Common Shares as
of November 1, 1998 by
(i) each person known by the Company to beneficially
own five percent or more
of the outstanding Common Shares, (ii) each director
and executive officer of
the Company and (iii) all executive officers and
directors as a group. Except
as indicated in the footnotes to the table, the
address of the shareholders
listed below as beneficially owning more than five
percent of the Common Shares
is that of the Company's principal executive offices.
Except as indicated in
the footnotes to the table, the persons named in the
table have sole voting and
investment power with respect to all shares
beneficially owned.
Number of Shares
Name Owned
Percent of
Class
Dr. Wan Muhamad Hasni Wan Sulaiman 5,209,082(1)
53.21 Azman Hussin 27,000(2)
*
Joseph T. Pisula 197,700(3)
2.01
Paul R. Sevigny 53,500(4)
*
Dr. Abdul Rahman Bin Abdullah 35,000(5)
*
Garry R. Bahsler 60,150(6)
*
Caravan Development Group Limited (7) 2,740,000(7)
21.93% All Directors and Executive Officers
as a group (6 persons) 5,582,432
55.56%
___________________
* Less than one percent of stock outstanding.
(1) Includes outstanding options to purchase
35,000 Common
Shares which are
exercisable within 60 days and 5,174,082 Common Shares
registered in the name
of Abrar Group International Sdn. Bhd., of which Dr.
Sulaiman is the Chairman
and majority shareholder and therefore exercises
control over such Common
Shares.
(2) Includes outstanding options to purchase
27,000 Common Shares which are
exercisable within 60 days.
(3) Includes outstanding options to purchase
104,500 Common Shares which
are exercisable within 60 days.
(4) Includes outstanding options to purchase
31,400 Common Shares which are
exercisable within 60 days.
(5) Includes outstanding options to purchase
35,000 Common Shares which are
exercisable within 60 days.
(6) Includes outstanding options to purchase
60,000 Common Shares which are
exercisable within 60 days.
(7) Includes outstanding warrants to purchase
2,740,000 Common Shares which
are exercisable within 60 days.
The address of Caravan Development Group Limited is 12
Majestic Drive,
Onchan, Isle of Man, IM3 2JQ, United Kingdom
<PAGE>
CERTAIN TRANSACTIONS
In the year ended December 31, 1996, the Company paid
management fees of
$292,056 to Abrar Group International Sdn. Bhd., its
majority shareholder. Dr.
Wan Muhamad Hasni Wan Sulaiman, the Chairman of the
Board of the Company, is
the Chairman of the Board and majority shareholder of
Abrar Group International
Sdn. Bhd. In the year ended December 31, 1997, and in
the current fiscal year,
the Company paid fees of $225,000 and $125,000
respectively to Abrar Group
International Sdn. Bhd. The fees were in payment for
the facilitation and
guarantee by Abrar to Arab-Malaysian Bank Berhad in
connection with a $5
million standby letter of credit issued by Arab-
Malaysian Bank Berhad to First
Union National Bank, as collateral for a $5 million
loan granted by First Union
National Bank to TSI, the Company's operating
subsidiary. See "Management's
Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital
Resources."
Parent Company
The Company is controlled by Abrar Group International
Sdn.
Bhd. which
owns approximately 53% of the Company's issued and
outstanding Common Shares.
Dr. Wan Muhamad Hasni Wan Sulaiman, the Chairman of
the Board of the Company,
is the Chairman of the Board and majority shareholder
of Abrar Group
International Sdn. Bhd.
LEGAL MATTERS
The validity of the issuance of the shares of
the Continued Common Stock
offered hereby will be passed upon by Venable,
Baetjer & Howard, LLP,
Baltimore, Maryland.
EXPERTS
The financial statements of the Company as of
December 31, 1997 and 1996
and for the years then ended have been included in
this proxy statement/prospectus in reliance upon the
report by KPMG LLP, Chartered
Accountants, independent public accountants,
appearing elsewhere herein, and
upon the authority of said firm as experts in
accounting and auditing.
<PAGE>
Consolidated Financial Statements of
TSI TELSYS CORPORATION
AND SUBSIDIARIES
(In U.S. dollars)
Years ended December 31, 1997 and
1996
<PAGE>
TSI TELSYS CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements
(In U.S. dollars)
Years ended December 31, 1997 and 1996
Auditors' Report
1
Consolidated Financial Statements
Consolidated Balance Sheets 2 Consolidated
Statements of Operations 4
Consolidated Statements of Stockholders' Equity
(Deficiency) 5 Consolidated Statements of Cash Flows
6
Notes 7
<PAGE>
AUDITORS' REPORT TO THE DIRECTORS
We have audited the consolidated balance sheets of
TSI TelSys Corporation and
Subsidiaries as at December 31, 1997 and 1996 and
the related consolidated
statements of operations, stockholders' equity 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 in Canada. Those standards require that we
plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial
statements present fairly, in all
material respects, the financial position of TSI
TelSys Corporation and
Subsidiaries as at December 31, 1997 and 1996
and the results of their
operations and cash flows for the years then ended in
accordance with generally
accepted accounting principles in the United States.
"KPMG LLP"
Chartered Accountants
Vancouver, Canada
February 27, 1998
COMMENTS BY AUDITOR FOR U.S. READERS ON
CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for
auditors require the addition of
an explanatory paragraph (following the opinion
paragraph) when the financial
statements are affected by conditions and events that
cast substantial doubt on
the Company's ability to continue as a going
concern, such as those described
in note 1(b) to the financial statements. Our
report to the directors dated
February 27, 1998 is expressed in accordance with
Canadian reporting standards
which do not permit a reference to such events and
conditions in the auditors'
report when these are adequately disclosed in the
financial statements.
"KPMG LLP"
Chartered Accountants
Vancouver, Canada
February 27, 1998
<PAGE>
TSI TELSYS CORPORATION
AND
SUBSIDIARIES
Consolidated
Balance Sheets
(in U.S.
dollars)
October 2, December
31,
1998
1997 1996
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,416,400
$ 2,124,734
$ 2,502,781
Accounts receivable, less allowance for
doubtful accounts of $nil in 1998,
$nil in 1997 and $nil in 1996 2,337,297
1,144,643
384,280
Inventories (note 2) 619,228
549,964
232,391
Current portion of notes receivable (note 4)
40,326
40,326 38,747
Prepaid expenses and deposits 166,933
209,334
43,679
Total current assets 4,580,184
4,069,001
3,201,878
Term deposits (note 9 (d)) 160,698
157,487
199,926
Property, plant and equipment (note 3) 1,075,607
1,327,291
1,140,635
Software, net of amortization of $428,973 in
1998, $259,028 in 1997 and $56,909 in 1996 85,724 217,811
170,727
Notes receivable (note 4) 60,489 91,802
139,923
$ 5,962,702
$ 5,863,392 $ 4,853,089
<PAGE>
TSI TELSYS CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(continued)
(in U.S.
dollars)
October 2, December 31,
1998 1997
1996
(unaudited)
Liabilities and Shareholders' Equity
Current liabilities:
Note payable to bank (note 5) $ 5,000,000
$ 3,407,500
$ -
Trade accounts payable 747,602 426,452
249,673
Accrued payroll 1,102,112 703,422
345,828
Accrued expenses 647,779 354,122
183,349
Payable to shareholder 62,955 252,804
446,371
Customer advances 6,000 -
- -
Deferred revenues 232,559 223,377
- -
Current installments of capital leases
and loans payable (note 6) 69,024 205,679
238,129
Total current liabilities 7,868,031
5,573,356
1,463,350
Capital leases and loans payable,
excluding current portion (note 6) 61,036 71,685
186,600
Stockholders' equity (deficiency) (note 7):
Senior preferred shares without
par value
Authorized 100,000,000
shares; no shares issued and
outstanding
Junior preferred shares
without par value Authorized
100,000,000 shares; no
shares
issued and outstanding
Common stock voting without par
value Authorized 100,000,000
shares; issued and
outstanding 9,754,202 shares
in 1998, 9,754,202 shares in
1997 and
9,038,832 in 1996 16,509,995
16,509,995
13,086,987
Additional paid-in capital 431,174
431,174
292,803
Accumulated deficit (18,907,534)
(16,722,818)
(10,176,651)
(1,966,365)
218,351 3,203,139
Commitments and contingencies (notes 1(b) and 9)
$ 5,962,702
$ 5,863,392 $ 4,853,089
See accompanying notes to consolidated financial
statements.
On behalf of the Board:
"Joseph T. Pisula" Director "Paul R. Sevigny"
Director
<PAGE>
TSI TELSYS CORPORATION
AND
SUBSIDIARIES Consolidated
Statements of Operations
(In U.S.
dollars)
Nine months
ended
Years ended
October 2,
October 3, December 31,
1998 1997
1997
1996
(unaudited) (unaudited)
Sales $ 7,210,262 $ 3,059,968
$ 4,215,940
$ 2,841,427
Cost of sales 4,910,917 2,426,670
3,711,580
1,774,886
2,299,345 633,298
504,360
1,066,541
Expenses:
Research and product
development 453,971 1,224,244
1,555,707
1,679,422
Selling, general and
administrative 3,845,402 3,894,035
5,508,347
5,034,237
4,299,373 5,118,279
7,064,054
6,713,659
Operating loss (2,000,028) (4,484,981)
(6,559,694)
(5,647,118)
Interest income 82,250 73,198
81,778
173,641
Interest expense (266,938) (58,253)
(68,251)
(9,578)
Loss from continuing operations
(2,184,716) (4,470,036)
(6,546,167) (5,483,055)
Earnings from discontinued
operations (note 10) - -
- -
8,681
Net loss $ (2,184,716) $ (4,470,036) $
(6,546,167) $ (5,474,374)
Loss per share from continuing
operations $ (0.22) $ (0.48)
$ (0.69)
$ (0.62)
Earnings per share from
discontinued operations $ - $ -
$ -
$ -
Net loss per share $ (0.22) $ (0.48)
$ (0.69)
$ (0.62)
Weighted average number of shares
outstanding 9,754,202 9,347,450
9,451,116
8,770,888
Comprehensive loss (note 1(n))
See accompanying notes to consolidated financial
statements.
<PAGE>
TSI TELSYS CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders'
Equity (Deficiency)
(In U.S. dollars)
Additional
Total
Common Stock Paid-in
Accumulated
Stockholders'
Shares Amount Capital
Deficit
Equity
Balances at
December 31,
1995 8,742,399 $ 11,263,760 $ - $
(4,702,277) $
6,561,483
Common shares
issued in:
Exercise of
share
purchase
warrants 460,000 2,043,386 -
- -
2,043,386
Exercise of
stock options 61,667 72,644 -
- -
72,644
Shares cancelled (225,234) (292,803) 292,803
- -
- -
Net loss - - -
(5,474,374)
(5,474,374)
Balances at
December 31,
1996 9,038,832 13,086,987 292,803
(10,176,651)
3,203,139
Common shares
issued:
Exercise of
share purchase
warrants 800,000 3,489,640 -
- -
3,489,640
Exercise of
stock options 11,000 71,739 -
- -
71,739
Shares cancelled (95,630) (138,371) 138,371
- -
- -
Net loss - - -
(6,546,167)
(6,546,167)
Balances at
December 31,
1997 9,754,202 16,509,995 431,174
(16,722,818)
218,351
Net loss (unaudited) - - -
(2,184,716)
(2,184,716)
Balance at
October 2, 1998
(unaudited) 9,754,202 $ 16,509,995 $ 431,174 $
(18,907,534) $
(1,966,365)
See accompanying notes to financial statements.
<PAGE>
TSI TELSYS CORPORATION
AND
SUBSIDIARIES
Consolidated Statements
of Cash Flows
(In U.S.
dollars)
Nine months
ended
Years ended
October 2,
October 3, December 31,
1998 1997
1997 1996
(unaudited) (unaudited)
Net cash used in operating
activities (note 8) $ (1,877,849) $ (4,328,873) $
(6,282,333)
$ (4,128,512)
Cash flows from investing activities:
Purchase of term deposits (3,211) -
-
(199,926)
Proceeds from sale of term
deposits - 42,439
42,439
- -
Receipts on notes receivable
31,313 37,530
46,542 -
Capital expenditures (76,076) (708,677)
(524,754)
(1,136,336)
Increase in software
production costs (37,858) (108,576)
(249,203)
(170,727)
Net cash used in investing activities
(85,832) (737,284)
(684,976) (1,506,989)
Cash flows from financing activities:
Proceeds from issuance of note
payable to bank 1,592,500 -
3,407,500
- -
Principal payments on note
payable to bank - -
- -
(442,196)
Advances from shareholder
- -
446,371
Payments to shareholder (189,849) (190,530)
(193,567) -
Proceeds from borrowings
under loans payable - -
75,528
133,496
Principal payments on capital
leases obligations and loans
payable (147,304) (108,360)
(261,578)
- -
Proceeds from issuance of
common shares, net of
issue costs - 71,739
71,739
72,644
Proceeds from issuance of
special warrants - 3,489,640
3,489,640
2,043,386
Net cash provided by financing
activities 1,255,347 3,262,489
6,589,262
2,253,701
Net decrease in cash and cash
equivalents (708,334) (1,803,668)
(378,047)
(3,381,800)
Cash and cash equivalents at
beginning of period 2,124,734 2,502,781
2,502,781 5,884,581
Cash and cash equivalents
at end of period $ 1,416,400 $ 699,113
$ 2,124,734
$ 2,502,781
Supplementary information of non-cash transactions:
Advances on notes receivable
on disposition of
discontinued operations $ - $ -
$ $ (178,670)
Equipment acquired under
capital leases - -
38,685
231,229
See accompanying notes to consolidated financial
statements.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial
Statements (In
U.S. dollars)
Years ended December 31, 1997
and 1996 Nine months ended October 2,
1998 and October 3, 1997
(unaudited)
1. Significant Accounting Policies:
(a) Description of business:
TSI TelSys Corporation, a Canadian company (the
"Company"), through its
100% owned U.S. operating subsidiary TSI TelSys, Inc.
("TSI"), designes,
manufactures and markets high-performance,
modular telemetry processing
and simulation systems and provides related
engineering
services to
international scientific, military and commercial
ground
station and
platform integrators and operators.
(b) Continuing operations:
These consolidated financial statements have
been prepared on the basis
That the Company will continue to operate as a going
concern. The
Company incurred losses of $6,546,167 and
$5,474,374 in the years ended
December 31, 1997 and 1996, respectively, in
connection with the startup
Of operations as a developer and manufacturer of
satellite data protocol
Processing systems for ground station operations and
satellite test and
Integration operations (the "new operations").
(Unaudited) In 1996, the first complete year of new
operations, the
Company received customer orders of $3,739,110
and generated sales of
$2,841,427. In 1997 the Company received
customer orders of $9,984,153
and generated sales of $4,215,940. The
Company's customer order
backlog at December 31, 1997 was $6,665,896 compared
to a
customer order
backlog at December 31, 1996 of $897,683. The
Company's ability
to continue as a going concern is dependent on
obtaining
additional
financing in the event that positive cash flow from
operations is not
attained. Failure to achieve sufficient cash
flow from operations or
obtain additional financing may limit the Company's
ability to satisfy
its obligations as they come due and could
negatively impact the
recoverability of the carrying value of assets.
(C) Principles of Consolidation:
The consolidated financial statements include
the financial statements
of the Company and its subsidiaries:
Contour Appliance Distributors Ltd. ("CADL")
(inactive) 100% ownership
Contour Distributors Ltd. (inactive)
100% ownership
TSI TelSys, Inc. ("TSI")
100% ownership
TSI Technology Inc. (inactive)
100% ownership
All significant intercompany balances and
transactions have been
eliminated in consolidation.
(D) Cash equivalents
Cash equivalents of $1,939,784 and $244,073
at December 31, 1997 and
1996, respectively, consist of overnight repurchase
agreements. For
purposes of the statements of cash flows, the Company
considers all
highly liquid debt instruments with original
maturities of three months
or less to be cash equivalents.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated
Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
1. Significant accounting policies (continued):
(e) Inventories:
Inventories are valued at the lower of cost and net
realizable value.
(f) Property, plant and equipment:
Property, plant and equipment is stated at cost.
Equipment under capital
Leases is stated at the present value of minimum lease
payments.
Amortization is provided for at the following
annual rates:
Equipment under capital leases 20%
declining balance
Computers and equipment 5 years
straight-line
Furniture and fixtures 20%
declining balance
Demo equipment 6 months
straight-line
Software 3 years
straight-line
Laboratory equipment 1 year
straight-line
Leasehold improvements 10 years
straight-line
(G) Software:
Certain applications and systems software
production costs are
capitalized once technical feasibility has been
established for the
product and the Company has identified a market for
the
product, and
intends to market the developed product. No other
development costs are
capitalized. Such capitalized costs are
amortized over the lesser of
the expected life of the related product or two
years.
(H) Change in reporting currency:
The consolidated financial statements of the
Company
have
historically been expressed in Canadian dollars.
Effective June 30,
1996, the U.S. dollar became the Company's functional
and
reporting
currency as a substantial portion of the Company's
consolidated assets
and liabilities are located in the United States and
consolidated
revenues and expenses are primarily transacted in
U.S.
currency. The
results of operations for the period from
January 1, 1996 to June 30,
1996 have been restated to U.S. dollars using
the exchange rates
prevailing in the applicable period.
(I) Revenue recognition:
Revenue from the sale of production-type contracts
is
recognized at
the time goods are shipped. Revenue from the
manufacture of customer
specific development contracts is recognized using
the
percentage of
completion method where progress is measured based
on
costs incurred
to date as compared to total expected costs.
Estimated losses,
if any, are recognized when they are identified.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j) Income taxes:
Income taxes are accounted for under the asset
and liability method.
Deferred tax assets and liabilities are
recognized for the future tax
consequences attributed to differences between
the financial statement
carrying amounts of existing assets and liabilities
and
their respective
tax bases and operating loss and tax credit
carryforwards. Deferred tax
assets and liabilities are measured using
enacted tax rates expected to
apply to taxable income in the years in which those
temporary differences
are expected to be recovered or settled. The effect on
deferred tax
assets and liabilities of a change in tax rates is
recognized in income
in the period that includes the enactment date.
(k) Stock option plan:
Prior to January 1, 1996, the Company accounted for
its
stock option plan
in accordance with the provisions of Accounting
Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to
Employees,
and related
interpretations. As such, compensation expense would
be
recorded on the
date of grant only if the current market price of the
underlying stock
exceeded the exercise price. On January 1, 1996,
the Company adopted
Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting
for Stock Based Compensation, which permits entities
to
recognize as
expense over the vesting period the fair value
of all stock based awards
on the date of grant. Alternatively, SFAS No. 123 also
allows entities
to continue to apply the provisions of APB Opinion No.
25
and provide pro
forma net income and pro forma earnings per
share disclosures for
employee stock option grants made in 1995 and
future years as if the
fair-value-based method defined in SFAS No. 123 had
been
applied. The
Company has elected to continue to apply the
provisions of APB opinion
No. 25 and provide the pro forma disclosure provisions
of
SFAS No. 123.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
1. Significant accounting policies (continued):
(l) Disclosures about fair value of financial
instruments:
The Company is required to disclose the fair
values of, and the methods
and assumptions used to estimate the fair value
of each of, the on and
off-balance sheet financial instruments. The following
methods and
assumptions have been used.
Accounts receivable, note payable to bank,
accounts
payable and
accrued liabilities, payable to shareholder and
customer
advances:
The carrying amount approximates fair value
because of the short-term
maturity of these instruments.
Notes receivable:
The fair value is determined as the present
value of expected future
cash flows discounted at the imputed interest
rates which approximates
rates currently offered by local lending
institutions for loans of
similar terms to companies with comparable
credit risk. Accordingly,
the carrying amount approximates fair value.
Capital leases and loans payable:
The carrying values of the obligations under
capital leases and loans
payable approximate their fair values, as the
effective interest rates
of the obligations under capital leases and
loans payable approximate
the current market rates for similar debt
instruments.
Limitations:
Fair value estimates are made at a specific
point in time, based on
relevant market information and information
about the financial
instruments. These instruments are subjective
in nature and involve
uncertainties and matters of significant
judgement and therefore
cannot be determined with precision. Changes in
assumptions could
significantly affect the estimates.
(m) Use of estimates:
The preparation of financial statements in
conformity with generally
accepted accounting principles requires
management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the
financial statements and the reported amounts of
revenues
and expenses
during the reporting period. Significant areas
requiring the use of
management estimates relate to the determination
of deferred revenue,
useful lives for amortization and provision for
contingencies. Actual
results could differ from these estimates.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
1. Significant accounting policies (continued):
(n) Comprehensive loss
Net loss represents comprehensive loss for all
periods
presented.
(o) Interim financial statements
Interim financial statements include all
adjustments which in the opinion
of management are necessary in order to make
the financial statement not
misleading.
2. Inventories:
1998 1997
1996
(unaudited)
Raw materials $ 589,603
$ 530,056
$ 181,586
Work-in-progress 29,625
19,908
50,805
$ 619,228
$ 549,964 $ 232,391
3. Property, plant and equipment:
1998 (unaudited)
A
c
c
u
m
u
l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
a
n
d
Cost
amortization Net
Equipment under capital leases $ 360,254
$ 183,699
$ 176,555
Computers and equipment 622,268
197,085
425,183
Furniture and fixtures 272,152
95,956
176,196
Demo equipment 119,064
119,064
- -
Laboratory equipment 416,559
416,559
- -
Software 404,459
355,841
48,618
Leasehold improvements 312,190
63,135
249,055
$ 2,506,946
$ 1,431,339 $ 1,075,607
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated
Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
3. Property, plant and equipment (continued):
1997
Ac
cu
mu
la
te
d
de
pr
ec
ia
ti
on
a
n
d
Cost
amortization Net
Equipment under capital leases $ 360,254
$ 129,661
$ 230,593
Computers and equipment 557,740
108,726
449,014
Furniture and fixtures 272,151
55,813
216,338
Demo equipment 119,064
119,064
- -
Laboratory equipment 416,559
395,873
20,686
Software 392,909
255,681
137,228
Leasehold improvements 312,190
38,758
273,432
$ 2,430,867
$ 1,103,576
$ 1,327,291
1996
A
c
c
u
m
u
l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
a
n
d
Cost
amortization Net
Equipment under capital leases $ 321,519
$ 58,255
$ 263,264
Computers and equipment 272,459
39,810
232,649
Furniture and fixtures 63,882
11,843
52,039
Demo equipment 117,139
117,139
- -
Laboratory equipment 331,063
241,199
89,864
Software 457,737
143,995
313,742
Leasehold improvements 196,641
7,564
189,077
$ 1,760,440
$ 619,805 $ 1,140,635
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
4. Notes receivable:
1998
1997
1996
(unaudited)
Receivable in monthly installments
of $2,291 with imputed interest of 6.0%, with
the balance due March 1,
2001 (see note 10 $ 68,725
$ 89,342
$ 124,118
Receivable in monthly installments
of $1,070 plus interest at Royal Bank prime
(6.0% at December 31, 1997) per annum, with
the balance
due March 1, 2001 (see note 10) 32,090
42,786
54,552
100,815
132,128 178,670
Current portion 40,326
40,326
38,747
$ 60,489
$ 91,802 $ 139,923
5. Note payable to bank:
Note payable to bank consists of advances on a
$5,000,000
commercial
promissory note secured by a $5,000,000 letter of
credit
issued by Arab-
Malaysian Bank Berhad and facilitated by the Company's
majority
shareholder.
Amounts drawn under the commercial promissory note
bear
interest at
overnight Federal Funds rate plus 1% (6.72% at
December
31, 1997).
The total amount outstanding as at December 31,
1997 and
1996 was
$3,407,500 and $Nil respectively.
(Unaudited) On August 6, 1998, the bank demanded
repayment of
the $5,000,000
loan owing by the Company. On August 21, 1998, Arab-
Malaysian
Bank repaid
the loan to the bank. The loan has been reflected as a
current
loan payable
since the terms of repayment of the loan have not
been determined.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
6. Capital leases and loans payable:
1998
1997 1996
(unaudited)
Loans payable $ 83,466 $
135,926
$ 125,000
Payable to Abrar Group International
Sdn. Bhd., its major shareholder,
with no interest bearing,
due May, 1997 -
- -
68,500
Obligations under capital leases 46,594
141,438
231,229
130,060
277,364 424,729
Less: current installments 69,024
205,679
238,129
Non-current portion $ 61,036
$ 71,685
$ 186,600
The loans payable are unsecured and consisted of
the
following at December
31, 1997:
(a) A loan of $125,000 bearing interest at 12%
repayable
in monthly
installments of $5,825 due on November 1, 1998.
(B) A loan of $67,560 bearing interest at 10.5%
repayable
in monthly
installments of $1,001 due on November 30, 2005.
Principal due on capital lease obligations and
loans
payable as at
December 31,1997 is as follows:
Loans
Capital lease
payable
obligations
Total
1998 $ 79,207
$ 146,775
$ 225,982
1999 7,440
17,753
25,193
2000 7,440
- -
7,440
2001 7,440
- -
7,440
2002 and after 34,399
- -
34,399
135,926
164,528 300,454
Less: Amount representing interest -
23,090
23,090
135,926
141,438 277,364
Less: Current installments 79,207
126,472
205,679
$ 56,719
$ 14,966
$ 71,685
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
7. Stockholders' equity (deficiency):
(a) Authorized:
Common shares voting without par value
100,000,000
Senior preferred shares without par value
100,000,000
Junior preferred shares without par value
100,000,000
(B) (Unaudited) Effective August 31, 1998, the issued
and
outstanding common
shares were consolidated on the basis of one
post consolidated share for
each five pre consolidated shares. The financial
statements have been
changed to reflect the consolidation on a
retroactive basis.
(C) ISSUED AND OUTSTANDING:
In 1995 the Company issued 2,630,000 common
shares in exchange for
249,999 common shares of the Company's subsidiary, TSI
TelSys, Inc.
The shares acquired represented the 25% of
TSI TelSys Inc. which
was owned by management and key employees of the
subsidiary. These class
A shares are subject to escrow provisions providing
for
their release
over a period of five years. In addition, the
Company may, at its
option, repurchase (a) two thirds of the
shares issued to any
employee whose employment is terminated with the
Company
before May 10,
1997; and (b) one third of the shares issued to
any employee whose
employment is terminated with the Company
before November 10, 1998,
all at a nominal amount.
In 1997, the Company repurchased 95,630 (1996 -
225,233)
shares at a
nominal value of $3 (1996 - $2). The excess of
the assigned value over
cost of the shares was credited to additional paid-in
capital.
As at December 31, 1997 and 1996, there were no senior
preferred shares
and junior preferred shares issued and outstanding.
(D) Common shares reserved:
In 1995, the Company issued 4,100,000 share purchase
warrants and
options, each of which entitles the holder to
acquire one common share
of the Company for $4.38 per share at any time up
to
November 10,
2000. In 1997 and 1996, a warrant holder
exercised
800,000 and
460,000 warrants and acquired 800,000 and
460,000 shares respectively.
As at December 31, 1997 and 1996 there
were warrants and options
outstanding to purchase a total of 2,840,000
and 3,640,000 common shares.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
8. Reconciliation of net loss to net cash used for
operating activities:
The reconciliation of net loss to net cash used for
operating
activities for
the periods ended are as follows:
Nine months ended Years
ended
October 2, October 3,
December 31,
1998 1997
1997 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Loss from continuing
operations $ (2,184,716) $ (4,470,036) $
(6,546,167)
$ (5,483,055)
Adjustments to reconcile
loss from continuing operations to net cash used
for continuing operations:
Amortization 497,705 430,550
544,858
616,269
Loss on sale of equipment - -
34,044 2,555
Increase in accounts
receivable (1,192,654) (924,922)
(760,363)
(206,404)
Decrease (increase) in
inventories (69,264) (474,955)
(317,573)
595,937
Decrease (increase)
in prepaid expenses
and deposits 42,401 (223,538)
(165,655)
(15,795)
Increase in deferred costs - -
659
Increase in accounts
payable and
accrued liabilities 1,013,497 796,219
705,146 353,282
Increase in customer
advances 6,000 239,973
- -
- -
Increase in deferred revenues
9,182 297,836
223,377 -
Net cash used for continuing
operations (1,877,849) (4,328,873)
(6,282,333)
(4,136,552)
Earnings from discontinued
operations - -
- -
8,681
Adjustments to reconcile
earnings from discontinued operations to net
cash provided by discontinued operations:
Amortization and depreciation - -
3,536
Gain on sale of equipment - -
(4,177)
Net cash provided by
discontinued operations - -
- -
8,040
Net cash used in operating
activities $ (1,877,849) (4,328,873)
(6,282,333)
(4,128,512)
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
9. Commitments and contingencies:
(a) Leases
The Company rents office and warehouse space and
leases
furniture and
computers under long-term operating leases.
The aggregate net rentals
for these commitments, over the five year
period ending December 31,
2002, amount to approximately:
1998 $ 381,000
1999 344,000
2000 268,000
2001 214,000
2002 221,000
Rent expense for the years ended December 31,
1997 and 1996 was $302,338
and $169,020 respectively. (Unaudited) Rent
expenses for the nine months
ended October 2, 1998 and October 3, 1997 was
$206,050 and $231,549
respectively.
(b) Legal proceedings:
In 1995, a third party commenced legal action in
the amount of $180,000
against one of the Company's subsidiaries, for an
alleged
employment
obligation regarding a non-related company. In
June 1996, on a summary
judgement application, the United States
district court for the District
of Maryland ruled in favour of the subsidiary. The
individual appealed
to the United States Court of Appeals for the Fourth
Circuit, which in
Februrary 1998, vacated the lower court's ruling and
remanded the case
for trial. The Company will continue to defend the
action
vigourously. No
provision was made in the accounts, as the
outcome was not determinable
as of December 31, 1997.
(Unaudited) The claim was settled on June
26, 1998 and the Company
paid $130,000 to the third party.
(C) Continuance as a Delaware corporation:
Holders of the common shares have the right to
dissent in connection
with the continuance of the Company from Canada to the
United States as
a Delaware corporation and be paid the fair value
of
such
stockholder's common shares if the stockholder
objects to the
continuance and the continuance becomes effective.
(D) Guarantees:
The Company provided guarantees, secured by term
deposits, to the Royal
Bank of Canada for Canadian $266,000 as security for
the
existing bank
operating loans of the purchasers (see note 10).
The bank
loans are
being repaid by the purchasers businesses over the
period
ending April 1,
As at November 1, 1998, the operating loans
payable to Royal Bank of
Canada amounted to Canadian $156,827.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
9. Commitments and contingencies (continued):
(e) Uncertainty due to the Year 2000 Issue:
The Year 2000 issue arises because many
computerized systems use two
digits rather than four to identify a year. Date-
sensitive systems may
recognize the year 2000 as 1900 or some other date,
resulting in errors
when information using Year 2000 dates is processed.
In
addition,
similar problems may arise in some systems which
use certain dates in
1999 to represent something other than a date.
The effects of the Year
2000 issue may be experienced before, on, or
after January 1, 2000, and,
if not addressed, the impact on operations and
financial
reporting may
range from minor errors to significant systems
failure which could affect
an entity's ability to conduct normal business
operations. It is not
possible to be certain that all aspects of the Year
2000
issue affecting
the entity, including those related to the efforts of
customers,
suppliers, or other third parties, will be fully
resolved.
10. Discontinued operations:
In 1996, one of the Company's subsidiaries, CADL,
had a distribution
contract with its main supplier which as not renewed
by the
supplier. As a
result, CADL ceased operations at the end of January,
1996 and
was
liquidated. In addition, the Company sold certain
assets of
another
subsidiary, Contour Kitchen Design Ltd. ("CKDL") to DG
Pacific
Distribution
Limited ("DG") for consideration of 49% of the shares
of DG.
Then the
Company signed an agreement to sell 51% of the shares
of CKDL,
and granted
options for the respective holders to acquire the
remaining 49%
of DG and
CKDL for cash consideration in the amount of $1, such
options
to be
exercisable upon the repayment, in full, of all
principal and
interest owing
under the promissory notes (see Note 4) and the
release of the
Company from
its guarantees in respect of the bank loans owing by
DG and
CKDL (see Note 9
(D)). As a result of these events, the Company ceased
in its
kitchen
appliance segment and the operations of these
former subsidiaries have been
recorded as discontinued operations and have been
accumulated
under the
heading "Earnings from discontinued operations" in
the Consolidated
Statements of Operations and Deficit.
Earnings from discontinued operations are comprised of
the
following:
1997
1996
Sales $ - $
815,001
Cost of sales -
705,008
Expenses -
194,026
Net operating loss -
84,033
Gain on sale of discontinued operations -
92,714
Earnings from discontinued operations $ -
$ 8,681
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
11. Stock option plan:
The Company has an Employee Stock Option Incentive
Plan
(the "Plan")
which provides for the issuance of stock options to
key
employees and
directors. The Plan was amended in March, 1997, to
increase
the time
period for the exercise of options from thirty days to
ninety
days after the
termination of employment.
(Unaudited) The Plan was amended in June, 1998 to
increase the
number of
common shares which may be issued on the exercise of
options to
a aggregate
of 2,401,883 common shares. The plan was also amended
in June,
1998 to
limit the number of options which may be granted to
insiders,
which are
generally defined as executive officers of the company
and
directors of the
Company and its subsidiaries, to 10% of the
outstanding common
shares, to
limit the number of common shares which may be issued
to
insiders on the
exercise of options within a one year period to 10% of
the
outstanding
number of common shares, and to limit the number of
common
shares which may
be issued to any one insider and such insider's
associates
within a one year
period to 5% of the outstanding common shares. The
Plan was
amended on
November 12, 1998, to provide for the issuance of
options to
persons or
companies engaged to provide ongoing management or
consulting
services to
the Company or its subsidiaries. On November 12, 1998,
the
Board of
Directors of the Company amended the Plan to remove
the 10%
limitation on
the number of options which may be granted to
insiders, to
remove the 10%
limitation on the number of common shares which may be
issued
to insiders on
the exercise of options within a one year period, and
to remove
the 5%
limitation on the number of common shares which may be
issued
to any one
insider and such insider's associates within a one
year period.
This
amendment is subject to the approval of the
shareholders of the
Company.
Options in the Company are issued with an
exercise
price denominated
in Canadian dollars. In this section, exercise
prices have
been reported
in U.S. dollar equivalents.
At December 31, 1997, there were 188,043 additional
options
available for
grant under the Plan. (Unaudited) On October 2,
1998 there
were 819,882
additional options available for grant under the
Plan. The
per share
weighted-average fair value of stock options granted
during
1997 and 1996
was $2.44 and $4.85 (unaudited - 1998 - $0.37) on
the date of
grant using
the Black Scholes option-pricing model with the
following
weighted-average
assumptions - expected volatility of 50%; expected
dividend
yield nil%,
risk-free interest rate of 4.00%, and an expected
life of 5
years.
The Company applies APB Opinion No. 25 in
accounting
for its Plan
and, accordingly, no compensation cost has been
recognized for
its stock
options in the financial statements because of
options
have been issued
with an exercise price greater than on equal to the
market
price of the stock
on the date of grant. Had the Company determined
compensation
cost based
on the fair value at the grant date for its stock
options under
SFAS No.
123, the Company's net loss and loss per share
would have
been increased
to the pro forma amounts indicated below.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
11. Stock option plan (continued):
1998
1997
1996
(unaudited)
Net loss:
As reported $ (2,184,716) $
(6,546,167) $
(5,474,374)
Pro forma (2,363,361)
(7,012,890)
(6,716,231)
Stock option activity during the periods indicated is
as
follows:
Weighted-
Number of average
shares exercise price
Balance, December 31, 1995 100,000
$ 1.90
Granted 204,100
8.12
Exercised (61,667)
1.18
Forfeited (8,333)
1.83
Balance, December 31, 1996 234,100
7.53
Granted 423,524
5.70
Forfeited (41,450)
6.93
Balance, December 31, 1997 616,174
6.07
(Unaudited)
Granted
1,268,700
1.30
Forfeited
(414,323)
5.76
Balance, October 2, 1998 (unaudited)
1,470,551
$ 1.90
At December 31, 1997, the range of exercise prices
and
weighted-average
Remaining contractual life of outstanding options was
$1.05 -
$9.01
(unaudited - October 2, 1998 - $0.58 - $8.28) and 4.5
years,
respectively.
Excise prices shown have been converted from
Canadian dollars to their
U.S. dollar equivalents.
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
11. Stock option plan (continued):
At December 31, 1997 and 1996, the number of
options exercisable was 159,589
and 49,625, respectively (unaudited - October 2,
1998 -
369,056), and the
weighted-average exercise price of those options
was $6.40 and $5.29,
respectively (unaudited - October 2, 1998 -
$3.96).
(Unaudited) On June 1, 1998 the Company awarded
options,
as part of the
employment contract, to its president and chief
executive
office of the
Company, to purchase 487,700 common shares of which
307,700
vest according
to a time-based schedule and 180,000 vest according
to a
performance-based
schedule. The options have an exercise price of
Canadian
$2.25 per share
and expire at the earlier of ninety days from the
date of
termination or May
31, 2008.
12. Income taxes:
Loss before income taxes for each of the periods
presented by
jurisdiction
are as follows:
1997 1996
Canada
$ 230,763
$ 247,025
United States
6,315,404
5,227,349
$
6,546,167 $ 5,474,374
The tax effects of temporary differences and carry
forwards
that give rise
to significant portions or deferred tax assets and
liabilities at December
31, 1997 and 1996 were as follows:
1997 1996
Deferred tax assets - loss carry forward $
4,523,949 $
2,571,620
Valuation allowance
4,523,949
2,571,620
$ -
$ -
SFAS 109 requires that deferred tax assets be
reduced by a
valuation
allowance if it is more likely than not that some
portion or
all of the
deferred tax asset will not be realized. During
1997, the net
increase in
the valuation allowance was $1,952,329 (1996 -
$1,890,768).
<PAGE>
TSI TELSYS CORPORATION
Notes to Consolidated Financial Statements
(continued) (In U.S.
dollars)
Years ended December 31, 1997 and
1996
Nine months ended October 2, 1998 and October 3, 1997
(unaudited)
13. Segmented information:
The Company operates in one segment. Export sales
were primarily to Japan
And amounted to $1,362,166 and $nil for the years
ended
December 31, 1997
and 1996 respectively. (Unaudited) $2,799,584 for the
nine
months ended
October 2, 1998.
14. Major customers:
The sales to major customers are approximately as
follows:
1998
1997
1996
(unaudited)
National Aeronautics and Space
Administration $ 2,703,100 $
2,096,300 $
2,794,500
NEC Corporation 2,799,584
1,278,066
- -
As at December 31, 1997 and 1996, NEC Corporation
accounted for
40% and nil
of accounts receivable (unaudited - October 2, 1998 -
29%).
15. Related party transactions:
In the year ended December 31, 1996, the Company
paid management fees of
$292,056 to Abrar Group International Sdn. Bhd.,
("Abrar") its
majority
shareholder. The Company paid fees to Abrar for
the facilitation and
guarantee by Abrar to Arab-Malaysian Bank Berhad on
the letter
of credit
referred to in note 5 of $225,000 for the year ended
December
31, 1997 and
(unaudited) $125,000 for the nine months ended October
2, 1998.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Officers and
Directors.
The Continued Company will be organized under the
laws of the State of
Delaware. The DGCL provides that a Delaware
corporation has the power
generally to indemnify its directors, officers,
employees and other agents
(each, a "Corporate Agent") against expenses and
liabilities (including amounts
paid in settlement) in connection with any proceeding
involving such person by
reason of his being a Corporate Agent, other than a
proceeding by or in the
right of the corporation, if such person acted in good
faith and in a manner he
reasonably believed to be in or not opposed to the
best interests of the
corporation and, with respect to any criminal
proceeding, such person had no
reasonable cause to believe his conduct was unlawful.
In the case of an action
brought by or in the right of the corporation,
indemnification of a Corporate
Agent against expenses is permitted if such person
acted in good faith and in a
manner he reasonably believed to be in or not opposed
to the best interests of
the corporation; however, no indemnification is
permitted in respect of any
claim, issue or matter as to which such person shall
have been adjudged to be
liable to the corporation, unless and only to the
extent that the Court of
Chancery or the court in which such proceeding was
brought shall determine upon
application that despite the adjudication of
liability, but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to
such indemnification. To the extent that a present or
former director or
officer of a corporation has been successful on the
merits or otherwise in the
defense of such proceeding, whether or not by or in
the right of the
corporation, or in the defense of any claim, issue or
matter therein, the
corporation is required to indemnify such person for
expenses in connection
therewith. Expenses incurred by a Corporate Agent in
connection with a
proceeding may, under certain circumstances, be paid
by the corporation in
advance of the final disposition of the proceeding as
the corporation deems
appropriate. The power to indemnify and advance the
expenses under the DGCL
does not exclude other rights to which a Corporate
Agent may be entitled to
under the certificate of incorporation, bylaws,
agreement, vote of stockholders
or disinterested directors or otherwise.
The Company's Delaware Certificate of Incorporation
and
Delaware Bylaws
will provide for the indemnification of the officers
and directors of the
Company for certain expenses, judgments, fines and
payments incurred by them in
connection with the defense or settlement of claims
asserted against them in
their capacities as officers and directors of the
Company to the fullest extent
authorized by the DGCL, provided that such
indemnification is authorized (i) by
a majority vote of the directors who are not parties
to the action, suit or
proceeding, even though less than a quorum, or (ii) if
there are no such
directors, or if such directors so direct, by
independent legal counsel in a
written opinion, or (iii) by the stockholders, or (iv)
by a court of competent
jurisdiction in the State of Delaware. To the extent,
however, that a director
or officer of the Company has been successful on the
merits or otherwise in
defense of any action, suit or proceeding described
above, or in defense of any
claim, issue or matter therein, he or she shall be
indemnified against expenses
(including attorneys' fees) actually and reasonably
incurred by him or her in
connection therewith, without the necessity of
authorization in the specific
case. In addition, expenses incurred by a director or
officer in defending or
investigating a threatened or pending action, suit or
proceeding may be paid by
the Company, upon the determination by the Board of
Directors, in advance of
the final disposition of such action, suit or
proceeding upon receipt of an
undertaking by or on behalf of such director or
officer to repay such amount if
it shall ultimately be determined that he or she is
not entitled to be
indemnified by the Company, provided the Company
approves in advance counsel
selected by the director or officer, which approval
shall not be unreasonably
withheld.
<PAGE>
The Delaware Certificate of Incorporation of the
Company will also contain
provisions which limit the personal liability of
directors to the Company or
its stockholders for monetary damages for breach of
their fiduciary duties as
directors, except for liability: of any director for
any breach of the
director's duty of loyalty to the Company or its
stockholders; for acts of
omissions not in good faith or which involve
intentional misconduct or a
knowing violation of law; for certain unlawful
payments of dividends or stock
repurchases under Section 174 of the DGCL; or for any
transaction from which
the director derives an improper personal benefit.
These provisions do not
limit the rights of the Company or any stockholder to
seek an injunction or any
other non- monetary relief in the event of a breach of
a director's fiduciary
duty. In addition, these provisions apply only to
claims against a director
arising out of his or her role as a director and do
not relieve a director from
liability for violations of statutory law, such as
certain liabilities imposed
on a director under the federal securities laws.
Under the DGCL, a Delaware corporation has the power
to
purchase and
maintain insurance on behalf of any Corporate Agent
against any liabilities
asserted against and incurred by him in such capacity,
whether or not the
corporation has the power to indemnify him against
such liabilities under the
DGCL. The Company currently maintains directors' and
officers' insurance and
intends to maintain such insurance if available at a
reasonable cost.
Reference is made to Sections 102(b)(7) and 145
of the DGCL, in connection
with the above summary of indemnification, insurance
and limitation of
liability.
The purpose of these provisions is to assist the
Company in
retaining
qualified individuals to serve as officers, directors
or other Corporate Agents
of the Company by limiting their exposure to personal
liability for serving as
such.
ITEM 21. Exhibits and Financial Statement
Schedules.
(a) Exhibits
Exhibit
Number Description
3.1 Articles of TSI TelSys Corporation
5.1 Opinion of Venable, Baetjer & Howard, LLP
regarding
legality of
securities being registered.
8.1 Opinion of Venable, Baetjer & Howard, LLP
regarding U.S.
federal tax
matters.
8.2 Opinion of Clark, Drummie & Company regarding
Canadian tax
matters.*
10.1 Employment Agreement dated as of May 20, 1998
between TSI
TelSys
Corporation and Joseph T. Pisula.*
10.2 Company Key Employee Stock Option Incentive
Plan.
10.3 Agreement of Lease dated November 22, 1995 by
and between
Brit Limited
Partnership and TSI TelSys, Inc., as amended by First
Amendment to
Lease dated July 2, 1996 by and between TSI
TelSys, Inc. and Brit
Limited Partnership and by Second Amendment to
Lease dated September
30, 1996, by and between TSI TelSys, Inc.
10.4 Subcontract number NAS5-96-010-27 dated
July 1, 1997
between Unisys
Corporation and TSI TelSys, Inc.*
10.5 Contract dated July 8, 1998 between Cornes
& Co. Ltd,
Tokyo and TSI
TelSys, Inc. (Order No. ZLS-2164/97B).*
10.6 Contract dated July 8, 1998 between Cornes
& Co. Ltd.,
Tokyo and TSI
TelSys, Inc. (Order No. ZLS-2163/97B).*
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Clark, Drummie & Company.*
23.2 Consent of Venable, Baetjer & Howard, LLP.
(included in
Exhibit 5.1).
23.3 Consent of KPMG LLP, Chartered Accountants.
24.1 Power of Attorney (contained on the signature
page).
27.1 Financial Data Schedule
* Portions of this exhibit have been omitted
pursuant to a
request for
confidential treatment.
<PAGE>
ITEM 22. Undertakings.
Insofar as indemnification for liabilities
arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling
persons of the Registrant pursuant to the provisions
described in Item 14
above, 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 of 1933 and
is, therefore,
unenforceable. In the event that a claim for
indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or
paid by a director, officer or controlling person of
the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such
director, officer or controlling person in connection
with the
securities being
registered, 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 of whether such
indemnification by it is
against public policy as expressed in the Securities
Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes
to respond to requests
for information that is incorporated by reference into
the prospectus pursuant
to Item 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 the
registration statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes
to supply by means of
post-effective amendment all information concerning a
transaction, and the
company being acquired involved therein, that was not
the subject of and
included in the registration statement when it became
effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, the
Registrant has duly caused this Registration Statement
to be signed on its
behalf by the undersigned, thereunto duly authorized,
in Columbia, Maryland, on
the 23rd day of December, 1998.
TSI TELSYS
CORPORATION
By: /s/ Joseph
T. Pisula
Joseph T.
Pisula
President
and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby
constitutes and
appoints Joseph T. Pisula and Paul R. Sevigny, either
of whom may act, as their
true and lawful attorneys-in-fact and agents of the
undersigned, with full
power of substitution and resubstitution, for and in
the name, place and stead
of the undersigned, in any and all capacities, to sign
any and all
amendments
(including post-effective amendments) to this
registration statement, to sign
any related registration statement filed pursuant to
Rule 462(b) of the
Securities Act of 1933, and to file the same, with all
exhibits thereto, and
other documents in connection therewith, with the
Securities and Exchange
Commission, and hereby grants to such attorneys-in-
fact and agents full power
and authority to do and perform each and every act and
thing requisite and
necessary to be done, as fully to all intents and
purposes as the undersigned
might or could do in person, hereby ratifying and
confirming all that said
attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the
Securities Act of 1933, this
Registration Statement has been signed by the
following persons in the
capacities and on the dates indicated.
Signature Title
Date
/s/ Joseph T. Pisula President, Chief Executive
December 23,
1998
Joseph T. Pisula Officer (Principal
Executive Officer)
/s/ Paul R. Sevigny Vice President and
December 23,
1998
Paul R. Sevigny Chief Financial Officer and
Director
(Principal Financial and
Accounting Officer)
/s/ Dr. Abdul Rahman Bin Abdullah Director
December 23, 1998
Dr. Abdul Rahman Bin Abdullah
/s/ Garry R. Bahsler
Garry R. Bahsler Director
December 23,
1998
<PAGE>
TSI TelSys Corporation
7100 Columbia Gateway
Drive
Columbia, Maryland
21046
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned hereby appoints Garry R.
Bahsler and Paul Sevigny and
each of them as proxies of the undersigned with full
power of substitution, to
act and vote at the Special Meeting of Stockholders
of TSI TelSys Corporation
(the "Company") to be held on ________ __, 1999 and
at any adjournment thereof
(the "Special Meeting"). The undersigned acknowledges
receipt of a notice of
the meeting dated ________ __, 1999.
The shares represented by this proxy will be
voted as directed below
or, if a direction is not indicated, will be voted
"FOR" the proposal referred
to below.
1. Approval of the proposed reduction and change
in authorized
share
capital by (a) reducing the authorized number of
Common
Shares from
100,000,000 shares to 40,000,000 shares and
changing their designation
to U.S. $.01 par value Common Shares, (b) canceling
the
unissued Senior
Preferred Shares, Series 1 as a series of shares and
reducing the
authorized number of Senior Preferred Shares from
100,000,000 to
2,000,000 shares and changing their designation to
U.S.
$5.00 par value
Preferred Shares, and (c) deleting the Junior
Preferred
Shares as a
class of shares.
FOR AGAINST ABSTAIN
2. Approval of the proposed discontinuance of the
Company from
the Province
of New Brunswick, Canada and continuance to the
State of Delaware,
United States.
FOR AGAINST ABSTAIN
3. Approval of the proposed amendment to the
Company's Key
Employee Stock
Option Incentive Plan (the "Plan") to reduce certain
restrictions on
the number of options which can be granted
under the Plan.
FOR AGAINST ABSTAIN
4. To increase the size of the Board of Directors
from six to
seven members
and to elect _______to the Board of Directors of the
Company.
Date: ______________, 1999
Signature:
______________________________________________________
________
(Please sign name exactly as stock is
registered, as
indicated
on the Notice of Special Meeting of
Shareholders accompanying this
Proxy. If you are signing in a representative
capacity, please
indicate the capacity in which you are
signing.)
(PRINT NAME)
____________________________________________________
_
CAPACITY (if applicable)
_________________________________________
No. of Common Shares owned: ______________
Please return your proxy to Garry Bahsler,
Secretary, TSI TelSys Corporation,
7100 Columbia Gateway Drive, Columbia, Maryland
21046, prior to the date of the
Special Meeting.
<PAGE>
Appendix
"A"
CERTIFICATE OF
DO
ME
ST
IC
AT
IO
N
OF
TSI TELSYS
CORPORATION
TSI TelSys Corporation (the
"Corporation"), a corporation organized
and existing under the laws of the Province of New
Brunswick, Country of
Canada, does hereby certify as follows:
FIRST: The Corporation was continued as a New
Brunswick, Canada, corporation on
the 15th day of April 1996, and was first formed as a
corporation named
International Contour Technology Inc. under the
Company Act of British
Columbia, Canada, on the 22nd day of September, 1987,
which name became TSI
TelSys Corporation under the Company Act of British
Columbia, Canada, on the
27th of October, 1995.
SECOND: The name of the Corporation immediately prior
to the filing of this
Certificate of Domestication was TSI TelSys
Corporation.
THIRD: The name of the Corporation under which it is
filing a Certificate of
Incorporation is TSI TelSys Corporation.
FOURTH: The principal place of business of the
Corporation immediately prior to
the filing of this Certificate of Domestication was
the Country of the United
States of America.
FIFTH: A Certificate of Incorporation of TSI TelSys
Corporation is being filed
contemporaneously with this Certificate of
Domestication.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Domestication to be signed by Garry R.
Bahsler, its Secretary, who is
authorized to sign this Certificate of Domestication
on behalf of the
Corporation, this ___day of December, 1998.
TSI TelSys
Corporation
By:
________________________________
Garry
R. Bahsler, Secretary
<PAGE>
Appendix "B"
CERTIFICATE OF
INCORPORATION
OF
TSI TELSYS
CORPORATION
FIRST: The name of the
corporation (the "Corporation") is TSI
TelSys Corporation.
SECOND: The address of the Corporation's
registered office in the
State of Delaware is 1013 Centre Road in the city of
Wilmington in the county
of New Castle. The name of the registered agent at
such address is CSC
Corporation.
THIRD: The purpose of the corporation is
to engage in any lawful
act or activity for which corporations may be
organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the
Corporation shall
have authority to issue is 40,000,000 shares of common
stock and the par value
of each such share is .01 Dollars ($.01) per share;
and 2,000,000 shares of
senior preferred stock and the par value of each such
share is Five Dollars
($5.00). The Board of Directors is hereby expressly
authorized to adopt, by
resolution or resolutions, a certificate of
designations to provide for the
issuance of any class or of any series of any class of
stock, the number of
shares of such class or series of any class of stock,
and the powers,
designations, preferences and relative, participating,
optional or other
rights, if any, or the qualifications, limitations or
restrictions thereof, if
any.
FIFTH: The name and mailing address of the
incorporator are
_________.
SIXTH: The names and mailing addresses of the
persons who are to
serve as directors until the first annual meeting of
stockholders, or until
their successors are elected and qualify, are Joseph
T. Pisula, Dr. Wan Muhamad
Hasni Wan Sulaiman, Paul R. Sevigny, Garry R. Bahsler,
Dr. Abdul Rahman Bin
Abdullah, Azman Hussin and __________.
SEVENTH: To the maximum extent permitted by
applicable law as
amended from time to time, the Corporation shall
indemnify and advance expenses
to any person who was or is a party, or is threatened
to be made a party, to
any threatened, pending or completed action, suit or
proceeding (other than an
action by or in the right of the Corporation) by
reason of the fact that he is
or was a director or officer of the Corporation, or is
or was serving at the
request of the Corporation as a director or officer of
another corporation,
partnership, joint venture, trust or other enterprise,
against expenses
(including attorneys' fees), judgments, fines and
amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or
proceeding, if he acted in good faith and in a manner
he reasonably believed to
be in or not opposed to the best interests of the
Corporation, or satisfies the
standard of conduct required by applicable law.
EIGHTH: The liability of the directors of the
Corporation to the
Corporation and its stockholders for monetary damages
shall be limited to the
maximum extent permitted by Delaware law. No amendment
or repeal of this
paragraph, or the adoption of any provision of the
Corporation's charter
inconsistent with this paragraph, shall apply to or
affect in any respect the
rights to limitation of liability of any director of
the Corporation with
respect to any alleged act or omission which occurred
prior to such amendment,
repeal or adoption.
NINTH: The Board of Directors shall have
the power to adopt,
amend or repeal bylaws.
IN WITNESS WHEREOF, the undersigned, being
the sole incorporator
herein named, for the purpose of forming a Delaware
corporation, has executed,
signed and acknowledged this certificate of
incorporation this ____ day of
__________, 1999.
__________________
____________
Incorporator
<PAGE>
Appendix "C"
BYLAWS
OF
TSI TELSYS CORPORATION
ARTICLE I
Stockholders
Section 1.1 Annual Meetings. An annual
meeting of stockholders
shall be held for the election of directors at such
date, time and place, either
within or outside of the State of Delaware, as may be
designated by resolution
of the Board of Directors from time to time. Any
other proper business may be
transacted at the annual meeting.
Section 1.2 Special Meetings. A special
meeting of stockholders
for any purpose or purposes may be called at any time
by the Board of
Directors, or by a committee of the Board of Directors
which has been duly
designated by the Board of Directors and whose powers
and authority, as
expressly provided in a resolution of the Board of
Directors, include the power
to call such meetings, but such special meetings may
not be called by any other
person or persons.
Section 1.3 Notice of Meetings. Whenever
stockholders are
required or permitted to take any action at a
meeting, a written notice of the
meeting shall be given which shall state the place,
date and hour of the
meeting, and, in the case of a special meeting, the
purpose or purposes for
which the meeting is called. Unless otherwise
provided by law, the certificate
of incorporation or these bylaws, the written notice
of any meeting shall be
given not less than ten nor more than sixty days
before the date of the meeting
to each stockholder entitled to vote at such meeting.
If mailed, such notice
shall be deemed to be given when deposited in the
mail, postage prepaid,
directed to the stockholder at his/her address as it
appears on the records of
the corporation.
Section 1.4 Adjournments. Any meeting of
stockholders, annual or
special, may adjourn from time to time to reconvene at
the same or some other
place, and notice need not be given of any such
adjourned meeting if the time
and place thereof are announced at the meeting at
which the adjournment is
taken. At the adjourned meeting the corporation may
transact any business
which might have been transacted at the original
meeting. If the adjournment
is for more than thirty days, or if, after the
adjournment, a new record date
is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be
given to each stockholder of record entitled to vote
at the meeting.
Section 1.5 Quorum. Except as otherwise
provided by law, the
certificate of incorporation or these bylaws, at each
meeting of stockholders,
the presence in person or by proxy of the holders of
shares of stock having a
majority of the votes which could be cast by the
holders of all outstanding
shares of stock entitled to vote at the meeting shall
be necessary and
sufficient to constitute a quorum. In the absence of
a quorum, the
stockholders so present may, by majority vote, adjourn
the meeting from time to
time in the manner provided in Section 1.4 of these
bylaws until a quorum shall
attend. Shares of its own stock belonging to the
corporation or to another
corporation, if a majority of the shares entitled to
vote in the election of
directors of such other corporation is held, directly
or indirectly, by the
corporation, shall neither be entitled to vote nor be
counted for quorum
purposes, provided, however, that the foregoing shall
not limit the right of
the corporation to vote stock, including but not
limited to its own stock, held
by it in a fiduciary capacity.
Section 1.6 Organization. Meetings of
stockholders shall be
presided over by the Chairman of the Board, if any, or
in his/her absence by
the Vice Chairman of the Board, if any, or in his/her
absence by the President,
or in his absence by a Vice President, or in the
absence of the foregoing
persons by a chairman designated by the Board of
Directors, or in the absence
of such designation by a chairman chosen at the
meeting. The Secretary shall
act as secretary of the meeting, but in his/her
absence, the chairman of the
meeting may appoint any person to act as secretary of
the meeting.
<PAGE>
Section 1.7 Voting; Proxies. Except as
otherwise provided by the
certificate of incorporation, each stockholder
entitled to vote
at any meeting
of stockholders shall be entitled to one vote for each
share of stock held by
him/her which has voting power upon the matter in
question. Each
stockholder
entitled to vote at a meeting of stockholders may
authorize another person or
persons to act for him/her by proxy, but no such proxy
shall be voted or acted
upon after three years from its date, unless the proxy
provides for a longer
period. A duly executed proxy shall be irrevocable if
it states that it is
irrevocable and if, and only as long as, it is coupled
with an interest
sufficient in law to support an irrevocable power. A
stockholder may revoke
any proxy which is not irrevocable by attending the
meeting and voting in
person or by filing an instrument in writing revoking
the proxy or another duly
executed proxy bearing a later date with the Secretary
of the corporation.
Voting at meetings of stockholders need not be by
written ballot and need not
be conducted by inspectors of election unless so
determined by the holders of
shares of stock having a majority of the votes which
could be cast by the
holders of all outstanding shares of stock entitled to
vote thereon which are
present in person or by proxy at such meeting. At all
meetings of stockholders
for the election of directors, a plurality of the
votes cast shall be
sufficient to elect. All other elections and
questions shall, unless otherwise
provided by law, the certificate of incorporation or
these bylaws, be decided
by the vote of the holders of shares of stock having a
majority of the votes
which could be cast by the holders of all shares of
stock entitled to vote
thereon which are present in person or represented by
proxy at the meeting.
Section 1.8 Fixing Date for Determination of
Stockholders of
Record. In order that the corporation may determine
the stockholders entitled
to notice of or to vote at any meeting of stockholders
or any adjournment
thereof, or to express consent to corporate action in
writing without a
meeting, or entitled to receive payment of any
dividend or other distribution
or allotment of any rights, or entitled to exercise
any rights in respect of
any change, conversion or exchange of stock or for the
purpose of any other
lawful action, the Board of Directors may fix a record
date, which record date
shall not precede the date upon which the resolution
fixing the record date is
adopted by the Board of Directors and which record
date: (1) in the case of
determination of stockholders entitled to vote at any
meeting of stockholders
or adjournment thereof, shall, unless otherwise
required by law, not be more
than sixty nor less than ten days before the date of
such meeting; (2) in the
case of determination of stockholders entitled to
express consent to corporate
action in writing without a meeting, shall not be more
than ten days from the
date upon which the resolution fixing the record date
is adopted by the Board
of Directors; and (3) in the case of any other action,
shall not be more than
sixty days prior to such other action. If no record
date is fixed: (1) the
record date for determining stockholders entitled to
notice of or to vote at a
meeting of stockholders shall be at the close of
business on the day next
preceding the day on which notice is given, or, if
notice is waived, at the
close of business on the day next preceding the day on
which the meeting is
held; (2) the record date for determining stockholders
entitled to express
consent to corporate action in writing without a
meeting when no prior action
of the Board of Directors is required by law, shall be
the first date on which
a signed written consent setting forth the action
taken or proposed to be taken
is delivered to the corporation in accordance with
applicable law, or, if prior
action by the Board of Directors is required by law,
shall be at the close of
business on the day on which the Board of Directors
adopts the resolution
taking such prior action; and (3) the record date for
determining stockholders
for any other purpose shall be at the close of
business on the day on which the
Board of Directors adopts the resolution relating
thereto. A determination of
stockholders of record entitled to notice of or to
vote at a meeting of
stockholders shall apply to any adjournment of the
meeting, provided, however,
that the Board of Directors may fix a new record date
for the adjourned
meeting.
<PAGE>
Section 1.9 List of Stockholders
Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every
meeting of stockholders,
a complete list of the stockholders entitled to vote
at the meeting, arranged
in alphabetical order, and showing the address of each
stockholder and the
number of shares registered in the name of each
stockholder. Such list shall
be open to the examination of any stockholder, for any
purpose germane to the
meeting, during ordinary business hours, for a period
of at least ten days
prior to the meeting, either at a place within the
city where the meeting is to
be held, which place shall be specified in the notice
of the meeting, or, if
not so specified, at the place where the meeting is to
be held. The list shall
also be produced and kept at the time and place of the
meeting during the whole
time thereof and may be inspected by any stockholder
who is present. Upon the
willful neglect or refusal of the directors to produce
such a list at any
meeting for the election of directors, they shall be
ineligible for election to
any office at such meeting. The stock ledger shall be
the only evidence as to
who are the stockholders entitled to examine the stock
ledger, the list of
stockholders or the books of the corporation, or to
vote in person or by proxy
at any meeting of stockholders.
Section 1.10 Action By Consent of
Stockholders. Unless otherwise
restricted by the certificate of incorporation, any
action required or
permitted to be taken at any annual or special meeting
of the stockholders may
be taken without a meeting, without prior notice and
without a vote, if a
consent in writing, setting forth the action so taken,
shall be signed by the
holders of outstanding stock having not less than the
minimum number of votes
that would be necessary to authorize or take such
action at a meeting at which
all shares entitled to vote thereon were present and
voted.
Prompt notice of
the taking of the corporate action without a meeting
by less than unanimous
written consent shall be given to those stockholders
who have not consented in
writing.
<PAGE>
ARTICLE II
Board of Directors
Section 2.1 Number; Qualifications. The
Board of Directors shall
consist of a minimum of five and a maximum of fifteen
members, the number
thereof to be determined from time to time by
resolution of the Board of
Directors. Directors need not be stockholders.
Section 2.2 Election; Resignation; Removal;
Vacancies. The Board
of Directors shall initially consist of the persons
named as directors in the
certificate of incorporation, and each director so
elected shall hold office
until the first annual meeting of stockholders or
until his/her successor is
elected and qualified. At the first annual meeting of
stockholders and at each
annual meeting thereafter, the stockholders shall
elect directors each of whom
shall hold office for a term of one year or until
his/her successor is elected
and qualified. Any director may resign at any time
upon written notice to the
corporation. Any newly created directorship or any
vacancy occurring in the
Board of Directors for any cause may be filled by a
majority of the remaining
members of the Board of Directors, although such
majority is less than a
quorum, or by a plurality of the votes cast at a
meeting of stockholders, and
each director so elected shall hold office until the
expiration of the term of
office of the director whom he/she has replaced or
until his/her successor is
elected and qualified.
Section 2.3 Regular Meetings. Regular
meetings of the Board of
Directors may be held at such places within or outside
of the State of Delaware
and at such times as the Board of Directors may from
time to time determine,
and if so determined notices thereof need not be
given.
Section 2.4 Special Meetings. Special
meetings of the Board of
Directors may be held at any time or place within or
outside of the State of
Delaware whenever called by the President, any Vice
President, the Secretary,
or by any member of the Board of Directors. Notice of
a special meeting of the
Board of Directors shall be given by the person or
persons calling the meeting
at least twenty-four hours before the special meeting.
Section 2.5 Telephonic Meetings
Permitted. Members of the Board
of Directors, or any committee designated by the Board
of Directors, may
participate in a meeting thereof by means of
conference telephone or similar
communications equipment by means of which all persons
participating in the
meeting can hear each other, and participation in a
meeting pursuant to this
bylaw shall constitute presence in person at such
meeting.
Section 2.6 Quorum; Vote Required for
Action. At all meetings of
the Board of Directors, a majority of the whole Board
of Directors shall
constitute a quorum for the transaction of business.
Except in cases in which
the certificate of incorporation or these bylaws
otherwise provide, the vote of
a majority of the directors present at a meeting at
which a quorum is present
shall be the act of the Board of Directors.
Section 2.7 Organization. Meetings of
the Board of Directors
shall be presided over by the Chairman of the Board,
if any, or in his/her
absence by the Vice Chairman of the Board, if any, or
in his/her absence by the
President, or in their absence by a chairman chosen at
the meeting. The
Secretary shall act as secretary of the meeting, but
in his absence the
chairman of the meeting may appoint any person to act
as secretary of the
meeting.
Section 2.8 Informal Action by
Directors. Unless otherwise
restricted by the certificate of incorporation or
these bylaws, any action
required or permitted to be taken at any meeting of
the Board of Directors, or
of any committee thereof, may be taken without a
meeting if all members of the
Board of Directors or such committee, as the case may
be, consent thereto in
writing, and the writing or writings are filed with
the minutes of proceedings
of the Board of Directors or such committee.
<PAGE>
Section 2.9 Committees. The Board of
Directors may, by
resolution passed by a majority of the whole Board of
Directors, designate one
or more committees, each committee to consist of one
or more of the directors
of the corporation. The Board of Directors may
designate one or more directors
as alternate members of any committee, who may replace
any absent or
disqualified member at any meeting of the committee.
In the absence or
disqualification of a member of the committee, the
member or members thereof
present at any meeting and not disqualified from
voting, whether or not he/she
or they constitute a quorum, may unanimously appoint
another member of the
Board of Directors to act at the meeting in place of
any such absent or
disqualified member. Any such committee, to the
extent permitted by law and to
the extent provided in the resolution of the Board of
Directors, shall have and
may exercise all the powers and authority of the Board
of Directors in the
management of the business and affairs of the
corporation, and may authorize
the seal of the corporation to be affixed to all
papers which may require it.
Section 2.10 Committee Rules. Unless
the Board of Directors
otherwise provides, each committee designated by the
Board of Directors may
make, alter and repeal rules for the conduct of its
business. In the absence
of such rules each committee shall conduct its
business in the
same manner as
the Board of Directors conducts its business pursuant
to Article II of these
bylaws.
ARTICLE III
Officers
Section 3.1 Executive Officers; Election;
Qualifications; Term
of Office; Resignation; Removal; Vacancies. The Board
of Directors shall elect
a President and Secretary, and it may, if it so
determines, choose a Chairman
of the Board and a Vice Chairman of the Board from
among its members. The
Board of Directors may also choose one or more Vice
Presidents, one or more
Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers. Each
such officer shall hold office until the first meeting
of the Board of
Directors after the annual meeting of stockholders
next succeeding his/her
election, and until his/her successor is elected and
qualified or until his/her
earlier resignation or removal. Any officer may resign
at any time upon written
notice to the corporation. The Board of Directors may
remove any officer with
or without cause at any time, but such removal shall
be without prejudice to
the contractual rights of such officer, if any, with
the corporation. Any
number of offices may be held by the same person. Any
vacancy occurring in any
office of the corporation by death, resignation,
removal or otherwise may be
filled for the unexpired portion of the term by the
Board of Directors at any
regular or special meeting.
Section 3.2 Powers and Duties of
Executive Officers. The
officers of the corporation shall have such powers and
duties in the management
of the corporation as may be prescribed by the Board
of Directors and, to the
extent not so provided, as generally pertain to their
respective offices,
subject to the control of the Board of Directors. The
Board of Directors may
require any officer, agent or employee to give
security for the faithful
performance of his duties.
ARTICLE IV
Stock
Section 4.1 Certificates. Every holder
of stock shall be
entitled to have a certificate signed by or in the
name of the
corporation by
the Chairman or Vice Chairman of the Board of
Directors, if any, or the
President or a Vice President, and by the Treasurer or
an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the
corporation, certifying the
number of shares owned by him/her in the corporation.
Any of or all the
signatures on the certificate may be a facsimile. In
case any officer,
transfer agent, or registrar who has signed or whose
facsimile signature has
been placed upon a certificate shall have ceased to be
such officer, transfer
agent, or registrar before such certificate is issued,
it may be issued by the
corporation with the same effect as if he/she were
such officer, transfer
agent, or registrar at the date of issue.
Section 4.2 Lost, Stolen or Destroyed Stock
Certificates;
Issuance of New Certificates. The corporation may
issue a new certificate of
stock in the place of any certificate theretofore
issued by it, alleged to have
been lost, stolen or destroyed, and the corporation
may require the owner of
the lost, stolen or destroyed certificate, or his/her
legal representative, to
give the corporation a bond sufficient to indemnify it
against any claim that
may be made against it on account of the alleged loss,
theft or destruction of
any such certificate or the issuance of such new
certificate. <PAGE>
ARTICLE V
Indemnification
Section 5.1 Right to Indemnification. The
corporation shall
indemnify and hold harmless, to the fullest extent
permitted by applicable law
as it presently exists or may hereafter be amended,
any person who was or is
made or is threatened to be made a party or is
otherwise involved in any
action, suit or proceeding, whether civil, criminal,
administrative or
investigative (a "proceeding") by reason of the fact
that he/she, or a person
for whom he/she is the legal representative, 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 or
of a partnership, joint venture, trust, enterprise or
non-profit entity,
including service with respect to employee benefit
plans, against expenses
(including reasonable attorneys' fees), judgments,
fines and
amounts paid in
settlement actually and reasonably incurred by him in
connection with such
action, suit or proceeding if he/she acted in good
faith and in a manner he/she
reasonably believed to be in or not opposed to the
best interests of the
corporation, and, with respect to any criminal action
or proceeding, had no
reasonable cause to believe this conduct was unlawful.
The corporation shall
be required to indemnify a person in connection with a
proceeding initiated by
such person only if the proceeding was authorized by
the Board of Directors of
the corporation.
Section 5.2 Prepayment of Expenses. The
corporation shall pay
the expenses incurred in defending any proceeding in
advance of its final
disposition, provided, however, that the payment of
expenses incurred by a
director or officer in advance of the final
disposition of the proceeding shall
be made only upon receipt of an undertaking by the
director or officer to repay
all amounts advanced if it should be ultimately
determined that the director or
officer is not entitled to be indemnified under this
Article or otherwise.
Section 5.3 Claims. If a claim for
indemnification or payment
of expenses under this Article is not paid in full
within sixty days after a
written claim therefor has been received by the
corporation, the claimant may
file suit to recover the unpaid amount of such claim
and, if successful in
whole or in part, shall be entitled to be paid the
expense of prosecuting such
claim: In any such action the corporation shall have
the burden of proving
that the claimant was not entitled to the requested
indemnification or payment
of expenses under applicable law.
Section 5.4 Non-Exclusivity of Rights.
The rights conferred on
any person by this Article V shall not be exclusive of
any other rights which
such person may have or hereafter acquire under any
statute, provision of the
certificate of incorporation, these bylaws, agreement,
vote of stockholders or
disinterested directors or otherwise.
Section 5.5 Other Indemnification. The
corporation's obligation,
if any, to indemnify any person who was or is serving
at its request as a
director, officer, employee or agent of another
corporation, partnership, joint
venture, trust, enterprise or non-profit entity shall
be reduced by any amount
such person may collect as indemnification from such
other corporation,
partnership, joint venture, trust, enterprise or non-
profit enterprise.
Section 5.6 Amendment or Repeal. Any
repeal or modification of
the foregoing provisions of this Article V shall not
adversely affect any right
or protection hereunder of any person in respect of
any act or omission
occurring prior to the time of such repeal or
modification.
<PAGE>
ARTICLE VI
Miscellaneous
Section 6.1 Fiscal Year. The fiscal
year of the corporation
shall be determined by resolution of the Board of
Directors.
Section 6.2 Seal. The corporate seal
shall have the name of the
corporation inscribed thereon and shall be in such
form as may be approved from
time to time by the Board of Directors.
Section 6.3 Wavier of Notice of Meetings of
Stockholders,
Directors and Committees. Any written waiver of
notice, signed by the person
entitled to notice, whether before or after the time
stated therein, shall be
deemed equivalent to notice. Attendance of a person
at a meeting shall
constitute a waiver of notice of such meeting, except
when the person attends a
meeting for the express purpose of objecting, at the
beginning of the meeting,
to the transaction of any business because the meeting
is not lawfully called
or convened. Neither the business to be transacted
at, nor the purpose of any
regular or special meeting of the stockholders,
directors, or members of a
committee of directors need be specified in any
written waiver of notice.
Section 6.4 Interested Directors; Quorum. No
contract or
transaction between the corporation and one or more of
its directors or
officers, or between the corporation and any other
corporation, partnership,
association, or other organization in which one or
more of its directors or
officers are directors or officers, or have a
financial interest, shall be void
or voidable solely for this reason, or solely because
the director or officer
is present at or participates in the meeting of the
Board of Directors or
committee thereof which authorizes the contract or
transaction, or solely
because his/her or their votes are counted for such
purpose, if: (1) the
material facts as to his/her relationship or interest
and as to the contract or
transaction are disclosed or are known to the Board of
Directors or the
committee, and the Board of Directors or committee in
good faith authorizes the
contract or transaction by the affirmative votes of a
majority of the
disinterested directors, even though the disinterested
directors be less than a
quorum; or (2) the material facts as to his/her
relationship or interest and as
to the contract or transaction are disclosed or are
known to the stockholders
entitled to vote thereon, and the contract or
transaction is specifically
approved in good faith by vote of the stockholders; or
(3) the contract or
transaction is fair as to the corporation as of the
time it is authorized,
approved or ratified, by the Board of Directors, a
committee thereof, or the
stockholders. Common or interested directors may be
counted in determining the
presence of a quorum at a meeting of the Board of
Directors or of a committee
which authorizes the contract or transaction.
Section 6.5 Form of Records. Any
records maintained
by the
corporation in the regular course of its business,
including its stock ledger,
books of account, and minute books, may be kept on, or
be in the form of, punch
cards, magnetic tape, photographs, microphotographs,
or any other information
storage device, provided that the records so kept can
be converted into clearly
legible form within a reasonable time. The
corporation shall so convert any
records so kept upon the request of any person
entitled to inspect the same.
Section 6.6 Amendment of Bylaws. These
bylaws may
be altered or
repealed, and new bylaws made, by the Board of
Directors, but the stockholders
may make additional bylaws and may alter and repeal
any bylaws whether adopted
by them or otherwise.
<PAGE>
Appendix "D"
TSI TELSYS CORPORATION (the
"Company") TEXT OF
SPECIAL RESOLUTION
AUTHORIZING CHANGE OF COMMON
SHARES
RESOLVED as a Special Resolution that:
1. the Articles of the Company be amended to
change the
designation of the
common shares from without par value to with par value
of one cent ($0.01)
United States of America currency per share (the
"Change of Designation") and
to change the limitation on the number of common
shares that the Company is
authorized to issue by providing that the Company is
authorized to issue forty
million (40,000,000) common shares (the "Change of
Limitation");
2. the Directors of the Company be and they are
hereby authorized to effect
the said Change of Designation and Change of
Limitation of common shares and to
take such steps as may be necessary to implement the
said Change of Designation
and Change of Limitation, including but not limited
to, the amendment of the
Articles of Continuation as may be required by the
Business Corporations Act
(New Brunswick), and make such other changes to the
proposed Change of
Designation and Change of Limitation as may be
required by the regulatory
authorities or otherwise if such change is deemed in
the absolute discretion of
the directors to be in the best interests of the
Company; and
3. the Directors of the Company be and they are
hereby authorized to
postpone delivery to the Director under the Business
Corporations Act (New
Brunswick), or to abandon the application for the
proposed Change of
Designation and Change of Limitation, without further
approval by the
shareholders for the Company, at any time prior to the
issuance of Articles of
Amendment by the Director under the Business
Corporations Act (New Brunswick)
if such postponement or abandonment is deemed in the
absolute discretion of the
directors to be in the best interests of the Company.
<PAGE>
TSI TELSYS CORPORATION (the
"Company")
TEXT OF SPECIAL RESOLUTION
AUTHORIZING CHANGE OF SENIOR
PREFERRED SHARES
RESOLVED as a Special Resolution that:
1. the Articles of the Company be amended to
decrease the authorized
capital of the Company by canceling the unissued
senior preferred shares,
series one and deleting the rights, privileges,
restrictions and conditions
attaching to the Senior Preferred shares, series one
(the "Cancellation of
Senior Preferred Shares Series One") and to change the
designation of the
senior preferred shares from without par value to par
value of five dollars (5)
United States of America currency per share (the
"Change of Designation") and
to change the limitation on the number of senior
preferred shares that the
Company is authorized to issue by providing that the
Company is authorized to
issue two million (2,000,000) senior preferred shares
(the "Change of
Limitation");
2. the Directors of the Company be and they are
hereby authorized to effect
the said Cancellation of Senior Preferred Shares
Series One, Change of
Designation and Change of Limitation of senior
preferred shares and to take
such steps as may be necessary to implement the said
Cancellation of Senior
Preferred Shares Series One, Change of Designation and
Change of Limitation,
including but not limited to, the amendment of the
Articles of Continuation as
may be required by the Business Corporations Act (New
Brunswick), and make such
other changes to the proposed Cancellation of Senior
Preferred Shares Series
One, Change of Designation and Change of Limitation as
may be required by the
regulatory authorities or otherwise if such change is
deemed in the absolute
discretion of the directors to be in the best interest
of the Company; and
3. the Directors of the Company be and they are
hereby authorized to
postpone delivery to the Director under the Business
Corporations Act (New
Brunswick), or to abandon the application for the
proposed Cancellation of
Senior Preferred Shares Series One, Change of
Designation and Change of
Limitation, without further approval by the
shareholders for the Company, at
any time prior to the issuance of Articles of
Amendment by the Director under
the Business Corporations Act (New Brunswick) if such
postponement or
abandonment is deemed in the absolute discretion of
the directors to be in the
best interests of the Company.
<PAGE>
RESOLUTION OF
TSI TELSYS CORPORATION (the
"Company")
AUTHORIZING CANCELLATION OF JUNIOR
PREFRRED SHARES
RESOLVED:
1. the Articles of the Company be amended to
decrease the authorized
capital of the Company by canceling the unissued
junior preferred shares and
deleting the rights, privileges, restrictions and
conditions attaching to the
junior preferred shares (the "Cancellation of Junior
Preferred Shares");
2. the Directors of the Company be and they are
hereby authorized to effect
the said Cancellation of Junior Preferred Shares and
to take such steps as may
be necessary to implement the said Cancellation of
Junior Preferred Shares,
including but not limited to, the amendment of the
Articles of Continuation as
may be required by the Business Corporations Act (New
Brunswick), and make such
other changes to the proposed cancellation of Junior
Preferred shares as may be
required by the regulatory authorities or otherwise if
such change is deemed in
the absolute discretion of the directors to be in the
best interest of the
Company; and
3. the Directors of the Company be and they are
hereby authorized to
postpone delivery to the Director under the Business
Corporations Act (New
Brunswick), or to abandon the application for the
proposed Cancellation of
Junior Preferred Shares, without further approval by
the shareholders for the
Company, at any time prior to the issuance of Articles
of Amendment by the
Director under the Business Corporations Act (New
Brunswick) if such
postponement or abandonment is deemed in the absolute
discretion of the
directors to be in the best interests of the Company.
<PAGE>
RESOLUTION OF
TSI TELSYS CORPORATION (the
"Company")
AUTHORIZING DISCONTINUANCE AND
CONTINUANCE
RESOLVED:
1. The Company discontinue in New Brunswick and
continue in Delaware and
the Directors of the Company be and they are hereby
authorized and directed to
make applications pursuant to: (i) section 127 of the
Business Corporations Act
of New Brunswick (the "NBBCA") to discontinue the
Company from New Brunswick
(the "Discontinuance"); and (ii) section 388 of the
Delaware General
Corporation Law (the "DGCL") to continue the Company
as if it had been
incorporated under the DGCL (the "Continuance");
2. the Directors of the Company be and they are
hereby authorized to effect
the said Discontinuance and Continuance and to take
such steps as may be
necessary to implement the said Discontinuance and
Continuance, including but
not limited to filing Articles of Discontinuance as
may be required by the
NBBCA and Articles of Continuance under the DGCL, and
make such other changes
to the proposed discontinuance and continuance as may
be required by the
regulatory authorities or otherwise if such change is
deemed in the absolute
discretion of the directors to be in the best
interests of the Company; and
3. the Directors of the Company be and they are
hereby authorized to
postpone delivery to the Director under the NBBCA and
the DGCL or to abandon
the application for the proposed Discontinuance and
Continuance, without
further approval by the shareholders for the Company,
at any time prior to the
issuance of Articles of Continuance by the Director
under the DGCL if such
postponement or abandonment is deemed in the absolute
discretion of the
directors to be in the best interests of the Company.
<PAGE>
RESOLUTION OF
TSI TELSYS CORPORATION (the
"Company")
AUTHORIZING AMENDMENT TO THE KEY EMPLOYEE STOCK OPTION
INCENTIVE PLAN
RESOLVED:
1. The Company's Key Employee Stock Option
Incentive Plan (the "Plan") be
amended (i) to remove the 10% limitation on the number
of options which may be
granted to "Insiders" (which are generally defined as
executive officers and
directors of the Company and its subsidiaries); (ii)
to remove the 10%
limitation on the number of shares which may be issued
to Insiders on the
exercise of options within a one year period; and
(iii) to remove the 5%
limitation on the number of shares which may be issued
to any one Insider and
such Insider's associates within a one year period
(collectively
the "Plan
Amendment"); and
2. the Directors of the Company be and they are
hereby
authorized to effect
the Plan Amendment and to take such steps as may be
necessary to implement the
Plan Amendment, including making changes to the
proposed Plan Amendment, as may
be required by the regulatory authorities or
otherwise if such change is deemed
in the absolute discretion of the directors to be in
the best interests of the
Company.
<PAGE>
RESOLUTION OF
TSI TELSYS CORPORATION (the
"Company")
INCREASE IN THE SIZE OF THE BOARD
OF DIRECTORS AND ELECTION
OF ____________
That the size of the Board of Directors shall be
increased from six
to seven members and that ________ is hereby elected
to the Board of Directors
of the Company until the next annual meeting of
shareholders of the Company or
until his successor is elected or appointed.
<PAGE>
Appendix "E"
Section 131 of the New Brunswick Business
Corporations Act
131(1) Subject to sections 132 and 166, a holder of
shares of any class of a
corporation may dissent if the corporation is subject
to an order under
paragraph 128(4)(d) that affects the holder or if the
corporation resolves to
(a) amend its articles under section 113 to add,
change or
remove
restrictions on the transfer of shares of a class or
series
of the shares
of the corporation;
(b) amend its articles under section 113 to add,
change or
remove any
restriction upon the business or businesses that the
corporation may
carry on;
(c) amend its articles under section 113 to provide
that
meetings of the
shareholders may be held outside New Brunswick at
one or more specified
places;
(d) amalgamate with another corporation,
otherwise than under section 123;
(e) be continued under the laws of another
jurisdiction under section
127;or
(f) sell, lease or exchange all or substantially all
its
property under
subsection 130(1).
131(2) A holder of shares of any class or series of
shares entitled to vote
under section 115 may dissent if the corporation
resolves to amend its articles
in a manner described in that section.
131(3) In addition to any other right he may have, but
subject to subsection
(26), a shareholder who complies with this section is
entitled, when the action
approved by the resolution from which he dissents
becomes effective, or an
order is made under subsection 128(5), to be paid by
the corporation the fair
value of the shares held by him in respect of which he
dissents, determined as
of the close of business on the day before the
resolution is adopted or an
order is made, but in determining the fair value of
the shares any change in
value reasonably attributable to the anticipated
adoption of the resolution
shall be excluded.
131(4) A dissenting shareholder may only claim under
this section with respect
to all the shares of a class held by him on behalf of
any one beneficial owner
and registered in the name of the dissenting
shareholder.
131(5) A dissenting shareholder shall send to the
registered office of the
corporation, at or before any meeting of shareholders
at which a resolution
referred to in subsection (1) or (2) is to be voted
on, a written objection to
the resolution, unless the corporation did not give
notice to the shareholder
of the purpose of the meeting or of his right to
dissent.
131(6) The corporation shall, within ten days after
the shareholders adopt the
resolution, send to each shareholder who has sent the
objection referred to in
subsection (5) notice that the resolution has been
adopted, but such notice is
not required to be sent to any shareholder who voted
for the resolution or who
has withdrawn his objection.
131(7) A dissenting shareholder shall, within twenty
days after he receives a
notice under subsection (6), or, if he does not
receive such notice, within
twenty days after he learns that the resolution has
been adopted,
send to the
corporation a written notice containing
(a) his name and address;
(b) the number and class of shares in respect of which
he
dissents; and
(c) a demand for payment of the fair value of such
shares.
<PAGE>
131(8) Not later than the thirtieth day after the
sending of a notice under
subsection (7), a dissenting shareholder shall send
the certificates
representing the shares in respect of which he
dissents to the corporation or
its transfer agent.
131(9) A dissenting shareholder who fails to comply
with subsection (8) has no
right to make a claim under this section.
131(10) A corporation or its transfer agent shall
endorse on any share
certificate received under subsection (8) a notice
that the holder is a
dissenting shareholder under this section and shall
return forthwith the share
certificates to the dissenting shareholder.
131(11) On sending a notice under subsection (7), a
dissenting shareholder
ceases to have any rights as a shareholder other than
the right to be paid the
fair value of his shares as determined under this
section except where
(a) the dissenting shareholder withdraws his notice
before
the corporation
makes an offer under subsection (12),
(b) the corporation fails to make an offer in
accordance with subsection
(12) and the dissenting shareholder withdraws his
notice, or
(c) the directors revoke a resolution to amend the
articles
under
subsection 113(2), terminate an amalgamation
agreement under subsection
122(6), abandon an application for continuance under
subsection 127(5),
or abandon a sale, lease or exchange under
subsection 130(7),
in which case his rights as the holder of the shares
in respect of which he had
dissented are reinstated as of the date he sent the
notice referred to in
subsection (7), and he is entitled, upon presentation
and surrender to the
corporation or its transfer agent of any certificate
representing the shares
that have been endorsed in accordance with subsection
(10), to be issued a new
certificate representing the same number of shares as
the certificate so
presented, without payment of any fee.
131(12) A corporation shall, not later than fourteen
days after the later of
the day on which the action approved by the resolution
is effective or the day
the corporation received the notice referred to in
subsection (7), send to each
dissenting shareholder who has sent such notice
(a) a written offer to pay for his shares in an amount
considered by the
directors of the corporation to be the fair value
thereof,
accompanied
by a statement showing how the fair value was
determined; or
(b) if subsection (26) applies, a notification that it
is
unable lawfully
to pay dissenting shareholders for their shares.
131(13) Every offer made under subsection (12) for
shares of the same class or
series shall be on the same terms.
131(14) Subject to subsection (26), a corporation
shall pay for the shares of a
dissenting shareholder within ten days after an offer
made under subsection
(12) has been accepted, but any such offer lapses if
the corporation does not
receive an acceptance thereof within thirty days after
the offer has been made.
131(15) Where a corporation fails to make an offer
under subsection (12) or if
a dissenting shareholder fails to accept an offer, the
corporation may, within
fifty days after the action approved by the resolution
is effective or within
such further period as the Court may allow, apply to
the Court to fix a fair
value for the shares of any dissenting shareholder.
131(16) If a corporation fails to apply to the Court
under subsection (15), a
dissenting shareholder may apply to the Court for the
same purpose within a
further period of twenty days or within such further
period as the Court may
allow.
131(17) If a corporation fails to comply with
subsection (12), then the costs
of a shareholder application under subsection (16) are
to be borne by the
corporation unless the Court otherwise orders.
<PAGE>
131(18) Before making application to the Court under
subsection (15) or not
later than seven days after receiving notice of an
application to the Court
under subsection (16), as the case may be, a
corporation shall give notice to
each dissenting shareholder who, at the date upon
which the notice is given,
(a) has sent to the corporation the notice referred to
in
subsection (7),
and
(b) has not accepted an offer made by the corporation
under
subsection
(12), if such offer was made,
of the date, place and consequences of the application
and of his right to
appear and be heard in person or by counsel, and a
similar notice shall be
given to each dissenting shareholder who, after the
date of such first
mentioned notice and before termination of the
proceedings commenced by the
application, satisfies the conditions set out in
paragraphs (a) and (b), within
three days after he satisfies such conditions.
131(19) All dissenting shareholders who satisfy the
conditions set out in
paragraphs (18)(a) and (b) shall be deemed to be
joined as parties to an
application under subsection (15) or (16) on the later
of the date upon which
the application is brought and the date upon which
they satisfy the conditions,
and shall be bound by the decision rendered by the
Court in the proceedings
commenced by the application.
131(20) Upon an application to the Court under
subsection (15) or (16), the
Court may determine whether any other person is a
dissenting shareholder who
should be joined as a party, and the Court shall then
fix a fair value for the
shares of all dissenting shareholders.
131(21) The Court may in its discretion appoint one or
more appraisers to
assist the Court to fix a fair value for the shares of
the dissenting
shareholders.
131(22) The final order of the Court in the
proceedings commenced by an
application under subsection (15) or (16) shall be
rendered against the
corporation and in favor of each dissenting
shareholder who, whether before or
after the date of the order, complies with the
conditions set out in paragraphs
(18)(a) and (b).
131(23) The Court may in its discretion allow a
reasonable rate of interest on
the amount payable to each dissenting shareholder from
the date the action
approved by the resolution is effective until the date
of payment.
131(24) Where subsection (26) applies, the corporation
shall, within ten days
after the pronouncement of an order under subsection
(22), notify
each
dissenting shareholder that it is unable lawfully to
pay dissenting
shareholders for their shares.
131(25) Where subsection (26) applies, a dissenting
shareholder, by written
notice delivered to the registered office of the
corporation within thirty days
after receiving a notice under subsection (24), may
(a) withdraw his notice of dissent, in which case the
corporation shall be
deemed to consent to the withdrawal and the
shareholder is
reinstated to
his full rights as a shareholder, or
(b) retain a status as a claimant against the
corporation, to be paid as
soon as the corporation is lawfully able to do so or,
in a
liquidation, to
be ranked subordinate to the rights of creditors of
the
corporation but in
priority to its shareholders.
131(26) A corporation shall not make a payment to a
dissenting shareholder
under this section if there are reasonable grounds for
believing that
(a) the corporation is or would after the payment be
unable
to pay its
liabilities as they become due; or
(b) the realizable value of the corporation's assets
would
thereby be
less than the aggregate of its liabilities.
131(27) Upon application by a corporation that
proposes to take any of the
actions referred to in subsection (1), the Court may,
if satisfied that the
proposed action is not in all the circumstances one
that should give rise to
the rights arising under subsection (3), by order
declare that those rights
will not arise upon the taking of the proposed action,
and the order may be
subject to compliance with such terms and conditions
as the Court thinks fit
and notice of any such application and a copy of any
order made by the Court
upon such application shall be served upon the
Director.
131(28) The Director may appoint counsel to assist the
Court upon the hearing
of an application under subsection (27).
<PAGE>
TSI TELSYS CORPORATION
INDEX TO EXHIBITS
Exhibit
Number Description
3.1 Articles of TSI TelSys Corporation
5.1 Opinion of Venable, Baetjer & Howard, LLP
regarding
legality of
securities being registered
8.1 Opinion of Venable, Baetjer & Howard, LLP
regarding U.S.
federal tax
matters
8.2 Opinion of Clark, Drummie & Company regarding
Canadian tax
matters*
10.1 Employment Agreement dated as of May 20, 1998
between TSI TelSys
Corporation and Joseph T. Pisula*
10.2 Company Key Employee Stock Option Incentive
Plan
10.3 Agreement of Lease dated November 22, 1995 by
and between Brit Limited
Partnership and TSI TelSys, Inc., as amended by First
Amendment to Lease
dated July 2, 1996 by and between TSI TelSys,
Inc. and Brit Limited
Partnership and by Second Amendment to Lease dated
September 30, 1996,
by and between TSI TelSys, Inc.
10.4 Subcontract number NAS5-96-010-27 dated July 1,
1997 between Unisys
Corporation and TSI TelSys, Inc.*
10.5 Contract dated July 8, 1998 between Cornes &
Co. Ltd, Tokyo and TSI
TelSys, Inc. (Order No. ZLS-2164/97B).*
10.6 Contract dated July 8, 1998 between Cornes &
Co. Ltd., Tokyo and TSI
TelSys, Inc. (Order No. ZLS-2163/97B).*
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Clark, Drummie & Company.*
23.2 Consent of Venable, Baetjer & Howard, LLP
(included in Exhibit 5.1).
23.3 Consent of KPMG LLP, Chartered
Accountants.
24.1 Power of Attorney (contained on the
signature page). 27.1 Financial Data Schedule.
* Portions of this exhibit have been omitted
pursuant to a
request for
confidential treatment.
ARTICLES
Exhibit 3.1
of
INTERNATIONAL CONTOUR TECHNOLOGY INC.
TABLE OF CONTENTS
PART ARTICLE SUBJECT
1 INTERPRETATION
1.1. Definition
Construction of Words
1.2. Definitions same as Company Act
1.3. Interpretation Act Rules of Construction apply
2 SHARES
2.1. Member entitled to Certificate
2.2. Replacement of Lost or Defaced Certificate
2.3. Execution of Certificates
2.4. Recognition of Trusts
3 ISSUE OF SHARES
3.1. Directors Authorized
3.2. Conditions of Allotment
3.3. Commissions and Brokerage
3.4. Conditions of Issue
4 SHARE REGISTERS
4.1. Registers of Members, Transfers and Allotments
4.2. Branch Registers of Members
4.3. Closing of Register of Members
5 TRANSFER AND TRANSMISSION OF SHARES
5.1. Transfer of Shares
5.2. Execution of Instrument of Transfer
5.3. Enquiry as to Title not Required
5.4. Submission of Instruments of Transfer
5.5. Transfer Fee
5.6. Personal Representative Recognized on Death
5.7. Death or Bankruptcy
5.8. Persons in Representative Capacity
6 ALTERATION OF CAPITAL
6.1. Increase of Authorized Capital
6.2. Other Capital Alterations
6.3 Creation, Variation and Abrogation of Special
Rights and
Restrictions
6.4. Consent of Class Required
6.5. Special Rights of Conversion
6.6. Class Meetings of Members
7 PURCHASE AND REDEMPTION OF SHARES
7.1. Company Authorized to Purchase or Redeem its
Shares
7.2. Selection of Shares to be Redeemed
7.3. Purchased or Redeemed Shares Not Voted
8 BORROWING POWERS
8.1. Powers of Directors
8.2 Special Rights Attached to and Negotiability
of Debt Obligations
8.3. Register of Debentureholders
8.4. Execution of Debt Obligations
8.5. Register of Indebtedness
9 GENERAL MEETINGS
9.1. Annual General Meetings
9.2. Waiver of Annual General Meetin2
9.3. Classification of General Meetings
9.4. Calling of Meetings
9.5. Advance Notice for Election of Directors
9.6. Notice of General Meeting
9.7. Waiver or Reduction of Notice
9.8. Notice of Special Business at General Meeting
10 PROCEEDINGS AT GENERAL MEETINGS
10.1. Special Business
10.2. Requirement of Quorum
10.3. Quorum
10.4. Lack of Quorum
10.5. Chairman
10.6. Alternate Chairman
10.7. Adjournments
10.8. Resolutions Need Not Be Seconded
10.9. Decisions by Show of Hands or Poll
10.10. Casting Vote
10.11. Manner of Taking Poll
10.12. Retention of Ballots Cast on a Poll
10.13. Casting of Votes
10.14. Ordinary Resolution Sufficient
II VOTES OF MEMBERS
11.1. Number of Votes Per Share or Member
11.2. Votes of Persons in Representative Capacity
11.3. Representative of a Corporate Member
11.4. Votes by Joint Holders
11.5. Votes by Committee for a Member
11.6. Appointment of Proxyholders
11.7. Execution of Form of Proxy
11.8. Deposit of Proxy
11.9. Validity of Proxy Note
11.10. Revocation of Proxy
12 DIRECTORS
12.1 Number of Directors
12.2. Remuneration and Expenses of Directors
12.3. Qualification of Directors
13 ELECTION OF DIRECTORS
13.1. Election at Annual General Meetings
13.2. Eligibility of Retiring Director
13.3. Continuance of Directors
13.4. Election of Less than Required Number of
Directors
13.5. Filling a Casual Vacancy
13.6. Additional Directors
13.7. Alternate Directors
13.8. Termination of Directorship
13.9. Removal of Directors
14 POWERS OF DUTIES OF DIRECTORS
14.1. Management of Affairs and Business
14.2. Appointment of Attorney
15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1. Disc1osure of Conflicting Interest
15.2. Voting and Quorum re Proposed Contract
15.3. Director May Hold Office or Place of Profit
with Company
15.4. Director Acting in Professional Capacity
15.5. Director Receiving Remuneration from Other
Interests
16 PROCEEDINGS OF DIRECTORS
16.1. Chairman and Alternate
16.2. Meetings Procedure
16.3. Meetings by Conference Telephone
16.4. Notice of Meeting
16.5. Waiver of Notice of Meetings
16.6. Quorum
16.7. Continuing Directors may Act During Vacancy
16.8. Validity of Acts of Directors
16.9. Resolution in Writing Effective
17 EXECUTIVE AND OTHER COMMITTEES
17.1. Appointment of Executive Committee
17.2. Appointment of Committees
17.3. Procedure at Meetings
18 OFFICERS
18.1. President and Secretary Required
18.2. Persons Holding More Than One Office and
Remuneration
18.3. Disclosure of Conflicting Interest
19 INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND
EMPLOYEES
19.1. Indemnification of Directors
19.2. Indemnification of Officers, Employees, Agents
19.3. Indemnification not invalidated by non-
compliance
19.4. Company may Purchase Insurance
20 DIVIDENDS AND RESERVES
20.1. Declaration of Dividends
20.2. Declared Dividend Date
20.3. Proportionate to Number of Shares Held
20.4. Reserves
20.5. Receipts from Joint Holders
20.6. No Interest on Dividends
20.7. Payment of Dividends
20.8. Capitalization of Undistributed Surplus
21 DOCUMENTS, RECORDS AND REPORTS
21.1. Documents to be Kept
21.2. Accounts to be Kept
21.3. Inspection of Accounts
21.4. Financial Statements and Reports for General
Meeting
21.5. Financial Statements and Reports for Members
22 NOTICES
22.1. Method of Giving Notice
22.2. Notice to Joint Holders
22.3. Notice to Personal Representative
22.4. Persons to Receive Notice
23 RECORD DATES
23.1. Record Date
23.2. No Closure of Register of Members
24 SEAL
24.1. Affixation of Seal to Documents
24.2. Reproduction of Seal
24.3. Official Seal for Other Jurisdictions
25 MECHANICAL REPRODUCTION OF SIGNATURES
25.1. Instruments may be Mechanically Signed
25.2. Definition of Instruments
26 PROHIBITIONS
26.1 Number of Members and No Securities Offered to
the
Public
26.2 Restriction on Transfer of Shares
<PAGE>
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
of
INTERNATIONAL CONTOUR TECIINOLOGY INC.
PART 1
INTERPREFATION
1.1. In these Articles, unless there is something in the
subject or
context inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the Directors,
sole
Director or alternate Director of the Company for the time being.
"Company Act" means the Company Act of the Province of British
Columbia as
from time to time enacted and all amendments thereto and statutory
modifications thereof and includes the regulations made pursuant
thereto.
"seal" means the common seal or the Company.
"month" means calendar month.
"registered owner" or "registered holder" when used with respect
to a share in
the authorized capital of the Company means the person registered
in the
register of members in respect of such share.
"personal representative" shall include executors. administrators,
trustees in
bankruptcy and duly constituted representatives in lunacy.
Expressions referring to writing shall be construed as including
references to
printing, lithography. typewriting, photography and other modes
or
representing or reproducing words in a visible form.
Words importing the singular include the plural and vice versa:
and words
importing male persons include female persons and words importing
persons
sha1l include corporations.
1.2. The meaning of any words or phrases defined in the
Company Act
shall. if not inconsistent with the subject or context, bear the
same meaning
in these Articles.
1.3. The Rules of Construction contained in the Interpretation
Act shall
apply, mutatis mutandis, to the interpretation of these Articles.
<PAGE>
PART 2
SHARES AND SHARE CERTIFICATES
2.1. Every member is entitled, without charge, to one
certificate
representing the share or shares of each class held by him;
provided that, in
respect of a share or shares held jointly by several persons, the
Company
shall not be bound to issue more than one certificate, and
delivery of a
certificate for a share to the first named of several joint
registered holders
or to his duly authorized agent shall be sufficient delivery to
all; and
provided further that the Company shall not be bound to issue
certificates
representing redeemable shares, if such shares are to be redeemed
within one
month of the date on which they were allotted. Any share
certificate may be
sent through the mail by registered prepaid mail to the member
entitled
thereto, and neither the Company nor any transfer agent shall be
liable for
any loss occasioned to the member owing to any such share
certificate so sent
being lost in the mail or stolen.
2.2. If a share certificate
(i) is worn out or defaced, the Directors shall, upon
production to them
of the said certificate and upon such other terms, if any, as they
may think
fit, order the said certificate to be cancelled and shall issue a
new
ertificate in lieu thereof;
(ii) is lost, stolen or destroyed. then, upon proof thereof to
the
satisfaction of the Directors and upon such indemnity, if any, as
the
Directors deem adequate being given, a new share certificate in
lieu thereof
shall be issued to the person entitled to such lost, stolen or
destroyed
certificate; or
(iii) represents more than one share and the registered owner
thereof
surrenders it to the Company with a written request that the
Company issue in
his name two or more certificates each representing a specified
number of
shares and in the aggregate representing the same number of shares
as the
certificate so surrendered and, upon payment of an amount
determined from time
to time by the Directors, the Company shall cancel the certificate
so
surrendered and issue in lieu thereof certificates in accordance
with such
request.
2.3. Every share certificate shall be signed manually by at
least one
officer or Director of the Company, or by or on behalf of a
registrar, branch
registrar, transfer agent or branch transfer agent of the Company
and any
additional signatures may be printed, lithographed, engraved or
otherwise
mechanically reproduced in accordance with these Articles.
2.4. Except as required by law, statute or these Articles, no
person shall
be recognized by the Company as holding any share upon any trust,
and the
Company shall not be bound by or compelled in any way to recognize
(even when
having notice thereof) any equitable, contingent, future or
partial interest
in any share or in any fractional part of a share or (except only
as by law,
statute or these Articles provided or as ordered by a court of
competent
jurisdiction) any other rights in respect of any share except an
absolute
ight to the entirety thereof in its registered holder.
<PAGE>
PART 3
ISSUE OF SHARES
3.1. Subject to Article 3.2 and to any direction to the
contrary contained
in a resolution passed at a general meeting authorizing any
increase or
alteration of capital, the shares shall be under the control of
the Directors
who may, subject to the rights of the registered holders of the
shares of the
Company for the time being issued, issue, allot, sell or otherwise
dispose of,
and/or grant options on or otherwise deal in, shares authorized
but not
outstanding at such times, to such persons (including Directors),
in such
manner, upon such terms and conditions, and at such price or for
such
consideration, as they, in their absolute discretion, may
determine.
3.2. If the Company is, or becomes, a company which is not a
reporting
company and the Directors are required by the Company Act before
allotting any
shares to offer them pro rata to the members, the Directors shall,
before
allotting any shares, comply with the applicable provisions of the
Company
Act.
3.3. Subject to the provisions of the Company Act, the
Company, or the
Directors on behalf of the Company, may pay a commission or allow
a discount
to any person in consideration of his subscribing or agreeing to
subscribe,
whether absolutely or conditionally. for any shares, debentures,
share rights,
warrants or debenture stock in the Company, or procuring or
agreeing to
procure subscriptions, whether absolutely or conditionally, for
any such
shares, debentures, share rights, warrants or debenture stock,
provided that,
if the Company is not a specially limited company, the rate of the
commission
and discount shall not in the aggregate exceed 25 per centum of
the amount of
the subscription price of such shares, and if the Company is a
specially
limited company, the rate of the commission and discount shall not
in the
aggregate exceed 98 per centum of the amount of the subscription
price of such
shares, debentures, share rights, warrants or debenture stock. The
Company may
also pay such brokerage as may be lawful.
3.4. No share may be issued until it is fully paid and the
Company shall
have received the full consideration therefor in cash, property or
past
services actually performed for the Company. The value of the
property or
services for the purposes of this Article shall be the value
determined by the
Directors by resolution to be, in all circumstances of the
transaction, the
fair market value thereof.
<PAGE>
PART 4
SHARE REGISTERS
4.1. The Company shall keep or cause to be kept a register of
members, a
register of transfers and a register of allotments within British
Columbia,
all as required by the Company Act. and may combine one or more of
such
registers. If the Company's capital shall consist of more than one
class of
shares, a separate register of members, register of transfers and
register of
allotments may be kept in respect of each class of shares. The
Directors on
behalf of the Company may appoint a trust company to keep the
register of
members, register of transfers and register of allotments or, if
there is more
than one class of shares, the Directors may appoint a trust
company. which
need not be the same trust company, to keep the register of
members, the
register of transfers and the register of allotments for each
class of shares.
The Directors on behalf of the Company may also appoint one or
more trust
companies, including the trust company which keeps the said
registers of its
shares or of a class thereof, as transfer agent for its shares or
such class
thereof, as the case may be, and the same or another trust company
or
companies as registrar for its shares or such class thereof, as
the case may
be. The Directors may terminate the appointment of any such trust
company at
any time and may appoint another trust company in its place.
4.2 Unless prohibited by the Company Act, the Company may keep
or cause to
be kept one or more branch registers of members at such place or
places as the
Directors may from time to time deter mine.
4.3. The Company may at any time close its register of members
upon
resolution of the Directors.
<PAGE>
PART 5
TRANSFER AND TRANSMISSION OF SHARES
5.1. Subject to the provisions of the Memorandum and of these
Articles
that may be applicable, any member may transfer any of his shares
by
instrument in writing executed by or on behalf of such member and
delivered to
the Company or its transfer agent. The instrument of transfer of
any share of
the Company shall be in the form, if any, on the back of the
Company's share
certificates or in such other form as the Directors may from time
to time
approve. Except to the extent that the Company Act may otherwise
provide, the
transferor shall be deemed to remain the holder of the shares
until the name
of the transferee is entered in the register of members or a
branch register
of members thereof.
5.2. The signature of the registered holder of any shares, or
of his duly
authorized attorney, upon an authorized instrument of transfer
shall
constitute a complete and sufficient authority to the Company, its
directors,
officers and agents to register, in the name of the transferee as
named in the
instrument of transfer, the number of shares specified therein or,
if no
number is specified, all the shares of the registered holder
represented by
share certificates deposited with the instrument of transfer. If
no transferee
is named in the instrument of transfer, the instrument of transfer
shall
constitute a complete and sufficient authority to the Company, its
directors,
officers and agents to register, in the name of the person in
whose behalf any
certificate for the shares to be transferred is deposited with the
Company for
the purpose of having the transfer registered, the number of
shares specified
in the instrument of transfer or, if no number is specified, all
the shares
represented by all share certificates deposited with the
instrument of
transfer.
5.3. Neither the Company nor any Director, officer or agent
thereof shall
be bound to inquire into the title of the person named in the form
of
transfer as transferee, or, if no person is named therein as
transferee, of
the person on whose behalf the certificate is deposited with the
Company for
the purpose of having the transfer registered or be liable to any
claim by
such registered holder or by any intermediate holder of the
certificate or of
any of the shares represented thereby or any interest therein for
registering
the transfer, and the transfer, when registered, shall confer upon
the person
in whose name the shares have been registered a valid title to
such shares.
5.4. Every instrument of transfer shall be executed by the
transferor and
left at the registered office of the Company or at the office of
its transfer
agent or registrar for registration together with the share
certificate for
the shares to bc transferred and such other evidence, if any, as
the
Directors or the transfer agent or registrar may require to prove
the title of
the transferor or his right to transfer the shares and the right
of the
transferee to have the transfer registered. All instruments of
transfer where
the transfer is registered shall be retained by the Company or its
transfer
agent or registrar and any instrument of transfer, where the
transfer is not
registered, shall be returned to the person depositing the same
together with
the share certificate which accompanied the same when tendered for
registration.
5.5. There shall be paid to the Company in respect of the
registration of
any transfer such sum, if any, as the Directors may from time to
time
determine.
5.6. In the case of the death of a member, the survivor or
survivors where
the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall
be the only
persons recognized by the Company as having any title to his
interest in the
shares. Before recognizing any legal personal representative the
Directors may
require him to obtain a grant of probate or letters of
administration in
British Columbia.
5.7. Upon the death or bankruptcy of a member, his personal
representative
or trustee in bankruptcy, although not a member, shall have the
same rights,
privileges and obligations that attach to the shares formerly held
by the
deceased or bankrupt member if the documents required by the
Company Act shall
have been deposited at the Company's registered office.
5.8. Any person becoming entitled to a share in consequence of
the death
or bankruptcy of a member shall, upon such documents and evidence
being
produced to the Company as the Company Act requires or who becomes
entitled to
a share as a result of an order of a Court of competent
jurisdiction or a
statute has the right either to be registered as a member in his
representative capacity in respect of such share, or, if he is a
personal
representative instead of being registered himself, to make such
transfer of
the share as the deceased or bankrupt person could have made: but
the
Directors shall, as regards a transfer by a personal
representative or trustee
in bankruptcy, have the same right, if any, to decline or suspend
registration
of a transferee as they would have in the case of a transfer of a
share by the
deceased or bankrupt person before the death or bankruptcy.
<PAGE>
PART 6
ALTERATION OF CAPITAL
6.1. The Company may by ordinary resolution filed with the
Registrar amend
its Memorandum to increase the authorized capital of the Company
by:
(i) creating shares with par value or shares without par
value, or both;
(ii) increasing the number of shares with par value or shares
without par
value, or both; or
(iii) increasing the par value of a class of shares with par
value, if no
shares of that class are issued.
All new shares shall be subject to the same provisions with
reference to
transfers, transmissions and otherwise as the existing shares of
the Company
6.2. The Company may by special resolution alter its
Memorandum to
subdivide, consolidate, change from shares with par value to
shares without
par value, or from shares without par value to shares with par
value, or
change the designation of all or any of its shares but only to
such extent, in
such manner and with such consents of members holding a class of
shares which
is the subject of or affected by such alteration, as the Company
Act provides
6.3 The Company may alter its Memorandum or these Articles
(i) by special resolution, to create, define and attach
special rights or
restrictions to any shares, and
(ii) by special resolution and by otherwise complying with any
applicable
provision of its Memorandum or these Articles, to vary or abrogate
any special
rights and restrictions attached to any shares and in each case by
filing a
certified copy of such resolution with the Registrar but no right
or special
right attached to any issued shares shall be prejudiced or
interfered with
unless all members holding shares of each class whose right or
special right
is so prejudiced or interfered with consent thereto in writing, or
unless a
resolution consenting thereto is passed at a separate class
meeting of the
holders of the shares of each such class by a majority of three-
fourths, or
such greater majority as may be specified by the special rights
attached to
the class of shares, of the issued shares of such class.
6.4 Notwithstanding such consent in writing or such
resolution, no such
alteration shall be valid as to any part of the issued shares of
any class
unless the holders of the rest of the issued shares of such class
either all
consent thereto in writing or consent thereto by a resolution
passed by the
votes of members holding three-fourths of the rest of such shares.
6.5 If the Company is or becomes a reporting company, no
resolution to
create, vary or abrogate any special right of conversion attaching
to any
class of shares shall be submitted to any meeting of members
unless, if so
required by the Company Act, the Superintendent of Brokers shall
have
consented to the resolution.
6.6 Unless these Articles otherwise provide, the provisions of
these
Articles relating to general meetings shall apply, with the
necessary changes
and so far as they are applicable, to a class meeting of members
holding a
particular class of shares but the quorum at a class meeting shall
be one
person holding or representing by proxy one-third of the shares
affected.
<PAGE>
PART 7
PURCHASE AND REDEMPTION OF SHARES
7.1 Subject to the special rights and restrictions attached to
any class
of shares, the Company may, by a resolution of the Directors and
in compliance
with the Company Act, purchase any of its shares at the price and
upon the
terms specified in such resolution or redeem any class of its
shares in
accordance with the special rights and restrictions attaching
thereto. No such
purchase or redemption shall be made if the Company is insolvent
at the time
of the proposed purchase or redemption or if the proposed purchase
or
redemption would render the Company insolvent. Unless the shares
are to be
purchased through a stock exchange or the Company is purchasing
the shares
from dissenting members pursuant to the requirements of the
Company Act, the
Company shall make its offer to purchase pro rata to every member
who holds
shares of the class or kind, as the case may be, to be purchased.
7.2 If the Company proposes at its option to redeem some but
not all of
the shares of any class, the Directors may, subject to the special
rights and
restrictions attached to such class of shares, decide the manner
in which the
shares to be redeemed shall be selected.
7 3 Subject to the provisions of the Company Act, any shares
purchased or
redeemed by the Company may be sold or issued by it, but, while
such shares
are held by the Company, it shall not exercise any vote in respect
of these
shares.
<PAGE>
PART 8
BORROWING POWERS
8.l The Directors may from time to time on behalf of the
Company
(i) borrow money in such manner and amount, on such security,
from such
sources and upon such terms and conditions as they think fit,
(ii) issue bonds, debentures, and other debt obligations either
outright or
as security for any liability or obligation of the Company or any
other
person, and
(iii) mortgage, charge, whether by way of specific or floating
charge, or
give other security on the undertaking, or on the whole or any
part of the
property and assets, of the Company (both present and future).
8.2 Any bonds, debentures or other debt obligations of the
Company may be
issued at a discount. premium or otherwise, and with any special
privileges as
to redemption, surrender, drawing. allotment of or conversion into
or exchange
for shares or other securities, attending and voting at general
meetings of
the Company, appointment of Directors or otherwise and may by
their terms be
assignable free from any equities between the Company and the
person to whom
they were issued or any subsequent holder thereof, all as the
Directors may
determine.
8.3. The Company shall keep or cause to be kept within the
Province of
British Columbia in accordance with the Company Act a register of
its
debentures and a register of debentureholders, which registers may
be
combined, and, subject to the provisions of the Company Act, may
keep or cause
to be kept one or more branch registers of its debentureholders at
such place
or places as the Directors may from time to lime determine and the
Directors
may by resolution, regulation or otherwise make such provisions as
they think
fit respecting the keeping of such branch registers.
8.4 Every bond, debenture or other debt obligation of the
Company shall be
signed manually by at least one Director or officer of the Company
or by or on
behalf of a trustee, registrar, branch registrar, transfer agent
or branch
transfer agent for the bond, debenture or other debt obligation
appointed by
the Company or under any instrument under which the bond,
debenture or other
debt obligation is issued and any additional signatures may be
printed or
otherwise mechanically reproduced thereon and, in such event, a
bond,
debenture or other debt obligation so signed is as valid as if
signed manually
notwithstanding that any person whose signature is so printed or
mechanically
reproduced shall have ceased to hold the office that he is stated
on such
bond, debenture or other debt obligation to hold at the date of
the issue
thereof.
8.5. The Company shall keep or cause to be kept a register of
its
indebtedness to every Director or officer of the Company or an
associate of
any of them in accordance with the provisions of the Company Act.
<PAGE>
PART 9
GENERAL MEETINGS
9.1. Subject to any extensions of time permitted pursuant to
the Company
Act, the first annual general meeting of the Company shall be held
within
fifteen months from the date of incorporation and thereafter an
annual general
meeting shall be held once in every calendar year at such time
(not being more
than thirteen months after the holding of the last preceding
annual general
meeting) and place as may be determined by the Directors.
9.2. If the Company is, or becomes, a company which is not a
reporting
company and all the members entitled to attend and vote at an
annual general
meeting consent in writing to all the business which is required
or desired to
be transacted at the meeting, the meeting need not be held.
9.3. All general meetings other than annual general meetings
are herein
referred to as and may he called extraordinary general meetings.
9.4. The Directors may, whenever they think fit, convene an
extraordinary
general meeting. An extraordinary general meeting, if
requisitioned in
accordance with the Company Act, shall be convened by the
Directors or, if not
convened by the Directors, may be convened by the requisitionists
as provided
in the Company Act.
9.5. If the Company is or becomes a reporting company, advance
notice of
any general meeting at which Directors are to be elected shall be
published in
the manner required by the Company Act.
9.6. A notice convening, a general meeting specifying the
place, the day,
and the hour of the meeting, and, in case of special business, the
general
nature of that business, shall be given as provided in the Company
Act and in
the manner hereinafter in these Articles mentioned, or in such
other manner
(if any) as may be prescribed by ordinary resolution, whether
previous notice
thereof has been given or not, to such persons as are entitled by
law or under
these Articles to receive such notice from the Company. Accidental
omission to
give notice of a meeting to, or the non-receipt of notice of a
meeting, by any
member shall not invalidate the proceedings at that meeting.
9.7. All the members of the Company entitled to attend and
vote at a
general meeting may, by unanimous consent in writing given before,
during or
after the meeting, or if they are present at the meeting by a
unanimous vote,
waive or reduce the period of notice of such meeting and an entry
in the
minute book of such waiver or reduction shall be sufficient
evidence of the
due convening of the meeting.
9.8. Except as otherwise provided by the Company Act, where
any special
business at a general meeting includes considering, approving.
ratifying,
adopting or authorizing any document or the execution thereof or
the giving of
effect thereto, the notice convening the meeting shall, with
respect to such
document, be sufficient if it states that a copy of the document
or proposed
document is or will be available for inspection by members at the
registered
office or records office of the Company or at some other place in
British
Columbia designated in the notice during usual business hours up
to the date
of such general meeting.
<PAGE>
PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1 All business shall be deemed special business which is
transacted at
(i) an extraordinary general meeting other than the conduct of
and voting
at, such meeting, and
(ii) an annual general meeting, with the exception of the
conduct of, and
voting at, such meeting. the consideration of the financial
statement and of
the respective reports of the Directors and Auditor, fixing or
changing the
number of directors, approval of a motion to elect two or more
directors by a
single resolution, the election of Directors, the appointment of
the Auditor,
the fixing of the remuneration of the Auditor and such other
business as by
these Articles of the Company Act may be transacted at a general
meeting
ithout prior notice thereof being given to the members or any
business which
is brought under consideration by the report of the Directors.
10.2. No business, other than election of the chairman or the
adjournment
of the meeting, shall be transacted at any general meeting unless
a quorum of
members, entitled to attend and vote, is present at the
commencement of the
meeting, but the quorum need not be present throughout the
meeting.
10.3. Save as herein otherwise provided, a quorum shall be two
members or
proxyholders representing two members, or one member and a
proxyholder
representing another member. The Directors, the Secretary or, in
his absence,
an Assistant Secretary, and the solicitor of the Company shall be
entitled to
attend at any general meeting but no such person shall be counted
in the
quorum or be entitled to vote at any general meeting unless he
shall be a
member or proxyholder entitled to vote thereat.
10.4. If within half an hour from the time appointed for a
general meeting
a quorum is not present, the meeting, if convened upon lie
requisition of
members, shall be dissolved. In any other case it shall stand
adjourned to the
same clay in the next week, at the same time and place, and, if at
the
adjourned meeting a quorum is not present within half an hour from
the time
appointed for the meeting, the person or persons present and
being, or
representing by proxy, a member or members entitled to attend and
vote at the
meeting shall be a quorum.
10.5 The Chairman of the Board, if any, or in his absence the
President
of the Company or in his absence a Vice-President of the Company,
if any,
shall be entitled to preside as chairman at every general meeting
of the
Company.
10.6. If at any general meeting neither the Chairman of the
Board nor
President nor a Vice-President is present within fifteen minutes
after the
time appointed for holding the meeting or is willing to act as
chairman, the
Directors present shall choose some one of their number to be
chairman or if
all the Directors present decline to take the chair or shall fail
to so choose
or if no Director be present, the members present shall choose
some other
person in attendance, who need not be a member, to be chairman.
10.7. The chairman may and shall, if so directed by the
meeting, adjourn
the meeting from time to time and from place to place, but no
business shall
be transacted at any adjourned meeting other than the business
left unfinished
at the meeting from which the adjournment took place. When a
meeting is
adjourned for thirty days or more, notice, but not advance notice,
of the
adjourned meeting shall be given as in the case of an original
meeting. Save
as aforesaid, it shall not be necessary to give any notice of an
adjourned
meeting or of the business to be transacted at an adjourned
meeting.
l0.8. No motion proposed at a general meeting need be seconded
and the
chairman may propose or second a motion.
10.9. Subject to the provisions of the Company Act, at any
general meeting
a resolution put to the vote of the meeting shall be decided on a
show of
hands, unless (before or on the declaration of the result of the
show of
hands) a poll is directed by the chairman or demanded by at least
one member
entitled to vote who is present in person or by proxy. The
chairman shall
declare to the meeting the decision on every question in
accordance with the
result of the show of hands or the poll, and such decision shall
be entered in
the book of proceedings of the Company A declaration by the
chairman that a
resolution has been carried, or carried unanimously, or by a
particular
majority, or lost or not carried by a particular majority and an
entry to that
effect in the book of the proceedings of the Company shall be
conclusive
evidence of the fact, without proof of the number or proportion of
the votes
recorded in favor of, or against, that resolution.
10.10. In the case of an equality of votes, whether on a show
of hands or
on a poll, the chairman of the meeting at which the show of hands
takes place
or at which the poll is demanded shall be entitled to a casting
vote in
addition to the vote or votes to which he may be entitled as
member or
proxyholder and this provision shall apply notwithstanding the
Chairman is
interested in the subject matter of the 'resolution.
10.11. No poll may be demanded on the election of a chairman.
A poll
demanded on a question of adjournment shall be taken forthwith. A
poll
demanded on any other question shall be taken as soon as, in the
opinion of
the chairman, is reasonably convenient, but in no event later than
seven days
after the meeting and at such time and place and in such manner as
the
hairman of the meeting directs. The result of the poll shall be
deemed to be
the resolution of and passed at the meeting upon which the poll
was demanded.
Any business other than that upon which the poll has been demanded
may be
proceeded with pending the taking of the poll. A demand for a poll
may be
withdrawn. In any dispute as to the admission or rejection of a
vote the
decision of the chairman made in good faith shall be final and
conclusive.
10.12. Every ballot cast upon a poll and every proxy
appointing a
proxyholder who casts a ballot upon a poll shall be retained by
the Secretary
for such period and be subject to such inspection as the Company
Act may
provide.
10.13. On a poll a person entitled to cast more than one vote
need not, if
he votes, use all his votes or cast all the votes lie uses in the
same way.
10.14. Unless the Company Act, the Memorandum or these
Articles otherwise
provide, any action to be taken by a resolution of the members may
be taken by
an ordinary resolution.
<PAGE>
PART 11
VOTES OF MEMBERS
11 1. Subject to any special voting rights or restrictions
attached to any
class of shares and the restrictions on joint registered holders
of shares, on
a show of hands every member who is present in person and entitled
to vote
thereat shall have one vote and on a poll every member shall have
one vote for
each share of which he is the registered holder and may exercise
such vote
either in person or by proxyholder.
11.2. Any person who is not registered as a member but is
entitled to vote
at any general meeting in respect of a share, may vote the share
in the same
manner as if he were a member; but, unless the Directors have
previously
admitted his right to vote at that meeting in respect of the
share, he shall
satisfy the Directors of his right to vote the share before the
time for
holding the meeting, or adjourned meeting, as the case may be, at
which he
proposes to vote.
11.3. Any corporation not being a subsidiary which is a member
of the
Company may, by resolution of its directors or other governing
body, authorize
such person as it thinks fit to act as its representative at any
general
meeting or class meeting. The person so authorized shall he
entitled to
exercise in respect of and at such meeting the same powers on
behalf of the
corporation which he represents as that corporation could exercise
if it were
an individual member of the Company personally present, including,
without
limitation, the right, unless restricted by such resolution, to
appoint a
proxyholder to represent such corporation and shall be counted for
the purpose
of forming a quorum if present at the meeting. Evidence of the
appointment of
any such representative may be sent to the Company by written
instrument,
telegram, telex or any method of transmitting legibly recorded
messages.
Notwithstanding the foregoing, a corporation being a member may
appoint a
proxyholder.
11.4. In the case of joint registered holders of a share, the
vote of the
senior who exercises a vote, whether in person or by proxyholder,
shall be
accepted to the exclusion of the votes of the other joint
registered holders;
and for this purpose seniority shall be determined by the order in
which the
names stand in the register of members. Several legal personal
representatives
of a deceased member whose shares are registered in his sole name
shall for
the purpose of this Article be deemed joint registered holders.
11.5 A member of unsound mind entitled to attend and vote, in
respect of
whom an order has been made by any court having jurisdiction, may
vote,
whether on a show of hands or on a poll, by his committee, curator
bonis, or
other person in the nature of a committee or curator bonis
appointed by that
court, and any such committee, curator bonis, or other person may
appoint a
proxyholder.
11.6. A member holding more than one share in respect of which
he is
entitled to vote shall be entitled to appoint one or more (but not
more than
five) proxyholders to attend, act and vote for him on the same
occasion. If
such member should appoint more than one proxyholder for the same
occasion, he
shall specify the number of shares each proxyholder shall be
entitled to vote.
A member may also appoint one or more alternate proxyholders to
act in the
place and stead of an absent proxyholder.
11.7. A form of proxy shall be in writing under the hand of
the appointor
or of his attorney duly authorized in writing or, if the appointor
is a
corporation, either under the seal of the corporation or under the
hand of a
duly authorized officer or attorney. A proxyholder need not be a
member of the
Company.
11.8. A form of proxy and the power of attorney or other
authority, if
any, under which it is signed or a notarially certified copy
thereof shall be
deposited at the registered office of the Company or at such other
place as is
specified for that purpose in the notice convening the meeting,
not less than
48 hours (excluding Saturdays, Sundays, and holidays) before the
time for
holding the meeting or such other time and place as is specified
in the notice
calling the meeting. In addition to any other method of depositing
proxies
provided for in these Articles, the Directors may from time to
time, by
resolution, make regulations relating to the depositing of proxies
at any
place or places and fixing the time or times for depositing the
proxies not
exceeding 48 hours (excluding Saturdays, Sundays, and holidays)
preceding the
meeting or adjourned meeting specified in the notice calling a
meeting of
members and providing for particulars of such proxies to be sent
to the
Company or any agent of the Company in writing or by letter,
telegram, telex,
or any method of transmitting legibly recorded messages so as to
arrive before
the commencement of the meeting or adjourned meeting at the office
of the
Company or of any agent of the Company appointed for the purpose
of receiving
such particulars and providing that proxies so deposited as
required by this
Part and votes given in accordance with such regulations shall be
valid and
shall be counted.
11.9. A vote given in accordance with the terms of a proxy is
valid
notwithstanding the previous death or incapacity of the member
giving the
proxy or the revocation of the proxy or of the authority under
which the form
of proxy was executed or the transfer of the share in respect of
which the
proxy is given provided that no notification in writing of such
death,
incapacity, revocation or transfer shall have been received at the
registered
office of the Company or by the chairman of the meeting or
adjourned meeting
for which the proxy was given before the vote is taken.
11.10. Every proxy may be revoked by an instrument in writing
(i) executed by the member giving the same or by his attorney
authorized
in writing or, where the member is a corporation, by a duly
authorized officer
or attorney of the corporation; and
(ii) delivered either at the registered office of the Company
at any time
up to and including the last business day preceding the day of the
meeting, or
any adjournment thereof at which the proxy is to be used, or to
the chairman
of the meeting on the day of the meeting or any adjournment
thereof before any
vote in respect of which the proxy is to be used shall have been
taken.
or in any other manner provided by law.
<PAGE>
PART 12
DIRECTORS
12.1. The subscribers to the Memorandum of the Company are the
first
Directors. The Directors to succeed the first Directors may be
appointed in
writing by a majority of the subscribers to the Memorandum or at a
meeting of
the subscribers, or if not so appointed, they shall be elected by
the members
entitled to vote on the election or Directors and the number of
Directors
shall be the same as the number of Directors so appointed or
elected. The
number of directors, excluding additional Directors, may be fixed
or changed
from time to time by ordinary resolution, whether previous notice
thereof has
been given or not, but notwithstanding anything contained in these
Articles
the number of Directors shall never be less than one or, if the
Company is or
becomes a reporting company, less than three.
12.2. The remuneration of the Directors as such may from time
to time be
determined by the Directors or, if the Directors shall so decide,
by the
members. Such remuneration may be in addition to any salary or
other
remuneration paid to any officer or employee of the Company as
such who is
also a Director. The Directors shall be repaid such reasonable
travelling,
hotel and other expenses as they incur in and about the business
of the
Company and if any Director shall perform any professional or
other services
for the Company that in the opinion of the Directors are outside
the ordinary
duties of a Director or shall otherwise be specially occupied in
or about the
Company's business, he may be paid a remuneration to be fixed by
the Board,
or, at the option of such Director, by the Company in general
meeting, and
such remuneration may be either in addition to, or in substitution
for any
other remuneration that he may be entitled to receive. The
Directors on behalf
of the Company, unless otherwise determined by ordinary
resolution, may pay a
gratuity or pension or allowance on retirement to any Director who
has held
any salaried office or place of profit with the Company or to his
spouse or
dependants and may make contributions to any fund and pay premiums
for the
purchase or provision of any such gratuity, pension or allowance.
12.3 A Director shall not be required to hold a share in
the capital
of the Company as qualification for his office but shall be
qualified as
required by the Company Act, to become or act as a Director.
<PAGE>
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1. At each annual general meeting of the Company, all the
Directors
shall retire and the members shall elect a Board of Directors
consisting of
the number of Directors for the time being fixed pursuant to these
Articles.
If the Company is, or becomes, a company that is not a reporting
company and
the business to be transacted at any annual general meeting is
consented to in
writing by all the members who are entitled to attend and vote
thereat such
annual general meeting shall be deemed for the purpose of this
Part to have
been held on such written consent becoming effective.
13.2. A retiring Director shall be eligible for re-election.
13.3. Where the Company fails to hold an annual general meeting
in
accordance with the Company Act, the Directors then in office
shall be deemed
to have been elected or appointed as Directors on the last day on
which the
annual general meeting could have been held pursuant to these
Articles and
they may hold office until other Directors are appointed or
elected or until
the day on which the next annual general meeting is held.
13.4. If at any general meeting at which there should be an
election of
Directors, the places of any of the retiring Directors are not
filled by such
election, such of the retiring Directors who are not re-elected as
may be
requested by the newly-elected Directors shall, if willing to do
so, continue
in office to complete the number of Directors for the time being
fixed
pursuant to these Articles until further new Directors are elected
at a
general meeting convened for the purpose. If any such election or
continuance
of Directors does not result in the election or continuance of the
number of
Directors for the time being fixed pursuant to these Articles such
number
shall be fixed at the number of Directors actually elected or
continued in
office
13.5. Any casual vacancy occurring in the Board of Directors
may be filled
by the remaining Directors or Director.
13.6. Between successive annual general meetings the Directors
shall have
power to appoint one or more additional Directors but not more
than one-third
of the number of Directors fixed pursuant to these Articles and in
effect at
the last general meeting at which Directors were elected. Any
Director so
appointed shall hold office only until the next following annual
general
meeting of the Company, but shall be eligible for election at such
meeting and
so long as he is an additional Director the number of Directors
shall be
increased accordingly.
13.7. Any Director may by instrument in writing delivered to
the Company
appoint any person to be his alternate to act in his place at
meetings of the
Directors at which he is not present unless the Directors shall
have
reasonably disapproved the appointment of such person as an
alternate Director
and shall have given notice to that effect to the Director
appointing the
alternate Director within a reasonable time after delivery of such
instrument
to the Company Every such alternate shall be entitled to notice of
meetings of
the Directors and to attend and vote as a Director at a meeting at
which the
person appointing him is not personally present, and, if he is a
Director, to
have a separate vote on behalf of the Director he is representing
in addition
to his own vote. A Director may at any time by instrument,
telegram, telex or
any method of transmitting legibly recorded messages delivered to
the Company
revoke the appointment of an alternate appointed by him. The
remuneration
payable to such an alternate shall be payable out of the
remuneration of the
Director appointing him.
13.8. The office of Director shall he vacated if the Director:
(i) resigns his office by notice in writing delivered to the
registered
office of the Company; or
(ii) is convicted of an indictable offence and the other
Directors shall
have resolved to remove him or
(iii) ceases to be qualified to act as a Director pursuant to the
Company Act.
13.9. The Company may by special resolution remove any
Director before the
expiration of his period of office, and may by an ordinary
resolution appoint
another person in his stead.
<PAGE>
PART 14
POWERS AND DUTIES OF DIRECTORS
14.1. The Directors shall manage, or supervise the management
of, the
affairs and business of the Company and shall have the authority
to exercise
all such powers of the Company as are not, by the Company Act or
by the
Memorandum or these Articles, required to be exercised by the
Company in
general meeting.
14.2. The Directors may from time to time by power of attorney
or other
instrument under the seal, appoint any person to be the attorney
of the
Company for such purposes, and with such powers, authorities and
discretions
(not exceeding those vested in or exercisable by the Directors
under these
Articles and excepting the powers of the Directors relating to the
constitution of the Board and of any of its committees and the
appointment or
removal of officers and the power to declare dividends) and for
such period,
with such remuneration and subject to such conditions as the
Directors may
think fit, and any such appointment may be made in favour of any
of the
Directors or any of the members of the Company or in favour of any
corporation, or of any of the members, directors, nominees or
managers of any
corporation, firm or joint venture and any such power of attorney
may contain
such provisions for the protection or convenience of persons
dealing with such
attorney as the Directors think fit. Any such attorney may he
authorized by
the Directors to sub-delegate all or any of the powers,
authorities and
discretions for the time being vested in him.
<PAGE>
PART l5
DISCLOSURE OF INTEREST OF DIRECTORS
15.1. A Director who is, in any way, directly or indirectly
interested in
an existing or proposed contract or transaction with the Company
or who holds
any office or possesses any property whereby, directly or
indirectly, a duty
or interest might be created to conflict with his duty or interest
as a
Director shall declare the nature and extent of his interest in
such contract
or transaction or of the conflict or potential conflict with his
duty and
interest as a Director, as the case may be, in accordance with the
provisions
of the Company Act.
15.2. A Director shall not vote in respect of any such
contract or
transaction with the Company in which he is interested and if he
shall do so
his vote shall not be counted, but he shall be counted in the
quorum present
at the meeting at which such vote is taken. Subject to the
provisions of the
Company Act, the foregoing prohibitions shall not apply to
(i) any such contract or transaction relating to a loan to the
Company,
which a Director or a specified corporation or a specified firm in
which he
has an interest has guaranteed or joined in guaranteeing the
repayment of the
loan or any part of the loan;
(ii) any contract or transaction made or to be made with, or
for the
benefit of a holding corporation or a subsidiary corporation of
which a
Director is a director;
(iii) any contract by a Director to subscribe for or
underwrite shares or
debentures to be issued by the Company or a subsidiary of the
Company, or any
contract, arrangement or transaction in which a Director is,
directly or
indirectly, interested if all the other Directors are also,
directly or
indirectly interested in the contract, arrangement or transaction;
(iv) determining the remuneration of the Directors:
(v) purchasing and maintaining insurance to cover Directors
against
liability incurred by them as Directors; or
(vi) the indemnification of any Director by the Company.
These exceptions may from time to time be suspended or amended to
any extent
approved by the Company in general meeting and permitted by the
Company Act,
either generally or in respect of any particular contract or
transaction or
for any particular period.
15.3. A Director may hold any office or place of profit with
the Company
(other than the office of auditor of the Company) in conjunction
with his
office of Director for such period and on such terms (as to
remuneration or
otherwise) as the Directors may determine and no Director or
intended Director
shall be disqualified by his office from contracting with the
Company either
with regard to this tenure of any such other office or place of
profit or as
vendor, purchaser or otherwise, and, subject to compliance with
the provisions
of the Company Act, no contract or transaction entered into by or
on behalf of
the Company in which a Director is in any way interested shall be
liable to be
voided by reason thereof.
15.4. Subject to compliance with the provisions of the Company
Act, a
Director or his firm may act in a professional capacity for the
Company
(except as auditor of the Company) and he or his firm shall be
entitled to
remuneration for professional services as if he were not a
Director.
15.5. A Director may be or become a director or other officer
or employee
of, or otherwise interested in, any corporation or firm in which
the Company
may be interested as a shareholder or otherwise, and, subject to
compliance
with the provisions of the Company Act, such Director shall not be
accountable
to the Company for any remuneration or other benefits received by
him as
director, officer or employee of, or from his interest in, such
other
corporation or firm, unless the Company in general meeting
otherwise directs.
<PAGE>
PART 16
PROCEEDINGS OF DIRECTORS
16.1. The Chairman of the Board, if any, or in his absence,
the President
shall preside as chairman at every meeting of the Directors, or if
there is no
Chairman of the Board or neither the Chairman of the Board nor the
President
is present within fifteen minutes of the time appointed for
holding the
meeting or is willing to act as chairman, or, if the Chairman of
the Board, if
any, and the President have advised the Secretary that they will
not be
present at the meeting, the Directors present shall choose one of
their number
to be chairman of the meeting.
16.2. The Directors may meet together for the dispatch of
business,
adjourn and otherwise regulate their meetings, as they think fit.
Questions
arising at any meeting shall be decided by a majority of votes. In
case of an
equality of votes, the chairman shall not have a second or casting
vote.
Meetings of the Board held at regular intervals may be held at
such place, at
such time and upon such notice (if any) as the Board may by
resolution from
time to time determine.
16.3. A Director may participate in a meeting of the Board or
of any
committee of the Directors by means of conference telephones or
other
communications facilities by means of which all Directors
participating in the
meeting can hear each other and provided that all such Directors
agree to such
participation. A Director participating in a meeting in accordance
with this
Article shall be deemed to be present at the meeting and to have
so agreed and
shall be counted in the quorum therefor and be entitled to speak
and vote
thereat.
16.4. A Director may, and the Secretary or an Assistant
Secretary upon
request of a Director shall, call a meeting of the Board at any
time.
Reasonable notice of such meeting specifying the place, day and
hour of such
meeting shall be given by mail, postage prepaid, addressed to each
of the
Directors and alternate Directors at his address as it appears on
the books of
the Company or by leaving it at his usual business or residential
address or
by telephone, telegram, telex, or any method of transmitting
legibly recorded
messages. It shall not be necessary to give notice of a meeting of
Directors
to any Director or alternate Director (i) who is at the time not
in the
Province of British Columbia or (ii) if such meeting is to be held
immediately
following a general meeting at which such Director shall have been
elected or
is the meeting of Directors at which such Director is appointed.
l6.5. Any Director of the Company may file with the Secretary a
document
executed by him waiving notice of any past, present or future
meeting or
meetings of the Directors being, or required to have been, sent to
him and may
at any time withdraw such waiver with respect to meetings held
thereafter.
After filing such waiver with respect to future meetings and until
such waiver
is withdrawn no notice need be given to such Director and, unless
the Director
otherwise requires in writing to the Secretary, to his alternate
Director of
any meeting of Directors and all meetings of the Directors so held
shall be
deemed not to be improperly called or constituted by reason of
notice not
having been given to such Director or alternate Director.
16.6. The quorum necessary for the transaction of the business
of the
Directors may be fixed by the Directors and if not so fixed shall
be a
majority of the Directors or, if the number of Directors is fixed
at one,
shall be one Director.
16.7. The continuing Directors may act notwithstanding any
vacancy in
their body. but, if and so long as their number is reduced below
the number
fixed pursuant to these Articles as the necessary quorum of
Directors, the
continuing Directors may act for the purpose of increasing the
number of
Directors to that number, or of summoning a general meeting of the
Company,
but for no other purpose.
16.8. Subject to the provisions of the Company Act, all acts
done by any
meeting of the Directors or of a committee of Directors, or by any
person
acting as a Director, shall, notwithstanding that it be afterwards
discovered
that there was some defect in the qualification, election or
appointment of
any such Directors or of the members of such committee or person
acting as
aforesaid, or that they or any of them were disqualified, be as
valid as if
every such person had been duly elected or appointed and was
qualified to be a
Director.
16.9. A resolution consented to in writing, whether by
document, telegram,
telex or any method of transmitting legibly recorded messages or
other means
by all of the Directors or their alternates shall be as valid and
effectual as
if it had been passed at a meeting of the Directors duly called
and held. Such
resolution may be in two or more counterparts which together shall
be deemed
to constitute one resolution in writing. Such resolution shall be
filed with
the minutes of the proceedings of the Directors and shall be
effective on the
date stated thereon or on the latest date stated on any
counterpart.
<PAGE>
PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1. The Directors may by resolution appoint an Executive
Committee to
consist of such member or members of their body as they think fit,
which
Committee shall have, and may exercise during the intervals
between the
meetings of the Board, all the powers vested in the Board except
the power to
fill vacancies in the Board, the power to change the membership
of, or fill
vacancies in, said Committee or any other committee of the Board
and such
other powers, if any, as may be specified in the resolution. The
said
Committee shall keep regular minutes of its transactions and shall
cause them
to be recorded in books kept for that purpose, and shall report
the same to
the Board of Directors at such times as the Board of Directors may
from time
to time require. The Board shall have the power at any time to
revoke or
override the authority given to or acts done by the Executive
Committee except
as to acts done before such revocation or overriding and to
terminate the
appointment or change the membership of such Committee and to fill
vacancies
in it. The Executive Committee may make rules for the conduct of
its business
and may appoint such assistants as it may deem necessary. A
majority of the
members of said Committee shall constitute a quorum thereof
17.2 The Directors may by resolution appoint one or more
committees
consisting of such member or members of their body as they think
fit and may
delegate to any such committee between meetings of the Board such
powers of
the Board (except the power to fill vacancies in the Board and the
power to
change the membership of or fill vacancies in any committee of the
Board and
the power to appoint or remove officers appointed by the Board)
subject to
such conditions as may be prescribed in such resolution, and all
committees so
appointed shall keep regular minutes or their transactions and
shall cause
them to be recorded in books kept for that purpose, and shall
report the same
to the Board of Directors at such times as the Board of Directors
may from
time to time require. The Directors shall also have power at any
time to
revoke or override any authority given to or acts to be done by
any such
committees except as to acts done before such revocation or
overriding and to
terminate the appointment or change the membership of a committee
and to fill
vacancies in it. Committees may make rules for the conduct of
their business
and may appoint such assistants as they may deem necessary. A
majority of the
members of a committee shall constitute a quorum thereof.
17.3. The Executive Committee and any other committee may meet
and adjourn
as it thinks proper. Questions arising at any meeting shall be
determined by a
majority of votes of the members of the committee present, and in
case of an
equality of votes the chairman shall not have a second or casting
vote. A
resolution approved in writing by all the members of the Executive
Committee
or any other committee shall be as valid and effective as if it
had been
passed at a meeting of such Committee duly called and constituted.
Such
resolution may be in two or more counterparts which together shall
be deemed
to constitute one resolution in writing. Such resolution shall be
filed with
the minutes of the proceedings of the committee and shall be
effective on the
date stated thereon or on the latest date stated in any
counterpart.
<PAGE>
PART 18
OFFICERS
18.1. The Directors shall, from time to time, appoint a
President and a
Secretary and such other officers, if any, as the Directors shall
determine
arid the Directors may, at any time, terminate any. such
appointment. No
officer shall be appointed unless he is qualified in accordance
with the
provisions of the Company Act.
18.2. One person may hold more than one of such offices except
that the
offices of President and Secretary must be held by different
persons unless
the Company has only one member. Any person appointed as the
Chairman of the
Board, the President or the Managing Director shall be a Director.
The other
officers need not be Directors. The remuneration of the officers
of the
ompany as such and their terms and conditions of their tenure of
office or
employment shall from time to time be determined by the Directors;
such
remuneration may be by way of salary, fees, wages, commission or
participation
in profits or any other means or all of these modes and an officer
may in
addition to such remuneration be entitled to receive after he
ceases to hold
such office or leaves the employment of the Company a pension or
gratuity. The
Directors may decide what functions and duties each officer shall
perform and
may entrust to and confer upon him any of the powers exercisable
by them upon
such terms and conditions and with such restrictions as they think
fit and may
from time to time revoke, withdraw, alter or vary all or any of
such
functions, duties and powers. The Secretary shall, inter alia,
perform the
functions of the Secretary specified in the Company Act.
18.3. Every officer of the Company who holds any office or
possesses any
property whereby, whether directly or indirectly, duties or
interests might be
created in conflict with his duties or interests as an officer of
the Company
shall, in writing, disclose to the President the fact and the
nature,
character and extent of the conflict
<PAGE>
PART 19
INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND
EMPLOYEES
19.1 Subject to the provisions of the Company Act, the
Directors shall
cause the Company to indemnify a Director or former Director of
the Company
and the Directors may cause the Company to indemnify a director or
former
director of a corporation of which the Company is or was a
shareholder and the
heirs and personal representatives of any such person against all
costs,
charges and expenses, including an amount paid to settle an action
or satisfy
a judgment, actually and reasonably incurred by him or them
including an
amount paid to settle an action or satisfy a judgment in a civil,
criminal or
administrative action or proceeding to which he is or they are
made a party by
reason of his being or having been a Director of the Company or a
director of
such corporation, including any action brought by the Company or
any such
corporation. Each Director of the Company on being elected or
appointed shall
be deemed to have contracted with the Company on the terms of the
foregoing
indemnity.
19.2. Subject to the provisions of the Company Act, the
Directors may
cause the Company to indemnify any officer,. employee or agent of
the Company
or of a corporation of which the Company is or was a shareholder
(notwithstanding that he is also a Director) and his heirs and
personal
representatives against all costs, charges and expenses whatsoever
incurred by
him or them and resulting from his acting as an officer, employee
or agent of
the Company or such corporation. In addition, the Company shall
indemnify the
Secretary or an Assistant Secretary of the Company (if he shall
not be a full
time employee of the Company and notwithstanding that he is also a
Director
and his respective heirs and legal representatives against all
costs, charges
and expenses whatsoever incurred by him or them and arising out of
the
functions assigned to the Secretary by the Company Act or these
Articles and
each such Secretary and Assistant Secretary shall on being
appointed be deemed
to have contracted with the Company on the terms of the foregoing
indemnity.
19.3. The failure of a Director or officer of the Company to
comply with
the provisions of the Company Act or of the Memorandum or these
Articles shall
not invalidate any indemnity to which he is entitled under this
Part.
19.4. The Directors may cause the Company to purchase and
maintain
insurance for the benefit of any person who is or was serving as a
Director,
officer, employee or agent of the Company or as a director,
officer, employee
or agent or any corporation of which the Company is or was a
shareholder and
his heirs or personal representatives against any liability
incurred by him as
such Director, director, officer, employee or agent.
<PAGE>
PART 20
DIVIDENDS AND RESERVE
20.1. The Directors may from time to time declare and
authorize payment of
such dividends, if any, as they may deem advisable and need not
give notice of
such declaration to any member. No dividend shall be paid
otherwise than out
of funds and/or assets properly available for the payment of
dividends and a
declaration by the Directors as to the amount of such funds or
assets
available for dividends shall he conclusive. The Company may pay
any such
dividend wholly or in part by the distribution of specific assets
and in
particular by paid up shares, bonds, debentures or other
securities of the
Company or any other corporation or in any one or more such ways
as may be
authorized by the Company or the Directors and where any
difficulty arises
with regard to such a distribution the Directors may settle the
same as they
think expedient, and in particular may fix the value for
distribution of such
specific assets or any part thereof, and may determine that cash
payments in
substitution for all or any part of the specific assets to which
any members
are entitled shall be made to any members on the basis of the
value so fixed
in order to adjust the rights of all parties and vest any such
specific
assets in trustees for the persons entitled to the dividend as may
seem
expedient the Directors.
20.2. Any dividend declared on shares of any class by the
Directors may be
made payable on such date as is fixed by the Directors.
20.3 Subject to the rights of members (if any) holding shares
with special
rights as to dividends, all dividends on shares of any class shall
be declared
and paid according to the number of such shares held.
20.4. The Directors may, before declaring any dividend, set
aside out of
the funds properly available for the payment of dividends such
sums as they
think proper as a reserve or reserves, which shall, at the
discretion of the
Directors, be applicable for meeting contingencies, or for
equalizing
dividends, or for any other purpose to which such funds of the
Company may be
properly applied, and pending such application may, at the like
discretion,
either be employed in the business of the Company or be invested
in such
investments as the Directors may from time to time think fit. The
Directors
may also, without placing the same in reserve, carry forward such
funds, which
they think prudent not to divide.
20.5. If several persons are registered as joint holders of
any share, any
one of them may give an effective receipt for any dividend,
bonuses or other
moneys payable in respect of the share.
20.6. No dividend shall bear interest against the Company.
Where the
dividend to which a member is entitled includes a fraction of a
cent, such
fraction shall be disregarded in making payment thereof and such
payment shall
be deemed to be payment in full
20.7. Any dividend. bonuses or other moneys payable in cash in
respect of
shares may be paid by cheque or warrant sent through the post
directed to the
registered address of the holder, or in the case of Joint holders,
to the
registered address of that one of the joint holders who is first
named on the
register, or to such person and to such address as the holder or
joint holders
nay direct in writing. Every such cheque or warrant shall be made
payable to
the order of the person to whom it is sent The mailing of such
cheque or
warrant shall, to the extent of the sum represented thereby (plus
the amount
of any tax required by law to be deducted) discharge all liability
for the
dividend, unless such cheque or warrant shall not be paid on
presentation or
the amount of tax so deducted shall not be paid [(I the
appropriate taxing
authority.
20.8. Notwithstanding anything contained in these Articles the
Directors
may from time to time capitalize any undistributed surplus on hand
of the
Company and may from time to time issue as fully paid and non-
assessable any
unissued shares, or any bonds debentures or debt obligations of
the Company as
a dividend representing such undistributed surplus on hand or any
part
thereof.
<PAGE>
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1. The Company shall keep at its records office or at such
other place
as the Company Act may permit, the documents, copies, registers,
minutes, and
records which the Company is required by the Company Act to keep
at its
records office or such other place. as the case may be.
21.2. The Company shall cause to be kept proper books of
account and
accounting records in respect of all financial and other
transactions of the
Company in order properly to record the financial affairs and
condition of the
Company and to comply with the Company Act.
21.3. Unless the Directors determine otherwise, or unless
otherwise
determined by an ordinary resolution, no member of the Company
shall be
entitled to inspect the accounting records of the Company.
21.4. The Directors shall from time to time at the expense of
the Company
cause to be prepared and laid before the Company in general
meeting such
financial statements and reports as are required by the Company
Act.
21.5 . Every member shall be entitled to be furnished once
gratis on
demand with a copy of the latest annual financial statement of the
Company
and, if so required by the Company, Act, a copy of each such
annual financial
statement and interim financial statement shall be mailed to each
member.
<PAGE>
PART 22
NOTICES
22.1 A notice, statement or report may be given or
delivered by the
Company to any member either by delivery to him personally or by
sending it by
mail to him to his address as recorded in the register of members.
Where a
notice, statement or report is sent by mail, service or delivery
of the
notice, statement or report shall be deemed to be effected by
properly
addressing. prepaying and mailing the notice. statement or report
and to have
been given on the day, Saturdays, Sundays and holidays excepted.
following the
date of mailing. A certificate signed by the Secretary or other
officer of the
Company or of any other corporation acting in that behalf for the
Company'
that the letter, envelope or wrapper containing the notice,
statement or
report was so addressed, prepaid and mailed shall be conclusive
evidence
thereof.
22.2 A notice, statement or report may be given or delivered
by the
Company to the joint holders of a share by giving the notice to
the joint
holder first named in the register of members in respect of the
share.
22.3. A notice, statement or report may be given or delivered
by the
Company to the persons entitled to a share in consequence of the
death,
bankruptcy or incapacity of a member by sending it through the
mail prepaid
addressed to them by name or by the title of representatives of
the deceased
or incapacitated person or trustee of the bankrupt, or by any like
description, at the address (if any) supplied to the Company for
the purpose
by' the persons claiming to be so entitled, or (until such address
has been so
supplied) by giving the notice in manner in which the same might
have been
given if the death. bankruptcy or incapacity' had not occurred.
22.4 Notice of every general meeting or meeting of members
holding a class
of shares shall be given in a manner herein before authorized to
every member
holding at the time of the issue of the notice or the date fixed
for
determining the members entitled to such notice, whichever is the
earlier,
shares which confer the right to notice of and to attend and vote
at any such
meeting. No other person except the auditor of the Company and
the Directors
of the Company shall be entitled to receive notices of any such
meeting.
<PAGE>
PART 23
RECORD DATES
23.1. The Directors may fix in advance a date, which shall not
be more
than the maximum number of days permitted by the Company Act
preceding the
date of any meeting of members or any class thereof or of the
payment of any
dividend or of the proposed taking of any other proper action
requiring the
determination of members as the record date for the determination
of the
members entitled to notice of, or to attend and vote at, any such
meeting and
any adjournment thereof, or entitled to receive payment of any
such dividend
or for any other proper purpose and, in such case, notwithstanding
anything
elsewhere contained in these Articles, only members of record on
the date so
fixed shall be deemed to be members for the purposes aforesaid.
23.2. Where no record date is so fixed for the determination
of members as
provided in the preceding Article the date on which the notice is
mailed or on
which the resolution declaring the dividend is adopted, as the
case may be,
shall be the record date for such determination.
<PAGE>
PART 24
SEAL
24 .1 The Directors may provide a seal for the Company and, if
they do so,
shall provide for the safe custody of the seal which shall not he
affixed to
any instrument except in the presence of the following persons,
namely,
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President, the
Managing
Director, a Director and a Vice-President together with one of the
Secretary,
the Treasurer, the Secretary-Treasurer. an Assistant Secretary, an
Assistant
Treasurer and an Assistant Secretary- Treasurer, or
(iii) if the Company shall have only one member, the President or
the
Secretary, or
(iv) such person or persons as the Directors may from time to time
by
resolution appoint
and the said Directors, officers, person or persons in whose
presence the seal
is so affixed to an instrument shall sign such instrument. For the
purpose of
certifying under seal true copies of any document or resolution
the seal may
be affixed in the presence of any one of the foregoing persons.
24.2. To enable the seal of the Company to be affixed to any
bonds,
debentures, share certificates. or other securities of the
Company, whether in
definitive or interim form, on which facsimiles of any of the
signatures of
the Directors or officers of the Company are, in accordance with
the Company
Act and or these Articles, printed or otherwise mechanically
reproduced there
may be delivered to the firm or company employed to engrave,
lithograph or
print such definitive or interim bonds, debentures. share
certificates or
other securities one or more unmounted dies reproducing the
Company's seal and
the Chairman of the Board, the President, the Managing Director or
a Vice-
President and the Secretary Treasurer, Secretary-Treasurer, an
Assistant
Secretary, an Assistant Treasurer or an Assistant Secretary-
Treasurer may by a
document authorize such firm or company to cause the Company's
seal to be
affixed to such definitive or interim bonds. debentures, share
certificates or
other securities by the use of such dies Bonds. debentures. share
certificates
or other securities to which the Company's seal has been so
affixed shall for
all purposes be deemed to be under and to bear the Company's seal
lawfully
affixed thereto.
24.3. The Company may have for use in any other province,
state,
territory, or country an official seal which shall have on its
face the name
of the province, state, territory or country where it is to be
used and all of
the powers conferred by the Company Act with respect thereto may
be exercised
by the Directors or by a duly authorized agent of the Company.
<PAGE>
PART 25
MECHANICAL REPRODUCTIONS OF SIGNATURES
25.1. The signature of any officer, Director. registrar,
branch registrar,
transfer agent or branch transfer agent of the Company, unless
otherwise
required by the Company Act or by these Articles, may. if
authorized by the
Directors, be printed, lithographed, engraved or otherwise
mechanically
reproduced upon all instruments executed or issued by the Company
or any
officer thereof; and any instrument on which the signature of any
such person
is so reproduced shall be deemed to have been manually signed by
such person
whose signature is so reproduced and shall be as valid to all
intents and
purposes as if such instrument had been signed manually, and
notwithstanding
that the person whose signature is so reproduced may have ceased
to hold the
office that he is stated on such instrument to hold at the date of
the
delivery or issue of such instrument
25.2. The term "instrument" as used in Article 25.1. shall
include deeds,
mortgages, hypothecs, charges, conveyances. transfers and
assignments of
property, real or personal, agreements, releases, receipts and
discharges for
the payment of money or other obligations, shares and share
warrants of the
Company, bonds, debentures and other debt obligations of the
Company, and all
paper writings.
<PAGE>
PART 26
PROHIBITIONS
26. 1. If the Company is, or becomes, a company which is not a
reporting
company, (i) the number of members for the time being of the
Company,
exclusive of persons who are for the time being in the employment
of the
Company and continue to be members after the termination of such
employment,
shall not exceed 50, and (ii) no securities issued by the Company
shall be
offered for sale to the public nor shall the public be invited to
subscribe
therefore.
26.2 If the Company is, or becomes a company which is not a
reporting company,
or a reporting company but does not have any of its securities
listed for
trading on any stock exchange wheresoever situate, or a reporting
company and
has not with respect to any of its securities filed a prospectus
with the
Superintendent of Brokers or any similar securities regulatory
body and
obtained a receipt therefore, then no shares shall be transferred
without the
previous consent of the Directors expressed by a resolution of the
Board and
the Directors shall not be required to give any reason for
refusing to any
such proposed transfer.
Full Name(s), Resident Address(es) and Occupation(s) of
Subscriber(s)
Signature: /S/ Louis P. Salley
Name: LOUIS P. SALLEY
Resident Address: 830 Millbank
Vancouver, B.C. V5Z 3Z4
Occupation: Barrister and Solicitor
DATED the 18th day of September, 1987.
<PAGE>
NEW BRUNSWICK
BUSINESS CORPORATIONS ACT
FORM 3
ARTICLES OF AMENDMENT
(Sections 26, 116)
1. Name of Corporation: TSI TelSys Corporation
2. Corporation Number: 502293
3. The articles of the above mentioned corporation are amended as
follows:
To consolidate the issued common shares by exchanging one common
share for
every five common shares.
Date July 30, 1998
<PAGE>
TSI TELSYS CORPORATION
NEW BRUNSWICK BUSINESS CORPORATIONS ACT
Form 7
Schedule 2
1. TSI TelSys Corporation
2. 100,000,000 Common Shares without par value; 100,000,000
Senior Preferred
Shares without par value, of which 3,000 are designated Senior
Preferred
Shares Series 1; and 100,000,000 Junior Preferred Shares without
par value.
3. Restrictions on share transfers: none.
4. Minimum of three and maximum of eight directors.
5. Restrictions on business the corporation may carry on: none.
6. Details of incorporation: Incorporated under the Company Act
(British
Columbia) on September 22, 1987.
7. Other provisions: Meetings of shareholders of the Company
may, as
determined by the Directors of the Company from time to time, be
held in:
(a)provinces other than New Brunswick; and
(b)in the United States.
<PAGE>
APPENDIX A
Schedule "A"
PART 27
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO SHARES
(As altered by Special Resolution dated March 22, 1996)
27.1 Common Shares.: The Common Shares without par value in
the capital of
the Company (the "Common Shares") shall have attached thereto the
following
rights, privileges, restrictions and conditions:
(i) Votes: The holders of the Common Shares are entitled to
receive notice
of and to attend all meetings of shareholders of the Company,
except meetings
at which only holders of another specified class or series of
Shares are
entitled to vote. The holders of the Common Shares are entitled to
one vote
for each Common Share held on all votes taken at such meetings.
(ii) Dividends: The holders of the Common Shares shall be
entitled to
receive and to participate as to dividends as and when declared by
the board
of Directors the Company and all such dividends shall he declared
and paid at
the same time on all such Common Shares at the time outstanding.
(iii) Change in Shares: Subject to the provisions of the
Company Act, any
amendment to the Articles of the Company to delete or vary any
rights,
privileges, restrictions or conditions attaching to the Common
Shares, or to
create any special shares ranking in priority or on a parity with
the Common
Shares or to subdivide, consolidate reclassify or change the
Common Shares,
may only be made if consented to by at least three quarters (314)
of the votes
cast at a meeting of the holders of the Common Shares duly called
for that
purpose.
<PAGE>
APPENDIX A
Schedule "B"
COMPANY ACT
FORM I
MEMORANDUM OF TSI TELSYS CORPORATION
(As altered by Special Resolution dated March 22, 1996)
1. The name of the Company is "TSI TELSYS CORPORATION".
2. The authorized capital of the Company consists of 300,000,000
shares
divided into:
a) 100,000,000 Common Shares without par value;
b) 100,000,000 Senior Preferred Shares without par value, of
which 3,000
are designated Senior Preferred Shares Series 1; and
c) 100,000,000 Junior Preferred Shares without par value.
3. The special rights and restrictions attached to the shares are
set out in
Parts 27 and 28 of the Articles of the Company.
<PAGE>
SCHEDULE "A"
COMPANY ACT
ALTERED MEMORANDUM OF TSI TELSYS CORPORATION
(as altered by special resolution dated April 7, 1995)
1. The name of the Company is "TSI TELSYS CORPORATION".
2. The authorized capital of the Company consists of
325,000,000 shares,
divided into:
(a) 100,000,000 Class A Subordinate Voting Shares without par
value;
(b) 25,000,000 Class C Multiple Voting Shares without par
value;
(c) 100,000,000 Senior Preferred Shares without par value, of
which 3,000
are designated Senior Preferred Shares, Series 1; and
(d) 100,000,000 Junior Preferred Shares without par value.
3. The special rights and restrictions attached to the shares are
set out in
Parts 27 and 28 of the Articles of the Company.
<PAGE>
SCHEDULE "B"
COMPANY ACT
FORM 1
MEMORANDUM OF INTERNATIONAL CONTOUR TECHNOLOGY INC.
(as altered by Special Resolution dated June 25, 1993)
1. The name of the Company is INTERNATIONAL CONTOUR TECHNOLOGY
INC.
2.The authorized capital of the Company consists of 325,000,000
shares,
divided into:
(a) 100,000,000 Class A Subordinate Voting Shares without par
value;
(b) 25,000,000 Class C Multiple Voting Shares without par value;
(c) 100,000,000 Senior Preferred Shares without par value, of
which 3,000 are
designated Senior Preferred Shares, Series 1; and
(d) 100,000,000 Junior Preferred Shares without par value.
3. The special rights and restrictions attached to the shares are
set out in
Parts 27 and 28 of the Articles of the Company.
<PAGE>
PART 27
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO SHARES
(as altered by special resolution dated April 7, 1995)
27.1 Subordinate Voting Shares and Multiple Voting Shares: The
Class A
Subordinate Voting Shares without par value (the "Subordinate
Voting Shares")
and the Class C Multiple Voting Shares without par value (the
"Multiple Voting
Shares") shall have attached thereto the following respective
rights,
privileges, restrictions and conditions:
(i) Votes: The holders of the Subordinate Voting Shares and the
Multiple
Voting Shares are entitled to receive notice of and to attend all
meetings of
shareholders of the Company, except meetings at which only holders
of another
specified class or series of Shares are entitled to vote. The
holders of the
Subordinate Voting Shares are entitled to one vote for each
Subordinate Voting
Share held on all votes taken at such meetings and the holders of
the Multiple
Voting Shares are entitled to 5 votes for each Multiple Voting
Share held on
all votes taken at such meetings.
(ii) Dividends: The holders of the Subordinate Voting Shares and
the Multiple
Voting Shares shall be entitled to receive and to participate as
to dividends
as and when declared by the board of Directors of the Company and
all such
dividends shall be declared and paid at the same time on all such
Subordinate
Voting Shares and Multiple Voting Shares at the time outstanding;
(iii) Conversion of Multiple Voting Shares: Upon and subject to
the terms
and conditions hereinafter set forth, a holder of Multiple Voting
Shares shall
be entitled at any time and from time to time to have any or all
of the
Multiple Voting Shares held by him converted into Subordinate
Voting Shares on
the basis of one Subordinate Voting Share for each Multiple Voting
Share so
converted (subject to adjustment as set forth below):
(a) Exercise of Conversion Right: Except as set forth in
paragraph 27.1.
(iv) (c) below, in order to exercise such right of conversion such
holder
shall deliver and surrender to the Company or to its transfer
agent the
certificate or certificates representing the Multiple Voting
Shares which he
desires to convert together with a written notice to the effect
that the
holder desires to exercise his right of conversion in respect of
that number
of Multiple Voting Shares specified in the conversion notice. The
conversion
notice shall state the name or names in which the holder wishes
the
certificate or certificates for Subordinate Voting Shares to be
issued and the
address or addresses to which he wishes such certificate or
certificates to be
sent and shall be signed by the holder or his agent duly
authorized in
writing. If less than all the Multiple Voting Shares represented
by any
certificate or certificates accompanying any conversion notice are
to be
converted, the holder shall be entitled to receive, at the expense
of the
Company, a new certificate representing the Multiple Voting Shares
comprised
in the certificate or certificates surrendered as aforesaid which
are not to
be converted.
(b) Share Certificate: On any conversion of Multiple Voting
Shares the
certificate or certificates representing the Subordinate Voting
Shares
resulting therefrom shall be issued at the expense of the Company
in the name
or names indicated in the notice of conversion or, in the absence
of such
indication, in the name of the holder, provided that the holder
shall pay any
applicable security transfer taxes or charges if such certificate
or
certificates are to be issued in a name or names other than the
name of the
holder.
(c) Date of Exercise of Conversion Right: Except as set forth in
paragraph
27.1. (iv) (c) below, the right of a holder of Multiple Voting
Shares to
convert the same into Subordinate Voting Shares shall and for all
purposes
shall be deemed to have been exercised and the holder of Multiple
Voting
Shares to be converted (or any person or persons in whose name or
names such
holder of Multiple Voting Shares shall have directed a
certificate or
certificates representing Subordinate Voting Shares to be issued
as provided
above) shall and for all purposes shall be deemed to have become a
holder of
Subordinate Voting Shares, on the date of receipt by the Company
or by its
transfer agent of the certificate or certificates representing all
of the
Multiple Voting Shares to be converted accompanied by an
appropriate
conversion notice as provided above, notwithstanding any delay in
the delivery
by the Company or by its transfer agent of the certificate or
certificates
representing the Subordinate Voting Shares into which the Multiple
Voting
Shares have been converted.
(d) Prior Notice of Dividends: The Company shall not pay any
dividend upon
the Subordinate Voting Shares payable in shares of the capital of
the Company,
or issue to holders of Subordinate Voting Shares rights to
purchase
Subordinate Voting Shares, unless it shall have given to the
holders of the
Multiple Voting Shares notice of the payment of such dividends or
the issue of
such rights at least THIRTY (30) days prior to the record date f6r
the
determination of shareholders entitled to such dividends or the
issue of such
rights and shall not, during the period of such notice, take any
other
corporate actions which might deprive the holders of the Multiple
Voting
Shares of the opportunity of exercising the right of conversion as
aforesaid.
(e) Dilution Protection: In the event of
A. any subdivision, consolidation, conversion, exchange or
reclassification of the Subordinate Voting Shares or Multiple
Voting Shares;
B. any reorganization of the share capital of the Company
affecting in any
manner the Subordinate Voting Shares or Multiple Voting Shares; or
C. the amalgamation of the Company with any other company or
companies;
the appropriate adjustment will be made to the conversion right
provided above
so as to preserve that right in all respects.
(iv) Take-Over Bid Protection:
(a) Exercise of Conversion Right to Multiple Voting Shares: Upon
and subject
to the conditions hereinafter set forth, in the event an Offer is
made, each
Subordinate Voting Share shall be convertible at the option of the
holder
during the Conversion Period into one Multiple Voting Share
(subject to
adjustment as set forth below). The holder shall complete and
sign the form
headed "Exercise of Right to Convert to Multiple Voting Shares"
(Form 1) on
the reverse side of the certificate or certificates representing
the
Subordinate Voting Shares which the holder desires to convert,
specifying the
number of Subordinate Voting Shares to be converted. Immediately
following
the completion and signing of Form 1 as aforesaid, the holder
shall complete
and sign the form headed "Exercise of Right to Convert to
Subordinate Voting
Shares" (Form 2) on the reverse side of each such certificate
or
certificates. Each such certificate or certificates shall
be
presented and surrendered to the Depositary at any of its
Designated Offices
or, in the event that the Offer is a Stock Exchange Offer, such
certificate or
certificates shall be presented and surrendered to the Transfer
Agent at any
of the offices at which the Transfer Agent provides transfer
agency facilities
for the Company's Subordinate Voting Shares. Upon such receipt by
the
Depositary or the Transfer Agent, as the case may be, and subject
to each of
Form 1 and Form 2 having been completed and signed as set forth
above, the
conversion right into Multiple Voting Shares shall have been
exercised and the
holder shall hold and shall be deemed for all purposes to hold
fully paid
Multiple Voting Shares effective from the time of signing, and in
the number
designated in, Form 1 (not exceeding in aggregate the total number
of Multiple
Voting Shares resulting from such conversion) and the certificate
or
certificates held by the Depositary or the Transfer Agent, as the
case may be,
shall represent and shall be deemed for all purposes to represent
such
Multiple Voting Shares. In the event that each of Form 1 and Form
2 are not
completed and signed as set forth above, no conversion to Multiple
Voting
Shares effective from the time of signing Form 1 shall or shall be
deemed to
have occurred. In the event that a certificate or certificates
are presented
and surrendered to the Transfer Agent as set forth above, the
Transfer Agent
shall and for all purposes shall be deemed to be irrevocably
appointed and
empowered to act as the true and lawful attorney of the depositing
ho1d~r to
take all such steps and sign all such documents in the name and on
behalf of
the depositing holder as is necessary for the purpose of
facilitating the
acceptance of the Stock Exchange Offer by the depositing holder.
The holder
shall pay any governmental or other tax imposed on or in respect
of the
conversion of Subordinate Voting Shares as set forth above. If
less than all
of the Subordinate Voting Shares represented by any certificate
are to be
converted, the holder shall be entitled to receive, at the
expense of the
Company, a new certificate representing the Subordinate Voting
Shares
comprised in the original certificate which are not to be
converted.
(b) Conversion Right Not Coming into Effect: The right of a
holder of
Subordinate Voting Shares to convert such shares into Multiple
Voting Shares
as set forth in paragraph 27.1. (iv) (a) above shall not come into
effect in
the event that an identical offer in terms of price per share,
percentage of
shares to be taken up, exclusive of shares owned immediately prior
to the
Offer by the offeror or associates or affiliates of the offeror,
and other
essential terms is made to purchase Subordinate Voting Shares
concurrently
with the Offer, which offer has no conditions attached other than
the right
not to take up and pay for Subordinate Voting Shares tendered if
no Multiple
Voting Shares are purchased pursuant to the Offer.
(c) Exercise of Right to Convert to Subordinate Voting Shares:
Notwithstanding paragraph 27.1. (iv) (a) above, by signing Form 2
on the
everse side of the certificate or certificates representing
Subordinate
Voting Shares which the holder elects to convert into Multiple
Voting Shares
as set forth in paragraph 27.1. (iv) (a) above, in the
circumstances
described below the holder shall and for all purposes shall be
deemed, in his
capacity as a holder of Multiple Voting Shares as a result of
completing and
signing Form 1, to have irrevocably elected to have exercised his
right to
convert into Subordinate Voting Shares each Multiple Voting Share
acquired by
him as a result of such conversion of Subordinate Voting Shares
into Multiple
Voting Shares. In such event the holder shall be entitled to one
Subordinate
Voting Share for each Multiple Voting Share so converted (subject
to
adjustment as set forth below). The said conversion of Multiple
Voting Shares
to Subordinate Voting Shares shall and for all purposes shall be
deemed to
occur and be effective:
A. in the case of Multiple Voting Shares taken up and purchased
under the
Offer, immediately after such shares are so taken up and
purchased; and
B. in the case of Multiple Voting Shares not taken up and
purchased under the
Offer, immediately after such shares are released to the
depositing holder by
the Depositary or by the Transfer Agent, as the case may be
(d) Dilution Protection: In the event of:
A. any subdivision1 consolidation, conversion, exchange or
reclassification of
the Multiple Voting Shares or Subordinate Voting Shares;
B. any reorganization of the share capital of the Company
affecting in any
manner the Multiple Voting Shares or Subordinate Voting Shares; or
C. the amalgamation of the Company with any other company or
companies; the
appropriate adjustment will be made to the conversion right
provided above so
as to preserve that right in all respects.
(e) Definitions: In this Article 27.1. (iv):
A. "Conversion Period" means the period of time commencing
on the Offer
Date and ending:
1) in the case of an Offer other than a Stock Exchange Offer, at
the latest
time for the deposit of Multiple Voting Shares under the Offer at
the
respective Designated Offices of the Depositary; and
2) in the case of a Stock Exchange Offer, at 12:30 p.m.,
Vancouver time, on
the business day immediately preceding the Expiry Date;
B. "Depositary" means the person or persons or company or
companies appointed
to act as depositary under the Offer;
C. "Designated Office" means those offices of the Depositary at
which
certificates representing Multiple Voting Shares may be deposited
under the
Offer;
D. "Expiry Date" means the last date upon which holders of
Multiple Voting
Shares may accept an Offer;
E. "Offer" means an offer to purchase Multiple Voting Shares
which must, by
reason of applicable securities legislation or the requirements of
a stock
exchange on which the Multiple Voting Shares are listed, be made
to all or
substantially all holders of Multiple Voting Shares residing in
any province
of Canada;
F. "Offer Date" means the date an Offer is made;
G. "Stock Exchange Offer" means an Offer made through the
facilities of a
stock exchange on which the Multiple Voting Shares are listed; and
H. "Transfer Agent" means the registrar and transfer agent of the
Company's
issued share capital.
(v)Change in Shares:
(a) Rights of Holders of Class of Shares Changed: Subject to the
provisions
of the Company Act, any amendment to the Articles of the Company
to delete or
vary any rights, privileges, restrictions and conditions attaching
to the
Subordinate Voting Shares or the Multiple Voting Shares or to
create any
special shares ranking in priority to or on a parity with either
the
Subordinate Voting Shares or the Multiple Voting Shares or to
subdivide,
consolidate, reclassify or change the Subordinate Voting Shares or
the
Multiple Voting Shares, may only be made if consented to by at
least three-
quarters (3/4) of the votes cast at a meeting of the holders of
the
Subordinate Voting Shares or the Multiple Voting Shares, as the
case may be,
duly called for that purpose.
(b) Rights of Holders of Other Class: The rights, privileges,
restrictions
and conditions attaching to either the Subordinate Voting Shares
or the
Multiple Voting Shares cannot be changed in any manner whatsoever
unless the
other class of shares is changed in the same manner and in the
same proportion
or unless the prior approval of the holders of the Subordinate
Voting Shares
and the Multiple Voting Shares has been obtained for such change.
(vi) Ranking of Subordinate Voting Shares and Multiple Voting
Shares:
Except as set out in paragraphs 27.l.(i) to 27.l.(v) above, the
holders of the
Subordinate Voting Shares and the holders of the Multiple Voting
Shares shall
rank equally in all respects and have the same rights and
restrictions and,
without limitation, shall rank pari passu with the other as to any
distribution of the remaining property or assets of the Company in
the event
of liquidation, dissolution or winding up of the Company.
<PAGE>
PART 28
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO PREFERRED
SHARES
(as altered by special resolution dated April 7,
1995)
28.1 Special Rights and Restrictions attaching to Senior
Preferred Shares,
as a class.
The Senior Preferred Shares as a class shall have attached thereto
the special
rights and restrictions set out below:
(a) the Senior Preferred Shares may, from time to time, be
issued in one
or more series and the Board may, before the issue of shares of
any particular
series, alter the Memorandum of the Company to fix the number of
and determine
the designation of shares of that series and alter the Articles of
the Company
to create, define and attach the preferences, special rights and
restrictions
attaching to the shares of that series;
(b) the Senior Preferred Shares of each series shall, with
respect to
priority in payment of dividends and in the distribution of assets
in the
event of the liquidation, dissolution or winding-up of the
Company, whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs, be
entitled to a preference over the Class A Subordinate voting
Shares without
par value (the "Subordinate Voting Shares"), the Class B Special
Subordinate
Voting Shares without par value (the "Special Shares"), the Class
C Multiple
Voting Shares without par value (the "Multiple Voting Shares"),
the Junior
Preferred Shares without par value (the "Junior Preferred Shares")
and over
any other shares ranking junior to the Senior Preferred Shares on
the
occurrence of such an event and the Senior Preferred Shares of
each series may
also be given such other preferences over the Subordinate Voting
Shares,
Special Shares, Multiple Voting Shares and Junior Preferred Shares
and any
other shares ranking junior to the Senior Preferred Shares as the
Board may
determine in accordance with Article 28.1(a) as to the amount of
the paid-up
capital thereon; and
(c) the Senior Preferred Shares of each series shall rank on
a parity
with the Senior Preferred Shares of every other series with
respect to
priority in payment of dividends, if any, and in the distribution
of assets in
the event of the liquidation, dissolution or winding-up of the
Company,
whether voluntary or involuntary, or any other distribution of the
assets of
he Company among its members for the purpose of winding-up its
affairs (other
than any sinking fund or compulsory retirement obligation
applicable to any
particular series).
28.2 Special Rights and Restrictions attaching to Junior
Preferred Shares. as
a class.
The Junior Preferred Shares as a class shall have attached thereto
the special
rights and restrictions set out below:
(a) the Junior Preferred Shares may, from time to time, be issued
in one or
more series and the Board may, before the issue of shares of any
particular
series, alter the Memorandum of the Company to fix the number of
and determine
the designation of shares of that series and alter the Articles of
the Company
to create, define and attach the preferences, special rights and
restrictions
attaching to the shares of that series;
(b) the Junior Preferred Shares of each series shall, with
respect to
priority in payment of dividends and in the distribution of assets
in the
event of the liquidation, dissolution or winding-up of the
Company, whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs, be
entitled to a preference over the Subordinate Voting Shares, the
Special
Shares, the Multiple Voting Shares, and over any other shares
ranking junior
to the Junior Preferred Shares on the occurrence of such an event
but not over
the Senior Preferred Shares and the Junior Preferred Shares of
each series may
also be given such other preferences over the Subordinate Voting
Shares,
Special Shares, Multiple Voting Shares and any other shares
ranking junior to
the Junior Preferred Shares as the Board may determine in
accordance with
Article 28.2(a) as to the amount of the paid-up capital thereon;
and
(c) the Junior Preferred Shares of each series shall rank on a
parity with
the Junior Preferred Shares of every other series with respect to
priority in
payment of dividends, if any, and in the distribution of assets in
the event
of the liquidation, dissolution or winding-up of the Company,
whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs (other
than any sinking fund or compulsory retirement obligation
applicable to any
particular series).
28.3 Special Rights and Restrictions attaching to the Senior
Preferred
Shares, Series 1
The Senior Preferred Shares, Series 1 shall have attached thereto
the special
rights and restrictions set out below:
(a) the holders of the Senior Preferred Shares, Series 1
shall be
entitled to receive and the Company shall pay thereon as and when
declared by
the Board out of the monies of the Company properly applicable to
the payment
of dividends fixed preferential cumulative cash dividends at the
rate of $7.50
per share per annum calculated, in the case of the first year,
from the date
of issue to January 1, 1991 and, in the case of the second and
third years,
from January 2, 1991 and January 2, 1992, respectively; and at the
rate of
$3.75 per share per annum calculated, in the case of the fourth
and fifth
years, from January 2, 1993 and January 2, 1994, respectively;
thereafter, no
dividends shall be paid on the Senior Preferred Shares, Series 1;
(b) if on any dividend payment date the dividend payable on
such date is
not paid in full on all the Senior Preferred Shares, Series 1 then
issued and
outstanding, such dividend or the unpaid part thereof shall be
paid on a
subsequent date or dates determined by the Board on which the
Company shall
have sufficient monies properly applicable to the payment of the
same;
(c) the holders of the Senior Preferred Shares, Series 1
shall not be
entitled to any dividends other than or in excess of the fixed
preferential
cumulative cash dividends hereinbefore provided for;
(d) unless approved by special resolution of the holders of
Senior
Preferred Shares, Series 1, no dividends shall at any time be
declared or paid
on or set apart for payment on any of the Subordinate Voting
Shares, Special
Shares, Multiple Voting Shares, Junior Preferred Shares or on any
shares of
any other class ranking junior to the Senior Preferred Shares,
Series 1 with
respect to dividends nor shall the Company purchase any number of
Senior
Preferred Shares, Series 1 less than the total number then
outstanding unless
in each case all dividends, up to and including the dividend
payable on the
last preceding dividend payment date, on the Senior Preferred
Shares, Series 1
then issued and outstanding shall have been declared and paid or
set apart for
payment at the date of such declaration or payment or setting
apart for
payment or purchase;
(e) in the event of the liquidation, dissolution or winding-
up of the
Company or other distribution of assets of the Company among its
members for
the purpose of winding up its affairs the holders of the Senior
Preferred
Shares, Series 1 shall be entitled to receive from the assets and
property of
the Company, before any amount is paid or any property or assets
of the
Company distributed to the holders of any of the Subordinate
Voting Shares,
Special Shares, Multiple Voting Shares, Junior Preferred Shares or
shares of
any other class ranking junior to the Senior Preferred Shares,
Series 1 on the
occurrence of such an event, an amount equal to all accrued and
unpaid
preferential dividends thereon (which for such purpose shall be
calculated as
if such dividends were accruing up to the date of distribution);
after payment
to the holders of the Senior Preferred Shares, Series 1 of the
amounts so
payable to them as above provided and as provided in Article
28.1(b) they
shall not be entitled to share in any further distribution of the
property or
assets of the Company;
(f) a holder of Senior Preferred Shares, Series 1 shall be
entitled to
require the Company to redeem, at any time or times, all or any of
the Senior
Preferred Shares, Series 1 registered in the name of such holder
on the books
of the Company by tendering to the Company at its head office a
share
certificate or certificates representing the Senior Preferred
Shares, Series 1
which the registered holder desires to have the Company redeem
together with a
written request to redeem such shares; upon receipt of a share
certificate or
certificates representing the Senior Preferred Shares, Series 1
which the
registered holder desires to have the Company redeem together with
such a
request the Company shall, no later than the seventh day after the
day on
which the request in writing is given to the Company (the
"Redemption Date")
redeem such Senior Preferred Shares, Series 1 by paying to such
registered
holder the amount paid up on such shares together with any accrued
and unpaid
dividends thereon calculated to the Redemption Date (the
"Redemption Price")
for each such Senior Preferred Share, Series 1 being redeemed;
such payment
shall be made by cheque payable at par at any branch of the
Company's bankers
for the time being in Canada; if payment of the Redemption Price
is not made
on or within 7 days of the Redemption Date, the rights of the
holder of the
said Senior Preferred Shares, Series 1 shall remain unaffected;
(g) the holders of the Senior Preferred Shares, Series 1 shall
not as such be
entitled to vote at or attend any meetings of the members of the
Company,
other than at meetings of the holders of Senior Preferred Shares,
Series 1 or
at class meetings of the holders of all Senior Preferred Shares;
(h) the holders of the Senior Preferred Shares, Series 1 shall be
entitled to
notice of meetings of the members of the Company called for the
purpose of
authorizing liquidation, dissolution or winding-up of the
Corporation or the
sale of all or substantially all of its undertaking but otherwise
shall not be
entitled to receive notice of meetings of the members of the
Company; and
(i) (i) each issued and fully paid Senior Preferred Share, Series
1 may until
January 2, 1993 be converted, at the option of the holder, into
Subordinate
Voting Shares; after January 2, 1993 and on or before January 2,
1997, each
issued and fully paid Senior Preferred Share, Series 1 may be
converted at the
option of the holder into Subordinate Voting Shares; the
conversion privilege
herein provided for may be exercised by notice in writing given to
the Company
accompanied by a certificate or certificates representing the
Senior Preferred
Shares, Series 1 in respect of which the holder thereof desires to
exercise
such right of conversion and shall specify the number of Senior
Preferred
Shares, Series 1 which the holder desires to have converted; upon
receipt of
such notice the Company shall issue certificates representing
fully paid
Subordinate Voting Shares upon the basis above prescribed and in
accordance
with the provisions hereof to the registered holder of the Senior
Preferred
Shares, Series 1 represented by the certificate or certificates
accompanying
such notice; if less than all of the Senior Preferred Shares,
Series 1
represented by any certificate are to be converted, the holder
shall be
entitled to receive a new certificate for the Senior Preferred
Shares, Series
1 representing the shares comprised in the original certificate
which are not
to be converted; if prohibited by applicable law, the Company
shall not issue
fractional shares, but shall pay to the shareholder an amount
determined by
multiplying the said fraction of a share by the Redemption Price
per share
then in effect;
(ii) all Subordinate Voting Shares resulting from any conversion
of Senior
Preferred Shares, Series 1 into Subordinate Voting Shares pursuant
to
paragraph (i) above shall be deemed to be fully paid and non-
assessable; the
Company shall not issue any Subordinate Voting Shares which will
result in the
unissued shares of such class being insufficient to fulfill the
conversion
privilege of the holders of the Senior Preferred Shares, Series 1
should the
holders of all the outstanding Senior Preferred Shares, Series 1
determine to
have the same converted in accordance with the provisions herein
contained;
and
(iii) in the event of any subdivision, consolidation,
reclassification or
other change in the Subordinate Voting Shares of the Company, the
holder of
any Senior Preferred Shares, Series 1 exercising the conversion
right shall be
entitled to such number and/or type of shares as it would have
received as a
result of such subdivision, consolidation, reclassification or
change if it
had converted its Senior Preferred Shares, Series 1 into
Subordinate Voting
Shares immediately prior to such change.
<PAGE>
SCHEDULE A
COMPANY ACT
FORM 1
MEMORANDUM OF INTERNATIONAL CONTOUR TECHNOLOGY INC.
(as altered by Special Resolution dated June 15,
1990)
1. The name of the Company is "INTERNATIONAL CONTOUR TECHNOLOGY
INC.".
2. The authorized capital of the Company consists of 275,000,000
shares,
divided into:
(a) 25,000,000 Class A Subordinate voting Shares without par
value;
(b) 25,000,000 Class B Special Subordinate voting Shares
without par
value;
(c) 25,000,000 Class C Multiple voting Shares without par
value;
(d) 100,000,000 Senior Preferred Shares without par value,
issuable in
series, of which 3,000 are designated Senior Preferred Shares,
Series 1; and
(e) 100,000,000 Junior Preferred Shares without par value,
issuable in
series.
3. The special rights and restrictions attached to the shares are
set out in
Parts 27 and 28 of the Articles of the Company
<PAGE>
PART 28
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO PREFERRED
SHARES
(as altered by Special Resolution dated June 15,
1990)
28.1 Special Rights and Restrictions attaching to Senior
Preferred Shares,
as a class.
The Senior Preferred Shares as a class shall have attached thereto
the special
rights and restrictions set out below:
(a) the Senior Preferred Shares may, from time to time, be
issued in one
or more series and the Board may, before the issue of shares of
any particular
series, alter the Memorandum of the Company to fix the number of
and determine
the designation of shares of that series and alter the Articles of
the Company
to create, define and attach the preferences, special rights and
restrictions
attaching to the shares of that series;
(b) the Senior Preferred Shares of each series shall, with
respect to
priority in payment of dividends and in the distribution of assets
in the
event of the liquidation, dissolution or winding-up of the
Company, whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs, be
entitled to a preference over the Class A Subordinate voting
Shares without
par value (the "Subordinate Voting Shares"), the Class B Special
Subordinate
Voting Shares without par value (the "Special Shares"), the Class
C Multiple
Voting Shares without par value (the "Multiple Voting Shares"),
the Junior
preferred Shares without par value (the "Junior Preferred Shares")
and over
any other shares ranking junior to the Senior Preferred Shares on
the
occurrence of such an event and the Senior Preferred Shares of
each series may
also be given such other preferences over the Subordinate Voting
Shares,
Special Shares, Multiple Voting Shares and Junior Preferred Shares
and any
other shares ranking junior to the Senior Preferred Shares as the
Board may
determine in accordance with Article 28.1(a) as to the amount of
the paid-up
capital thereon; and
(c) the Senior Preferred Shares of each series shall rank on
a parity
with the Senior Preferred Shares of every other series with
respect to
priority in payment of dividends, if any, and in the distribution
of assets in
the event of the liquidation, dissolution or winding-up of the
Company,
whether voluntary or involuntary, or any other distribution of the
assets of
the Company among its members for the purpose of winding-up its
affairs (other
than any sinking fund or compulsory retirement obligation
applicable to any
particular series).
28.2 Special Rights and Restrictions attaching to Junior
Preferred Shares. as
a class.
The Junior Preferred Shares as a class shall have attached thereto
the special
rights and restrictions set out below:
(a) the Junior Preferred Shares may, from time to time, be issued
in one or
more series and the Board may, before the issue of shares of any
particular
series, alter the Memorandum of the Company to fix the number of
and determine
the designation of shares of that series and alter the Articles of
the Company
to create, define and attach the preferences, special rights and
restrictions
attaching to the shares of that series;
(b) the Junior Preferred Shares of each series shall, with
respect to
priority in payment of dividends and in the distribution of assets
in the
event of the liquidation, dissolution or winding-up of the
Company, whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs, be
entitled to a preference over the Subordinate Voting Shares, the
Special
Shares, the Multiple Voting Shares, and over any other shares
ranking junior
to the Junior Preferred Shares on the occurrence of such an event
but not over
the Senior Preferred Shares and the Junior Preferred Shares of
each series may
also be given such other preferences over the Subordinate Voting
Shares,
Special Shares, Multiple Voting Shares and any other shares
ranking junior to
the Junior Preferred Shares as the Board may determine in
accordance with
Article 28.2(a) as to the amount of the paid-up capital thereon;
and
(c) the Junior Preferred Shares of each series shall rank on a
parity with
the Junior Preferred Shares of every other series with respect to
priority in
payment of dividends, if any, and in the distribution of assets in
the event
of the liquidation, dissolution or winding-up of the Company,
whether
voluntary or involuntary, or any other distribution of the assets
of the
Company among its members for the purpose of winding-up its
affairs (other
than any sinking fund or compulsory retirement obligation
applicable to any
particular series).
28.3 Special Rights and Restrictions attaching to the Senior
Preferred
Shares, Series 1
The Senior Preferred Shares, Series 1 shall have attached thereto
the special
rights and restrictions set out below:
(a) the holders of the Senior Preferred Shares, Series 1
shall be
entitled to receive and the Company shall pay thereon as and when
declared by
the Board out of the monies of the Company properly applicable to
the payment
of dividends fixed preferential cumulative cash dividends at the
rate of $7.50
per share per annum calculated, in the case of the first year,
from the date
of issue to January 1, 1991 and, in the case of the second and
third years,
from January 2, 1991 and January 2, 1992, respectively; and at the
rate of
$3.75 per share per annum calculated, in the case of the fourth
and fifth
years, from January 2, 1993 and January 2, 1994, respectively;
thereafter, no
dividends shall be paid on the Senior Preferred Shares, Series 1;
(b) if on any dividend payment date the dividend payable on
such date is
not paid in full on all the Senior Preferred Shares, Series 1 then
issued and
outstanding, such dividend or the unpaid part thereof shall be
paid on a
subsequent date or dates determined by the Board on which the
Company shall
have sufficient monies properly applicable to the payment of the
same;
(c) the holders of the Senior Preferred Shares, Series 1
shall not be
entitled to any dividends other than or in excess of the fixed
preferential
cumulative cash dividends hereinbefore provided for;
(d) unless approved by special resolution of the holders of
Senior
Preferred Shares, Series 1, no dividends shall at any time be
declared or paid
on or set apart for payment on any of the Subordinate Voting
Shares, Special
Shares, Multiple Voting Shares, Junior Preferred Shares or on any
shares of
any other class ranking junior to the Senior Preferred Shares,
Series 1 with
respect to dividends nor shall the Company purchase any number of
Senior
Preferred Shares, Series 1 less than the total number then
outstanding unless
in each case all dividends, up to and including the dividend
payable on the
last preceding dividend payment date, on the Senior Preferred
Shares, Series 1
then issued and outstanding shall have been declared and paid or
set apart for
payment at the date of such declaration or payment or setting
apart for
payment or purchase;
(e) in the event of the liquidation, dissolution or winding-
up of the
Company or other distribution of assets of the Company among its
members for
the purpose of winding up its affairs the holders of the Senior
Preferred
Shares, Series 1 shall be entitled to receive from the assets and
property of
the Company, before any amount is paid or any property or assets
of the
Company distributed to the holders of any of the Subordinate
Voting Shares,
Special Shares, Multiple Voting Shares, Junior Preferred Shares or
shares of
any other class ranking junior to the Senior Preferred Shares,
Series 1 on the
occurrence of such an event, an amount equal to all accrued and
unpaid
preferential dividends thereon (which for such purpose shall be
calculated as
if such dividends were accruing up to the date of distribution);
after payment
to the holders of the Senior Preferred Shares, Series 1 of the
amounts so
payable to them as above provided and as provided in Article
28.1(b) they
shall not be entitled to share in any further distribution of the
property or
assets of the Company;
(f) a holder of Senior Preferred Shares, Series 1 shall be
entitled to
require the Company to redeem, at any time or times, all or any of
the Senior
Preferred Shares, Series 1 registered in the name of such holder
on the books
of the Company by tendering to the Company at its head office a
share
certificate or certificates representing the Senior Preferred
Shares, Series 1
which the registered holder desires to have the Company redeem
together with a
written request to redeem such shares; upon receipt of a share
certificate or
certificates representing the Senior Preferred Shares, Series 1
which the
registered holder desires to have the Company redeem together with
such a
request the Company shall, no later than the seventh day after the
day on
which the request in writing is given to the Company (the
"Redemption Date")
redeem such Senior Preferred Shares, Series 1 by paying to such
registered
holder the amount paid up on such shares together with any accrued
and unpaid
dividends thereon calculated to the Redemption Date (the
"Redemption Price")
for each such Senior Preferred Share, Series 1 being redeemed;
such payment
shall be made by cheque payable at par at any branch of the
Company's bankers
for the time being in Canada; if payment of the Redemption Price
is not made
on or within 7 days of the Redemption Date, the rights of the
holder of the
said Senior Preferred Shares, Series 1 shall remain unaffected;
(g) the holders of the Senior Preferred Shares, Series 1 shall
not as such be
entitled to vote at or attend any meetings of the members of the
Company,
other than at meetings of the holders of Senior Preferred Shares,
Series 1 or
at class meetings of the holders of all Senior Preferred Shares;
(h) the holders of the Senior Preferred Shares, Series 1 shall be
entitled to
notice of meetings of the members of the Company called for the
purpose of
authorizing liquidation, dissolution or winding-up of the
Corporation or the
sale of all or substantially all of its undertaking but otherwise
shall not be
entitled to receive notice of meetings of the members of the
Company; and
(i) (i) each issued and fully paid Senior Preferred Share, Series
1 may until
January 2, 1993 be converted, at the option of the holder, into
Subordinate
Voting Shares; after January 2, 1993 and on or before January 2,
1997, each
issued and fully paid Senior Preferred Share, Series 1 may be
converted at the
option of the holder into Subordinate Voting Shares; the
conversion privilege
herein provided for may be exercised by notice in writing given to
the Company
accompanied by a certificate or certificates representing the
Senior Preferred
Shares, Series 1 in respect of which the holder thereof desires to
exercise
such right of conversion and shall specify the number of Senior
Preferred
Shares, Series 1 which the holder desires to have converted; upon
receipt of
such notice the Company shall issue certificates representing
fully paid
Subordinate Voting Shares upon the basis above prescribed and in
accordance
with the provisions hereof to the registered holder of the Senior
Preferred
Shares, Series 1 represented by the certificate or certificates
accompanying
such notice; if less than all of the Senior Preferred Shares,
Series 1
represented by any certificate are to be converted, the holder
shall be
entitled to receive a new certificate for the Senior Preferred
Shares, Series
1 representing the shares comprised in the original certificate
which are not
to be converted; if prohibited by applicable law, the Company
shall not issue
fractional shares, but shall pay to the shareholder an amount
determined by
multiplying the said fraction of a share by the Redemption Price
per share
then in effect;
(ii) all Subordinate Voting Shares resulting from any conversion
of Senior
Preferred Shares, Series 1 into Subordinate Voting Shares pursuant
to
paragraph (i) above shall be deemed to be fully paid and non-
assessable; the
Company shall not issue any Subordinate Voting Shares which will
result in the
unissued shares of such class being insufficient to fulfill the
conversion
privilege of the holders of the Senior Preferred Shares, Series 1
should the
holders of all the outstanding Senior Preferred Shares, Series 1
determine to
have the same converted in accordance with the provisions herein
contained;
and
(iii) in the event of any subdivision, consolidation,
reclassification or
other change in the Subordinate Voting Shares of the Company, the
holder of
any Senior Preferred Shares, Series 1 exercising the conversion
right shall be
entitled to such number and/or type of shares as it would have
received as a
result of such subdivision, consolidation, reclassification or
change if it
had converted its Senior Preferred Shares, Series 1 into
Subordinate Voting
Shares immediately prior to such change.
<PAGE>
SCHEDULE "A"
COMPANY ACT
FORM 1
MEMORANDUM OF INTERNATIONAL CONTOUR TECHNOLOGY INC.
(as altered by Special Resolution dated December 16,
1988)
1. The name of the Company is "INTERNATIONAL CONTOUR TECHNOLOGY
INC.".
2. The authorized capital of the Company consists of 75,000,000
shares,
divided into:
(a) 25,000,000 Class A Subordinate Voting Shares without par
value;
(b) 25,000,000 Class B Special Subordinate Voting Shares without
par value;
and
(c) 25,000,000 Class C Multiple Voting Shares without par value.
A. The special rights and restrictions attached to the shares are
set out in
B. Part 27 of the Articles of the Company.
<PAGE>
SCHEDULE "B"
PART 27
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO SHARES
27. Special Subordinate voting Shares, Subordinate Voting Shares
and Multiple
voting Shares: The Class A Subordinate Voting Shares without par
value (the
"Subordinate Voting Shares"), the Class B Special Subordinate
Voting Shares
without par value (the "Special Shares") and the Class C Multiple
Voting
Shares without par value (the "Multiple Voting Shares") shall have
attached
thereto the following respective rights, privileges, restrictions
and
conditions:
(a) Votes: The holders of the Subordinate Voting Shares, the
Special
Shares and the Multiple Voting Shares are entitled to receive
notice of and to
attend all meetings of shareholders of the Company, except
meetings at which
only holders of another specified class or series of shares are
entitled to
vote. The holders of the Subordinate Voting Shares and the
Special Shares are
entitled to one vote for each Subordinate Voting Share or Special
Share held
on all votes taken at such meetings and the holders of the
Multiple Voting
Shares are entitled to 5 votes for each Multiple Voting Share held
on all
votes taken at such meetings.
(b) Dividends: The holders of the Subordinate Voting Shares,
the Special
Shares and the Multiple Voting Shares shall be entitled to receive
and to
participate as to dividends as and when declared by the board of
Directors of
the Company and all such dividends shall be declared and paid at
the same time
on all such Subordinate Voting Shares, Special Shares and Multiple
Voting
Shares at the time outstanding;
(c) Conversion of Special Shares: Upon and subject to the
terms and
conditions hereinafter set forth, the Special Shares issued and
outstanding
shall be converted into and become Subordinate Voting Shares,
without further
cost to the holder thereof, on the following basis:
A) Twenty-five percent (25%) of the Special Shares issued and
outstanding
shall be converted on a pro-rata basis on the date (the "First
Exchange Date")
which is the earlier of:
1) 90 days after the Company shall have received a receipt for
a final
prospectus which will enable the holders of the Subordinate Voting
Shares
obtained upon such conversion of Special Shares, who are not
otherwise
restricted, to resell such Subordinate Voting Shares without the
requirement
that a prospectus be filed in respect thereof; and
2) the day which is twelve months following the date of the
issuance of
such Special Shares.
B) The balance of the Special Shares issued and outstanding
shall be
converted on a pro-rata basis on the date which is the earlier of:
1) 360 days after the Company shall have received a receipt
for a final
prospectus which will enable the holders of the Subordinate voting
Shares
obtained upon such conversion of Special Shares, who are not
otherwise
restricted, to resell such Subordinate voting Shares without the
requirement
that a prospectus be filed in respect thereof; and
2) the day which is eighteen months following the date of the
issuance of
such Special Shares.
(i) Method of Conversion: In order to effect such conversion,
the Company
or its transfer agent shall give each holder of Special Shares, by
prepaid
registered mail addressed to his address appearing on the books of
the
Company, notice in writing of the conversion, which notice shall
require such
holder to surrender the certificate or certificates representing
the Special
Shares to be converted at the registered office of the Company or
at the
office of the transfer agent stating the name or names in which he
wishes the
certificates for the Subordinate Voting Shares to be sent.
(ii) Share Certificate: On the conversion of Special Shares
the
certificate or certificates representing the Subordinate Voting
Shares
resulting therefrom shall be issued at the expense of the Company
in the name
or names indicated in the notice of conversion or, in the absence
of such
indication, in the name of the holder, provided that the holder
shall pay any
applicable security transfer taxes or charges if such certificate
or
certificates are to be issued in a name or names other than the
name of the
holder.
(iii) Dilution Protection: In the event of:
(a) any subdivision, consolidation, conversion, exchange or
reclassification of the Special Shares, Subordinate Voting Shares
or Multiple
Voting Shares;
(b) any reorganization of the share capital of the Company
affecting in
any manner the Special Shares, Subordinate Voting Shares, or
Multiple Voting
Shares; or
(c) the amalgamation of the Company with any other company or
companies;
the appropriate adjustment will be made td the conversion right
provided above
so as to preserve that right in all respects.
(iv) Restriction on Issue of Shares: No Special Shares may be
issued at any
time following the First Exchange Date
(d) Conversion of Multiple voting Shares: Upon and subject to
the terms
and conditions hereinafter set forth, a holder of Multiple Voting
Shares shall
be entitled at any time and from time to time to have any or all
of the
Multiple Voting Shares held by him converted into Subordinate
Voting Shares on
the basis of one Subordinate Voting Share for each Multiple Voting
Share so
converted (subject to adjustment as set forth below):
(i) Exercise of Conversion Right: Except as set forth in
paragraph (e)(iii)
below, in order to exercise such right of conversion such holder
shall deliver
and surrender to the Company or to its transfer agent the
certificate or
certificates representing the Multiple Voting Shares which he
desires to
convert together with a written notice to the effect that the
holder desires
to exercise his right of conversion in respect of that number of
Multiple
Voting Shares specified in the conversion notice. The conversion
notice shall
state the name or names in which the holder wishes the certificate
or
certificates for Subordinate Voting Shares to be issued and the
address or
addresses to which he wishes such certificate or certificates to
be sent and
shall be signed by the holder or his agent duly authorized in
writing. If
less than all the Multiple Voting Shares represented by any
certificate or
certificates accompanying any conversion notice are to be
converted, the
holder shall be entitled to receive, at the expense of the
Company, a new
certificate representing the Multiple Voting Shares comprised in
the
certificate or certificates surrendered as aforesaid which are not
to be
converted.
(ii) Share Certificate: On any conversion of Multiple Voting
Shares the
certificate or certificates representing the Subordinate Voting
Shares
resulting therefrom shall be issued at the expense of the Company
in the name
or names indicated in the notice of conversion or, in the absence
of such
indication, in the name of the holder, provided that the holder
shall pay any
applicable security transfer taxes or charges if such certificate
or
certificates are to be issued in a name or names other than the
name of the
holder.
(iii) Date of Exercise of Conversion Right: Except as set forth
in paragraph
(e)(iii) below, the right of a holder of Multiple Voting Shares to
convert the
same into Subordinate Voting Shares shall and for all purposes
shall be deemed
to have been exercised and the holder of Multiple Voting Shares to
be
converted (or any person or persons in whose name or names such
holder of
Multiple Voting Shares shall have directed a certificate or
certificates
representing Subordinate Voting Shares to be issued as provided
above) shall
and for all purposes shall be deemed to have become a holder of
Subordinate
Voting Shares, on the date of receipt by the Company or by its
transfer agent
of the certificate or certificates representing all of the
Multiple Voting
Shares to be converted accompanied by an appropriate conversion
notice as
provided above, notwithstanding any delay in the delivery by the
Company or by
its transfer agent of the certificate or certificates representing
the
Subordinate Voting Shares into which the Multiple Voting Shares
have been
converted.
(iv) Prior Notice of Dividends: The Company shall not pay any
dividend upon
the Subordinate Voting Shares payable in shares of the capital of
the Company
or issue to holders of Subordinate Voting Shares rights to
purchase
Subordinate Voting Shares, unless it shall have given to the
holders of the
Multiple Voting Shares notice of the payment of such dividends or
the issue of
such rights at least THIRTY (30) days prior to the record date for
the
determination of shareholders entitled to such dividends or the
issue of such
rights and shall not, during the period of such notice, take any
other
corporate actions which might deprive the holders of the Multiple
Voting
Shares of the opportunity of exercising the right of conversion as
aforesaid.
(v) Dilution Protection: In the event of:
(a) any subdivision, consolidation, conversion, exchange or
reclassification of the Special Shares, Subordinate Voting Shares,
or Multiple
Voting Shares;
(b) any reorganization of the share capital of the Company
affecting in
any manner the Special Shares1 Subordinate Voting Shares, or
Multiple Voting
Shares; or
(c) the amalgamation of the Company with any other company
or companies;
the appropriate adjustment will be made to the conversion right
provided above
so as to preserve that right in all respects.
(e) Take-Over Bid Protection
(i) Exercise of Conversion Right to Multiple Voting Shares: Upon
and subject
to the conditions hereinafter set forth, in the event an Offer is
made, each
Subordinate Voting Share shall be convertible at the option of the
holder
during the Conversion Period into one Multiple Voting Share
(subject to
adjustment as set forth below). The holder shall complete and
sign the form
headed "Exercise of Right to Convert to Multiple Voting Shares"
(Form 1) on
the reverse side of the certificate or certificates representing
the
Subordinate Voting Shares which the holder desires to convert,
specifying the
number of Subordinate Voting Shares to be converted. Immediately
following
the completion and signing of Form 1 as aforesaid, the holder
shall complete
and sign the form headed "Exercise of Right to Convert to
Subordinate Voting
Shares" (Form 2) on the reverse side of each such certificate or
certificates.
Each such certificate or certificates shall be presented and
surrendered to
the Depositary at any of its Designated Offices or, in the event
that the
Offer is a Stock Exchange Offer, such certificate or certificates
shall be
presented and surrendered to the Transfer Agent at any of the
offices at which
the Transfer Agent provides transfer agency facilities for the
Company's
Subordinate Voting Share 5. Upon such receipt by the Depositary
or the
Transfer Agent, as the case may be, and subject to each of Form 1
and Form 2
having been completed and signed as set forth above, the
conversion right into
Multiple Voting Shares shall have been exercised and the holder
shall hold and
shall be deemed for all purposes to hold fully paid Multiple
Voting Shares
effective from the time of signing, and in the number designated
in, Form 1
(not exceeding in aggregate the total number of Multiple Voting
Shares
resulting from such conversion) and the certificate or
certificates held by
the Depositary or the Transfer Agent, as the case may be, shall
represent and
shall be deemed for all purposes to represent such Multiple Voting
Shares. In
the event that each of Form 1 and Form 2 are not completed and
signed as set
forth above, no conversion to Multiple Voting Shares effective
from the time
of signing Form 1 shall or shall be deemed to have occurred. In
the event
that a certificate or certificates are presented and surrendered
to the
Transfer Agent as set forth above, the Transfer Agent shall and
for all
purposes shall be deemed to be irrevocably appointed and empowered
to act as
the true and lawful attorney of the depositing holder to take all
such steps
and sign all such documents in the name and on behalf of the
depositing holder
as is necessary for the purpose of facilitating the acceptance of
the Stock
Exchange Offer by the depositing holder. The holder shall pay any
governmental or other tax imposed on or in respect of the
conversion of
ubordinate Voting Shares as set forth above. If less than all of
the
Subordinate Voting Shares represented by any certificate are to be
converted,
the holder shall be entitled to receive, at the expense of the
Company, a new
certificate representing the Subordinate Voting Shares comprised
in the
original certificate which are not to be converted.
(ii) Conversion Right Not Coming into Effect: The right of a
holder of
Subordinate Voting Shares to convert such shares into Multiple
Voting Shares
as set forth in paragraph (i) above shall not come into effect in
the event
that an identical offer in terms of price per share, percentage of
shares to
be taken up, exclusive of shares owned immediately prior to the
Offer by the
offeror or associates or affiliates of the offeror, and other
essential terms
is made to purchase Subordinate Voting Shares concurrently with
the Offer,
which offer has no conditions attached other than the right not to
take up and
pay for Subordinate Voting Shares tendered if no Multiple Voting
Shares are
purchased pursuant to the Offer.
(iii) Exercise of Right to Convert to Subordinate Voting Shares:
Notwithstanding paragraph (c)(i) above, by signing Form 2 on the
reverse side
of the certificate or certificates representing Subordinate Voting
Shares
which the holder elects to convert into Multiple Voting Shares as
set forth in
paragraph (i) above, in the circumstances described below the
holder shall and
for all purposes shall be deemed, in his capacity as a holder of
Multiple
Voting Shares as a result of completing and signing Form 1, to
have
irrevocably elected to have exercised his right to convert into
Subordinate
Voting Shares each Multiple Voting Share acquired by him as a
result of such
conversion of Subordinate Voting Shares into Multiple Voting
Shares. In such
event the holder shall be entitled to one Subordinate Voting Share
for each
Multiple Voting Share so converted (subject to adjustment as set
forth below).
The said conversion of Multiple Voting Shares to Subordinate
Voting Shares
shall and for all purposes shall be deemed to occur and be
effective:
A. in the case of Multiple Voting Shares taken up and purchased
under the
Offer, immediately after such shares are so taken up and
purchased; and
B. in the case of Multiple Voting Shares not taken up and
purchased under the
Offer, immediately after such shares are released to the
depositing holder by
the Depositary or by the Transfer Agent, as the case may be.
(iv) Dilution Protection: In the event of:
(a) any subdivision, consolidation, conversion1 exchange or
reclassification
of the Multiple Voting Shares or Subordinate voting Shares;
(b) any reorganization of the share capital of the Company
affecting in any
manner the Multiple Voting Shares or Subordinate Voting Shares; or
(c) the amalgamation of the Company with any other company or
companies;
the appropriate adjustment will be made to the conversion right
provided above
so as to preserve that right in all respects.
(v)Definitions: In this Article 27(e):
(a) "Conversion Period" means the period of time commencing on
the Offer Date
and ending:
(i) in the case of an Offer other than a Stock Exchange Offer, at
the latest
time for the deposit of Multiple Voting Shares under the Offer at
the
respective Designated Offices of the Depositary; and
(ii) in the case of a Stock Exchange Offer, at 12:30 p.m.,
Vancouver time, on
the business day immediately preceding the Expiry Date;
(b) "Depositary" means the person or persons or company or
companies
appointed to act as depositary under the Offer;
(c) "Designated Office" means those offices of the Depositary at
which
certificates representing Multiple Voting Shares may be deposited
under the
Offer;
(d) "Expiry Date" means the last date upon which holders of
Multiple Voting
Shares may accept an Offer;
(e) "Offer" means an offer to purchase Multiple Voting Shares
which must, by
reason of applicable securities legislation or the requirements of
a stock
exchange on which the Multiple Voting Shares are listed, be made
to all or
substantially all holders of Multiple Voting Shares residing in
any province
of Canada;
(f) "Offer Date" means the date an Offer is made;
(g) "Stock Exchange Offer" means an Offer made through the
facilities of a
stock exchange on which the Multiple Voting Shares are listed; and
(h) "Transfer Agent" means the registrar and transfer agent of
the Company's
issued share capital.
(f) Change in Shares
(i) Rights of Holders of Class of Shares Changed:
Subject to the provisions of the Company Act, any amendment to the
Articles of
the Company to delete or vary any rights, privileges, restrictions
and
conditions attaching to the Special Shares, Subordinate Voting
Shares or the
Multiple Voting Shares or to create any special shares ranking in
priority to
or on a parity with either the Special Shares, Subordinate Voting
Shares or
the Multiple Voting Shares or to subdivide, consolidate,
reclassify or change
the Special Shares, Subordinate Voting Shares or the Multiple
Voting Shares,
may only be made if consented to by at least three-quarters (3/4)
of the votes
cast at a meeting of the holders of the Special Shares,
Subordinate Voting
Shares or the Multiple Voting Shares, as the case may be, duly
called for that
purpose.
(ii) Rights of Holders of Other Class: The rights, privileges,
restrictions
and conditions attaching to either the Special Shares, Subordinate
Voting
Shares or the Multiple Voting Shares cannot be changed in any
manner
whatsoever unless the other class of shares is changed in the same
manner and
in the same proportion or unless the prior approval of the holders
of the
Special Shares, Subordinate Voting Shares and the Multiple Voting
Shares has
been obtained for such change.
(g) Ranking of Special Shares, Subordinate Voting Shares and
Multiple
Voting Shares:
Except as set out in paragraphs (a) to (f) above, the holders of
the Special
Shares, Subordinate Voting Shares and the holders of the Common
Shares shall
rank equally in all respects and have the same rights and
restrictions and,
without limitation, shall rank pari passu with the other as to any
distribution of the remaining property or assets of the Company in
the event
of liquidation, dissolution or winding up of the Company.
EXHIBIT 5.1
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, MD 21201
December 21, 1998
TSI TelSys Corporation
7100 Columbia Gateway Drive
Columbia, MD 21046
Re: Registration Statement on Form S-4 relating to
9,754,202 SHARES OF THE COMMON STOCK OF TSI TELSYS
CORPORATION
Ladies and Gentlemen:
We have acted as United States counsel to TSI TelSys
Corporation, a New
Brunswick business corporation (the "Company"), in
connection with the
continuance or domestication of the Company as a
corporation (the
"Continuance") under the Delaware General Corporation Law (the
"DGCL"), the
simultaneous discontinuance of the Company as a corporation
under the New
Brunswick Business Corporations Act (the "NBBCA") and the deemed
issuance, in
connection therewith, of up to 9,754,202 shares (the "Shares")
of the common
stock, par value $.01 per share, of the Company, as
described in the
Registration Statement on Form S-4 of the Company (as the same
may be amended
from time to time, the "Registration Statement") filed by the
Company with the
Securities and Exchange Commission (the "Commission")
pursuant to the
Securities Act of 1933 (the "Act").
The consummation of the Continuance and the issuance of
the Shares with
respect thereto is contingent upon, among other things, (i)
the requisite
approval of the special resolutions (as set forth as an
attachment to the
Registration Statement, the "Special Resolutions") authorizing
the Continuance
by the stockholders of the Company (the "Stockholders") in
accordance with the
DGCL; (ii) the requisite approval of the Continuance by the
Director appointed
under the NBBCA (the "Registrar"); and (iii) the requisite
approval of the
Continuance by the Secretary of State of the State of Delaware.
In connection with the opinion set forth herein, we have
considered such
questions of law as we have deemed necessary as a basis for the
opinions set
forth below, and we have examined or otherwise are familiar with
originals or
copies, certified or otherwise identified to our
satisfaction, of the
following: (i) the Registration Statement; (ii) the form of
Certificate of
Domestication, Certificate of Incorporation and Bylaws of the
Company as a
Delaware corporation; and (iii) such other documents as we
have deemed
necessary or appropriate as a basis for such opinions. In our
examination, we
have assumed without independent verification the
genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the
conformity to original documents of all documents submitted to us
as certified
or photostatic copies and the authenticity of the originals of
such copies. As
to any facts material to this opinion that we did not
independently establish
or verify, we have relied solely upon statements and
representations of
officers and other representatives of the Company.
Based upon the foregoing, we are of the opinion that,
when and to the
extent (i) the Registration Statement has become effective under
the Act; and
(ii) the Continuance, as described in the Registration
Statement, has taken
place in accordance with the description included therein,
including without
limitation, (a) the Stockholders have approved the Special
Resolutions
authorizing the Continuance in accordance with the NBBCA and the
DGCL, (b) the
Registrar has approved the Continuance and (c) the Secretary of
State of the
State of Delaware has approved the Continuance, the Shares
will be duly
authorized, and when issued in the manner contemplated by the
Registration
Statement, will be validly issued, fully paid and nonassessable.
This letter is strictly limited to the matters expressly set
forth herein
and no statements or opinions should be inferred beyond such
matters. This
opinion is limited to the DGCL (without regard to the principles
of conflicts
of laws thereof) and is based upon and limited to such laws and
regulations in
effect as of the date hereof. We assume no obligation to
update the opinion
set forth herein.
We hereby consent to the filing of this opinion with the
Commission as
Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ VENABLE, BAETJER and HOWARD, LLP
1
DC1DOCS1:#85758 v1 - TSI legality opinio
Exhibit 10.1
TSI
TelSys Corporation
7100 Columbia
Gateway Drive
Columbia, MD 21046
U.S.A.
May 20, 1998
Mr. Joseph T. Pisula
1582 North Colonial Terrace
Arlington, VA 22209
Dear Jay:
Subject: OFFER OF EMPLOYMENT
We are pleased to offer you the position of President/Chief
Executive Officer
(<O`>President/CEO<O'>) of TSI TelSys Corporation (the
<O`>Company<O'>) at an
annual salary of US$240,000 (US$20,000 monthly) on the terms set
out below.
EMPLOYMENT TERM. We would like you to start full-time
employment on June 1,
1998 or earlier as mutual agreed. [Confidential portions omitted
and filed separately with the Commission.]
SUBSEQUENT APPOINTMENT AS ADVISOR. In addition, the Company and
you also now
agree that the Company will offer and that you will accept
employment as
Advisor to the Company for a period of 21 months, which will
begin immediately
following your employment as President/CEO or as Vice-
Chairman, whichever
appointment is the latest one held. As Advisor, the Company and
you agree that
your salary would be US$1,000 per month and your time
commitment would be
proportionately reduced. Also, during your employment as Advisor,
you agree not
to compete with the Company, as per the section labeled
<O`>Non-Compete<O'>
below. None of the provisions pertaining to the
<O`>Additional Incentive
Compensation<O'>, <O`>Benefits<O'>, <O`>Leave<O'>, <O`>Temporary
Lodging<O'>,
<O`>Disclosure of Other Business Interests<O'>,
<O`>Notice<O'> or
<O`>Severance<O'> sections that appear below will apply to
you in this
position. Further, the Company and you also now agree that
neither party is
able to terminate your employment as Advisor before 21 months<O~>
employment in
this role has been completed.
DUTIES OF PRESIDENT/CEO. As you know, the Company has been in
existence for
two and one-half years and is now past the <O`>start-up<O'>
phase. We are in a
period of exciting growth and transition, which we would like
for you to
continue and accelerate. The Board of Directors of the Company
expects that you
will:
<circle> within the first 45 days of your employment, present a
written version
of your operating plan to the Board for its review and
concurrence. Your
operating plan must detail (i) how the Company will achieve
and exceed in
1998 the sales, bookings and net operating income targets
presented in the
Strategic Business Plan for the Communications Division
(dated December 5,
1997), and (ii) state your financing objectives and plans;
<circle> within three to six months of your start date, to
present your
strategic plan to the Board for its review and concurrence;
<circle> obtain and close on financing for the Company in an
amount not less
than US$2.5 million by August 15, 1998 D this amount and
its achievement
date will be subject to modification depending on the success
in arranging
an extension or renewal of the letter of credit;
<circle> assess and make recommendations for the Company<O~>s
team-building
skills and competencies;
<circle> also assume the position of CEO at the Company<O~>s
wholly-owned
subsidiary, TSI TelSys Inc. and Acting CEO at the Company<O~>s
subsidiary,
TSI Technology Inc., for the flat fee of US$1.00 per
year at each
subsidiary;
AS YOU KNOW, WE HAVE BEGUN PREPARING TO RESTRUCTURE OF THESE TWO
SUBSIDIARIES.
IT IS EXPECTED THAT AFTER THIS RESTRUCTURE, TSI TELSYS
INC. WILL BE
PRIMARILY FOCUSED ON THE COMMUNICATIONS BUSINESS, WHILE TSI
TECHNOLOGY INC.
WILL BECOME FOCUSED ON RECONFIGURABLE COMPUTING. IT IS
ALSO OUR CURRENT
INTENTION, SUBJECT TO THE APPROVAL OF THE STRATEGIC PLAN BY
THE BOARD, TO
SEPARATE TSI TECHNOLOGY INC. FROM TSI TELSYS CORPORATION
AND TO RECRUIT
ANOTHER INDIVIDUAL TO HEAD THE FORMER COMPANY AS CEO.
<circle> implement and carry out any other additional duties
assigned to you by
the Board from time to time.
ADDITIONAL INCENTIVE COMPENSATION. In addition to your
monthly salary as
President/CEO and/or as Vice-Chairman, the Company agrees to
offer additional
incentive compensation in the form of Stock Option Compensation,
as outlined in
<O`>Attachment A: Stock Option Compensation<O'>, and in the
form of a
Performance Bonus, as outlined in <O`>Attachment B: Performance
Bonus<O'>.
BENEFITS. While you are employed as President/CEO or as Vice-
Chairman, the
Company will provide you with benefits that include health and
life insurance,
workers<O~> compensation, social security and a 401(k) plan,
which will be
described in a separate brochure. There will be an employee
contribution
required to participate in certain benefits, many of which are
administered by
an outside vendor, Administaff. Under this arrangement, you will
be an employee
of both Administaff (for purposes of payroll, insurance and so
forth) and the
Company through TSI TelSys Inc. You will be required to complete
an employment
application and other administrative documents as part of the
hiring process.
LEAVE. President/CEO is a full-time position. However, the
Company recognizes
that you have some outside commitments. You and the Company
agree that these
outside commitments will not exceed four working days a month and
that if you
elect to take any one or all of those days, you
1
<PAGE>
will take them as unpaid leave. You are entitled to three (3)
weeks<O~> paid
vacation a calendar year (pro rated). The Company<O~>s composite
leave policy
will NOT apply to you while you are President/CEO. The
Company<O~>s composite
leave policy will apply to you on a pro rata basis while you
are employed as
Vice-Chairman. The composite leave policy will NOT apply to you
when you become
Advisor, however.
TEMPORARY LODGING. During your employment as President/CEO, the
Company will
reimburse you for actual and reasonable temporary lodging expenses
you incur to
facilitate your employment commitment in the Columbia office, at a
rate not to
exceed US$110 per night on a tax-grossed-up basis, and subject to
a maximum of
US$1,500 per month on a tax-grossed-up basis.
NON-COMPETE. In consideration for your employment and the
compensation and
benefits that you will receive, provided that the Company is not
in default on
its obligations, the Company requires that, (i) during and for
two years after
your employment with the Company as either President/CEO or as
Vice-Chairman
and also (ii) during your employment with the Company as Advisor,
you agree:
<circle> NOT to engage in any business activities for your
own account,
directly or indirectly, other than via investments in mutual
funds, or to
act as an officer, director, agent, or in any other capacity
of any other
corporation, partnership, or any other business organization
that have or
may have business interests that are similar or in any way
connected to or
competitive with the Company<O~>s interests or the interests
of any of its
subsidiaries without the knowledge of and approval by the
Board;
<circle> NOT to solicit, directly or indirectly, any customers of
the Company
or of any of its subsidiaries to divert their business in any
way to you or
to any corporation, partnership or any other business
organization in which
you have a financial interest, directly or indirectly, without
the knowledge
of and approval by the Board;
<circle> NOT to solicit, directly or indirectly, any employee of
the Company or
of any of its subsidiaries to leave the Company for any other
corporation,
partnership or any other business organization without the
knowledge of and
approval by the Board.
You agree that the scope of this agreement not to compete and
the nature and
duration of the restrictions are reasonable and necessary for
the proper
protection of the Company. In the event that any person or entity
successfully
contests the validity or enforceability of this agreement not to
compete in its
present form, the agreement not to compete shall not be deemed
invalid or
unenforceable, but shall instead be deemed modified so as to
be valid and
enforceable. This non-compete provision may be enforced through
request for
injunctive relief or damages in any court of competent
jurisdiction.
DISCLOSURE OF OTHER BUSINESS INTERESTS. You agree that within 21
days of your
start date as President/CEO, you will disclose to the Board
of TSI TelSys
Corporation all other business interests in which you have
greater than a five
percent (5%) ownership interest. During your term of
employment as
President/CEO or as Vice-Chairman, you also agree to notify the
Board of any
changes to your ownership interest in any of these other business
interests or
in any other business interests in which you acquire a greater
than a five
percent (5%) ownership interest: such notification is to be made
within 21 days
of any such change. You also agree, while employed as
President/CEO or as Vice-
Chairman, not to act as an officer, director, agent or in any
other capacity
of any other corporation, partnership or any other business
organization
without the knowledge of the Board. You also agree, while
employed as
President/CEO or as Vice-Chairman,
2
<PAGE>
not to act as an officer, director, agent, or in any other
capacity of any
other corporation, partnership or any other business organization
that have or
may have business interests that are similar or in any way
connected to or
competitive with the Company<O~>s interests without the
knowledge of and
approval by the Board.
You also agree, while employed as President/CEO or as Vice-
Chairman, to
disclose to the Board all investment banks and stockbroking
companies with
which you have had any business dealings over the past three
years. You also
agree to disclose to the Board, at a time and date no later than
the following
Board meeting, any business dealings you have or have
arranged with any
investment banks and stockbroking companies for your own account,
directly or
indirectly, or as an officer, director, agent, or in any other
capacity of any
other corporation, partnership, or any other business
organization while you
are employed as President/CEO or as Vice-Chairman.
NON-DISCLOSURE OF COMPANY MATTERS. You will be required to
sign a non-
disclosure agreement, the purpose of which is to safeguard the
Company<O~>s
interests in proprietary information developed by the
Company and its
subsidiaries.
NOTICE. While you are employed as President/CEO or as Vice-
Chairman, if you
decide to terminate your employment with the Company, you are
required to give
at least three months<O~> prior written notice to the Board.
The Company has the right to terminate your employment as
President/CEO or as
Vice-Chairman at any time with or without prior written
notice. Other than
termination for just cause, if the Company decides to
terminate your
employment, you will be entitled to receive the severance package
described in
the following section entitled <O`>Severance<O'>. The Company will
be entitled
to terminate your employment without notice and without
severance package to
you for just cause. For the purposes of this employment
letter, <O`>just
cause<O'> shall mean: (I) commission of a willful act of
dishonesty in the
course of your duties; (ii) conviction by a court of competent
jurisdiction of
a crime constituting a felony or conviction in respect of any
act involving
fraud, dishonesty or moral turpitude; (iii) performance of
your job
responsibilities while under the influence of alcohol or
any controlled
substance during working hours after the Company shall have
provided written
notice to you that your behaviour is inappropriate and will not
be tolerated
and has offered to you counselling services; (iv) frequent or
extended, and
unjustifiable (not as a result of your incapacity or
disability) absenteeism
which shall not have been cured within 30 days after the
Company shall have
advised you in writing of its intention to terminate your
employment in
accordance with these provisions in the event that such
condition shall not
have been cured; (v) willful and continued personal
misconduct, action,
inaction, inability or refusal by you to perform duties and
responsibilities
described under <O`>Duties<O'> above; (vi) material non-
compliance with the
terms of this employment letter.
The Company and you agree that if the Company chooses to
terminate your
employment as President/CEO, then you will be subsequently
employed as Advisor
to the Company for a period of 21 months, as described earlier,
but you will
NOT be employed as Vice-Chairman. Also, the Company and you
agree that if the
Company chooses to terminate your employment as Vice-Chairman,
then you will be
subsequently employed as Advisor to the Company for a period of 21
months.
Further, the Company and you agree that the Company<O~>s
subsidiaries will be
entitled to terminate your employment without notice and without
severance for
any reason, provided that your employment with the subsidiary (or
subsidiaries)
is not the primary source of your salary, benefits or
other incentive
compensation at that time.
SEVERANCE. If the Company decides to terminate your
employment as
President/CEO or as Vice-Chairman for any reason other than for
just cause, you
will be entitled to one of the following severance packages:
a) if the decision to terminate occurs within the first six
months from the
start date of your employment, you will be entitled to
severance equivalent
to six months<O~> salary as President/CEO (the total to be
paid to you at
one-sixth each month for six months) and to enjoy a
continuation of the
Company benefits (health and life insurance, workers<O~>
compensation,
social security and 401(k) plan) for the same six-month
period. Further the
six-
3
<PAGE>
month period during which you continue to draw salary and
benefits will be
hereinafter referred to as the <O`>Termination Period<O'>;
b) if the decision to terminate occurs more than six months from
the start date
of your employment and if you are at that time employed as
President/CEO,
you will be entitled to severance equivalent to nine
months<O~> salary as
President/CEO (the total to be paid to you at one-ninth each
month for nine
months) and to enjoy a continuation of the Company benefits
(health and life
insurance, workers<O~> compensation, social security and
401(k) plan) for
the same nine-month period. Further the nine-month period
during which you
continue to draw salary and benefits will be hereinafter
referred to as the
<O`>Termination Period<O'>;
c) if you are employed at that time as Vice-Chairman, you will
be entitled to
severance equivalent to twelve months<O~> salary as Vice-
Chairman (the total
to be paid to you at one-twelfth each month for twelve months)
and to enjoy
a continuation of the Company benefits on a pro rata basis
(health and life
insurance, workers<O~> compensation, social security and
401(k) plan) for
the same twelve-month period. The twelve-month period
during which you
continue to draw salary and benefits will be hereinafter
referred to as the
<O`>Termination Period<O'>.
NON-VESTING DURING TERMINATION PERIOD. If the Company decides to
terminate your
employment as President/CEO or as Vice-Chairman, it also can
choose whether to
request you to continue to come to work during the Termination
Period. Vesting
of Time-Based Stock Options granted to you will continue
through the
Termination Period only if the Company requests you to
continue to come to
work, or unless you qualify for accelerating vesting of
Time-Based Stock
Options by virtue of the completion of a Change of Control
Transaction or Sale
of the Communications Business during the 180 day period
immediately following
the termination of your employment as either President/CEO or as
Vice-Chairman
in which the Pre-Deal Valuation of the Company or the Pre-Deal
Valuation of the
Communications Business is at least US$50 million and so
long as you also
played an active part in the negotiations with the
purchaser prior to
termination.
Vesting of Performance-Based Stock Options will also continue
through the
Termination Period only if the Company requests you to
continue to come to
work, or unless you qualify for further vesting by virtue of the
completion of
a Change of Control Transaction or Sale of the Communications
Business during
the 180 day period immediately following the termination of your
employment as
either President/CEO or as Vice-Chairman in which the Pre-Deal
Valuation of the
Company or the Pre-Deal Valuation of the Communications
Business is at least
US$25 million and so long as you also played an active part in the
negotiations
with the purchaser prior to termination.
CHANGES IN DESIGNATION AND DUTIES TO ENABLE TSI TELSYS INC TO
OBTAIN FACILITY
CLEARANCE. The Company and you share an understanding that we
are proceeding
with this appointment letter, notwithstanding the possibility that
the Company
may find it desirable to redefine your role at some future date
in order for
its subsidiary, TSI TelSys Inc., to obtain facility
clearance from the
Department of Security Services (<O`>DSS<O'>).
As you know, we are still exploring possibilities in this
regard. It is
possible, for example, that it would serve the Company<O~>s best
interests if
you step down as President/CEO of the Company in a few months<O~>
time, while
continuing to take charge of the operations of the subsidiary,
TSI TelSys Inc,
by becoming simply the CEO of the latter, which could then qualify
for Facility
Clearance. If the Company and you mutually agree to terminate
your employment
as President/CEO of TSI TelSys Corporation for this reason,
then you will be
offered an equivalent employment package as
4
<PAGE>
CEO of TSI TelSys Inc. (with the same salary and benefits as
before and an
incentive compensation package that will parallel what is
contained herein).
GOVERNING LAW. This agreement, including all attachments, shall
be interpreted
pursuant to the laws of the State of Maryland except as
to its law of
conflicts.
We look forward to your joining the Company.
Sincerely,
For and on behalf of TSI TelSys Corporation
_____________________________________
Dr. Wan Muhamad Hasni Wan Sulaiman
Chairman
Attachment A: Stock Option Compensation
Attachment B: Completion of Tasks Bonus
I agree and accept employment on the terms set out above:
_____________________________________
Joseph T. Pisula
_____________________________________
Date
5
<PAGE>
ATTACHMENT A
STOCK OPTION COMPENSATION
GRANT OF STOCK OPTIONS.. TSI TelSys Corporation (the
<O`>Company<O'>) agrees to
grant to you 2,438,500 Stock Options on your start date,
pursuant to the
Company<O~>s Key Employee Incentive Stock Option Plan and
subject to the
conditions that no options are exercised by you until such time as
the Montreal
Exchange has granted their approval of the issuance of the Stock
Options to you
and the Montreal Exchange and the shareholders of the Company have
approved the
increase in the number of common share options available to be
issued under the
Company<O~>s Key Employee Share Option Incentive Plan, such
shareholder
approval being sought at the Annual General Meeting to be
held on June 25,
1998. Of this total, 1,538,500 will be Time-Based Stock Options
and 900,000
will be Performance-Based Stock Options. They will vest as
per the schemes
described below.
EXERCISE PRICE. The exercise price on these Stock Options will be
set at either
(i) Cdn$0.45; or (ii) pursuant to the terms of the Key Employee
Share Option
Incentive Plan, the average of daily high and low board lot
trading prices on
the Montreal Exchange for the immediately preceding five days on
which trades
occurred prior to the date of grant; whichever is the highest.
EXERCISE PERIOD. The exercise period for these Stock Options shall
terminate 90
days from date that your employment (i.e., from the last day of
employment as
Advisor) with the Company terminates.
CHANGES IN CAPITALIZATION. If the authorized capital of the
Company as
presently constituted is consolidated into a lesser number of
common shares or
subdivided into a greater number of common shares, the number of
Stock Options
covered by this letter and its attachments shall be decreased
or increased
proportionately, as the case may be, and the exercise price to be
paid for each
new share in TSI TelSys Corporation shall also be adjusted
accordingly.
AMALGAMATION OR MERGER. If, from time to time, any other change
is made in the
capital of the Company or the Company amalgamates or
combines, merges or
consolidates with one or more other companies or corporations (and
the right to
do so is hereby expressly reserved by the Company) whether
by way of
arrangement, by exchange of shares, or otherwise, in each such
case each Stock
Option shall extend to and cover the number, class and kind of
shares or other
obligations to which the holder of the Stock Option would have
been entitled
had the Stock Option been fully exercised immediately prior to
the date such
amalgamation, merger, combination or consolidation becomes
effective and the
then prevailing subscription price of the Shares or other
obligations so
covered shall be correspondingly adjusted if and to the extent
that the Board
considers it to be equitable and appropriate.
EXCEPTION FOR DISTRIBUTION OR RIGHTS OFFERING OF SHARES IN A
RECONFIGURABLE
COMPUTING COMPANY. It is currently contemplated that the
reconfigurable
business will be transferred to a separate subsidiary, such as
TSI Technology
Inc., and that shares in this subsidiary could then be
distributed to
shareholders via a dividend or via a rights offering or might
even be sold
directly to a third party. It is the Company<O~>s understanding
that holder of
Stock Options would NOT be entitled to participate in the
dividend or rights
offering. However, if it is determined at a future date that
holders of Stock
Options will be entitled to participate to some extent, you
agree that your
participation will be limited to the extent that you have
already become
vested or become entitled to vesting. In other words, if you have
been granted
a total of 2,438,500 Stock Options but only 833,333 have actually
vested at the
time of the
6
<PAGE>
distribution or rights offering of RC shares, and if the Company
has decided to
distribute 100 RC Shares for every 1,000 Stock Options, for
example, then you
agree that you would be entitled to 83,333 RC shares (NOT 243,850
RC shares).
DEFINITIONS:
CHANGE OF CONTROL TRANSACTION (<O`>CCT<O'>):
A CCT refers to a sale of shares or any combination or
series of
sales of
shares or new issuances of shares that results in one
single party or a
group acting in concert accumulating more than 50% of the
common shares of
the Company.
Notwithstanding the above, for the purposes of this
letter and its
attachments, a CCT does not include a sale or transfer of
shares presently
registered to Abrar Group International (hereinafter
<O`>A.G.I.<O'>) or to
other companies in the Abrar group of companies
(hereinafter <O`>other
Abrar-related companies<O'>) if that sale or transfer
takes place to
either:
<circle> other Abrar-related companies; or
<circle> an individual shareholder of A.G.I.; or
<circle> a company controlled by an individual shareholder
of A.G.I..
SALE OF THE COMMUNICATIONS BUSINESS (<O`>SCB<O'>):
In the case that Communications and Reconfigurable Computing
are both
divisions
of TSI TelSys Inc. on the Completion Date, then a SCB
refers to the
execution of a Sale and Purchase Agreement by both parties
that involves a
sale of the Communications Division.
In the case that Reconfigurable Computing is no longer a
division of TSI
TelSys Inc. on the Completion Date, then a SCB refers to the
execution of
a Sale and Purchase Agreement by both parties that involves
a sale of at
least 50% of the common shares of TSI TelSys Inc.
PRE-DEAL VALUATION OF THE COMPANY<O~>S EQUITY
(<O`>PDVCE<O'>):
Recognizing that a Change of Control Transaction could
involve
significantly
less than 100% of the common shares of the Company, then
PDVCE will be
calculated as follows:
PDVCE = ( P x CE ) + <capital-sigma> ( V{i} x W{i} ) +
<capital-sigma> [ (
P - E{j} ) x W{j} x D{j }]
where
P = total gross consideration agreed to be paid by the
purchaser in a
Change of Control
Transaction for the common shares in the Company that
he agrees to
purchase, divided
by the number of common shares in the Company that
he agrees to
purchase;
CE = total number of common shares outstanding in the
Company on the
Completion Date
(see definition below) of the Change of Control
Transaction;
V{i} = total gross consideration agreed to be paid by the
purchaser in
a Change of Control
Transaction for the warrants (or options that have
been vested by
the Completion Date)
of subset i which he agrees to purchase, divided by
the number of
warrants (or options
that have been vested by the Completion Date) of
subset i that he
agrees to purchase;
W{i} = the total no. of warrants (or options that have
been vested by
the Completion Date) of
subset i that have been issued by the Company and
which have not
expired or
been canceled on or before the Completion Date of
the Change of
Control Transaction;
E{j} = the exercise price of subset j of warrants (or
options that have
been vested by the
Completion Date) which the purchaser has not
7
<PAGE>
agreed to purchase (i.e., they remain outside the deal);
D{j} = a dummy variable which takes the value of either
(a) 1, if the
warrants (or
options that have been vested by the Completion Date)
of subset i
can be considered to be <O^>in the money<O~> (i.e., if
E{j} is less
than or equal P) or
(b) 0, if the warrants (or options that have been
vested by the
Completion
Date) of subset i can be considered to be <O^>out of
the money<O~>
(i.e., if E{j} is
greater than P);
<capital-sigma> is a mathematical notation, that refers to
summation.
NOTE: PDVCE does NOT include the market value of the
Company<O~>s debt
obligations.
PRE-DEAL VALUATION OF THE COMMUNICATIONS BUSINESS
(<O`>PDVCB<O'>):
In the case that the Communications Business and
Reconfigurable
Computing are
both divisions of TSI TelSys Inc. on the Completion Date of
a Sale of the
Communications Business, then PDVCB will be calculated as
follows:
PDVCB = total gross consideration agreed to be paid by the
purchaser in
a Sale
of the Communications Business to acquire the
Communications
Division of TSI TelSys Inc.;
NOTE: PDVCB does NOT take include the market value of TSI
TelSys Inc.<O~>s
debt
obligations that may be attributable to the
Communications Division.
In the case that the Reconfigurable Computing business has
already been
taken out of TSI TelSys Inc. by the Completion Date, such
that TSI TelSys
Inc. is essentially a Communications Business only, and
also recognizing
that a Sale of the Communications Business could involve
significantly
less than 100% (e.g., 51%) of the common shares of the
Company, then PDVCB
will be calculated as follows:
PDVCB = ( P x CE )
where
P = total gross consideration agreed to be paid by the
purchaser in a
Sale of the
Communications Business for the equity in TSI TelSys
Inc., that he
agrees to
purchase, divided by the number of shares in TSI TelSys
Inc. that he
agrees to
purchase;
CE = total number of common shares outstanding in TSI
TelSys Inc. on the
Completion Date (see definition below) of the
Sale of the
Communications
Business.
NOTE: PDVCB does NOT include the market value of the
Company<O~>s debt
obligations.
8
<PAGE>
Completion Date:
<O`>Completion Date<O'> shall be the date on
which the
agreement for the sale
and purchase of the shares has been executed by
both parties.
Current U.S. Dollar Equivalent Price:
In the case that the Company becomes listed on
a U.S. stock
exchange, the <O`>Current U.S. Dollar Equivalent
Price<O'> will
refer to the number of U.S. dollars equivalent to
a specified
Canadian price, after conversion at the daily
closing exchange
rate quoted by Bank of Canada, or quoted by
another financial
source that the Company and you mutually agree
upon.
VESTING OF TIME-BASED STOCK OPTIONS. The Time-Based Stock Options
will vest as
follows:
<circle> 18,500 will vest on your start date.
<circle> 56,000 options will vest each month from June
1998 to December
1999 inclusive (19 months) for each full month that you
complete as
President/CEO. Vesting will occur on the first
business day of each
subsequent month.
<circle> 28,500 options will vest each month from January
2000 to April
2001 inclusive (16 months) for each full month that you
complete as
Vice-Chairman. Vesting will occur on the first
business day of each
subsequent month.
<circle> there will NOT be any pro rata vesting of Time-
Based Stock
Options D e.g., if your employment as President/CEO
ceases on December
15, 1999, you will NOT be vested with 15/31 of 56,000
options for
December 1999.
ACCELERATED VESTING OF TIME-BASED STOCK OPTIONS. As
an additional
incentive, all Time-Based Stock Options not already
vested will vest
immediately if either:
<circle> you are President/CEO at the time and either
on or before
December 31, 1999, the average of daily high and low
board lot trading
prices on the primary exchange for a period of twenty
days on which
trades occur (hereinafter referred to as the <O`>20
Day Average
Price<O'>) reaches or exceeds Cdn$2.20, adjusted to take
into account
any changes in capitalization, or, in the case that the
Company becomes
listed on a U.S. stock exchange, that the average of daily
high and low
board lot trading prices on that U.S. exchange for a
period of twenty
days on which trades occur, and after converting each
day<O~>s average
to its Canadian dollar equivalent using the daily closing
exchange rate
quoted by Bank of Canada, (hereinafter referred to as the
<O`>US Dollar
Equivalent of the 20 Day Average Price<O'>) reaches
or exceeds
Cdn$2.20, adjusted to take into account any changes in
capitalization;
or
<circle> you are Vice-Chairman at the time and either on or
before April
30, 2001, the 20 Day Average Price reaches or
exceeds Cdn$3.00,
adjusted to take into account any changes in
capitalization, or, in the
case that the Company becomes listed on a U.S. stock
exchange, that the
US Dollar Equivalent of the 20 Day Average Price reaches
or exceeds
Cdn$3.00, adjusted to take into account any changes in
capitalization;
or
<circle>
9
<PAGE>
there is the completion of a Change of Control Transaction
or a Sale of
the Communications Business in which the Pre-Deal
Valuation of the
Company<O~>s Equity or the Pre-Deal Valuation of the
Communications
Business is at least US$50 million, and either:
(i) you are President/CEO on the Completion Date; or
(ii) you are Vice-Chairman on the Completion Date; or
(iii) the Completion Date occurs within 180 days after
your term as
either President/CEO or Vice-Chairman, and so
long as you also
played an active part in the negotiations with
the purchaser
prior to termination.
ENTITLEMENT TO VESTING OF PERFORMANCE-BASED STOCK OPTIONS. You
can become
entitled to the vesting of Performance-Based Stock Options
through either (i)
increases in the market value of TSI TelSys shares or (ii) the
completion of a
Change of Control Transaction or a Sale of the Communications
Business or (iii)
some combination of both, as follows:
(i) INCREASES IN THE MARKET VALUE OF TSI TELSYS SHARES.
While you are
employed as President/CEO and on or before December 31, 1999:
a) you will be entitled to be vested with 83,333
Performance-Based
Stock Options if the 20 Day Average Price for TSI
TelSys Corporation
shares reaches or exceeds Cdn$0.50 (or the Current
U.S. Dollar
Equivalent Price).
b) you will be entitled to be vested with an
additional 83,333
Performance-Based Stock Options whenever the 20 Day
Average Price
reaches the next price level that is Cdn$0.10 above
its precedent.
For instance at Cdn$0.60 (or the Current U.S.
Dollar Equivalent
Price), you will be entitled to be vested with
another 83,333
Performance-Based Stock Options, at Cdn$0.70 (or the
Current U.S.
Dollar Equivalent Price) another 83,333, and so on.
c) there will be 18 price levels that would trigger your
entitlement to
be vested, viz.: Cdn$0.50, Cdn$0.60, and at each
Cdn$0.10 interval
up to Cdn$2.20 (or the Current U.S. Dollar Equivalent
Prices).
d) at the Cdn$2.20-level (or the Current U.S. Dollar
Equivalent Price),
you will be entitled to be vested with 83,339
Performance-Based
Stock Options.
e) however, you will not be entitled to be vested with
any additional
Performance-Based Stock Options at any prices above
Cdn$2.20.
f) when there is either the completion of a Change
of Control
Transaction or a Sale of the Communications
Business or your
employment as President/CEO or as Vice-Chairman
terminates, then a
pro rata calculation of the number of Performance Stock
Options that
you have earned will be made. For instance, if the
20 Day Average
Price has reached Cdn$1.09 at the time that any of
these occur, then
you will be entitled to 9/10ths of the entitlement
earned if the 20
Day Average Price had increased from Cdn$1.00 to
Cdn$1.10 (i.e., an
additional 75,000).
g) you will only become entitled to be vested the first
time that the
20 Day Average Price reaches or exceeds a particular
price level. It
is NOT intended that you would become entitled to vest
an additional
number of Performance-Based Stock Options if the 20
Day Average
Price exceeds Cdn$1.00 for a second time, for example.
h) both the number of Performance-Based Stock Options and
the exercise
price may be adjusted, as described in the
<O`>Change in
Capitalization<O'> section above, to take into
account any changes
in capitalization since the original grant.
If, by the time your employment as President/CEO
terminates, your
entitlements to Performance-Based Stock Options are less than
one and one
half million, then during your employment as Vice-
Chairman and on or
before April 30, 2001:
[a] the difference between one and one half million and
the number of
entitlements earned as President/CEO will be
calculated;
[b] the highest round-number price level that was
achieved will be
determined (hereinafter the <O`>Previous Price Level
Attained<O'>).
[c] the remaining entitlements will then be spread
evenly from the
Previous Price Level Attained up to the Cdn$3.00
level (or the
Current U.S. Dollar Equivalent Price of Cdn$3.00),
at Cdn$0.10
intervals.
[d] however, there will be no further entitlement to
be vested with
Performance-Based Stock Options at any prices above
Cdn$3.00.
[e] also clauses (f), (g) and (h) of <O`>Section (i)
Increases in the
Market Value of TSI TelSys Shares<O'> will continue to
apply.
EXAMPLE: Suppose that you had become entitled to 833,333
Performance-
Based Stock Options while serving as President/CEO and
the 20 Day
Average Price had reached a maximum of Cdn$1.445.
Then 666,667
entitlements would be spread over 16 intervals from
Cdn$1.50 to
Cdn$3.00 D 41,666 per Cdn$0.10 intervals, and 41,677 at
the Cdn$3.00
price level.
(i) CHANGE OF CONTROL TRANSACTION OR SALE OF THE
COMMUNICATIONS BUSINESS.
You will be entitled to be vested with 450,000 Performance-
Based Stock
Options if a Change of Control Transaction of a Sale of the
Communications
Business is completed in which the Pre-Deal Valuation of the
Company<O~>s
Equity or the Pre-Deal Valuation of the Communications
Business is at
least US$25 million (twenty five million US dollars), so long
as either:
a) you are the President/CEO of the Company on the Completion
Date; or
b) you are the Vice-Chairman of the Company on the Completion
Date; or
c) the Completion Date occurs within 180 days after your
term as either
President/CEO or Vice-Chairman has ended, and so long
as you also
played an active role in the negotiations with the
purchaser prior to
termination.
Furthermore, you will also be entitled to be vested with
an additional
12,500 Performance-Based Stock Options for every additional
US$1.0 million
(one million US dollars), or a pro rata of 12,500 Stock
Options for any
part of US$1.0 million, that the Pre-Deal Valuation of the
Company<O~>s
Equity or the Pre-Deal Valuation of the Communications
Business, as the
case may be, exceeds US$25 million -- up to a maximum
valuation of US$61
million (sixty-one million US dollars) or a maximum of
an additional
450,000 Performance-Based Stock Options.
10
<PAGE>
At US$61 million, therefore, you would therefore be
entitled to
900,000
Performance-Based Stock Options in the aggregate (450,000
plus 450,000).
You will NOT be entitled to be vested for any additional
Performance-Based
Stock Options (i.e., none in excess of this 900,000) if
the Pre-Deal
Valuation of the Company<O~>s Equity or the Pre-Deal
Valuation of the
Communications Business exceeds US$61 million.
(i) VESTING UNDER A COMBINATION OF THE TWO SCHEMES. You can
also be entitled
to be vested under a combination of the two entitlement
schemes discussed
above. If so, the number of Performance-Based Stock Options
that you would
be entitled to be vested with will be the sum of the number
you would be
entitled to under each of the two schemes, except that the
total number of
Performance-Based Stock Options that you may become entitled
to will never
exceed one and one half million.
For example, if you are entitled to be vested with 833,333
Performance-
Based Stock Options (because the 20 Day Average Price
reached Cdn$1.40
while you are employed as President/CEO, for instance) and
you also closed
a Change of Control Transaction or Sale of Communications
Business at a
Pre-Deal Valuation of US$45 million (entitling you to
vest a further
700,000 Performance-Based Stock Options), then you would
still have earned
entitlements to vest only one and one half million
Performance-Based Share
Options.
NON-VESTING DURING TERMINATION PERIOD. If the Company decides to
terminate your
employment as President/CEO or as Vice-Chairman, it also can
choose whether to
request you to continue to come to work during the termination
period. Vesting
of Time-Based Stock Options granted to you will continue
through the
termination period only if the Company requests you to
continue to come to
work, or unless you qualify for accelerating vesting of Time-
Based Stock
Options by virtue of the closing of a Change of Control
Transaction or Sale of
the Communications Business during the 180 day period
immediately following
your employment as either President/CEO or as Vice-Chairman in
which the Pre-
Deal Valuation of the Company or the Pre-Deal Valuation of the
Communications
Business is at least US$50 million and so long as you also
played an active
part in the negotiations with the purchaser prior to termination.
Vesting of Performance-Based Stock Options will also continue
through the
termination period only if the Company requests you to
continue to come to
work, or unless you qualify for further vesting by virtue of the
closing of a
Change of Control Transaction or Sale of the Communications
Business during the
180 day period immediately following your employment as either
President/CEO or
as Vice-Chairman in which the Pre-Deal Valuation of the Company or
the Pre-Deal
Valuation of the Communications Business is at least US$25
million and so long
as you also played an active part in the negotiations with
purchaser prior to
termination.
Up to 900,000 Performance-Based Stock Options will vest as
soon as you have
become entitled to their vesting. If you become entitled to more
than 900,000
Performance-Based Stock Options. Based on the vesting program
laid out above,
the total number of Performance-Based Stock Options that you
could conceivably
be entitled to vest could aggregate to 1,500,000, which is in
excess of the
900,000 Performance-Based Stock Options actually being granted to
you. In this
circumstance, i.e., where you become entitled to more than 900,000
Performance-
Based Options, the Company agrees that compensation as
outlined in
<O`>Attachment B: Performance Bonus<O'> will be paid to you as
consideration
for having outperformed the benchmarks for the 900,000 Performance-
Based Stock
Options.
11
<PAGE>
ATTACHMENT B
PERFORMANCE BONUS
1) PERFORMANCE BONUS. If you have earned the entitlement to more
than 900,000
Performance-Based Stock Options, then the Company will
provide you with
additional compensation, which will either take the form
of (a) an
Additional Cash Bonus or (b) Additional Stock Options combined
with a Cash
Top-Up Payment.
(a) ADDITIONAL CASH BONUS ALTERNATIVE. The Additional Cash
Bonus will be
calculated as follows:
<capital-sigma> [ Q x ( P - OEP) x TF ]
where:
Q = the number of entitlements in excess of
900,000 that
you have earned
P = the average of daily high and low board
trading prices
on the principal exchange for the
immediately preceding
five days on which trades occur
OEP = the original exercise price on the
original 2,438,500
Stock
Options granted to you
TF = either 1.000, 1.192 or 1.324, depending on
the date that
you
earn the respective entitlements, viz:
TF = 1.000 if the entitlements were earned
in the first
12 months from your start date
TF = 1.192 if the entitlements were earned
in the
13{th} to
18{th} month from your start date
TF = 1.324 if the entitlements were earned
after
18 months from your start date.
<capital-sigma> is a mathematical notation,
that refers to
summation.
Here, the formula within the square
brackets
is to be calculated for all the actual cases
in which
you earn entitlements in excess of
900,000 and the
results of each calculation are to be
summed.
The Company agrees to pay you this additional cash bonus:
<circle> on the date that full payment has been
received by the
seller in the case that a Change of Control
Transaction or Sale
of the Communications Business is completed; or
<circle> in the case that your entitlement to this
additional cash
bonus arises from the increase in market value
of TSI TelSys
shares either:
<circle> if the additional cash bonus is less than
Cdn$100,000,
by a lump sum payment to you within 10 days
from the date on
which all 2,438,500 vested Stock Options
have been
exercised; or
<circle>
12
<PAGE>
if the additional cash bonus is greater than
Cdn$100,000 and
less than Cdn$400,000, by equal monthly
installments (1/12
of the total to be paid to you per month)
over a one-year
period beginning from the date on which all
2,438,500 vested
Stock Options have been exercised;
<circle> it the additional cash bonus is
greater than
Cdn$400,000, by equal monthly installments
(1/24 of the
total to be paid to you per month) over a two-
year period
beginning from the date on which all 2,438,500
vested Stock
Options have been exercised.
<circle> or an appropriate combination of the two,
if some of the
entitlements arise from a Change of Control
Transaction or Sale
of the Communications Business and some arise from
an increase in
the market value of TSI TelSys shares.
(a) ADDITIONAL STOCK OPTIONS WITH CASH TOP-UP PAYMENT
ALTERNATIVE.
Notwithstanding the foregoing, the Company shall have
the right to
substitute for the additional cash bonus in (a) above by
granting you
up to an additional 600,000 Performance-Based Stock
Options. In the
event that the Company grants you these additional Stock
Options, then
the difference between the original exercise price of
the 2,438,500
original Stock Options and the exercise price of the
600,000 Stock
Options multiplied by the additional number of
Performance-Based Stock
Options being vested shall be paid to you as a Cash Top-
Up Payment on
the date(s) that any of the 600,000 Stock Options are
exercised. All
Stock Options that become vested shall be exercised on
a <O`>First
In/First Out<O'> basis such that the Cash Top-Up Payment
would be paid
only after all of the vested Stock Options from the
2,438,500 pool had
been exercised.
1) CASH BONUS FOR CHANGE OF CONTROL TRANSACTION OR SALE OF THE
COMMUNICATIONS
BUSINESS.
The Company also agrees to pay to you an additional cash bonus on
the date that
full payment has been received by the seller in the event that
a Change of
Control Transaction or Sale of the Communications Business is
completed, so
long as you were either:
<circle> employed as either President/CEO or as Vice-
Chairman of the
Company on the Completion Date; or
<circle> meet all three of the following conditions: (i) had
been employed
as either President/CEO or as Vice-Chairman within 180
days of the
Completion Date, (ii) had not been terminated for just
cause; and (iii)
had also played an active role in the negotiations with
the purchaser
prior to termination.
The amount of this additional bonus will be as follows:
<circle> if the Completion Date of the Change of Control
Transaction or
Sale of the Communications Business occurs within 12
months from your
start date, there will be no additional cash bonus
(<O`>nil<O'>).
<circle> if the Completion Date of the Change of Control
Transaction or
Sale of the Communications Business occurs within 13-
18 months from
your start date, the size of this additional cash
bonus will be
equivalent to 0.5% (one half of one percent) of the Pre-
Deal Valuation
of the Company<O~>s Equity or the Pre-Deal
Valuation of the
Communications Business, whichever is relevant.
<circle>
13
<PAGE>
if the Completion Date of the Change of Control
Transaction or Sale of
the Communications Business occurs more than 18 months
from your start
date, the size of this additional cash bonus will be
equivalent to
0.75% (three quarters of one percent) of the Pre-Deal
Valuation of the
Company<O~>s Equity or the Pre-Deal Valuation of the
Communications
Business, whichever is relevant.
14
TSI TelSys Corporation
Exhibit 10.2
KEY EMPLOYEE STOCK OPTION INCENTIVE PLAN
(revised as of November 12, 1998)
1. NAME AND PURPOSE OF PLAN
1.1 The stock option plan constituted hereby shall be known as
the Key
Employee Stock Option Incentive Plan.
1.2 The purpose of the Plan is to provide a means whereby
those Employees
of the Company and its Subsidiaries who have the principal
responsibility for
the successful administration and management of the Company and
whose present
and potential contributions are important to its success can
obtain a
proprietary interest in the Company thereby providing an incentive
for
continuing beneficial service to the Company.
2. INTERPRETATION
In this Plan and in any Option, unless the context otherwise
requires:
(a) "Board" means, at any time, the board of directors of the
Company in
office at that time;
(b) "Company" means TSI TelSys Corporation and any successor or
continuing
company resulting from amalgamation of the Company and any other
company or
resulting from any other form of corporate reorganization;
(c) "Employee" means an individual who is a bona fide employee,
director or
officer of the Company or any of its Subsidiaries, and shall
include an
individual or corporation who has been engaged by the Company or
any of its
Subsidiaries to provide ongoing management or consulting services
to the
Company or any of its Subsidiaries;
(d) "Market Price" on any particular day means an average of
daily high and
low board lot trading prices (with no discount) on the Montreal
Exchange for
the immediately preceding five days on which trades occurred;
(e) "Option" means any option granted pursuant to the Plan;
(f) "Optionee" means an Employee who has been granted an Option;
(g) "Option Price" means the price at which Optioned Shares may
be subscribed
for pursuant to an Option.
(h) "Optioned Shares" means Shares which are the subject of an
Option;
(i) "Plan" means the Key Employee Stock Option Incentive Plan as
embodied
herein and as from time to time amended in accordance with the
provisions
hereof;
(j) "Shares" means Common Shares without par value in the capital
of the
Company, as constituted at the effective date hereof;
(k) "Subsidiary" has the same meaning, with respect to the
Company, as that
term has under the Business Corporation Act (New Brunswick) .
2.1 The masculine gender shall include the feminine gender and
singular
shall include the plural and vice versa.
3. SHARES SUBJECT TO THE PLAN
3.1 The aggregate number of Shares which may be issued in
respect of which
Options may be granted, at any time, shall be 2,401,883 (post
August 31, 1998
consolidation) which number of Shares shall include the balance of
authorized
and unissued Shares in respect of which Options are outstanding at
that time
(or such number, class and kind of shares which, in accordance
with section 12
hereof, shall be substituted therefor or into which they shall be
altered) and
the requisite number of Shares shall from time to time be
appropriated for the
purposes of the Plan and reserved and set aside for issue upon the
due exercise
of Options. If any Option shall expire or terminate for any
reason without
having been exercised in full, any Optioned Shares not subscribed
for thereunder
shall be available for further Options.
3.2 The aggregate number of Shares which may be issued in
respect of which
Options may be granted, at any time to any one person, shall be
that number of
Shares which is equal to 5% of the number of Shares of the Company
which are
issued and outstanding at that time, (or such number, class and
kind of shares,
into which they shall be altered) and the requisite number of
Shares shall from
time to time be appropriated for the purposes of the Plan and
reserved and set
aside for issue upon the due exercise of Options. If any Option
shall expire
or terminate for any reason without having been exercised in full,
any Optioned
Shares not subscribed for thereunder shall be available for
further Options.
4. GRANT OF OPTIONS AND ADMINISTRATION OF THE PLAN
4.1 Subject only to the express provisions of the Plan, the
Board shall
have the sole authority:
(a) to determine, in its own discretion, each Employee to whom,
and the time
or times at which, and the Option Price and term for which, an
Option shall be
granted and the number of Optioned Shares to be subject to the
Option;
(b) to determine and approve from time to time the form of
Options, and to
authorize an officer or officers to execute and deliver any Option
on behalf of
the Company;
(c) to interpret the Plan and to amend the Plan; and
(d) to make all other determinations and perform all such other
actions as the
Board deems necessary or advisable to implement and administer the
Plan.
4.2 In making any determinations under subsection 4.1, the
Board may take
into account the nature of the services rendered by the Employee,
his present
and potential contribution to the success of the Company and its
Subsidiaries
and such other factors as to the Board in its discretion shall
deem applicable
to carry out the purposes of the Plan. The Board may, in its
discretion,
authorize the granting of additional Options to an Optionee before
an existing
Option has terminated.
4.3 All decisions and interpretations of the Board respecting
the Plan or
Options shall be binding and conclusive on the Company and on all
Optionees and
their respective legal personal representatives and on all
Employees.
5. TERM OF OPTIONS
5.1 No Option shall be for a term longer than ten years from
the date of
the granting of the Option.
6. OPTION PRICE
6.1 The Option Price in any Option shall not be an amount
less than as
defined
by Paragraph 2(d).
7. EXERCISE OF OPTIONS
7.1 Subject to the provisions of this section and sections 10
and 11
hereof, each Option shall be exercisable in whole at any time or
in part from
time to time during the term thereof.
7.2 An Option may be exercised at the applicable times and in
the
applicable amounts by giving to the Company written notice of
exercise signed
by the Optionee specifying the number of Shares to be subscribed
for and
accompanied by full payment for the Shares to be subscribed for in
cash or by
cheque certified by a Canadian chartered bank.
7.3 Except as provided in sections 9, 10 and 11 hereof, no
Option may be
exercised in whole or in part at any time unless at the time of
such exercise
the Optionee is an Employee.
7.4 At any time the Board may, by notice in writing to all
Optionees under
the Plan, require each Optionee to elect, within such period as
the Board shall
prescribe, to subscribe and pay for all the Optioned Shares then
remaining
unsubscribed for under his Option, or to accept termination of his
Option in
the event of his failing within such period to so elect or to
exercise his
Option and to subscribe and pay for all such remaining Optioned
Shares.
8. RIGHTS OF OPTIONEE
8.1 No Optionee shall have any of the rights of a member of
the Company
with respect to any Optioned Shares until such Optioned Shares
have been issued
to him upon exercise of the Option and full payment therefor has
been made by
him to the Company.
9. NON-TRANSFERABILITY OF OPTIONS
No Option shall be assignable or transferable by an Optionee and
any purported
assignment or transfer of an Option shall be void and shall render
the Option
void, but if the employment or position of an Optionee with the
Company or any
of its Subsidiaries, as the case may be, is terminated by reason
of his death,
the Optionee's legal personal representative or representatives
may exercise
the Option in accordance with section 10.
10. DEATH OR RETIREMENT OF OPTIONEE
10.1 If the employment or position of an Optionee with the
Company or any
of its Subsidiaries, as the case may be, is terminated by reason
of his death
at any time during the term of an Option, then, until the earlier
of:
(a) the expiry date of the Option specified at the time of its
grant, or
(b) the date which is one year from the death of the Optionee,
the Option may be exercised by the Optionee's legal personal
representative
or representatives as to such maximum number of Optioned Shares
which the
Optionee would have otherwise been entitled to exercise the Option
in respect
of at the date of his death.
10.2 If the employment or position of an Optionee with the
Company or any
of its Subsidiaries, as the case may be, is terminated by reason
of his
retirement in accordance with the Company's policies relating to
retirement
of Employees at any time during the term of an Option, then, until
the earlier
of:
(a) the expiry date of the Option specified at the time of its
grant, or
(b) the date which is one year from the retirement of the
Optionee,
the Option may be exercised by the Optionee or by the Optionee's
legal
personal representative or representatives if the Optionee dies
within the
period so specified as to such maximum number of Optioned Shares
which the
Optionee would have otherwise been entitled to exercise the Option
in respect
of at the date of his retirement.
11. TERMINATION OF EMPLOYMENT OF OPTIONEE
11.1 If the employment or position of an Optionee with the
Company or any
of its Subsidiaries, as the case may be, is terminated for any
reason other
than as specified in section 10 or subsection 11.2, then, until
the earlier of:
(a) the expiry date of the Option specified at the time of its
grant, or
(b) the date which is 90 days from the termination of employment
of the
Optionee, the Optionee may exercise his Option in respect of the
number of
Optioned Shares which the Optionee was entitled to subscribe and
pay for under
the Option on the date of termination of his employment. This
section shall
apply to all current existing outstanding options as at March 17,
1997 and all
subsequent grants of options.
11.2 If the employment or position of an Optionee with the
Company or any
of its Subsidiaries, as the case may be, is terminated by the
Company or any
Subsidiary for lawful cause, all of the rights of the Optionee
under his Option
shall terminate and the Option shall become null and void
effective immediately
upon such termination taking effect.
11.3 Nothing contained in the Plan or any Option shall confer
on any
Optionee any right to, or guarantee of continued employment by the
Company or
any Subsidiary, or in any way limit the right of the Company or a
Subsidiary to
terminate the employment of the Optionee at any time.
12. CHANGES IN CAPITALIZATION OR NUMBER OF OUTSTANDING SHARES
12.1 If, and whenever, prior to the issuance by the Company
of all the
Optioned Shares under an Option, the Shares are from time to time
consolidated
into a lesser number of Shares or subdivided into a greater number
of Shares,
the number of Optioned Shares remaining unissued under the Option
shall be
decreased or increased proportionately, as the case may be, and
the
subscription price to be paid by the Optionee for each such Share
shall be
adjusted accordingly.
12.2 If from time to time any other change is made in the
capital of the
Company or the Company amalgamates or combines, merges or
consolidates with one
or more other companies or corporations (and the right so to do is
hereby
expressly reserved by the Company) whether by way of arrangement,
by exchange
of shares, or otherwise, in each such case each Option shall
extend to and
cover the number, class and kind of shares or other obligations to
which the
holder of the Option would have been entitled had the Option been
fully
exercised immediately prior to the date such amalgamation, merger,
combination
or consolidation becomes effective and the then prevailing
subscription price
of the Shares or other obligations so covered shall be
correspondingly adjusted
if and to the extent that the Board considers it to be equitable
and
appropriate.
12.3 Except as expressly provided in this section 12, the
issue by the
Company of shares of any class, or of securities convertible into
shares of any
class, for cash or property, or for labour or services, either
upon direct sale
or upon the exercise of rights or warrants to subscribe therefor,
or upon
conversion of shares or obligations of the Company convertible
into such shares
or other securities, shall not affect, and no adjustment by reason
thereof
shall be made with respect to, the number of Optioned Shares.
12.4 No Option shall in any way affect the right or power of
the Company
or its members to make or authorize any or all adjustments,
recapitalizations,
reorganizations or other changes in the capital structure of the
Company or its
business, or any amalgamation, combination, merger or
consolidation of the
Company, or any issue of bonds1 debentures, shares with special
rights and
restrictions ranking ahead of or affecting the shares or the
rights thereof, or
the dissolution or liquidation of the Company, or any sale or
transfer of all
or any part of its assets or business or any other corporate act
or proceeding,
whether of a similar character or otherwise.
13. AMENDMENT AND TERMINATION OF THE PLAN
13.1 The Board may at any time terminate the Plan or make such
amendments
to the Plan as it shall deem advisable provided that no such
termination or
amendment shall adversely affect any outstanding Option except
with the consent
of all affected Optionees.
14. SHARES TO BE LISTED
14.1 The Company shall not be required to deliver any
certificate or
certificates for Optioned Shares purchased upon the exercise of
any Option
prior to the listing of such Optioned Shares on any stock exchange
on which
shares in the capital of the Company are then listed. The Company
will
promptly take such steps as may be required to effect such
listing.
15. RIGHT TO OPTIONS
15.1 Nothing contained herein or in any resolution adopted or
hereafter
adopted by the Board or any action taken by the Board shall vest
the right in
any person whomsoever to receive any Option. No person shall
acquire any of
the rights of an Optionee unless and until a written Option, in
form
satisfactory to the Board, shall have been duly executed on
behalf of the
Company and delivered to the Optionee and executed and delivered
by the
Optionee to the Company. Any agreement purporting to be an Option
shall, to
the extent it may be contrary to the express provisions of the
Plan, be
unenforceable by the Optionee against the Company.
16. REGULATORY AND STOCK EXCHANGE APPROVALS OR CONSENTS
16.1 The Plan and all Options are subject to all consents,
receipts,
approvals or other authorization by any securities commission,
administrative
agency, other governmental authority or stock exchange on which
shares in
the capital of the Company are listed which are requisite to the
Plan and the
granting of Options.
17. EFFECTIVE DATE OF THE PLAN
17.1 The Plan shall become effective when it has been approved
by the Board
and all requisite consents, receipts, approvals or other
authorizations have
been obtained and complied with.
AGREEMENT OF LEASE Exhibit
10.3
THIS AGREEMENT OF LEASE (this "Lease"), made this 22nd day of
November, 1995,
by and between BRIT LIMITED PARTNERSHIP, A Mary1and Limited
Partnership (herein
called "Landlord") and TSI TelSys, INC., a Maryland Corporation
(herein called
"Tenant").
WITNESSETH:
1. Premises. Landlord is the owner of a development of office
buildings (the
"Complex) including the building designated on the attached
Exhibit "A" as
Building "C" (herein called the "Building") which Complex is on a
lot located
at Parcels M-7, M-8, M-9 and Lot S-12, Columbia Gateway, Columbia,
Maryland and
more fully described by metes and bounds on Exhibit "B" hereto.
Landlord does
hereby demise and let unto Tenant and Tenant does hereby lease and
take from
Landlord, for the term and upon the terms, covenants, conditions
and provisions
set forth herein, that portion of the Building constituting 15,008
sq. ft. ,
identified as 7100 Columbia Gateway Drive, Columbia, Maryland
21046 - Building
"C", Suite 150 (all of which is herein called the "Premises"),
together with
the right, in common with the other occupants of the Building and
the Complex,
to use the driveway, sidewalks and loading and parking areas on
the Complex (to
the extent not restricted pursuant to the provisions of other
leases). The
total number of leasable square feet constituting the Premises
shall be
referred to herein as the "Total Square Feet". Further, the Total
Square Feet
shall be adjusted as necessary to reflect any changes to the
Premises by
expansion or any other event affecting the area of the Premises.
Tenant hereby
accepts the tenant improvements in the premises in "As IS"
condition and as
complying with all obligations of Landlord with respect to the
condition,
order, and repair thereof. Landlord warrants that on February 4,
1993 the
Premises were in compliance with all local, state and federal
codes, i.e., The
Americans with Disabilities Act. The Landlord makes no warranties
with respect
to compliance subsequent to that date.
2. Term.
(a) The term of this lease shall commence upon the later of
December 1, 1995
or occupancy by Tenant, but in no event later than January 31,
1996 (herein
called the "Commencement Date").
(b) Unless sooner terminated in accordance with the terms hereof
or extended
as hereinafter provided, the term of this lease shall end ten (10)
years
following the Commencement Date without the necessity for notice
from either
party to the other (the date of the termination of this Lease,
whether upon
termination of the original term or any subsequent term hereof, or
upon
termination for any other reason hereunder is herein called the
"Expiration
Date"). Notwithstanding the above to the contrary, Tenant shall
have the option
to terminate this Lease on the expiration of five (5) full years
from the
Commencement Date. For Tenant to exercise this termination option,
Tenant shall
give Landlord nine (9) months written notice prior to the
expiration of the
fifth (5th) complete year of the Lease. Simultaneously with the
delivery of
this notice, Tenant shall pay to Landlord a cancellation fee equal
to $59,900
plus the unamortized portion of any improvements made by Landlord
on behalf of
Tenant in connection with the exercise of Tenant's right to first
offer on two
(2) spaces adjacent to the Premises.
(c) If Tenant continues to occupy the Premises after the
Expiration Date
whether or not after obtaining Landlord's express, written consent
thereto:
(i) such occupancy shall (unless the parties hereto otherwise
agree in
writing) be deemed to be under a month-to-month tenancy, which
shall continue
until either party hereto notifies the other in writing, by at
least thirty
(30) days before the end of any calendar month, that the notifying
party elects
to terminate such tenancy at the end of such calendar month, in
which event
such tenancy shall so terminate; and
(ii) such month-to-month tenancy shall be upon the same terms and
subject to
the same conditions as those set forth in the provisions of this
Lease except
that the base monthly rent may be increased to double the base
monthly rent in
effect immediately prior to the expiration date.
(d) Subsequent to the execution of this Lease by Landlord and
Tenant and
prior to the Commencement Date, Tenant and agents, employees and
contractors of
Tenant shall have the right to enter onto the Premises to commence
certain
improvements to be paid for by Tenant (i.e., cabling). Tenant
shall give
Landlord 24 hours' notice of such entry and Tenant shall provide
Landlord with
evidence that Tenant, its employees, agents and/or contractors
have obtained
any insurance that may reasonably be required by Landlord.
3. Comp1etion of Premises. N/A.
4. Use of Premises/Limitation of Competitors: Tenant shall use
the Premises
solely for the purpose of the operation of an electronics, design,
manufacturing and sales business and related uses in the ordinary
course of
Tenant's business (including general offices) (the "Permitted
Use"), and the
Premises shall not be used or occupied in whole or in part for any
other
purpose, without the written consent of the Landlord. The Landlord
agrees that
during the term of this Lease (including all extensions hereof) it
shall not
lease space in the Complex to any entity conducting a business
competitive with
the Permitted Use of the Tenant. For purposes of the foregoing, an
"entity
conducting a business competitive with the Permitted Use of the
Tenant shall
mean and include only those entities whose business is made up of
in excess of
ten percent (10%) by operations competitive with the Permitted
Use.
5. Rent.
(a) Tenant shall pay as base rent an annual amount each year as
set forth
below.
Year 1: $95,639 (8.50 x 15,008)
(initial 9 months at $7,083.33;
months 10-12 at $10,630.67)
Year 2: $131,470 (8.76 x 15,008)
Year 3 $135,222 (9.01 x 15,008)
Year 4: $139,274 (9.28 x 15,008)
Year 5: $143,476 (9.56 x 15,008)
Year 6: $147,829 (9.85 x 15,008)
Year 7: $152,331 (10.15 x 15,008)
Year 8; $156,834 (10.45 x 15,008)
Year 9: $161,637 (10.77 x 15,008)
Year 10: $165,589 (11.10 x 15,008)
All rental payments shall be made in advance, without notice or
demand, and
without set-off, in monthly installments on the first day of each
calendar
month during the term of this lease (starting with the
Commencement Date) (the
"Base Rent"). Rent for any partial month from the Commencement
Date until the
first day of the next succeeding calendar month (pro rated on a
per diem basis)
and the rent for the first full calendar month of this Lease shall
be paid upon
the signing of this Lease.
(b) In addition to the Base Rent, Tenant shall pay to
Landlord, as additional rent, any and all costs or other sums
which
Tenant may be required to pay to Landlord under the provisions of
Sections 7, 11, 15 and any other provision of this Lease. All rent
shall be paid to Landlord at the address given in Section 31.
6. Late Charges. Notwithstanding any rights of Tenant to cure a
default
hereunder, any payment of Base Rent or additional rent due
hereunder and not
paid within ten (10) days of the due date thereof shall incur a
late payment
charge of five percent (5%) of such payment. In addition, all
payments due to
the Landlord which are made more than thirty (30) days late shall
bear interest
at the effective rate of fifteen percent (15%) per annum,
compounded on a
monthly basis.
7. Taxes, Other Impositions and Management Costs. As additional
monthly rental
payments, throughout the term of this Lease, Tenant shall pay all
costs set
forth below. The costs shall be apportioned for the first and last
calendar
years covered by the term hereof. All payments of costs shall be
made within
thirty (30) days of Landlord's written request, provided such
request is
accompanied by a reasonable itemization of such costs, and
Landlord delivers to
Tenant within ten (10) days such bills, invoices or other records
as Tenant may
reasonably request in writing within ten (l0) days of Landlord's
original
request for payment to verify the accuracy of such costs. Except
as otherwise
specifically provided herein above, or in other provisions of this
Lease,
Landlord shall pay all taxes, impositions, management costs and
other costs
relating to the Premises.
(a) Taxes. Tenant shall pay the Landlord all levies, taxes,
assessments,
water and sewer rents and charges, liens, charges for public
utilities and all
other charges, imposts or burdens of whatsoever kind and nature,
which at any
time during the term of this lease may be assessed or imposed by
any federal,
state or municipal government or public authority, or under any
law, ordinance
or regulation thereof or pursuant to any recorded covenants or
agreements (all
of which are hereinafter referred to as "Impositions"), upon or
with respect to
the Premises, any improvements made thereto, or this Lease.
Additionally,
Tenant shall pay a proportionate share, as defined in section 30
of any
Imposition which is not imposed upon the Premises as a separate
entity but
which is imposed upon the Building or the Complex or upon the
appurtenances,
leases, rents, transactions or documents relating to the Building
or the
Complex. Impositions shall not include any levy in tax
specifically attributed
by the taxing authority to improvements to the Building or Complex
for another
tenant.
(b) Operating Costs: Attached hereto as Exhibit "D" is a non-
exclusive list
of the management and other services provided by Landlord to the
Tenant
(collectively with all similar charges the "Operating Costs").
Tenant shall pay
its Proportionate Share of the Operating Costs to the Landlord for
each year of
the lease. Notwithstanding anything else in this Lease to the
contrary, the
following shall not be included in determining the Landlord's
Operating Costs:
(i) except as set forth in (x) below, any payments (such as
salaries or fees)
to or expenses charged by the Landlord's executive personnel or
partners;
(ii) costs for items that, by generally accepted accounting
principles, should
be capitalized (such as heating, ventilating, and HVAC
replacement) unless such
costs reduce the Operating Costs of the Building;
(iii) depreciation or interest (unless it is related to an
allowable capital
item);
(iv) ground rent;
(v) taxes on the Landlord's business (such as income, excess
profits,
franchise, capital stock, estate, and inheritance taxes);
(vi) leasing commissions and other costs associated with the
leasing of space
or the sale or potential sale of Building or Complex, advertising
expenses,
tenant improvements, free rent, moving expenses, etc.);
(vii) legal fees incurred by Landlord in leasing additional space
in the
complex, except that Tenant shall remain obligated to pay such
legal fees
provided for elsewhere in this Lease;
(viii) expenses payable directly by a tenant for any reason
(such as
excessive utility use), insurer or other third party, provided
same is actually
paid by such party;
(ix) costs for improving any tenant's space or depreciation or
amortization of
such improvements;
(x) management fees in excess of 5% of the gross rents for the
Complex;
(xi) employees' salaries or benefits other than for personnel
supporting
building systems or delivering building services in the Building
or the
Complex, as the case may be;
(xii) any repair or other work necessitated by condemnation, fire,
or other
casualty;
(xiii) services, benefits, or both, to which Tenant is not
entitled
hereunder, but which are provided to other tenants of the
building;
(xiv) reserves for future expenditures;
(xv) damages paid by Landlord to any tenant or other party unless
caused by
Tenant's acts;
(xvi) expenditures to the extent reimbursed by insurance proceeds
or other
Tenants;
(xvii) fines or penalties imposed on Landlord, unless
incurred as a result
of any actions or omissions of Tenant;
(xviii) the cost of repairs, alterations or replacements
required as a
result of the exercise of Eminent Domain to the extent that
Landlord receives
net condemnation proceeds as a result of such exercise;
(xix) auditing fees, other than those in connection with the
maintenance of the
Complex or Building or in connection with the preparation of
Landlord's
statements for Operating Expenses;
(xx) any appraisal fees incurred in valuing the Building, Complex
or Land,
unless required by Landlord's insurance company.
(c) Insurance: Landlord shall keep the insurance policies
required to be
maintained by the Landlord pursuant to Paragraph 8. Tenant shall
pay to
Landlord its Proportionate Share of the premium cost of such
policies, which
premiums shall be for insurance that Landlord deems reasonable and
appropriate
(the "Premiums").
(d) Monthly Deposits: Notwithstanding the foregoing provisions
of this
Section 7, Landlord shall have the right, at its option, to
require Tenant to
pay to Landlord or to any mortgagee, at the time when the monthly
installment
of Base Rent is payable, an amount equal to one-twelfth (1/12) of
the
anticipated annual Impositions, Operating Costs and Premiums as
estimated by
Landlord. If Landlord elects to have Tenant make such payments,
Tenant also
shall pay to Landlord or to such mortgagee, as the case may be,
the amount by
which the actual costs coming due exceed the monthly payments on
account
thereof previously made by Tenant. So long as the Tenant is not in
default, the
amounts paid by Tenant pursuant to this sub-paragraph (e) shall be
used to pay
the Impositions, the Operating Costs, the Premiums and the
Cleaning Costs, (and
any excess of the payments above the actual costs shall be applied
against next
rental coming due) but such amounts shall not be deemed to be
trust funds and
no interest shall be payable thereon to the Tenant.
8. Insurance.
(a) Fire Insurance. Landlord shall maintain and keep in effect
through the
term of this lease and extension hereof insurance against loss or
damage to the
Building and all other improvements now or hereafter located in
the Complex by
fire and such other casualties as may be included within either
fire and
extended coverage insurance or all risk insurance at replacement
cost (if
available at commercially reasonable rates), rent insurance and
such other
insurance as may reasonably be needed or required by law.
(b) Liability. Tenant, at Tenant's sole cost and expense, shall
maintain and
keep in effect throughout the term of this lease insurance against
liability
for bodily injury (including death) or property damage in or about
the
Premises, under a policy of commercial general liability
insurance, with such
limits as to each as may be reasonably required by Landlord from
time to time
but not less than $1,000,000 for each occurrence for bodily injury
(including
death) and $1,000,000 for each occurrence of property damage and
$3,000,000 in
the aggregate. The policies of commercial general liability
insurance shall
name Landlord and Tenant as the insured parties. Each policy
required by this
paragraph (b) shall provide that it shall not be cancelable
without at least
thirty (30) days prior written notice to Landlord and shall be
issued by an
insurer and in a form satisfactory to Landlord. At least five (5)
days prior to
the Commencement Date and before the commencement of the Extended
Term, as
applicable, a certificate of insurance shall be delivered to
Landlord.
(c) Waiver of Subrogation. Rights under Insurance Policies. Each
of the
parties hereto releases the other, to the extent of the releasing
party's
insurance coverage, from any and all liability for any loss or
damage covered
by such insurance which may be inflicted upon the property of such
party even
if such loss or damage shall be brought about by the fault or
negligence of the
other party, its agents or employees; provided, however, that this
release
shall be effective only with respect to loss or damage occurring
during such
time as the appropriate policy of insurance shall contain a clause
to the
effect that this release shall not affect said policy or the right
of the
insured to recover thereunder. If any policy does not permit such
a waiver, and
if the party to benefit therefrom requests that such a waiver be
obtained, the
other party agrees to obtain an endorsement to its insurance
policies
permitting such waiver of subrogation if it is available. If an
additional
premium is charged for such waiver, the party benefiting
therefrom, if it
desires to have the waiver, agrees to pay to the other the amount
of such
additional premium promptly upon being billed therefor.
(d) Increase of Premiums. Tenant will not do or suffer to be
done, or keep or
suffer to be kept, anything in, upon, or about the Premises, the
Building or
the Complex which will contravene Landlord's policies insuring
against loss or
damage by fire or other hazards or which will prevent Landlord
from procuring
such policies in companies acceptable to Landlord for the
occupancy anticipated
hereunder within the permitted use. If any breach of this
paragraph (d) by
Tenant shall cause the premium for fire or other insurance
covering any or all
of the Premises or the remainder of the Building to be increased
beyond the
amount which would normally have been paid for the occupancy
anticipated
hereunder within the permitted use, Tenant shall pay the entire
amount of such
increase to Landlord, promptly upon demand by Landlord.
9. Tenant's Fixtures. Tenant shall not install in, affix or
attach to the
Premises any fixtures (other than minor installations which do not
affect or
damage the structure or appearance of the Building) without the
prior written
consent of the Landlord, which will not be unreasonably withheld
or
conditioned. If Tenant does not receive a response within ten (10)
business
days, acceptance shall be deemed granted. At the termination of
this lease
Tenant may remove any or all such fixtures installed from time to
time during
the term of this lease which are not part of or affect the
structure of the
Premises or any mechanical installations, walls or floors and
shall remove any
further additions, alterations or fixtures if so directed by
Landlord. Tenant
shall repair and restore any damage or injury to the Premises
caused by the
installation and/or removal of any such fixtures.
10. Signs. Tenant, at its sole cost and expense, shall be
entitled to place
signage on the Building exterior over Tenant's entrance, of a
quality and type
mutually agreeable to Landlord and Tenant, and as allowed by
governmental
regulation.
11. Repairs and Maintenance.
(a) Except as otherwise specifically provided herein, Tenant, at
its sole
cost and expense and throughout the term of this lease and
extensions hereof,
shall keep and maintain the Premises in good order and condition
and shall
promptly make all repairs, replacements and renewals necessary to
keep and
maintain such in good order and condition, normal wear and tear
excepted. All
repairs, replacements and renewals made by Tenant shall utilize
materials and
equipment which are at least equal in quality and usefulness to
those
originally used in constructing the Building and the Premises.
Tenant shall
have no obligation to perform any structural repairs to the
building or any
part thereof or any repairs to, or replacements of, any building
systems
(except as provided below). Landlord shall make all repairs to the
Premises
resulting from the gross negligence or willful misconduct of
Landlord or
Landlord's agents, employees, or contractors.
(b) Landlord, throughout the term and extensions hereof and at
Landlord's
sole cost and expense, shall make all necessary repairs to the
footings and
foundations and the structural steel columns and girders forming a
part of the
Premises and the roof the walls and the exterior parts of the
Premises and the
Building. Provided, however, that Tenant shall pay the cost of
repairs to the
walls and exterior portions of the Premises and the Building and
for the repair
and/or replacement of any damage which arises out of or is caused
by Tenant's
use, manner of use or occupancy of the Premises, or by Tenant's
installation in
or upon the Premises of any item or by any act or omission of
Tenant or any
employee, agent, contractor or invitee of Tenant. In addition,
Landlord shall
make all repairs to the Premises resulting from the gross
negligence or
intentional act of Landlord or Landlord's agents, employees,
contractors or
invitees.
(c) Landlord, throughout the term of this lease and extensions
hereof, shall
make all necessary repairs to the utility lines and equipment and
to any
driveways, sidewalks, curbs, loading, parking and landscaped
areas, and other
exterior improvements in the Complex. Tenant shall pay its
Proportionate Share
of the cost of all repairs specified in this paragraph (c) as
additional rent,
upon being billed by Landlord, except, Tenant shall not be
responsible for
repairs made necessary because of any abuse by or any negligent
acts or
omissions of (i) any other tenant of the Complex or such tenant's
employees,
agents, contractors, or invitees, to the extent same are paid for
by such
tenant, or (ii) the Landlord or Landlord's agents, employees,
contractors or
invitees and except for any such repairs caused by Tenant, its
employees,
agents, contractors or invitees which shall be paid entirely (and
not just the
Proportionate Share) of such repairs.
(d) During the term of this lease, the Tenant shall maintain the
HVAC unit or
units serving the Premises in good condition and repair at its
sole cost and
expense. Tenant agrees to keep in force a service contract on the
HVAC unit(s)
with a contractor mutually selected by the Landlord and Tenant.
The HVAC
unit(s) shall be subject to Tenant's control. Landlord warrants
and represents
that the HVAC unit will be in good condition and working order on
the
Commencement Date.
(e) Tenant shall provide, at its expense, janitorial and
cleaning services
for the Premises. Landlord shall keep and maintain all common
areas of the
Complex in a clean and orderly condition, free of accumulation of
dirt and
rubbish, shall provide dumpster(s) and trash removal, shall keep
and maintain
all landscaped areas in a neat and orderly condition, and shall
perform all
necessary snow removal to clear sidewalks, parking areas and
access ways, which
serve more than one tenant of the Building. The cost of the
Increases of all
such cleaning services shall be paid by Tenant as provided in
Paragraph 7.
(f) Landlord agrees to make all repairs required hereunder as
quickly as
possible under the circumstances (provided Landlord receives
notice of required
repairs) and to use reasonable efforts to avoid adversely
interfering with
Tenant's business. Except in an emergency, Landlord shall give
advance notice
prior to entering the Premises and shall comply with Tenant's
reasonable
security measures. Landlord shall not be liable for inconvenience,
annoyance,
disturbance or other damage to Tenant (except for damage caused by
the
Landlord, its agents, or contractors) by reason of making any
repair or by
bringing or storing materials, supplies, tools and equipment in
the Premises
during the performance of any work, and the obligations of Tenant
under this
lease shall not thereby be affected in any matter whatsoever.
(g) Tenant shall not use or permit the use of any portion of the
Complex for
outdoor storage unless otherwise permitted.
(h) Tenant may install at its sole cost and expense a satellite
dish on the
roof of the Building at a location mutually agreeable to the
Landlord and
Tenant, so long as (i) all applicable governmental licenses and
approvals are
obtained; (ii) the satellite dish is not prominently visible and
is shielded to
Landlord's satisfaction; (iii) the structural integrity of the
Building,
including, but not limited to the roof, is not damaged in any way;
(iv)
existing Building warranties are not affected adversely or
diminished in any
way; and (v) the installation is performed under Landlord's
supervision, if
Landlord so elects.
12. Alterations and Additions by Tenant.
(a) Tenant shall not make or permit to be made any alterations,
improvements
or additions to the Premises (except ones deemed to be minor in
nature), the
Building or the Complex without on each occasion first presenting
to Landlord
plans and specifications therefor and obtaining Landlord's prior
written
consent thereto which consent shall not be unreasonably withheld
or conditioned
for alterations.
(b) All improvements, repairs, alterations and additions and all
other
property installed before the Commencement Date, except the clean
room, shall
remain upon the Premises at the expiration or sooner termination
of this Lease
and shall remain (or become) the property of Landlord without
payment therefor
by Landlord, and Tenant shall have neither the right nor the
obligation to
remove same, except for any property installed by Tenant pursuant
to Section
2(d) above.
(c) To the extent Landlord approves any alteration, improvement
or addition
to the Premises following the execution of this Lease, Tenant
shall have the
right, but not the obligation, to remove same at or before the end
of the term;
and provided Tenant shall repair any damage resulting from the
installation or
removal therefrom prior to the expiration of the term; provided,
however, that
Tenant shall have the obligation to remove such fixtures,
installations or
improvements as shall have been made with the consent of Landlord,
if Landlord
shall have conditioned its consent upon such removal. The removal
(including
the cost of any repair to the Premises or the Complex) to be at
Tenant's sole
cost and expense.
(d) To the extent Tenant makes any alteration, addition or
improvement to any
portion of the Premises or the Complex (except ones deemed to be
minor in
nature) without obtaining the prior written consent of the
Landlord, Tenant
shall remove same at Tenant's cost and expense prior to the
termination of the
term of this Lease (including any repairs required on the Premises
or the
Complex) unless Landlord shall notify Tenant prior to such removal
that such
improvement shall remain on the Premises at the termination of
this Lease (in
the Landlord's sole discretion).
13. Landlord's Right of Entry. Tenant shall permit Landlord and
the
authorized representatives of Landlord and of any mortgagee or any
prospective
mortgagee, prospective purchaser or, during the last six (6)
months of any term
or extended term hereof prospective tenant, to enter the Premises
at all
reasonable times with reasonable notice (at least twenty-four (24)
hours)
except in case of an emergency for the purpose of (i) inspecting
them or (ii)
making any necessary repairs thereto or to the Building or the
Complex and
performing any work therein.
14. Utility charges and Allowances. Tenant shall be solely
responsible for
and shall pay promptly all rents, costs and charges for water
service, sewer
service, gas, electricity, light, heat steam, power, telephone and
other
communication services, and any and all other utility or service
rendered or
supplied upon or in connection with the Premises or used or
consumed in or
servicing the Premises and all other costs and expenses involved
in the care,
management and use of the Premises throughout the term of this
lease, and
Tenant shall indemnify Landlord and save Landlord harmless against
any costs,
liability or damages on account of such expenses which should have
been paid by
the Tenant hereunder. All such utilities shall be provided by
separate meter to
the Premises and same shall be paid by Tenant. To the best of
Landlord's
knowledge, the meters are in good working condition and repair at
the time of
execution of this Lease.
15. Governmental Regulations. Throughout the term of this lease
and at its
sole cost and expense, Tenant shall comply with all laws,
including but not
limited to the Americans with Disabilities Act, ordinances,
notices, order,
rules, regulations and requirements of all federal state and
municipal
governments and all departments, commissions, boards and officers
thereof, and
with all notices, orders, rules and regulations of the National
Board of Fire
Underwriters or any other body now or hereafter constituted
exercising similar
functions, relating to the Premises only and otherwise the
responsibility of
the Tenant pursuant to this Lease, or to the use or manner of use
of the
Premises.
16. Mechanics' Liens. Each party shall promptly pay any
contractors and
materialmen who or which may supply labor, work or materials at
the Premises,
the Building or the Complex so as to minimize the possibility of a
lien
attaching to the Premises, the Building or the Complex. Each party
shall take
all steps permitted by law in order to avoid the imposition of any
mechanic's,
laborer's or materialman's lien upon the Premises, the Building or
the Complex.
Should notice of any such lien be filed, then (i) the party
receiving such
notice shall promptly notify the other party of such notice and
(ii) the Tenant
shall bond against or discharge the same within fifteen (15) days
of knowledge
of the existence of such lien or claim regardless of the validity
of the claim.
Nothing in this lease is intended to authorize Tenant to do or
cause any work
or labor to be done, or any materials to be supplied for the
account of
Landlord, all of the same to be solely for Tenant's account and at
Tenant's
risk and expense. This paragraph shall not be construed to
authorize Tenant to
make any additions, alterations or improvements to the Premises
other than as
expressly provided herein.
17. Damage by Fire or Other Casualty.
(a) If the Premises shall be damaged or destroyed by fire or
other casualty,
Tenant shall promptly notify Landlord, and Landlord, subject to
the conditions
hereafter set forth in this Section 17, shall repair, rebuild or
replace such
damage and restore the Premises to substantially the same
condition in which
they were immediately prior to such damage or destruction. The
work shall be
commenced promptly and completed with due diligence, taking into
account the
time required by Landlord to effect a settlement with, and procure
insurance
proceeds from, the insurer.
(b) If in Landlord's reasonable opinion the insurance proceeds
will not be
adequate to complete such restoration, or if the Lease is in the
final year of
any term and Tenant has not unequivocally and irrevocably elected
to continue
this Lease for any additional term, Landlord shall have the right
to terminate
this lease and all the unaccrued obligations of the parties hereto
by sending a
written notice of such termination to Tenant, the notice to
specify a
termination date no less than fifteen (15) days after its
transmission.
Landlord's obligation or election to restore the Premises under
this Section
shall not include the repairs, restoration or replacement of the
fixtures,
improvements, alterations, furniture or any other property owned,
installed or
made by Tenant. Further, Landlord shall have the right to
terminate this lease
on the occurrence of any substantial damage (25% or more) to the
Premises
and/or the remainder of the Building by giving express, written
notice thereof
to the Tenant within 30 days of the occurrence of such substantial
damage. In
the event of the failure of Landlord to terminate this Lease in
the time
provided above, Landlord's right to terminate as a result of such
casualty
should be waived.
(c) If twenty five (25%) percent or more of the Premises are
rendered
unusable by fire or other casualty for their Permitted Use and if
either (i)
the Landlord fails to commence the repair of the Premises within
sixty (60)
days after the casualty and thereafter fails to complete such
repairs within
six (6) months of the date of fire or other casualty subject to
delays beyond
the reasonable control of Landlord or Landlord's contractors,
subcontractors or
suppliers, or (ii) the fire or other casualty occurs during the
last twelve
(12) months of the term of this Lease (which term has not been
unequivocally or
irrevocably extended), then Tenant may elect to terminate this
lease within ten
(10) days after the occurrence of the event giving rise to such
right of
termination. In the event such notice is so given, this lease
shall terminate
as of the date of such notice, any rent owing prior to the
termination date
shall be paid and any rent paid with respect to any period
following such
termination date shall be promptly refunded to Tenant, and the
Tenant shall
quit and surrender the demised premises as if such termination
date were the
expiration date of the term of this Lease. In the event of the
failure of
tenant to timely provide the foregoing notice, Tenant's right to
terminate as a
result of such casualty shall be waived.
(d) In the event of the termination of this Lease as hereinabove
provided,
all rent shall be adjusted between the parties hereto as of the
casualty. So
long as this Lease is not terminated as above set forth and except
as provided
in Section 20, Tenant shall continue to pay the adjusted Base Rent
and all
adjusted additional rent hereunder.
18. Indemnification of Landlord. Tenant will indemnify Landlord
and save
Landlord harmless from and against any and all claims, actions,
damages,
liability and expenses in connection with (i) loss of life,
personal injury and
damage to property caused to any person in or about the Premises,
(ii) arising
from or out of the occupancy or use by Tenant of the Premises or
any part
thereof, (iii) occasioned wholly or in part by any act or omission
of Tenant,
its agents, contractors, employees, licensees or invitees, (iv)
the failure by
Tenant to adequately protect or secure any controlled substances
located on the
Premises, (v) any environmental clean up required as a result of
any substance
brought onto the Premises by Tenant, or (vi) any other obligation
of Tenant
under the Lease. In case any such claim, action or proceeding is
brought
against Landlord, Tenant upon notice from Landlord and at Tenant's
sole cost
and expense shall resist or defend such claim, action or
proceeding or shall
cause it to be resisted or defended by an insurer. Notwithstanding
anything to
the contrary herein provided, Tenant's indemnification of Landlord
under this
section shall not apply to any negligent or intentional acts or
omissions of
Landlord, its employees, agents, contractors or invitees and
Landlord will
indemnify and save Tenant harmless therefrom.
19. Condemnation.
(a) Termination. If all or part of the Premises is taken or
condemned for a
public or quasi-public use (a sale in lieu of condemnation to be
deemed a
taking or condemnation), this Lease shall as to the part so taken
terminate as
of the date title to the condemned real estate vests in the
condemnor and the
rent shall abate in the same proportion as the floor area of the
part taken
bears to the floor area of all of the Premises or shall cease (if
the entire
Premises be so taken).
(b) Notwithstanding the foregoing, either party shall have the
right to
terminate this Lease on the occurrence of any such substantial
(25% or more)
taking or condemnation of any of the Premises by giving express,
written notice
thereof to the other within forty-five (45) days thereafter. In
such event, all
rent shall be adjusted between the parties hereto as of the date
of such taking
or condemnation.
(c) Award. In the event this lease is terminated pursuant to the
provisions
of this Section, Tenant shall have the right to make a claim,
against the
condemnor for loss of business and for its removal expenses,
business
dislocation damages and moving expenses, trade fixtures, equipment
and Tenant's
other personal property, provided and to the extent, however, that
such claims
or payments do not reduce the sums otherwise payable by the
condemnor to
Landlord. Tenant hereby assigns any and all claims it may have
against the
condemnor except as expressly provided herein.
20. Abatement of Rent. Except as otherwise expressly provided,
damage to or
destruction of all or any portion of the Premises by fire or by
any other cause
shall neither terminate this lease nor entitle Tenant to surrender
the
Premises. If all or any portion of the Premises is substantially
unusable for
the Permitted Use, Base Rent, additional rent and other sums
payable hereunder
by Tenant shall abate as to that portion of the Premises which is
substantially
unusable for the Permitted Use, for so long as the Premises remain
substantially unusable.
21. Quiet Enjoyment. Tenant, upon paying the rent, and observing
and keeping
all covenants, agreements and conditions of this lease on its part
to be kept,
shall quietly have and enjoy the Premises during the term of this
lease without
hindrance or molestation by anyone claiming by or through
Landlord, including
prior tenants, subject, however, to the exceptions, reservations
and conditions
of this lease.
22. Assignment and Subletting.
(a) Except as provided herein, Tenant shall not assign,
mortgage, pledge or
encumber this lease, or sublet the whole or any part of the
Premises except
with the prior written consent of Landlord which consent may not
be
unreasonably withheld or conditioned. The assignee, subtenants,
etc. shall use
the Premises for the same purposes as provided under Paragraph 4,
or such other
purposes as Landlord may approve, which approval shall not be
unreasonably
withheld or conditioned. It shall not be unreasonable for Landlord
to withhold
its approval based, among other things, on the tenant mix in the
Complex or the
terms of other tenants' leases. This prohibition against assigning
or
subletting shall be construed to include a prohibition against any
assignment
or subletting by operation of law. In the event of any assignment
of this lease
made with or without Landlord's consent, Tenant, nevertheless,
shall (unless
otherwise agreed in writing) remain liable for the performance of
all of the
terms, conditions and covenants of this lease and shall require
any assignee to
execute and deliver to Landlord an assumption of liability
agreement in form
satisfactory to Landlord, including an assumption by the assignee
of all of the
obligations of Tenant and the assignee's ratification of and
agreement to be
bound by all the provisions of this Lease. Any profit which may be
realized as
a result of any subletting of the Premises or assignment of this
lease, whether
consented to or not by Landlord, shall be divided equally between
the Landlord
and the Tenant after Tenant "nets-out" all costs and expenses
associated with
the marketing and subletting/assignment of the Premises. Tenant
shall document
to Landlord all costs incurred and the evidence must be
satisfactory to
Landlord in its reasonable opinion. In all events, Tenant shall
continue to be
liable for all obligations (including without limitation all Base
Rent and
additional rent) accruing hereunder, whether or not any assignment
or
subletting is permitted hereunder. Without limiting the generality
of the
foregoing provisions of this Section, Landlord shall be entitled
to condition
its consent to any such assignment or subletting upon Tenant's
having provided
to Landlord (i) a true copy or duplicate original of the agreement
by which
such assignment or subletting is accomplished; (ii) the name of
the proposed
assignee or subtenant; (iii) a written statement by Tenant as to
the proposed
assignee or subtenant's intended use of the Premises; and (iv) a
current
financial statement of the proposed assignee or subtenant, in form
and
substance satisfactory to Landlord.
(b) Notwithstanding subparagraph 22(a) above, no consent by
Landlord shall be
required to an assignment of this Lease and/or a subletting of the
Premises (i)
to an affiliate of the Tenant (having a community of ownership
with Tenant of
at least seventy five percent [75%]), or (ii) in connection with a
merger
between Tenant and another entity, provided however, that the
surviving entity
shall have a net worth at least equal to the net worth of Tenant
on the date of
this Lease. Except as otherwise agreed by the parties, in the
event of an
assignment or sublet pursuant to (i), Tenant and any guarantor,
and in the
event of a permitted merger under (ii), any guarantor, shall
continue to remain
liable for all obligations under this Lease.
23. Subordination and Non-Disturbance.
(a) This lease and Tenant's rights hereunder shall be subject
and subordinate
at all times in lien and priority to any first mortgages and/or
other mortgages
or financing arrangements now or hereafter placed upon or
affecting the
Premises or the Complex, and to all renewals, modifications,
consolidations and
extensions thereof, without the necessity of any further
instrument or act on
the part of Tenant. Tenant shall execute and deliver upon demand
any further
instrument or instruments of attornment that may be desired by any
mortgagee or
proposed mortgagee or by any other person. If Tenant has not
executed the
instrument(s) within five (5) business days, then Tenant hereby
appoints
Landlord the attorney-in-fact of Tenant irrevocably (such power of
attorney
being coupled with an interest), to execute and deliver any such
instrument or
instruments for and in the name of Tenant. Notwithstanding the
foregoing, any
mortgagee may at any time subordinate its mortgage to this lease,
without
Tenant's consent, by giving notice in writing to Tenant, and
thereupon this
lease shall be deemed prior to such mortgage without regard to
their respective
dates of execution and delivery and in that event such mortgagee
shall have the
same rights with respect to this lease as though this lease had
been executed
prior to the execution and delivery of the mortgage and had been
assigned to
such mortgagee.
(b) The Tenant agrees that if any mortgagee shall succeed to the
interest of
the Landlord under the Lease, the mortgagee shall not be (i)
liable for any act
or omission of any prior Landlord under the Lease; or (ii) subject
to any
offsets or defenses which Tenant might have against any prior
landlord.
(c) The Landlord, at its expense, shall exercise its best
efforts to secure
from the current mortgagee, and from any subsequent mortgagee, an
agreement for
the benefit of the Tenant which shall provide that so long as the
Tenant is not
in default under the Lease and so long as the Tenant continues to
perform its
obligations thereunder, the Lease shall not be terminated by such
mortgagee nor
shall the use, possession or enjoyment of the Premise by the
Tenant be
disturbed or interfered with, nor shall the leasehold estate
granted by this
Lease be affected in any other manner, in any foreclosure or other
action or
proceeding constituted to take possession of the Premises or the
Complex.
(d) Tenant agrees that if the interest of the Landlord in the
Premises shall
be transferred to or owned by a mortgagee by reason of foreclosure
or other
proceedings brought by such mortgagee, or by any other manner, the
Tenant shall
attorn to the mortgagee (or its assigns), as its landlord and be
bound to the
mortgagee (or its assigns), under all of the terms, covenants and
conditions of
the Lease for the balance of the term remaining and any extensions
or renewals
thereof, with the same force and effect as if such mortgagee (or
its assigns)
were the landlord under the Lease, including, without limitation,
the
obligation to pay all rentals due under the Lease to such
mortgagee (or its
assigns). Such attornment shall be effective and self-operative
without the
execution of any further instruments on the part of the parties
hereto as soon
as the mortgagee (or its assigns) succeeds to the interest of the
Landlord in
the Leased Premises. Tenant may rely on any reasonable notice of
such transfer
without further inquiry.
24. Memorandum of Lease; Certificates of Lease.
(a) Tenant, at any time and from time to time and within five
(5) business
days after Landlord's written request, shall execute, acknowledge
and deliver
to Landlord a short form or memorandum of this lease for recording
purposes,
which recording shall be at Landlord's expense.
(b) Tenant, at any time and from time to time and within five
(5) business
days after Landlord's written request, shall execute, acknowledge
and deliver a
written instrument in recordable form stating any facts and
certifying any
conditions with regard to the Premises or this lease, reasonably
requested or
required by any mortgagee, prospective mortgagee, prospective
assignee or
purchaser of the Premises or any interest therein.
(c) Landlord, at any time, and from time to time upon at least
ten (10) days
prior written request by Tenant shall execute, acknowledge and
deliver to
Tenant, and/or to any other person, firm or corporation specified
by Tenant, a
statement certifying that this lease is unmodified and in full
force and effect
(or, if there have been modifications, that the same is in full
force and
effect as modified, and stating the modifications), stating the
dates to which
the rent and additional rent have been paid, and stating whether
or not, to its
knowledge, there exists any default by Tenant under this Lease,
and if so,
specifying such default. The foregoing obligation of the Landlord
shall apply
only once in each calendar year of this Lease.
25. Curing Tenant's Defaults. If Tenant shall be in default in
the
performance of any of its obligations hereunder after notice of
default and
expiration of the applicable cure period, Landlord (without any
obligation to
do so), in addition to any other rights it may have in law or
equity, and after
written notice to Tenant, except in the case of emergency, may
elect to cure
any such default on behalf of Tenant, and Tenant shall reimburse
Landlord upon
demand for any reasonable sums paid or costs incurred by Landlord
in curing
such default, including interest, the rate of fifteen percent
(15%) per annum,
from the respective dates of Landlord's making the payments and
incurring the
costs, which sums and costs together with interest thereon shall
be deemed
additional rent payable hereunder and shall be payable upon
demand.
26. Surrender. At the expiration or earlier termination of the
term hereof,
Tenant shall promptly yield up, clean and neat, order and repair
in which they
are required to be kept throughout the term hereof, the Premises
and all
improvements, alterations and additions thereto (except as
permitted to be
removed by Tenant or required to be removed by Landlord as
provided herein),
and all fixtures and equipment servicing the Building, ordinary
wear and tear
or damage by fire or other casualty excepted.
27. Defaults; Remedies.
(a) If Tenant does not pay in full within ten (10) days of
written notice any
and all installments of Base Rent; or
(b) If Tenant does not pay in full within ten (10) days of
written notice any
payment of additional rent or any other charges or payments
whether or not
herein included as rent, or
(c) If Tenant violates or fails to perform or otherwise breaches
any
agreement, covenant or condition herein contained and does not
cure within 15
days after written notice from Landlord or within a reasonable
period after
such notice if Tenant demonstrates to Landlord's satisfaction that
cure cannot
reasonably be completed within such period and Tenant is
diligently proceeding
to cure; or
(d) If Tenant becomes insolvent or bankrupt in any sense or
makes an
assignment for the benefit of creditors of offers a composition or
settlement
to creditors, or if a petition in bankruptcy or for reorganization
or for an
arrangement with creditors under any federal or state act is filed
by or
against Tenant, or a bill in equity or other proceeding for the
appointment of
a receiver, trustee, liquidator, custodian, conservator or similar
official for
any of Tenant's assets, or if any of the real or personal property
of Tenant
shall be levied upon by any sheriff, marshal or constable and does
not cure
within 30 days after written notice from landlord; or
(e) If Tenant transfers assets in excess of a sixty percent
(60%) of its
assets, such transfer shall constitute a default hereunder unless,
prior to
such transfer, the Tenant shall cause all recipients of its assets
to execute a
guaranty agreement in form acceptable to the Landlord, obligating
such
transferee (on a primary basis with the Tenant and all other
obligors) to pay
all obligations of Tenant arising under this lease;
(f) Failure to make payments under the Promissory Note; which
Promissory Note
is described in Paragraph 47 below and which is attached hereto as
Exhibit I,
after any applicable cure and grace period.
Then, in any such event, Landlord shall have the following rights:
1. To re-enter the Premises and repossess and enjoy the
Premises, together
with all additions, alterations and improvements and to remove all
persons and
all or any property therefrom. Upon recovering possession of the
Premises by
reason or based upon or arising out of a default on the part of
Tenant,
Landlord may, at Landlord's option, either terminate this lease or
make such
alterations and repairs as may be necessary in order to relet the
Premises and
relet the Premises or any part of parts thereof, either in
Landlord's name or
otherwise, for a term or terms which may, at Landlord's option, be
less than or
exceed the period which would otherwise have constituted the
balance of the
term of this lease and at such rent or rents and upon such other
terms and
conditions as Landlord may decide. If such rentals received from
such reletting
during any month shall be less than that to be paid during that
month by Tenant
hereunder, Tenant shall pay any deficiency to Landlord. Such
deficiency shall
be calculated and paid monthly.
2. To terminate this lease and the term hereby created without
any right on
the part of Tenant to waive the forfeiture by payment of any sum
due or by
other performance of any condition, term or covenant broken.
Whereupon Landlord
shall be entitled to recover, in addition to any and all sums and
damages for
violation of Tenant's obligations hereunder in existence at the
time of such
termination, damages for Tenant's default in an amount equal to
the amount of
the rent reserved for the balance of the term of this lease, as
well as all
other charges, payments, costs and expenses herein agreed to be
paid by Tenant,
all of which amount shall be immediately due and payable from
Tenant to
Landlord. Landlord shall not be entitled to exercise its rights
under this
subparagraph 2. until the earlier of the following to occur
(i) the first default under (d) or (e) above.
(ii) the first default under (a), (b) or (c) above during the
term of this
Lease not cured by Tenant within thirty (30) days of any required
notice.
(iii) in any event, or the third default under (b) or (c) above
during the term
of this Lease.
28. Rights and Remedies Cumulative. No right or remedy herein
conferred upon
or reserved to Landlord or Tenant is intended to be exclusive of
any other
right or remedy herein or by law provided but each shall be
cumulative and in
addition to every other right or remedy given herein or now or
hereafter
existing at law or in equity or by statute.
29. Nonwaiver. No waiver by either party of any breach by the
other party of
any of the other party's obligations, agreements or covenants
herein shall be a
waiver of any subsequent breach or of any obligation, agreement or
covenant,
nor shall any forbearance by either party of any rights and
remedies with
respect to such or any subsequent breach.
30. Definitions.
(a) Definition of "Landlord". The word "Landlord" is used herein
to include
the Landlord named above as well as its successors and assigns.
Any such
person, whether or not named herein, shall have no liability
hereunder after he
or it ceases to hold title to the Premises, Building, Complex,
land and lot,
except for obligations which may have theretofore accrued provided
Tenant shall
have been given thirty (30) days prior written notice of such
transfer. Neither
Landlord nor any principal of Landlord, whether disclosed or
undisclosed, shall
have any personal liability with respect to any of the provisions
of this lease
of the Premises, and if Landlord is in breach or default with
respect to
Landlord's obligations under this lease or otherwise, Tenant shall
look solely
to the equity of Landlord in the Premises for the satisfaction of
Tenant's
remedies.
(b) Definition of "Tenant". The word "Tenant" is used herein to
include the
Tenant named above as well as its successors and assigns. However,
no rights,
privileges or powers shall inure to the benefit of any assignee of
Tenant
immediate or remote, unless the assignment to such assignee is
permitted
hereunder or has been approved in writing by Landlord.
(c) Definition of "mortgage" and "mortgagee". The word
"mortgage" is used
herein to include any lien or encumbrance on the Premises, the
Complex or the
Building, and improvements thereon or on any part of or interest
in or
appurtenance to any of the foregoing including without limitation
any ground
rent or ground lease if Landlord's interest is or becomes a
leasehold estate.
The word "mortgagee" is used herein to include the holder of any
mortgage,
including any ground lessor if Landlord's interest is or becomes a
leasehold
estate. Wherever any right is given to a mortgagee, that right may
be exercised
on behalf of such mortgagee by any representative or servicing
agent of any
such mortgagee.
(d) Definition of "person". The word "person" is used herein to
include a
natural person or persons, a partnership or partnerships, a
corporation or
corporations, an association or associations and any other form of
business
association or entity.
(e) Definition of "proportionate share". Tenant's "proportionate
share" of
any imposition, cost, charge, rent, expense or payment shall be
calculated,
unless otherwise specified by multiplying the relevant sum by a
fraction, the
numerator of which shall be the Total Square Feet and the
denominator of which
shall be the floor area of the Building, or the Complex, as the
case may be.
For the purposes of this paragraph, it is stipulated that the
floor area of the
Premises is 15,008 square feet for the entire term of this Lease
(subject to
adjustment as set forth herein) and the Tenant's proportionate
share of the
Building equals 25.97% and the Tenant's proportionate share of the
Complex
equals 10.32%. Proportionate share is fixed and does not change
with respect to
any changes in occupancy at the Building or the Complex.
31. Notices. All notices, demands, requests, consents,
certificates and
waivers required or permitted hereunder from either party to the
other shall be
in writing and sent by United States certified mail, return
receipt requested,
postage prepaid. Notices to the Tenant shall be addressed to TSI
TelSys, Inc.,
a Maryland corporation, 4407-A Forbes Boulevard, Lanham, Maryland
20706,
Attention: Bruce Montgomery, with a copy to Gary L. Bohlke,
Esquire, Semmes,
Bowen & Semmes, 250 W. Pratt Street, Baltimore, Maryland 21201,
and after the
Commencement Date shall additionally be sent to the Premises.
Notices to
Landlord shall be addressed to Landlord c/o Beco Associates, 13873
Park Center
Road, Suite 153, Herndon, Virginia 22071, attention Jeffrey L.
Cohen with a
carbon copy to Carole S. Gould, Esquire, Levin & Gann, P.A., 2
Hopkins Plaza,
9th Floor, Baltimore, Maryland 21201. Either party may at any
time, in the
manner set forth for giving notices to the other, set forth a
different address
to which notices and/or rent to it shall be sent.
32. Entire Agreement: Interpretation. This lease represents the
entire
agreement between the parties hereto and there are no collateral
or oral
agreements or understandings between Landlord and Tenant with
respect to the
Premises or the Complex. No rights, easements or licenses are
acquired in the
Building, the Complex or any land adjacent to the Complex by
Tenant by
implication or otherwise except as expressly set forth in the
provisions of
this lease. This lease shall not be modified in any manner except
by an
instrument in writing executed by the parties. The masculine (or
neuter)
pronoun, singular number shall include the masculine, feminine and
neuter
genders and the singular and plural number.
33. Captions. The captions in this Lease are for convenience
only and are not
a part of the lease and do not in any way define, limit, describe
or amplify
the terms and provisions of this lease or the scope or intent
thereof.
34. Rules and Regulations. Landlord shall have the right to
prescribe, at its
sole discretion, reasonable rules and regulations (hereinafter
referred to as
"the Rules and Regulations") relating to the Premises or the
Building or the
Complex, and Tenant agrees to abide and cause its employees,
agents and
invitees to comply with said Rules and Regulations. The Rules and
Regulations
are attached hereto as Exhibit G. Notwithstanding anything to the
contrary,
Rules 6, 10 and 11 are not applicable to this Lease.
35. Hours of Operation. During the term of this lease, Tenant
shall be
permitted access to the Building twenty-four (24) hours a day
seven (7) days a
week, including holidays.
36. Option to Renew.
(a) Provided Tenant is not in default under any of the terms,
covenants or
conditions hereof, Tenant shall have the option to renew the term
of this Lease
and any expansions thereof for one additional period of five
years, upon the
same terms, covenants and conditions herein set forth, except that
the Base
Rent per annum for the renewal term shall be at the prevailing
market rate for
comparable space in the Complex. Landlord shall provide evidence
to the Tenant
of the comparable rents.
(b) For Tenant to exercise either renewal option contained
herein, Tenant
shall give Landlord six (6) months written notice prior to the end
of the
current term of Tenant's written intention to renew the term.
(c) In the event Tenant exercises its option for the first
extended term
hereunder, the Landlord, at its sole cost and expense shall
provide the Tenant
with new carpet for the Premises and shall paint the Premises to
the same
quality and standard as the original carpet and painting.
37. Parking. Tenant shall be allowed 3.4 surface parking spaces
for each
1,000 square feet of the Premises or expansion premises, same to
be used on a
non-exclusive basis with the other tenants of the Building and the
Complex.
Tenant shall not use (and shall instruct its employees,
contractors, and
invitees not to use) any parking space marked specifically for the
use of any
other tenant. Landlord shall also provide five (5) spaces in front
of the
Premises marked specifically for the use of the Tenant.
38. First Right to offering. During the term hereof, or any
extended term,
provided there is no uncured default and in the event the adjacent
spaces in
the Building comprised of 6,756 sq. ft. and 5,477 sq. ft.
respectively becomes
available for rent, the Tenant shall have the first right to lease
such
available space in the Building (the "Expansion Space") subject to
the
following terms and conditions:
(a) Landlord shall give notification to Tenant of any Expansion
Space which
is available for lease, which notification need not include any
specific terms
and conditions other than a description of the particular space at
issue.
(b) Tenant shall have ten (10) business days following receipt
of such
written notice to notify Landlord that it will lease that portion
of the
Expansion Space covered by the offer under the terms and
conditions set forth
below. If such offer is not accepted by Tenant by written notice
given to
Landlord within such ten (10) days period, all rights of Tenant to
lease any
portion of the Expansion Space shall be deemed terminated and
Landlord shall
thereafter be free to lease (free of this First Right to Lease)
all or any
portion of the Expansion Space to such party on such terms and
conditions as
Landlord may desire.
(c) If such offer is accepted by Tenant within the ten (10) day
period set
forth above, the following provisions shall apply:
(1) The lease term for the Expansion Space shall be for such
term as is
necessary to make the lease for the Expansion Space coterminous
with the lease
term contained herein.
(2) Tenant also shall have an option to renew the lease of the
Expansion
Space for the same periods as the options provided to Tenant
hereunder.
(3) The rental rate charged on the Expansion Space shall be the
then existing
per square foot rate being charged under this Lease.
(4) Landlord, at Landlord's expense, shall provide the Tenant
with the
initial plans ("test fit") for the build-out of the Expansion
Space. In the
event that Tenant determines within 10 days after the receipt of
the initial
plans, in its reasonable discretion, that the Expansion Space is
not
satisfactory, then Tenant may terminate its offer, without
penalty.
(d) The parties acknowledge that various portions of the
Building are subject
to rights of refusal, options and renewal rights with other
Tenants as set
forth on Exhibit "F" (the "Pre Existing Rights"). Any rights
afforded to other
tenants under such Pre-Existing Rights shall take precedence to
this first
right to lease and Landlord shall not offer such space to Tenant
(and the
failure to take such space by Tenant shall not terminate Tenant's
future
rights) until such Pre-Existing Rights shall terminate, be waived
or shall
otherwise fail to be exercised.
39. Arbitration. Any dispute between the parties hereto relating
to this
Lease shall be adjudicated by arbitration under the rules then
obtaining of the
American Arbitration Association, applying the terms of this
Lease. Venue and
jurisdiction shall be in Maryland on all matters relating to this
Lease.
40. Brokers. The parties acknowledge that the Tenant has engaged
Jones Lang
Wootton USA in cooperation with Scheer Partners, Inc. to locate
the Premises.
Landlord has used Barnes, Morris, Pardoe & Foster as brokers.
Landlord agrees
to pay the commission owed to Jones Lang Wootton USA (which
commission is to be
shared with Scheer Partners, Inc.) and any commission owed to
Barnes, Morris,
Pardoe & Foster. Each party agrees to indemnify the other from any
and all
liability arising from broker commissions relating to this Lease
other than as
set forth above to a maximum amount of the commissions due.
41. Warranties.
(a) Hazardous Substances. Tenant warrants that it shall not
bring on the
Premises any item which constitutes "Hazardous Material" as
defined in Title 7,
Subtitles 1 and 2 of the Environment Article of the Annotated Code
of Maryland
and all regulations thereunder.
(b) Landlord warrants to its knowledge, the Premises do not
contain any toxic
or unlawful substances which may prove harmful to Tenant, its
employees or
invitees.
42. Locks. Tenant, at its expense, may change or add a lock to
the entry way
of the Premises if necessary for security purposes provided a key
is provided
immediately to Landlord.
43. Net Lease. Except for the obligations of Landlord expressly
set forth
herein, this Lease is a "net, net, net lease" and Landlord shall
receive the
minimum annual rent hereinabove provided as net income from the
Premises, not
diminished by any Imposition or any expenses or charges required
to be paid to
maintain and carry the Premises or to continue the ownership of
Landlord, other
than payments under any mortgages now existing or hereafter
created by
Landlord, and Landlord is not and shall not be required to render
any services
of any kind to Tenant except as specifically set forth in this
Lease.
44. Walkway. Landlord, at Landlord's expense, agrees to
construct a concrete
walkway from the 5 reserved spaces in the parking lot in front of
the Premises
to the entrance to the Premises as shown on Exhibit H attached
hereto and made
a part hereof. Landlord agrees to complete the construction of the
walkway no
later than thirty (30) days after the execution of the Lease
unless prior to
commencement of the construction of the walkway, Tenant requests a
delay in
Landlord's performance.
45. Security Deposit. Tenant, simultaneously with the execution
of this
Lease, shall deposit with Landlord the security deposit of
$21,262.00 which sum
shall be held without payment of interest as security for the
performance by
Tenant of its obligations under this Lease. Landlord is authorized
to deposit
those funds in a non-interest-bearing account with security
deposits made by
other tenants of portions of the Complex, and Landlord shall not
be responsible
for the solvency of the depository so long as it is insured by the
Federal
Deposit Insurance Corporation, the Federal Savings and Loan
Insurance
Corporation, or similar insurer. If Tenant shall perform all such
obligations,
the security deposit shall be refunded to Tenant, without
interest, within
thirty (30) days after termination of this Lease. If Tenant shall
default in
any obligation, Landlord shall be entitled to apply any or all of
the security
deposit toward Landlord's damages as determined by Landlord, and
Tenant shall,
within five (5) days after notice thereof, deposit with Landlord
an amount
sufficient to restore the security deposit to its original amount,
which amount
shall constitute Additional Rent under the Lease.
46. Exhibits. The following Exhibits are attached to this Lease
and made a
part hereof:
A Premises
B Legal Description
C Plans (Not Applicable)
D Operating Costs
E Not Applicable
F Pre-Existing Rights
C Rules and Regulations
H Walkway Drawing
I Promissory Note
47. Loan. Landlord agrees to loan Tenant the sum of $125,000 to
be used
solely for the purpose of Making improvements at the Premises.
Tenant agrees to
execute the Promissory Note attached hereto as Exhibit I
simultaneously with
the execution of this Agreement to Lease.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement under seal
the day and year first above written.
ATTEST: TSI TelSys, INC.
By:
ATTEST: BRIT LIMITED PARTNERSHIP,
A Maryland Limited Partnership
BY: BECO MANAGKKENT, INC., agent
For BRIT Limited Partnership
By:
"Landlord"
EXHIBIT "A"
Floor Plan Graphic
EXHIBIT "B"
LEGAL DESCRIPTION OF THE LOT IN
COLUMBIA GATEWAY, HOWARD COUNTY, MARYLAND
All that lot or parcel of ground situate in the 6th Election
District of Howard
County, in the State of Maryland and describe as follows, that is
to say:
BEING KNOWN AND DESIGNATED as Lot M-7, M-8, M-9 and S-12, as shown
on a plat
entitled "Columbia Gateway, Lots S-12 and S-14 and Parcels M-7
through M-9, a
re-subdivision of lot S-9 as shown on Plat No. 9713 and a Re-
subdivision of
Parcel M-6 as shown on Plat No. 9193 and recorded in the Plat
Records of Howard
County, Maryland in Plat M.D.R. 10131.
BEING part of the land which was acquired by Brit Limited
Partnership by Deed
dated June 29, 1992, and recorded among the Land Records of Howard
County,
Maryland.
EXHIBIT "C"
PLANS
Not Applicable
EXHIBIT "D"
OPERATING COSTS
1995 OPERATING BUDGET
PROPERTY: THREE PONDS BUSINESS PARK CONSOLIDATED
RENTABLE SF: 145,778
PREPARED BY: JONATHAN OSEROFF
DATE: JANUARY 1O,1995 - FINAL
ACCOUNT # DESCRIPTION 7100 7090 7080 PROJECTED COST $/SF
% OF TOTAL
50010 OFFICE SALARIES 0 0 0 0
0.000 0.00
51000 MANAGEMENT FEE 25,799 39,479 15,318 80.596
0.553 24.15
52010 TELEPHONE 0 0 0 0
0.000 0.00
52050 DUES/SUBSCRIPTIONS 0 0 0 0
0.000 0.00
52070 RENT (GROUND) 0 0 0 0
0.000 0.00
52080 OFFICE SUPPLIES 29 25 20 74
0.001 0.02
52085 OFFICE EQUIPMENT/ FURNITURE
44 37 30 111
0.001 0.03
52090 OFFICE EQUIPMENT - LEASE
0 0 0 0
0.000 0.00
52100 UNIFORMS 80 68 54 202
0.001 0.06
52300 LEGAL FEES 0 0 0 0
0.000 0.00
52305 LEGAL FEES - COURT COSTS
144 0 0 144
0.001 0.04
52310 ACCOUNTING FEES 200 200 200 600
0.004 0.18
52320 PROFESSIONAL FEES 0 0 0 0
0.000 0.00
52330 CONCIERGE SERVICES 0 0 0 0
0.000 0.00
52350 PAYROLL SERVICES 0 0 0 0
0.000 0.00
52400 DONATIONS 0 0 0 0
0.000 0.00
52700 TENANT AMENITIES 0 0 0 0
0.000 0.00
52800 PROMOTIONS 1,918 2,684 1,698 6,300
0.043 1.89
53010 ELECTRIC 5,056 2,518 0 7,574
0.052 2.27
53020 GAS 0 0 0 0
0.000 0.00
53040 WATER/SEWER 1,578 1,872 1,037 4,487
0.031 1.34
54010 REPAIRS/MAINTENANCE - SUPPLIES
124 105 84 313
0.002 0.09
54011 REPAIRS/MAINTENANCE - DOORS/WINDOWS
75 64 51 190
0.001 0.05
54012 REPAIRS/MAINTENANCE - ELECTRICAL
0 0 0 0
0.000 0.00
54013 REPAIRS/MAINTENANCE - PLUMBING
1,500 0 0 1,500
0.010 0.45
54014 REPAIRS/MAINTENANCE - ROOF
500 500 500 1,500
0.010 0.45
54015 REPAIRS/MAINTENANCE - MATS
0 0 0 0
0.000 0.00
54016 REPAIRS/MAINTENANCE - SPECIAL SERVICES
0 0 0 0
0.000 0.00
54017 REPAIRS/MAINTENANCE - PARKING LOT/GARAGE/WALKS
2,000 0 0 2,000
0.014 0.60
54020 REPAIRS/MAINTENANCE - EQUIPMENT
29 25 20 74
0.001 0.02
54030 REPAIRS/MAINTENANCE - LABOR
0 0 0 0
0.000 0.00
54035 REPAIRS/MAINTENANCE - SIGNAGE
0 0 0 0
0.000 0.00
54040 REPAIRS/MAINTENANCE - OTHER
1,208 500 500 2,208
0.015 0.67
54045 BUILDING ENGINEERS - LABOR
3,900 3,316 2,656 9,872
0.068 0.66
54055 LANDSCAPING - CONTRACT
8,457 7,191 5,760 21,408
0.147 6.41
54065 LANDSCAPING - REPAIRS/ENHANCEMENTS
1,889 8,006 1,946 11,841
0.081 3.55
54075 LANDSCAPING - INTERIOR 0 0 0 0
0.000 0.00
54080 SNOW REMOVAL - CONTRACT
12,103 10,292 8,242 30,638
0.210 9.18
54090 SNOW REMOVAL - SUPPLIES
71 60 48 179
0.001 0.05
54100 JANITORIAL - CONTRACT
7,875 0 0 7,875
0.054 2.36
54110 JANITORIAL - SUPPLIES/OTHER
0 0 0 0
0.000 0.00
54200 TRASH REMOVAL 4,392 0 2,928 7,320
0.050 2.19
54205 TRASH REMOVAL - RECYCLING
0 0 1,017 1,017
0.007 0.30
54210 EXTERMINATION 0 0 0 0
0.000 0.00
54220 SECURITY - CONTRACT 0 0 0 0
0.000 0.00
54230 SECURITY - PAYROLL 0 0 0 0
0.000 0.00
54240 SECURITY - OTHER 559 0 786 1,345
0.009 0.40
54250 LIFE SAFETY 1,015 175 550 1,740
0.012 0.52
54300 ELEVATOR - CONTRACT 0 0 0 0
0.000 0.00
54310 ELEVATOR - OTHER 0 0 0 0
0.000 0.00
54350 HVAC - CONTRACT 0 0 0 0
0.000 0.00
54360 HVAC - OTHER 0 0 0 0
0.000 0.00
54370 HVAC - LABOR 0 0 0 0
0.000 0.00
56010 REAL ESTATE TAXES 48,456 41,206 32,999 122,662
0.841 36.75
56040 OTHER TAXES/LICENSES 0 0 0 0
0.000 0.00
56050 INSURANCE 3,959 3,345 2,679 9,982
0.068 2.99
132,960 121,669 79,124 333,752
2.289 100.00
1995 LEASING EXPENSE BUDGET
ACCOUNT # DESCRIPTION 7100 7090 7080 PROJECTED COST $/SF
52600 LEASING - PROMOTIONS
1,122 954 764 2,840
0.019
52610 LEASING - ADVERTISING 198 168 135 500
0.003
52620 LEASING - MARKETING 0 0 0 0
0.000
52630 LEASING - OVERNIGHT/MESSENGER
24 20 16 60
0.000
52640 LEASING - LEGAL 972 826 662 2,460
0.017
52650 LEASING - SPACE PLANNING
543 462 370 1,374
0.009
52660 LEASING - POSTAGE 0 0 0 0
0.000
2,858 2,430 1,946 7,234
0.050
PROPERY TOTAL 340.986
2.339
1995 OPERATING BUDGET
PROPERTY: THREE PONDS BUSINESS PARK CONSOLIDATED
RENTABLE SF: 145,778
PREPARED BY: JONATHAN OSEROFF
DATE: JANUARY 1O,1995 - FINAL
ACCOUNT # DESCRIPTION 7100
50010 OFFICE SALARIES 0
51000 MANAGEMENT FEE 25,799
52010 TELEPHONE 0
52050 DUES/SUBSCRIPTIONS 0
52070 RENT (GROUND) 0
52080 OFFICE SUPPLIES 29
52085 OFFICE EQUIPMENT/FURNITURE 44
52090 OFFICE EQUIPMENT - LEASE 0
52100 UNIFORMS 80
52300 LEGAL FEES 0
52305 LEGAL FEES - COURT COSTS 144
52310 ACCOUNTING FEES 200
52320 PROFESSIONAL FEES 0
52330 CONCIERGE SERVICES 0
52350 PAYROLL SERIVCES 0
52400 DONATIONS 0
52700 TENANT AMENITIES 0
52800 PROMOTIONS 1,918
53010 ELECTRIC 5,056
53020 GAS 0
53040 WATER/SEWER 1,578
54010 REPAIRS/MAINTENANCE - SUPPLIES 124
54011 REPAIRS/MAINTENANCE - DOORS/WINDOWS 75
54012 REPAIRS/MAINTENANCE - ELECTRICAL 0
54013 REPAIRS/MAINTENANCE - PLUMBING 1,500
54014 REPAIRS/MAINTENANCE - ROOF 500
54015 REPAIRS/MAINTENANCE - MATS 0
54016 REPAIRS/MAINTENANCE - SPECIAL SERVICES 0
54017 REPAIRS/MAINTENANCE - PARKING LOG/GARAGE/WALKS 2,000
54020 REPAIRS/MAINTENANCE - EQUIPMENT 29
54030 REPAIRS/MAINTENANCE - LABOR 0
54035 REPAIRS/MAINTENANCE - SIGNAGE 0
54040 REPAIRS/MAINTENANCE - OTHER 1,208
54045 BUILDING ENGINEERS - LABOR 3,900
54055 LANDSCAPING - CONTRACT 8,457
54065 LANDSCAPING - REPAIRS/ENHANCEMENTS 1,889
54075 LANDSCAPING - INTERIOR 0
54080 SNOW REMOVAL - CONTRACT 12,103
54090 SNOW REMOVAL - SUPPLIES/OTHER 0
54200 TRASH REMOVAL 4,392
54205 TRASH REMOVAL - RECYCLING 0
54210 EXTERMINATION 0
54220 SECURITY - CONTRACT 0
54230 SECURITY - PAYROLL 0
54240 SECURITY - OTHER 559
54250 LIFE SAFETY 1,015
54300 ELEVATOR - CONTRACT 0
54310 ELEVATOR - OTHER 0
54350 HVAC - CONTRACT 0
54360 HVAC - OTHER 0
54370 HVAC - LABOR 0
56010 REAL ESTATE TAXES 48,456
56040 OTHER TAXES/LICENSES 0
56050 INSURANCE 3,959
132,960
1995 LEASING EXPENSE BUDGET
ACCOUNT # DESCRIPTION 7100
52600 LEASING - PROMOTIONS 1,122
52610 LEASING - ADVERTISING 198
52620 LEASING - MARKETING 0
52630 LEASING - OVERNIGHT/MESSENGER 24
52640 LEASING - LEGAL 972
52650 LEASING - SPACE PLANNING 543
52660 LEASING - POSTAGE 0
2,858
EXHIBIT "E"
SIGN EXHIBIT
Not applicable
EXHIBIT "F"
PRE-EXISTING RIGHTS
BLDG # SUITE # TENANT NAME RIGHTS LOCATION
SPECIFICS
70 100 NUCLETRON 01/01/93 LEASE SECTION 39,
PAGE 13 LL
FIRST RIGHT TO ANY AVAILABLE SPACE IN THE COMPLEX; MUST GIVE
NOTICE TO TENANT
OF SPACE AVAILABILITY; TENANT HAS 10 DAYS FROM NOTICE TO LEASE THE
SPACE; IF
ACCEPTED, NEW LEASE WILL BE COTERMINOUS WITH EXISTING LEASE AND
RENT WILL BE AT
THE SAME RATE AS EXISTING LEASE.
72 100 PRIMACARE 11/04/93 LEASE SECTION 38,
PAGE 13 LL
FIRST RIGHT TO ANY CONTIGUOUS SPACE IN THE BUILDING; MUST GIVE
NOTICE TO TENANT
OF SPACE AVAILABILITY; TENANT HAS 10 DAYS FROM NOTICE TO LEASE THE
SPACE; IF
ACCEPTED, NEW LEASE WILL BE COTERMINOUS WITH EXISTING LEASE, BUT
RENT WILL BE
AT $7/SF FOR THE FIRST TWO YEARS, THEN MARKET RATE THEREAFTER;
RENT WILL BE
INCR. BY UNAMORTIZED PORTION OF COSTS OF LEASEHOLD IMPROVEMENTS
FOR THE
EXPANSION SPACE.
72 208 NIKE 10/18/95 AMENDMENT SECTION
10, PAGE 4
FIRST RIGHT TO ANY CONTIGUOUS SPACE ON THE FIRST FLOOR THAT
BECOMES AVAILABLE
DURING THE LEASE TERM; NOTE THAT LEASE TERM PER AMENDMENT
COMMENCES 4/1/96.
Agreement of Lease
By and between
Brit Limited Partnership
and
Exhibit G
CURRENT RULES AND REGULATIONS,
1. The sidewalks,lobbies. Passages, elevators and stairways
shall not be
obstructed by the Tenent and used by the Tenant for any purpose
other than
ingress and egress from and to the Tenant's offices. The Landlord
shall in all
cases retain the right to control or prevent access thereto by any
person whose
presence, in the Landlord's judgment, would be prejudicial to the
safety,
peace, character or reputation of the Building or of any tenant of
the
Property.
2. The toilet rooms', water closets, sinks, faucets, plumbing
and other
service apparatus of any kind shall not be used by the Tenant for
any purpose
other than those for which they were installed, and no sweepings,
rubbish,
rags, ashes, chemicals or other refuse or injurious substances
shall be placed
therein or used in connection therewith by the Tenant, or left by
the Tenant in
the lobbies, passages, elevators or stairways of the Building.
3. No skylight, window, door or transom of the Building shall
be covered or
obstructed by the Tenant, and no window shade, blind, curtain,
screen, storm
window, awning or other material shall be installed or placed on
any window or
in any window space, except as approved in writing by the
landlord. If the
Landlord has installed or hereafter installs any shade, blind or
curtain in the
Premises, the Tenant shall not remove it without first obtaining
the Landlord's
written consent thereto.
4. No sign, lettering; insignia, advertisement, notice or other
thing shall
be inscribed, painted, installed, erected or placed in any portion
of the
Premises which may be seen from outside the Building, or on any
window, window
space or other part of the exterior or interior of the Building,
unless first
approved in writing by the Landlord. Names on suite entrances
shall be provided
by and only by the Landlord and at Tenant's expense, using in each
instance
lettering of a design and in a form consistent with the other
lettering in the
Building, and first approved in writing by the Landlord. The
Tenant shall/will
not erect and stand, booth or showcase or other article or matter
in or upon
the Premises and/or the building without first obtaining the
Landlord's written
consent thereto.
5. The Tenant shall not place any additional lock or security
devices upon
any door within the Premises or elsewhere upon the Property
without Landlord's
consent, and shall surrender all keys for all such locks at the
end of the
Term. The Landlord shall provide the Tenant with one set of keys
to the
Premises when the Tenant assumes possession thereof.
6. The.delivery of towels, ice, water, food, beverages,
newspaper and other
supplies, equipment and furniture will be permitted only under the
Landlord's
direction and control.
7. The Tenant shall not do or permit to be done anything which
obstructs or
interferes with the rights of any other tenant of the Property.
The Tenant
shall not keep anywhere within the Property any matter having an
offensive
odor, or any kerosene, gasoline, benzins, camphene, fuel or other
explosive or
highly flammable material. No bird. fish or other animal shall be
brought into
or kept in or about the Premises.
8. The Tenant shall keep the Premises in a good state of
preservation and
cleanliness while in possession of the Premises.
9. If the Tenant desires to install signaling, telegraphic,
telephonic,
protective alarm or other wires, apparatus or devices within the
Premises, the
Landlord shall direct where and how they are to be installed and,
except as so
directed, no installation, boring or cutting shall be permitted.
The Landlord
shall, have the right (a) to prevent or interrupt the transmission
of
excessive, dangerous or annoying current of electricity or
otherwise into or
through the Building or the Premises, (b) to require the changing
of wiring
connections or layout at the Tenant's expense, to the extent that
the Landlord
may deem necessary, (c) to require compliance with such reasonable
rules as the
Landlord may establish relating thereto, and (d) in the event of
noncompliance
with such requriments or rules, immediately to cut wiring or do
whatever else
it considers necessary to remove; the danger; annoyance or
electrical
interference with apparatus in any part of the Building. Each wire
installed by
the Tenant must be clearly tagged at each distributing board and
junction box
and elsewhere where required by Landlord, with the number of the
office to
which such wire leads and the purpose for which it is used,
together with the
name of the tenant or other concern, if any, operating or using
it.
10. No furniture, package, equipment, supplies or merchandise
may be received
in the Building, or carried up or down in the elevators or
stairways, except
during such hours as are designated for such purpose by the
Landlord, and only
after Tenant gives notice thereof to the Landlord. The Landlord
shall have the
exclusive right to prescribe the method and manner in which any of
the same is
brought into or taken out of the Building, and the right to
exclude from the
Building any heavy furniture, safe or other article which may
create a hazard
and to require it to be located at a designated place in the
Premises. The
Tenant shall not place any weight anywhere beyond the safe
carrying capacity of
the building. The cost of repairing any damage to the Building or
any other
part of the property caused by taking of the same in or out of the
premises, or
any damage causd while it is in the Premises or the rest of the
Building, shall
be borne by the Tenant.
11. Without the Landlord's prior written request, (a) nothing
shall be
fastened to (and no hole shall be drilled, or nail or screw driven
into) any
wall or partition, (b) no wall, or partition shell be painted,
papered or
otherwise covered or moved in any way or marked or broken, (c) no
connection
shall be made to any electrical wire for running any fan, motor or
other
apparatus, device or equipment, (d) no machinery of any kind other
than
customary small business machinery shall be allowed in the
Premises, (e) no
switchboard or telephone wiring or equipment shall be placed
anywhere other
than where designated by the Landlord, and (f) no mechanic shall
be allowed to
work in or about the Building other than one employed by the
Landlord, unless
approved in writing by Landlord.
12. The Tenant shall have access to the premises at all
reasonable times. The
Landlord shall in no event be responsible for admitting or
excluding any person
from the Premises. In case of invasion, hostile attack,
insurrection, mob
violence, riot, public excitement or other commotions, explosion,
fire or any
casualty, the Landlord shall have the right to bar or limit access
to the
Building to protect the safety of the occupants of the Property,
or any
property within the Property.
13. The Landlord shall have the right to rescind, suspend or
modify the Rules
and Regulations and to promulgate such other Rules or Regulations
as, in the
Landlord's reasonable judgment, are from time to time needed for
the safety,
care, maintenance, operation and cleanliness of the Building, or
for the
preservation of good order therein. Upon the Tenant's having been
given notice
of the taking of any such action, the Rules and Regulations as if
in effect at
the time at which the Tenant's lease was entered into (except that
nothing in
the Rules and Regulations shall be deemed in any way to alter or
impair any
provision of such lease).
14. The use of any room within the building as sleeping quarters
is strictly
prohibited at all times.
15. The Tenant shall keep the windows and doors of the Premises
(including
those opening on corridors and all doors between rooms entitled to
receive such
service), closed while the heating or air conditioning system is
operating, in
order to minimize the energy used by, and to conserve the
effectiveness of,
such systems. The Tenant shall comply with all reasonable Rules
and Regulations
from time to time promulgated by the Landlord with respect to such
Systems or
their use.
16. Nothing in these Rules and Regulations shall give any Tenant
any right or
claim against the Landlord or any other person if the Landlord
does not enforce
any of them against any other tenant (whether or not the Landlord
has the right
to enforce them against such tenant or person), and no such
nonenforcement with
respect to any tenant shall constitute a waiver of the right to
enforce them as
to the Tenant or any other tenant or person.
Exhibit "H"
Walkway Drawing
Exhibit "I"
Promissory Note
$125,000 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of BRIT
Limited Partnership ("Holder"), c/o BECO Management, Inc., 11140
Rockville
Pike, Ste. 300, Rockville, Maryland 20852 or at such other place
or to such
other party or parties as the holder of this Promissory Note may
from time to
time designate, the principal sum of One Hundred Twenty-Five
Thousand Dollars
($125,000) plus interest at the rate of twelve percent (12%) per
annum, in
twenty-four (24) equal monthly installments of Five Thousand Eight
Hundred
Twenty-Five Dollars and Ninety-Two Cents ($5,825.92), commencing
December 1,
1995.
If default be made in the payment of any installment of
principal or any
other sums payable pursuant to the terms of this Promissory Note
then or at any
time thereafter, and such default is not cured within five (5)
days, at the
option of Holder, the whole of the principal sum then remaining
unpaid plus
interest thereafter at the rate of fifteen percent (15%) per
annum, shall
immediately become due and payable without notice. Failure to
exercise such
right or any other rights to which Holder may be entitled in the
event of any
such default shall not constitute a waiver of the right to
exercise such right
or any other rights in the event of any subsequent default,
whether of the same
or different nature.
The undersigned and all endorsers, guarantors and all
persons liable or
to become liable on this Promissory Note waive presentment,
protest and demand,
notice of protest, demand and dishonor and non-payment of this
Promissory Note,
and consent to any and all renewals and extensions in the time of
payment
hereof, and agree, further, that at any time and from time to time
without
notice, the terms of payment herein may be modified, without in
anyway
affecting the liability of any party to this instrument or any
person liable or
to become liable with respect to any indebtedness evidenced
hereby.
In the event that the undersigned shall become insolvent or
institute a
general proceeding of any nature under the United States
Bankruptcy Code, or
under any State insolvency statute, or if any proceeding for the
appointment of
a receiver be applied for, or a writ, lien or order of attachment
or
garnishment be issued or made against the property, assets or
income of the
undersigned, or in the event the holder, in its discretion, deems
the prospect
of payment insecure, then this obligation shall immediately become
due and
payable in full, whether according to its face or not.
If this Promissory Note is forwarded to an attorney for
collection after
the maturity hereof (whether by acceleration, declaration,
extension or
otherwise), the undersigned shall pay on demand all costs and
expenses of
collection, including a reasonable attorney's fee of no more than
fifteen
percent (15%) of the balance of this Promissory Note then
remaining due and
payable hereunder.
The undersigned and any and all guarantors agree upon any
default
hereunder to waive the benefits of any exemption now or hereafter
allowed by
law insofar as such exemptions may lawfully be waived. The
undersigned and any
and all guarantors hereby constitute and appoint the attorney of
Holder, with
power of substitution, or any clerk of any court of the United
States or any
jurisdiction thereof, as the undersigneds' true and lawful
attorney in fact, to
act for the undersigned and in the undersigneds' name and stead,
to acknowledge
service of any and all legal papers or any kind of suit brought
for collection
of this obligation and to confess judgment thereon, including
court costs,
interest at fifteen percent (15%), and attorneys' fees of fifteen
percent (15%)
of the remaining principal sum, hereby ratifying and confirming
the acts of
said attorney in fact as fully as if don, in person.
Holder may assign this Promissory Note to any transferee who
shall
thereupon become vested with all right. of Holder.
Any rights given hereunder and by any other instrument shall
be
cumulative to the end that the exercise of any such right shall
not preclude
the exercise by the payee of any other right given to it
hereunder. All
references herein to the undersigned shall apply with like affect
to each of
the undersigned if more than one.
This Note has been delivered pursuant to the provisions of
an Agreement
to Lease between Holder and Payar dated November
1995.
In Witness Whereof, this Promisory Note has been executed
under seal the
day and year first above written.
WITNESS: TSI Telsys, Inc.,
a Maryland corporation
By: (SEAL)
July 12, 1996
Mr. Edward J. O'Malley
Manager, Contracts & Procurement
TSI TelSys, Inc.
7100 Columbia Gateway Drive
Suite 150
Columbia, MD 21046
Re: Three Ponds Business Park
Dear Mr. O'Malley:
All of us at BECO Management, Inc. would like to thank you and
congratulate you
on your decision to expand at Three Ponds Business Park. Enclosed
for your
records is an executed copy of the Third Amendment between you
with and BRIT
Limited Partnership. We look forward to providing you with an
outstanding
environment and watching your business prosper and grow into the
21st century.
Please continue to direct your property management questions and
suite
construction question to Tony Eastridge, the Three Ponds Business
Park property
manager, at the phone number listed below. We encourage your
questions and
would be happy to meet with you at any time.
Sincerely,
BECO MANAGEMENT, INC.
Claire Ruben
Lease Administration
First Amendment to Lease
This first amendment to lease (this"Amendment") is made this 2nd
day of July,
1996, by and between BRIT Limited Partnership, a Maryland limited
partnership
("Landlord"), and TSI TelSys, Inc., a Maryland corporation
("Tenant").
Recitals:
A. Landlord and Tenant entered into a lease Agreement dated
November 22,
1995(the "Lease") for approximatley 15,008 retable square feet of
space and
known as Suite 150, located in the office building located at 7100
Columbia
Gateway Drive, Columbia, Maryland 21046 - Building C (the
"Building"), within
the complex known as Three Ponds Business Park (the "Complex").
B. Tenant desires to lease from Landlord an additional 6,756
rentalbe squre
feet of space in the Building known as Suite 130, upon the same
terms and
condiditons contained in the Lease, except as modified herein.
C. The parties hereto desire to modify the Lease to reflect among
other things,
the leasign of the additional space by Tenant.
Now, therefore, in consideration of the premises and such other
good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties do hereby agree to amend the Lease as
follows:
1. Capitalized Terms. Unless otherwise stated, capitalized
terms are defined
as provided in the Lease. To the extent the provisions of this
Amendment are
inconsistent with the provisions of the Lease, the provisions of
this Amendment
shall be controlling.
2. Lease. Landlord hereby leases to Tenant and Tenant hereby
leases from
Landlord an additional 6,756 rentable square feet of space know as
Suite 130 as
shown on Exhibit "A" attached hereto (the "Additional Space").
3. Premises. The Lease hereby amended to provide that the
"Premises," as
defined in Section 1 of the Lease, shall consist of approximately
21,764
rentable square feet of space, consisting of (I) 15,008 rentable
spuare feet of
space known as Suite 150 (the "Existing Space"), and (ii) 6,756
rentable square
feet of space known as Suite 130 (i.e., the Additional Space).
4. Term.
(a) Commencement Date. Landlord and Tenant hereby agree that the
lease term
for the Additional Space shall commence (the "Additional Space
Commencement
Date") on the earlier of (I) the first day after the date on which
the Landlord
substantially completes (as described in Paragraph 4(b) below) the
Landlord's
Work under the provisions of Paragraph 8 hereof and tenders
possession thereof
to Tenant, or (ii) the date on which Tenant commences beneficial
use of the
Additional Space. Tenant shall be deemed to have commenced
beneficial use of
the Additional Space when Tenant begins to move furniture,
furnishings,
inventory, equipment or trade fisxtures into the Additional Space.
Other than
the additonal Space Commencement Date, the provisions prertining
to the lease
term for the Additonal Space shall be governed by the terms of the
Lease, such
that the term for the Additonal Space shall coincide with the term
for the
Existing Space as set forth in the Lease. Notwithstanding the
foregoing, if
Landlord is delayed in completing construction of the Additional
Space as a
result of any of the reasons set forth in Paragraph 4(b), then for
purposes of
determing the Addiotnal Space Commencement Date, the Additonal
Space shall be
deemed to have been substantially complete on the date determined
in accordance
with Paragraph 4(b).
(b) Substantial Completion. Except as otherwise provided in this
Paragraph
4(b), the Additional Space shall be deemed to be substantially
complete when
the Landlord's Work to be performed by Landlord pursuant to
Paragraph 8 has
been completed, as certified by Landlord's architect or
construction
department, except for items of work and adjustment of equipment
and fixtures
that can be completed after the Additional Space are occupied
without causing
more than minor interference with Tenant's use of the Additional
Space (i.e.,
the "punch list" items). If Landlord shall be delayed in
completing the
Additional Space as a result of any delay caused by Tenant, then
for purposes
of determining the Additional Space Commencement Date, the
Additional Space
shall be deemed to have been substantially complete on the date
that Landlord's
architect or construction department determines1 in its reasonable
judgment,
that the Additional Space would have been substantially complete
if such delay
or delays had not occurred. Landlord shall use reasonable
commercial efforts to
complete punch list items within thirty (30) days of Tenant's
occupancy of the
Premises, except Landlord shall have an additional reasonable
amount of time if
its efforts are delayed or hindered by a force majeure event or an
event
otherwise beyond Landlord's control.
(c) Commencement Date Certificate. Promptly after the Additional
Space
Commencement Date is ascertained, Landlord and Tenant shall
execute a
certificate, in the form attached hereto as Exhibi tD, which
certificate shall
set forth the Additional Space Commencement Date.
5. Completion of Improvements. Tenant shall accept the
Additional Space on
the Additional Space Commencement Date in their "as is" condition.
The
improvements by Landlord to the Additional Space shall be
performed in
accordance with the terms of Paragraph 8 below.
6. Rent. Section 5(a) of the Lease is hereby amended in part to
reflect that
the number of rentable square feet has been increased to include
the Additional
Space, as follows:
Lease Year Annual PSF Rental Rate Square Feet Annual
Base Rent
1 (months 1-9 $5.66) 15,088 until To be
calculated upon
(months 10-12 $8.50) Additional Space
determination of
Commencement Date Additional
Space
Commencement Date
2 $8.76 21,764
$190.652.64
3 $9.01 21,764
$196.093.64
4 $9.28 21,764
$201,969.92
5 $9.56 21,764
$208,063.84
6 $9.85 21,764
$214,375.40
7 $10.15 21,764
$220,904.60
8 $10.45 21,764
$227,433.80
9 $10.77 21,764
$234,398.28
10 $11.10 21,764
$241,580.40
If the Additional Space Commencement Date is a day other then the
first day of
a month, then the base rent for the month in which the Additional
Space
Commencement Date occurs shall be pro-rated as of the Additional
Space
Commencement Date.
In addition to the amounts set forth above, Tenant shall pay as
additional base
rent the Allowance for Additional Space Improvements, together
with interest
thereon, as set forth in Paragraph 9 below.
7. Proportionate Share. Effective on the Additional Space
Commencement Date,
Section 30(e) of the Lease is hereby amended to reflect that the
square footage
of the Premises has been increased to 21,764, that Tenant's
proportionate share
of the Building equals 37.66%, and that Tenant's proportionate
share of the
Complex equals 14.97%.
8. Tenant Improvements - Landlord's Work. Landlord shall
perform the work
set forth on Exhibit B, using building standard materials and
specifications
(the "LandIord's Work11). Except for Landlord's Work, Landlord is
under no
obligation to make any alterations, decorations, additions or
improvements in
or to the Premises. Landlord's Work may be performed during normal
business
hours, but Landlord shall coordinate the completion of Landlord's
Work so as to
not unreasonably interfere with Tenant's use of the Premises.
There shall be no
rental reduction or other abatement during the period of the
performance of
Landlord's Work. Any delay in Landlord's completion of the
Landlord's Work
caused by modifications requested by Tenant shall constitute a
tenant delay for
purposes of determining the date of substantial completion.
9. Tenant Improvements - Tenant's Work.
(a) Tenant's Work. Tenant shall construct ("Tenant's Work")
additional
improvements to the Additional Space (the" Additional Space
Improvements")
according to plans and specifications approved by Landlord. Tenant
shall be
responsible for all costs of constructing Tenant's Work, except
that Landlord
shall contribute up to $13,000.00 to reimburse Tenant (upon
Landlord's receipt
of evidence of costs) for costs and expenses incurred by Tenant
for repainting
the painted surfaces of the Additional Space, recarpeting the
carpeted surfaces
of the Additional Space, and the installation of the cove base in
the
Additional Space. Tenant shall flinush, and provide copies to
Landlord of, all
working drawings for architecture, plumbing, mechanical,
electrical, telephone
and other requirements for construction of the Additional Space
Improvements,
and all permits pertaining to the construction, inspection and
approval of
Tenant's Work. Such requirements shall include the categories of
work and all
other items necessary to complete construction of the Additional
Space
Improvements. Said working drawings must be approved in writing by
Landlord and
after such approval shall be defined as '1Tenantts Plans." Any
changes or
modifications to Tenant's Plans must also be approved in writing
by Landlord
prior to construction on same. A copy of the approved working
drawings will be
attached hereto as Exhibit C and shall he referred to as Tenant's
Plans. Tenant
and Landlord each covenants and agrees that it will flilly and
Thithfi~ly
comply with all reasonable response requirements to assure timely
completion of
the Additional Space Improvements, time being of the essence. The
following
conditions shall apply to the construction of the Additional Space
Improvements:
(i) Tenant, before its work is started shall: seure all
licelises and permits
recessary therefor; deliver to Landlord a statement of the names
of all its
contractors and subcontractors; and cause each contractor to carry
workmen1s
compensation insura~ in statutory amounts covering all the
contractor's and
subcontractor's employees and cornprehensive public liability
insurance with
such limits as Landlord may reasonably require, but in no event
less than
$3,OO0,OOO/$l,O00,000 and property damage insurance with limits of
not less
than $1,000,000 (all such insurance to be written with companies
reasonably
approved by Landlord and insuring Landlord and Tenant as well as
the
contractors), and to deliver to Landlord copies of certificates of
all such
insurance;
(ii) Tenant agrees to pay promptly when due the entire cost of
any work done
on the Premises by Tenant, its contractors and subcontractors, and
not to cause
or permit any liens for labor or materials performed or flirnished
in
connection therewith to attach to the property on which the
Building is
located, the Building or the Premises and irnmediately to
discharge any such
liens which may so attach as provided herein, and Tenant shall
obtain lien
waivers from all contractors, subcontractors, mechanics and
materialmen that
provide goods or services to the Additional Space;
(iii) All construction work shall be done in a good and
workmanlike manner and
in compliance with all applicable laws and ordinances, regulations
and orders
of governmental authority and insurers of the Building;
(iv) Tenant's Work shall be in accordance with Tenant's Plans. All
alterations
and construction carried out by Tenant shall be perforrned by
contractors
approved by the Landlord and in accordance with Landlord's
construction
guidelines. Landlord shall provide Tenant with a list of approved
contractors.
Tenant shall use the structural and HVAC engineers provided by
Landlord, but
may use mechanical, electrical and plumbing engineers of its own
selection,
provided that they coordinate with Landlord's engineers. Tenant
shall bear the
cost of all such services.
(b) Improvement Allowance. Landlord shall lend to
Tenant up to
Sixty-Seven Thousand Five Hundred Sixty and 00/100 Dollars
($67,560.00) (the
"Maximum Amount") to be used solely, and for no other reason, as
an allowance
for the costs and expenses of the Additional Space Improvements
(the
"Allowance"). If the total amount borrowed by Tenant is less than
the Maximum
Amount, then Landlord and Tenant shall certify as to the specific
amount of the
Allowance actually borrowed by Tenant as soon as practicable.
Provided Tenant
is not in default hereunder, Landlord shall disburse the Allowance
in
accordance with the architecture, construction and related
agreements
evidencing work on the Additional Space Improvements. At
Landlord's request,
Tenant shall execute a security agreement whereby tenant shall
grant to
Landlord a security interest in all goods, inventory, equipment,
fixtures and
other personal property belonging to Tenant which are placed into
the
Additional Space during the Term, and all proceeds of the
foregoing.
(c) Tenant's Repayment of Improvement Allowance. Tenant shall
repay the
Allowance, together with interest thereon at the rate of 10.5% per
annum
compounded monthly over the Term of the Lease, commencing on the
Additional
Space Commencement Date, as part of Base Rent as set forth in
Section 5(a) of
the Lease, as amended by Paragraph 6 of this Amendment. If the
actual amount of
the Allowance has not been determined as of the Additional Space
Commencement
Date, then for purposes of paying Base Rent, it will be assumed
that the amount
of the Allowance is the Maximum Amount. In the event that the
actual amount of
the Allowance is determined to be less than the Maximum Amount,
then any excess
amounts paid by Tenant shall be credited to the next payment(s) of
Base Rent
due from Tenant. If an Event of Default occurs or upon any
termination of the
Lease prior to the Termination Date of the Lease, the entire
amount of the
Allowance shall become immediately due and payable. To the extent
not
considered Base Rent hereunder, all amounts payable pursuant to
this Paragraph
9 by Tenant shall be considered additional rent and are subject to
the
provisions of the Lease.
10. Parking. The number of unreserved parking spaces allocated
to Tenant, as
set forth in Section 37 of the Lease, is hereby increased by 23
additional
unreserved parking spaces within the Complex. The number of
reserved parking
spaces allocated to Tenant, as set forth in Section 37 of the
Lease, is hereby
increased by five (5) additional reserved parking spaces within
the Cornplex,
at no additional cost to Tenant, at locations to be mutually
agreed upon by
Landlord and Tenant.
11. Due Execution. Each of the individuals signing this
Amendment on behalf
of the Tenant do hereby represent and warrant to Landlord that
they have the
full right, power, capacity and authority to execute and deliver
this Amendment
as a binding and valid obligation of the Tenant hereunder.
12. Ratification. Except as expressly amended, modified 6r
revised herein,
the Lease and all of its terms, provisions, covenants and
agreements are hereby
ratified, confirmed and adopted for all purposes and in all
respects.
13. Miscellaneous. To the extent the provisions of this
Amendment are
inconsistent with the provisions of the Lease, the provisions of
this Amendment
shall control.
IN WITNESS WHEREOF, Landlord and Tenant have executed and sealed
this Amendment
as of the date first above written.
WITNESS/ATTEST:
LANDLORD.
BRIT LIMITED PARTNERSHIP
a Maryland limited partnership
By: BECO MANAGEMENT, INC.,
authorized
By:
Name:
Title:
TENANT:
TSI TELSYS, INC.,
a Maryland corporation
By:
Name: James R. Chesney
Title: President
Exhibit A
Additional Space
(To be Attached)
EXHIBT B
Landlord's Work
Landlord shall use bwlding standard materials for all work to be
performed by
Landlord hereunder, unless otherwise set forth below.
1. Landlord shall remove the overhead light fixture in Area 121 of
the
Additional Space
2. Landlord shall replace the lighting and light switch with
building standard
materials in Office 102 of the Additional Space.
3. Landlord shall replace the lighting in the following areas
of the
Additional Space:
Office 101
Area 100
Office 104
Office 105
Office 20
Hallway between Area 106 and Area 115
Area 106
Office 111
Office 114
4. Landlord shall cancel the floor drops in Area 106 of the
Additional Space.
5. Landlord shall repair the walls, remove the ceiling fixture
above the
entranceway, remove all existing ceiling lighting fixtures and
restore to code,
and remove the "mulch pen," in Area 115 of the Additional Space.
6. Landlord shall remove the DC electrical panel, and repair and
re-install the
existing door, in Room 114 of the Additional Space.
7. Landlord shall strip and refinish the vinyl floor in Rooms 110,
112 and 113
and repair the crack in the wall in Room 113 of the Additional
Space.
8. Landlord shall remove the existing data/telephone cables,
remove existing
shelving, and repair the walls in Room 109 of the Additional
Space.
Exhibit C
Tenant's Plans
(To be attahced.)
EXHIBIT D
FORM OF CERTIFICATE
The Certificate to be executed by Landlord and Tenant pursuant to
Paragraph
4(c) of the Amendment shall provide as follows:
"This Certificate is being provided pursuant to the terms and
provisions of
that certain First Amendment to Lease dated __________________
1996 (the
"Amendment"), between BRIT LIMITED PARTNERSHIP and TSI TELSYS,
INC. The parties
desire to confirm that the following terms which are defined in
the Lease shall
have the meanings set forth below for all purposes in the Lease:
1. The Additional Space Commencement Date is ______________,1996.
WITNESS/ATTEST: LANDLORD
BRIT LIMITED PARTNERSHIP
a Maryland limited partnership
By: BECO MANAGEMENT, INC~,
authorized agent
By:
Name:
Title
TENANT:
TELSYS, INC.,
a Maryland corporation
By:
Name:
Title:
Exhibit B
Landlords Work
Landlord shall use building standard materials for all work to be
performed by
Landlord hereunder, unless otherwise set forth below.
1. Landlord shall remove the overhead light fituure in Area 121
of the
Additional Space.
2. Landlord shall replace the lighting and light switch with
building
standard materials in Of~ice 102 of the Additional Space.
3. Landlord shall replace the lighting in the following areas
of the
Additional Space:
Office 101
Area 100
Office 104
Office 105
Office 20
Hallway between Area 106 and Area 115
Area 106
Office Ill
Office 114
4. Landlord shall cancel the floor drops in Area 106 of the
Additional
Space.
5. Landlord shall repair the walls, remove the ceiling fixture
above the
entranceway, remove all existing ceiling lighting fixtures and
restore to code,
and remove the "mulch pen," in Area 115 of the Additional Space.
6. Landlord shall remove the DC electrical panel, and repair
and re-install
the existing door, in Room 114 of the Additional Space.
7. Landlord shall strip and refinish the vinyl floor in Rooms
110, 112 and
113 and repair the crack in the wall in Room 113 of the Additional
Space.
8. Landlord shall remove the existing data/telephone cables,
remove existing
shelving, and repair the walls in Room 109 of the Additional
Space.
Exhibit D
Form of Certificate
The Certificate to be executed by Landlord and Tenant pursuant to
Paragraph
4(c) of the Amendment shall provide as follows:
"This Certificate is being provided pursuant to the terms and
provisions of
that certain First Amendment to Lease dated __________________
1996 (the
"Amendmentt1), between BRIT LIMITED PARTNERSHIP and TSI TELSYS,
INC. The
parties desire to confirm that the following terms which are
defined in the
Lease shall have the meanings set forth below for all purposes in
the Lease:
1. The Additional Space Commencement Date is _________________,
1996.
WITINESS/ATTTST LANDLORD:
BRIT LIMITED PARTNERSHIP
a Maryland limited partnership
By: BECO MANAGEMENT, INC.,
authorized agent
By
Name:
Tiile:
TENANT
TSI TELSYS, INC.,
a Maryland corporation
By:
Name:
Title:
November 25, 1996
Mr. Bruce G Montgomery P.E.
TSI TelSys, Inc.
7100 Columbia gateway Drive
Suite 150
Columbia, MD 21046
BECO
Re: Lease Commencement
Dear Mr. Montgomery:
On behalf of BECO Management Inc. I would like to thank you and
congratulate
you on your recent expansion at Three Ponds Business Park. Below,
please find
the pertinent terms of your expansion:
Expansion Commencement Date: October 15, 1996
Termination Date: November 30, 2005
Total Expansion Space Square Footage: 6,756
Monthly Base Rent for Expansion Space: $4,785.50
Please remit $7,497.34 ($2,711.84 for the period October 15,
through October31,
and $4,785.50 for November 1996). Beginning December, 1996 please
remit
$15,887.72 per month (total space of 21,764 square feet at $8.76
per square
foot).
Attached, please find 3 copies of Exhibit D, Form of Certificate
showing the
additional space commencement date as October 15 per Paragraph 4
of the Second
Amendment to Lease. Please sign and return 2 copies of Exhibit D.
A fully
executed copy will be returned for your records. Also, enclosed is
a fully
executed copy of the Second Amendment to Lease.
If you have any questions please call me at (301) 816-1573.
Sincerely,
Tony Eastridge
Property Manager
SECOND AMENDMENT TO LEASE
This second amendment to lease (this "Amendment") is made
this 30th day
of Septmeber1996, by and between BRIT LIMITED PARTNERSIIIP, a
Maryland limited
partnership ("Landlord"), and TSI TELSYS, INC., a Maryland
corporation
("Tenant").
RECITALS:
A. Landlord and Tenant entered into a Lease Agreement dated
November 22,
1995, as amended by that certain First Amendment to Lease dated
July 2, 1996
(the "First Amendment") (collectively, the "Lease") for
approximately 21,764
rentable square feet of space and known as Suite
150, located in the office building located at 7100 Columbia
Gateway Drive,
Columbia, Maryland 21046- Building C (the "Building"), within the
complex known
as Three Ponds Business Park (the "Complex").
B. Pursuant to the First Amendment, Landlord agreed to make
certain
improvements to the Premises as set forth in Paragraph 8 of the
First Amendment
and defined as "Landlord's Work." Landlord also agreed to
contribute up to
$13,000.00 (the "Landlord's Contribution") to reimburse Tenant for
certain
improvements to be performed by Tenant, as described in Paragraph
9(a) of the
First Amendment. Tenant desires not to have Landlord perform
Landlord's Work,
but instead to perform said work itself. Landlord and Tenant agree
that in lieu
of Landlord performing Landlord's Work, Landlord shall increase
the Landlord's
Contribution by $11,000.
C. Because Landlord shall not be performing Landlord's Work,
Landlord and
Tenant acknowledge that Landlord does not have control over when
Landlord's
Work shall be substantially complete, and, consequently, the
Additional Space
Commencement Date shall be changed, as set forth below.
D. The parties hereto desire to modify the Lease to reflect,
among other
things, the agreement that Tenant will perform Landlord's Work,
the increase to
Landlord's Contribution, and the change in the Additional Space
Commencement
Date.
NOW, THEREFORE, in consideration of the premises and such other
good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties do hereby agree to amend the Lease as
follows:
1. Definitions. All of the capitalized terms used in this
Amendment shall
have the same meaning as set forth in the Lease, except as
modified by this
Amendment.
2. Commencement Date. Paragraph 4 of the First Amendment is
hereby deleted
in its entirety, and, in lieu thereof, the following is hereby
inserted:
4. Term.
(a) Commencement Date. Landlord and Tenant hereby agree that the
lease term
for the Additional Space shall commence (the "Additional Space
Commencement
Date") on the earlier of (i) October 15, 1996, or (ii) the date on
which Tenant
commences beneficial use of the Additional Space. Tenant shall be
deemed to
have commenced beneficial use of the Additional Space when Tenant
begins to
move furniture, furnishings, inventory, equipment or trade
fixtures into the
Additional Space. Other than the Additional Space Commencement
Date, the
provisions pertaining to the lease term for the Additional Space
shall be
governed by the terms of the Lease, such that the term for the
Additional Space
shall coincide with the term for the Existing Space as set forth
in the Lease.
(b) Commencement Date Certificate. Promptly after the Additional
Space
Commencement Date is ascertained, Landlord and Tenant shall
execute a
certificate, in the form attached hereto as Exhibit D, which
certificate shall
set forth the Additional Space Commencement Date.
3. Completion of Improvements. Paragraphs of the First
Amendment is hereby
deleted in its entirety.
4. Tenant Improvements - Landlord's Work. Paragraph 8 of the
First Amendment
is hereby deleted in its entirety, and, in lieu thereof, the
following is
hereby inserted:
8. Tenant Improvements - Landlord's Work. Tenant shall
perform the
work set forth on Exhibit B, using building standard materials and
specifications (the "Landlord's Work"). Landlord is under no
obligation to make
any alterations, decorations, additions or improvements in or to
the Premises.
Landlord's Work may be performed during normal business hours.
There shall be
no rental reduction or other abatement during the period of the
performance of
Landlord's Work.
5. Tenant Improvements - Tenant's Work. Paragraph 9(a) of the
First
Amendment is hereby amended by deleting the second (2nd) sentence
of Paragraph
9(a), and inserting, in lieu thereof, the following sentence:
Tenant shall be responsible for all costs of planning and
constructing
Landlord's Work and Tenant's Work, except that Landlord shall
contribute up to
$24,000.00 to reimburse Tenant (upon Landlord's receipt of
evidence of costs)
for costs and expenses incurred by Tenant in performing Landlord's
Work and for
repainting the painted surfaces of the Additional Space,
recarpeting the
carpeted surfaces of the Additional Space, and the installation of
the cove
base in the Additional Space.
6. Due Execution. The individual signing this Amendment on
behalf of Tenant
represents and warrants to Landlord that it has the full right,
power, capacity
and authority to execute and deliver this Amendment as a binding
and valid
obligation of the Tenant hereunder.
7. Ratification. Except as expressly amended, modified or
revised herein,
the Lease and all of its terms, provisions, covenants and
agreements are hereby
ratified, confirmed and adopted for all purposes and in all
respects.
8. Miscellaneous. To the extent the provisions of this
Amendment are
inconsistent with the provisions of the Lease, the provisions of
this Amendment
shall control.
IN WITNESS WHEREOF, Landlord has caused these presents to be
signed and sealed
by its authorized agent, and Tenant has caused these presents to
be signed in
its corporate name by its duly authorized officer, all done as of
the date
first set forth above.
WITNESS/ATTEST:
LANDLORD:
BRIT LIMITED PARTNERSHIP
By: BECO Management, Inc., authorized agent
By:
Print Name: Jeffery Lee Cohen
Title: President
TENANT:
TSI TELSYS, INC., a Maryland Corporation
By:
Print Name: James R.Chesney
Title: President
Exhibit D
Form of Certificate
The Certificate to be executed by Landlord and Tenant pursuant to
Paragraph
4(c) of the Amendment shall provide as follows:
"This Certificate is being provided pursuant to the
terms and
provisions of that certain Second Amendment to Lease dated
September 30 - 1996
(the "AmendMent"), between BRIT LIMITED PARTNERSHIP and TSI
ThLSYS, INC. The
parties desire to confirm that the following terms which are
defined in the
Lease shall have the meanings set forth below for all purposes in
the Lease:
I. The Additional Space Commencement Date is October 15,1996.
WITNESS/ATTEST.
LANDLORD
BRIT LIMITED PARTNERSHIP
a Maryland limited partnership
By: BECO MANAGEMENT, INC.,
authorized agent
By:
Name:
TitIe:
TENANT
TSI TELSYS, INC.,
a Maryland corporation
By:
Name:
Title:
Exhibit
10.4
PURCHASE ORDER #H80133
UNISYS
UNISYS Government System, Inc.
7455-J New Ridge Road
Hanover, MD 21076
Division: PAO
Buyer: 69
Date of Order: 98-11-13
Type of Order: Change Order
Same Ship To Address
Terms: Net 30 days
Freight: Prepaid
FOB: Destination
Ship Via: See below
This change order #2. Dated 11/13/98 is issued to :
1) Change requested delivery date to 2/28/99 for all items TSI
letter as
accepted by customer.
All other terms and conditions remain unchanged.
<TABLE>
<CAPTION>
Item Vendor Part Number Delivery Date Quantity Unit Price
<S> <C> <C> <C> <C>
001 TSI-TCGS75 99-02098
Redundant CCSDS
Gateway System
Value for Line item
001
Contract: NAS5-96010 Rating: DOA7
002 TSI-RCGS75-MTS 99-02028
RCGS75 Monitoring &
Test System
Value for Line item
002
Contract: NAS5-96010 Rating: DOA7
Total Value of $1,581,204.00
Contract
</TABLE>
The following special provisions apply to all items on this
purchase order:
INSPECTION CODES: H
Previous PO Value 1581204.00
Value of Change 0.00
Current PO Value 1581204.00
IMPORTANT SELLER NOTE:
This order is subject to UNISYS specifications. If any
discrepancies exist
between UNISYS specifications and vendor specifications UNISYS
specifications
shall apply. Packing slip must accompany each delivery.
SHOW P.O. NUMBER ON ALL PACKAGES AND DOCUMENTS.
This is a rated order certified for national defense use, and you
are required
to follow all the provisions of the defense priorities and
allocations system
regulation (15 CFR Part 350). Items indicated on this purchase
order are
intended for ultimate use under government contract.
PURCHASE ORDERS UNDER $500.00 REQUIRE NO WRITTEN ACKNOWLEDGEMENT
TO UNISYS.
Address all inquiries to:
Buyer: Robert Fronczak
Phone: 410-694-4300
<PAGE>
SUBCONTRACT NUMBER: NAS5-96-010-027
BETWEEN
UNISYS CORPORATION
AND
TSI TELSYS INC.
UNDER
PRIME CONTRACT NO. NAS5-96-010
FOR THE
NASA SCIENTIFIC AND ENGINEERING WORKSTATION PROCUREMENT II
("SEWP II")
PROGRAM
Date: 7/1/1997
<PAGE>
TABLE OF CONTENTS
PAGE
NUMBER
Part I Subcontract
Article I Scope 1
1.1 Products 1
1.2 Services 1
1.3 Product Family Category 1
1.4 Discount 1
1.5 Warranty 2
1.6 Extended Warranty/Maintenance 2
1.7 Purchase Orders 2
1.8 Discontinued Products 2
1.9 Technology Refreshment 2
Article II Subcontract Term 3
Article III Packaging, Shipment and Delivery 3
Article IV Invoices and Payment 3
4.1 Invoices 3
4.2 Payment 4
Article V Inspection and Acceptance 4
Article VI Federal Acquisition Regulations 4
6.1 Incorporation by Reference of Certain
Federal
Acquisition Regulation (FAR) Clauses 4
6.2 Subcontracts 4
Article VII Notices 4
Article VIII Order of Precedence 5
Part II: Schedules
The below identified Schedules which are applicable to
this Subcontract
are incorporated herein.
Schedule A: Product Discounts and Pricing
Schedule B: Software/Firmware
Schedule C: Packaging, Shipment and Delivery
Attachment 1: Bar Code Labeling Procedures
Schedule D: Inspection and Acceptance
Schedule E: Warranty
Attachment 1: Standard Commercial Warranty
Procedures
Schedule F: Extended Warranty/Maintenance and Repair
Attachment 1: Extended Warranty/Maintenance
Pricing and Plans
Schedule G: Other Subcontractor Services
Schedule H: Insurance
Schedule I: Federal Acquisition Regulation
Schedule J: Technical Specifications
Schedule K: Subcontractor Representations and Certifications
Schedule L: Special Requirements
Part III: General Provisions
-
1-
<PAGE>
SUBCONTRACT
This subcontract, including all Schedules annexed hereto
and any other
documents incorporated herein by reference ("Subcontract") is made
this 1st day
of May, 1997, by and between Unisys Corporation, a Delaware
corporation, with a
place of business at 8008 Westpark Drive, McLean, VA 22102
("Unisys"), and TSI
TelSys Inc., a Maryland corporation, with its principal place
of business at
7100 Columbia Gateway Drive, Columbia Maryland 21046
("Subcontractor"), under
Prime Contract No. NAS5-96-010 ("Prime Contract"), which has the
program name
of SEWP II ("Program").
PART I
IN CONSIDERATION of the mutual covenants herein contained, and for
other good
and valuable consideration, the parties, intending to be legally
bound by the
provisions herein, agree as follows:
ARTICLE I: SCOPE
1.1 PRODUCTS
Products are defined as the hardware, software, firmware and
documentation
listed in Schedule A, including any acceptable new Product
and/or acceptable
replacement, substitute, enhancement, or add-on to an
existing Product.
Product(s) provided hereunder shall conform to the commercial
item definition
provided in FAR Part 2.101.
Subcontractor must make available to Unisys any replacement,
substitute,
enhancement, add-on and/or new product within five (5) business
days after its
first commercial announcement.
1.2 SERVICES
Services are defined as the Warranty and Maintenance of the
Product(s) defined
above. Services shall comply with the requirements of the Prime
Contract and
this Subcontract. Subcontractor's Warranty obligations are
defined in Schedule
E, and Subcontractor's Extended/Maintenance obligations are
defined in Schedule
F.
1.3 PRODUCT FAMILY CATEGORY
Product Family Category is defined as a group of Products.
Products will be
grouped and/or classified into a Product Family Category or
Product Family
Categories. Individual Product items will be grouped into a
single Product
Family Category. Product Family Categories are identified in
Schedule A.
1.4 DISCOUNT
Discount is defined as a firm-fixed discount from the commercial
list price. A
Product Family Category will have a single Discount for
the term of the
Subcontract. Different Product Family Categories may have
different discounts.
Subcontractor will provide all Product grouped into a particular
Product Family
Category at the Discount associated with that Product Family
Category.
If in the course of this Subcontract, a Product's GSA Schedule
price, as a
percentage off its commercial list price, decreases,
Subcontractor's Discount
to Unisys shall also increase by the same change in
percentage. The new
Discount shall be effective on the same date as the new GSA
Schedule price or
change in GSA Schedule discount. At no time will the Discount be
less than the
GSA Schedule discount or that discount offered by
Subcontractor to its most
favored reseller.
1.5 WARRANTY
Warranty is defined as the Subcontractor's standard commercial
warranty, as
modified in Schedule E of this Agreement. Subcontractor shall
furnish a Product
Warranty, for a period of one (1) year for all hardware
Product(s), and, for a
period of ninety (90) days for all software Product(s), in
accordance with the
terms of Schedule E and the Subcontractor's standard
commercial warranty,
incorporated herein as Schedule E, Attachment 1.
Warranty shall be be provided at no additional cost and shall be
included in
the purchase price of the Product(s).
1.6 EXTENDED WARRANTY/MAINTENANCE
Extended Warranty/Maintenance is defined as the terms presented
in Schedule F
and the Subcontractor's hardware and software maintenance plans,
as detailed in
Schedule F Attachment 1. As may be required from time to time
by Unisys,
Subcontractor shall provide Extended Warranty/Maintenance in
accordance with
the terms and pricing specified and incorporated herein as
Schedule F. Unisys
is under no obligation to purchase Extended
Warranty/Maintenance or repair
services from Subcontractor.
1.7 PURCHASE ORDERS
This is an INDEFINITE DELIVERY/INDEFINITE QUANTITY type
subcontract. During the
Term of the Subcontract, Subcontractor agrees to furnish Unisys
the Products
and Services listed in the Schedules at the Discount(s) specified
therein. No
Product or Service is ordered for delivery by virtue of being
listed in any
Schedule hereto. All Products and Services to be
purchased/licensed hereunder
shall be made pursuant to purchase orders ("Purchase Orders")
issued by Unisys
to Subcontractor. The terms and conditions of this Subcontract
shall control
all orders released under the Program, irrespective of whether
this Subcontract
is referenced by the Purchase Order, and no terms or conditions on
any invoice,
form or acknowledgment of either party (other than specific
delivery
instructions consistent with the requirements herein) shall be of
any force or
effect, unless expressly agreed to in a separate writing by both
parties.
Purchase Orders and related instructions which are consistent with
the terms of
this Subcontract shall be accepted by Subcontractor.
1.8 DISCONTINUED PRODUCTS
In order for Product to be replaced it must be discontinued by the
manufacturer. The definition of "discontinued" also encompasses
Product(s)
still advertised by the Subcontractor as available but which can
only be
acquired by special order and therefore, which involves either a
significant
cost in excess of comparable market items or a prohibitive delay
in
availability. Subcontractor must provide Unisys with a notice, in
writing,
sixty (60) days in advance of Product discontinuance or "End-of-
Life".
1.9 TECHNOLOGY REFRESHMENT
A. Replacement, Substitution, Enhancement, and Add-On Products
During the term of this Agreement, Subcontractor may propose
replacement,
substitution, enhancement or add-on products to any Product
which is part
of this Subcontract. Any such product must be offered to
Unisys under the
same Product Family Category, and with the same Discount,
Warranty,
Maintenance, and other terms and conditions as the Product
for which it is
being offered as a replacement, substitution, enhancement, or
add-on. For
each replacement, substitute, enhancement, or add-on product
offered,
Subcontractor shall provide documentation to support that the
functionality and performance characteristics of the
replacement,
substitute, enhancement, or add-on product are equal to or
greater than
the functionality and performance characteristics of the
Product for which
the replacement, substitute, enhancement, or add-on product
is offered.
Those products which are acceptable to Unisys and the
Government will be
added to this Agreement through a unilateral subcontract
modification.
Unisys will have the final determination on any such product
changes and
such decisions shall not be subject to the Disputes provision
of this
Subcontract. Unisys acceptance is conditional on Government
approval.
B. New Products
During the term of this Agreement, upon commercial
announcement of new
products that can be technically added to Products provided
hereunder,
Subcontractor shall offer all said products for addition to
the
Subcontract. Any such product must be offered to Unisys at
the terms and
conditions established in this Agreement. New Product will be
assigned to
a particular Product Family Category, and accorded the
Discount and terms
and conditions specified for that particular Category.
Those products which are acceptable to Unisys and the
Government will be
added to this Agreement through a unilateral subcontract
modification.
Unisys will have the final determination on any such product
changes, and
such decisions shall not be subject to the Disputes provision
of this
Subcontract. Unisys acceptance is conditional on Government
approval.
ARTICLE II: SUBCONTRACT TERM
The Term of this Subcontract shall commence on the effective date
of the Prime
Contract and terminate on November 12, 2000, unless sooner
terminated in
accordance with any provision of this Subcontract. The Prime
Contract is a four
year contract featuring a base year and three (3) one-year
options.
ARTICLE III: PACKAGING, SHIPMENT AND DELIVERY
Products and Services specified in the Schedules shall be
delivered/ provided
by Subcontractor within the timeframe, and at the locations,
specified on the
Purchase Order, and in accordance with the requirements in
Schedule C,
PACKAGING, SHIPMENT AND DELIVERY.
ARTICLE IV: INVOICES AND PAYMENT
4.1 INVOICES
Subcontractor shall submit invoices for payment for the Products
and Services
accepted under this Subcontract by Unisys and/or the Government.
Invoices for
Products may be submitted after the date of delivery of such
Products to the
Government site. Invoices for Services shall be submitted on an
annual basis
in advance of the year for which such Services were rendered. All
invoices
shall provide the following information: (i) name and address of
Subcontractor; (ii) invoice date; (iii) Prime Contract number,
Subcontract
number, Purchase Order number; (iv) Subcontract line item
number(s),
description, serial numbers, quantity and unit and extended
price(s) of
Products delivered or Services performed; (v) date(s) that
Products were
delivered or services rendered; (vi) shipping date(s) and bill of
lading
number(s); (vii) payment terms including any prompt payment
discounts; (viii)
name and address of Subcontractor official to whom payment is to
be sent; (ix)
name, title, phone number and mailing address of person to be
notified in event
of a defective invoice; (x) credits (if applicable); and (xi) any
other
information or documentation required by the Prime Contract or
reasonably
requested by Unisys.
4.2 PAYMENT
A. PRODUCTS AND SERVICES. Unisys shall pay Subcontractor for
Products and
Services net thirty (30) days after Government
acceptance of the
Product/Services, or upon receipt of a proper invoice from
Subcontractor,
whichever is later.
ARTICLE V: INSPECTION AND ACCEPTANCE
The Products and Services ordered hereunder shall not be accepted
and no
charges shall be paid unless and until the Products meet the
standard of
performance set forth in the Prime Contract and Schedule D,
INSPECTION AND
ACCEPTANCE, and are accepted by the Government. Products and
Services will be
accepted by Unisys on the date such Products and Services are
accepted by the
Government. Any Products or Services not accepted by the
Government shall be
rejected by Unisys.
ARTICLE VI: FEDERAL ACQUISITION REGULATION
6.1 INCORPORATION BY REFERENCE OF CERTAIN FEDERAL ACQUISITION
REGULATION (FAR)
CLAUSES AND SUPPLEMENTS.
The FAR and Government supplemental clauses set forth by citation
in Schedule I
hereto are incorporated by reference in this Subcontract with the
same force
and effect as though herein set forth in full text.
6.2 SUBCONTRACTS
To the extent Unisys authorizes Subcontractor to provide any of
the Products or
Services by subcontracting with another person or entity,
Subcontractor shall
incorporate all required FAR and Government supplemental clauses
which are
incorporated herein by reference in any such subcontract.
Subcontractor
further covenants that it will impose this incorporation by
reference
obligation on all of its subcontractors.
ARTICLE VII: NOTICES
All notices contemplated herein shall be sent in writing to the
other party by
certified mail, return receipt requested, or by wire
communications (E.G.,
telex, telefax, twx, etc.) to the following addresses, or to such
other address
as the party may, by written notice, designate to the other from
time to time.
UNISYS: COPY TO:
Unisys Corporation Unisys Corporation
7455-J New Ridge Road 7455-J New Ridge Road
Hanover, Maryland 21076 Hanover, Maryland 21076
Telephone: 410-684-2010 Telephone: 410-684-2010
Telefax: 410-684-2681 Telefax: 410-684-2681
Attn.: Robert Fronczak Attn.: Rebecca Prettyman
Subcontract Manager Manager - Product Management
SUBCONTRACTOR: COPY TO:
TSI TelSys Incorporated TSI TelSys Incorporated
7100 Columbia Gateway Drive 7100 Columbia Gateway Drive
Columbia, Maryland 21046 Columbia, Maryland 21046
Telephone: 410-872-3900 Telephone: 410-872-3900
Telefax: 410-872-3902 Telefax: 410-872-3902
Attn.: Edward O'Malley Attn: Clark Austin
Director, Contracts Vice President, Sales
ARTICLE VIII: ORDER OF PRECEDENCE
Conflicting provisions of this Subcontract, if any, shall
prevail in the
following descending order of precedence:
(i) Part II Schedules, except Schedule I;
(ii) Part I;
(iii) Part III;
(iv) Specifications attached or incorporated by reference;
(v) Schedule I of Part II.
IN WITNESS WHEREOF, the parties have set their hands and
seals to this
Subcontract as of the date first above written.
UNISYS CORPORATION TSI TELSYS INCORPORATED
BY: _________________________ BY: __________________________
NAME: ROBERT FRONCZAK NAME JAMES R. CHESNEY
TITLE: SUBCONTRACTS MANAGER TITLE: PRESIDENT
DATE: _______________________ DATE: ________________________
A-1
<PAGE>
PART II: SCHEDULES
SCHEDULE A: PRODUCT
PRODUCT DISCOUNTS AND PRICING
Commercial GSA Product
Family Unisys
MODEL NUMBER DESCRIPTION LIST PRICE PRICE
CATEGORY DISCOUNT
____________ ___________ __________ _____
______________ ________
[Confidential portions omitted and filed with the Commission]
[Headers Cont'd.]
Hardware Software Software Extended Warranty
24 Hr.
Warranty Warranty Upgrade Annual Cost
Board Swap
PERIOD PERIOD SERVICE(ANNUAL) SILVER GOLD
PLATINUM
[Confidential portions omitted and filed with the Commission]
PROPRIETARY INFORMATION
B-
1
<PAGE>
SCHEDULE B: SOFTWARE/FIRMWARE
(1) All Software Products shall comply with the
Products published
specifications, unless specifically stated below.
(2) All Software Products provided hereunder shall be non-
developmental,
commercially available software.
(3) LICENSE
Subcontractor hereby grants to Unisys, a perpetual,
irrevocable, world-
wide, non-exclusive right to sublicense to the Software
Products and the
right to sublicense any later provided updates,
improvements, additions,
enhancements and modifications to the Software Products on
the terms and
conditions stated in this Subcontract.
Software may be moved from one system/server to
another with no
restrictions other than its complete removal upon transfer.
(4) NON-SUBCONTRACTOR-OWNED SOFTWARE.
Subcontractor warrants that all Subcontractor-provided
Software which it
does not own has been procured by Subcontractor under a valid
license from
such person, corporation or entity as does own such Software
and that
Subcontractor is not currently in default under any such
license, and that
no additional licenses must be procured by Unisys or the
Government from
any third party or additional fees paid to any third party in
order to use
such Software or transfer such Software to the Government,
except as are
specifically set forth in Schedule A.
C-
1
<PAGE>
SCHEDULE C: PACKAGING, SHIPPING AND DELIVERY
(1) DELIVERY SITE.
The designated shipping address will be as specified on an
individual
Purchase Order basis. It is anticipated that all Product
deliveries,
excluding software updates and upgrades, will be to the end-
user and
address noted on the Purchase Order. Unisys receiving
inspection will be
accomplished at Subcontractor's facility, unless otherwise
indicated.
Products shall be delivered FOB Destination, inside delivery.
(2) DELIVERY SCHEDULE.
Unless otherwise specified below, the Subcontractor shall
make its best
efforts to deliver all Products within sixty (60) days of
issuance of the
Purchase Order. Customer requests for modifications to
the commercial
products will require an additional delivery term as
mutually agreed upon
between the parties. Services shall be delivered as stated in
the Purchase
Order requesting the applicable services.
(3) PARTIAL SHIPMENTS
A partial shipment is any order that does not include all
items specified
for delivery. Partial shipments will not be accepted unless
authorized on
the Purchase Order, or by the Buyer's Purchasing Manager
prior to the time
of delivery. Buyer reserves the right to return partial
shipments to the
Subcontractor, transportation charges collect.
(4) PACKAGING AND MARKING
Products shall be packaged, marked or otherwise prepared
for delivery in
accordance with best commercial practices. Material shall be
packed for
shipment to insure acceptance by common carrier and
safe delivery at
destination. Containers and closures shall comply with
the Interstate
Commerce Commission regulations, Uniform Freight
Classification Rules, or
regulations of other carriers as applicable to the mode of
transportation.
Markings shall indicate "NOT FOR OUTSIDE STORAGE."
Packaging and packing
shall provide protection during shipping and storage, and
shall protect
against shock and vibration encountered during shipping
and handling.
Subcontractor will provide a packing list with each
delivery. At a
minimum, the packing list will reference Unisys Purchase
Order number,
product description, product quantity, product part number
and product
serial number.
(5) CARRIER
Unisys reserves the right to direct the use of specific
carriers or
premium modes of transportation and arrange for direct
billing of freight
charges. In any such case Unisys shall be responsible for
incremental
freight charges in excess of general commodity carrier
charges.
However, if such Unisys direction is necessitated by
Subcontractor's
failure to perform in accordance with established schedules
as addressed
on purchase Orders, Subcontractor shall bear any resulting
increase in
transportation and packaging costs.
D-
1
<PAGE>
SCHEDULE D: INSPECTION AND ACCEPTANCE
(1) FACTORY INSPECTION AND TEST
All Products supplied to Unisys shall be subject to
inspection and test by
Subcontractor prior to delivery to ensure compliance with
commercial
practice and operation to stated specifications.
(2) IDENTIFICATION/MARKING REQUIREMENTS
All products (hardware, software and documentation) shall
be clearly
marked with part numbers. The markings of the top assembly
level shall be
visible without having to remove or disassemble any part of
the assembly.
The UL and FCC approval labels shall be clearly visible.
The markings
shall clearly reflect the current engineering level,
including optional
parts of the products.
(3) MAINTENANCE, SERVICE AND PARTS
Maintenance service and parts shall be furnished by
Subcontractor at
no additional charge during the test period unless such
service and parts
are required due to fault or negligence of Unisys.
(4) SUBCONTRACTOR ASSISTANCE
Unisys shall give Subcontractor notice of any problems with
acceptance
testing which involves Subcontractor's Products.
Subcontractor shall
provide reasonable assistance to Unisys, at no additional
cost, to solve
such acceptance testing problems caused by Subcontractor's
products.
(5) FINAL INSPECTION AND ACCEPTANCE
All products shall be subject to inspection and acceptance
upon receipt at
customer site.
In case any Products, or lot of Products, is defective
in material or
workmanship, or otherwise not in conformance with the
requirements of
Product's stated specifications, Unisys shall have the
right either to
reject it or require its correction. Any products which have
been rejected
or required to be corrected may be returned to and shall be
replaced or
corrected by and at the expense of the
subcontractor, including
transportation charges. If, after being requested by
Unisys, the
Subcontractor fails to promptly replace or correct
any defective
commodities within five (5) calendar days after receipt of
the returned
materials, Unisys may (I) by contract or otherwise,
replace or correct
such commodities and charge to Subcontractor all costs
incurred by Unisys
thereby, or (II) require a reduction in price which is
equitable under the
circumstances.
Upon the completion of acceptance at the customer site,
the product
warranty period shall begin.
E-
1
<PAGE>
SCHEDULE E: WARRANTY
(1) HARDWARE WARRANTY
(A) BASIC HARDWARE WARRANTY
The purchase of hardware includes a basic hardware
warranty, which
provides, at a minimum, the same basic warranty
features the
Subcontractor offers in connection with the sale of
hardware either
(a) on the commercial market, or (b) to the Seller's
most favored
purchasers.
(1) Responsibilities of the Seller
The Subcontractor shall provide warranty service,
and parts.
Warranty service does not include electrical
work external to
the equipment, the furnishing of supplies,
and adding or
removing accessories, attachments, or other
devices. It does
not include the repair of damage resulting from
an accident,
transportation between Government sites,
neglect, misuse,
failure of electrical power, air conditioning,
humidity control,
or causes other than ordinary use.
Subcontractor sponsored alterations or
attachments to the
equipment shall be made only with the consent of
the Government.
(2) Level of Parts Replacement
The level of replacement of worn or defective
parts shall be
consistent with the original manufacturer's
design of the
equipment. The Subcontractor has the
responsibility for
the
repair or the replacement of all faulty hardware
within the
equipment.
(3) Quality of Parts
Only new standard parts, or parts equivalent to
new parts in
performance, shall be used in effecting warranty
repairs. Parts
which have been replaced shall become the
property of the
Subcontractor.
(4) Field Engineering Changes
The Subcontractor shall install all required
field engineering
changes within 30 days/best efforts (based on
reasonable access
to the place of performance) after the
availability of the
change. Concurrence of the Government shall be
required prior to
the installation of the field engineering changes
and they shall
be installed at no additional cost to the
Government. These
field engineering changes shall only take
place during the
warranty or maintenance period, unless the change
affects the
safety or reliability of the unit, as
determined by
Subcontractor.
(B) NETWORK CLASS HARDWARE ADVANCE EXCHANGE
Subcontractor shall make available to Unisys an
advance exchange
program under which Unisys/the end-user can
contact the
Subcontractor and request the next-day delivery of
replacement
hardware. The Subcontractor shall ship via the
Overnight Express
company
of its
choice. Product
will be delivered to the Unisys/end-user site
designated at the time
of the request. Products will be delivered to the
designated site
FOB Destination, inside delivery. Unisys/end-
user will take
ownership of the replacement Product upon delivery at
the designated
site. Product will be returned to the vendor FOB
Destination.
Hardware Advance Exchange will be covered on a unit
price monthly
fee basis. All pricing offered will be firm through the
full term of
the SEWP II contract. Pricing for this advance exchange
program is
contained in Schedule A.
(2) BASIC SOFTWARE WARRANTY
The purchase of software/firmware includes a basic ninety
(90) day software
warranty, which
provides, at a minimum, that the software/firmware delivery
medium is free
from defects. Other software/firmware functions, as listed
below shall
also be included in the basic ninety (90) day software
warranty:
(a) Software/Firmware Patches
Software/firmware patches are modifications to the
software/firmware
which provide bug and security fixes. Software/Firmware
patches
shall be provided to all end-users at no additional
cost beyond the
initial cost of the software/firmware. This condition
shall be in
effect for the life of the contract. Software/firmware
patches shall
be provided to all end-users through the Subcontractors
most
efficient means at the time of the request, preferably
through on-
line access/the World Wide Web (WWW).
(b) Technical Support
Technical software support shall be available from the
Subcontractor
throughout the selected warranty period. Subcontractor
shall provide
a toll-free voice telephone hot-line. The voice hot-
line will be
manned 9 a.m. to 5 p.m. (Eastern Standard Time), Monday
through
Friday (excluding Government holidays).
All other software/firmware warranty functions shall be
provided in
accordance with the Subcontractor's standard commercial
warranty
practices, presented in Attachment 1 to this Schedule
E.
(3) RETURN OF DEFECTIVE PRODUCT
All defective Product shall be returned by Unisys to the
vendor FOB
Destination. Subcontractor shall return repaired/replaced
product to
the designated site FOB Destination, inside delivery.
E-
2
<PAGE>
SCHEDULE E
ATTACHMENT 1
STANDARD COMMERCIAL WARRANTY PROCEDURES
TSI TELSYS INC.'S LIMITED HARDWARE WARRANTY
V6 3/17/97
TSI TelSys Inc.'s ("TELSYS") Warranty obligations are limited to
the terms set
forth below:
1. LIMITED WARRANTY. TELSYS warrants this hardware product
against defects in
materials and workmanship, under normal use and service, for a
period of one
(1) year from the date of receipt by the Purchaser.
If the Purchaser discovers a defect within the warranty period,
TELSYS will, at
its discretion, repair the product with either new or refurbished
replacement
parts at no charge. If TELSYS is unable to restore the product to
good working
order, TELSYS will, at its option, replace or refund the purchase
price of the
product. All products that are replaced will become the property
of TELSYS.
Any replaced or repaired product is warranted for the remainder of
the initial
warranty period or ninety days, whichever is longer. TELSYS shall
not be
responsible for any software, firmware, information or memory data
of the
Purchaser contained in, stored on, or integrated with any products
for system
components returned to TELSYS pursuant to any warranty.
2. RETURN PROCEDURES. To obtain service under this warranty
within the
established period, the Purchaser must:
Call TELSYS Technical Service Support Operations at 1-888-849-CARE
(2273)
between 8 a.m. and 5 p.m. EST, Monday through Friday, excluding
holidays.
To insure that your product qualifies for return to factory
warranty service,
you will be asked to provide the model and serial number of your
product, the
date of original purchase, and the Purchaser's name, address, and
phone number.
Products returned to TELSYS' Technical Service Support Operations
must be pre-
authorized by TELSYS with a Return Material Authorization (RMA)
number marked
on the outside of the package, and sent prepaid, insured, and
packaged
appropriately for safe shipment. The repaired or replaced item
will be shipped
to the Purchaser at TELSYS' expense, not later than (90) ninety
days after
receipt by TELSYS.
3. APPLICABILITY.
This warranty applies only to hardware products (including
internal components)
supplied by TELSYS that can be identified by the "TELSYS"
trademark, trade
name, or logo affixed to them. Any warranty on external third-
party hardware
(i.e., Sun Workstation) installed by TELSYS with this product is
provided by
the hardware vendor, not TELSYS. This warranty does not apply to
damage caused
by accident, abuse, misuse, improper installation or testing,
misapplication,
or service (including upgrades and expansions) performed by anyone
who is not a
TELSYS Authorized Service Provider or any other cause beyond the
range of the
intended use, or by fire, lightning, or other hazard; if the
product has been
modified without the written permission of TELSYS; if any TELSYS
serial number
has been removed or defaced; or if you cannot provide proof of
original
purchase as described above.
4. LIMITATIONS OF REMEDIES AND DAMAGES.
IN NO EVENT WILL TELSYS, ITS PARENT OR SUBSIDIARIES OR ANY OF THE
LICENSORS,
DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES OF ANY OF THE
FOREGOING BE LIABLE
TO THE PURCHASER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
SPECIAL DAMAGES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND
THE LIKE,)
WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE USE OF OR
INABILITY TO
USE THE SOFTWARE OR ACCOMPANYING WRITTEN MATERIAL, REGARDLESS OF
THE BASIS OF
THE CLAIM AND EVEN IF TELSYS OR A TELSYS REPRESENTATIVE HAS BEEN
ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. TELSYS'S LIABILITY TO THE PURCHASER
FOR DIRECT
DAMAGES FOR ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF
THE ACTION,
WILL BE LIMITED TO THE ACTUAL PURCHASE PAID FOR THE PRODUCT.
Some states do not allow the exclusion or limitation of incidental
or
consequential damages or exclusion of implied warranties, so the
above
limitations or exclusions may not apply to the Purchaser. This
warranty gives
the Purchaser specific legal rights, and the Purchaser may also
have other
rights that vary from state to state.
THE WARRANTY AND REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN
LIEU OF ALL
OTHERS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED. TELSYS
SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT
LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. UNLESS
MODIFIED IN WRITING AND SIGNED BY THE AUTHORIZED REPRESENTATIVES
OF BOTH
PARTIES, THIS WARRANTY IS UNDERSTOOD TO BE THE COMPLETE AND
EXCLUSIVE WARRANTY
BETWEEN THE PARTIES. NO TELSYS SALES REPRESENTATIVE, DEALER,
RESELLER, AGENT
OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR
ADDITION TO
THIS WARRANTY UNLESS OTHERWISE ALLOWED BY THIS AGREEMENT.
E-
3
<PAGE>
TSI TelSys Inc.'s Software License
V6 5/2/97
The enclosed computer program(s)("Software") is licensed, not
sold, to you
by TSI TelSys, Inc. ("TELSYS") for use only under the terms
of this
License, and TELSYS reserves any rights not expressly granted
to the
Licensee. The Licensee owns the disk(s) on which the Software is
recorded
or fixed, but TELSYS retains ownership of the Software itself.
1. LICENSE. This License allows the Licensee to:
(a) Use one copy of the Software on a single computer at a time.
To "use"
the Software means that the Software is either loaded in the
temporary
memory (i.e. RAM) of a computer or installed on the permanent
memory of a
computer (i.e. hard disk, CD ROM, etc.) The Licensee may
install the
Software on a common storage device which is accessible by
multiple
computers, provided that if more computers have access to
the common
storage device than the number of licensed copies of the Software,
you must
have some Software mechanism which locks-out any concurrent users
in excess
of the number of licensed copies of the Software (an additional
license is
not needed for the one copy of Software installed on the
common storage
device accessed by multiple computers provided the number of
licensed
copies is not exceeded by the number of concurrent users.).
(b) Make one copy of the Software in machine readable form
solely for
backup purposes.
2. PROPRIETARY MATERIAL AND RESTRICTIONS. "Proprietary
Material" shall
mean the Programs(s) in any form and the algorithms, technology
and know-
how embodied therein and all documentation, manuals and other
material
related thereto. Customer expressly acknowledges that the
Proprietary
Material is confidential and proprietary property of TELSYS
and hereby
agrees to receive and maintain it as it would its own
confidential and
proprietary material. Licensee shall not cause or permit
disclosure of any
Proprietary Material to any person other than the Licensee's
employees and
consultants whose responsibilities require access to such
material without
the prior written consent of TELSYS.
The Software contains trade secrets in its human perceivable
form and, to
protect them, the Licensee may not REVERSE ENGINEER, DECOMPILE,
DISASSEMBLE
OR OTHERWISE REDUCE THE SOFTWARE TO ANY HUMAN PERCEIVABLE FORM.
LICENSEE
MAY NOT MODIFY, ADAPT, TRANSLATE, RENT, LEASE, LOAN OR CREATE
DERIVATIVE
WORKS BASED UPON THE SOFTWARE OR ANY PART THEREOF.
3. TERMINATION. This License is effective until terminated.
This License
will terminate immediately without notice from TELSYS or
judicial
resolution if Licensee fails to comply with any provision of this
License.
Upon such termination you must destroy the Software, all
accompanying
written materials and all copies thereof, and Sections 2, 5, 6,
and 7 will
survive any termination.
4. EXPORT LAW ASSURANCES. You agree that neither the
Software nor any
direct product thereof is being or will be shipped,
transferred or
reexported, directly or indirectly, into any country prohibited
by the
United States Export Administration Act and the regulations
thereunder or
will be used for any purpose prohibited by the Act.
5. LIMITED WARRANTY. TELSYS warrants that the Software
programs (which
include embedded third party software) licensed from it will
perform in
substantial conformance to the program specifications
therefore for a
period of one year from the date of receipt from TELSYS. TELSYS
warrants
the storage media containing Software against failure during the
warranty
period. No updates are provided. TELSYS' obligation hereunder
shall be to
replace any defective media with Software which substantially
conforms to
TELSYS' applicable published specifications or in the
event that
replacement is not possible, to refund the purchase price paid
by the
Licensee for any defective Software products. TELSYS makes no
warranty
that its Software products will work in combination with any
hardware or
applications Software products independently purchased by the
Customer from
third party vendors.
THIS LIMITED WARRANTY IS THE ONLY WARRANTY PROVIDED BY TELSYS
AND TELSYS
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESSED OR
IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE WITH REGARD TO THE
SOFTWARE AND
ACCOMPANYING WRITTEN MATERIALS. Because some jurisdictions do
not allow
the exclusion or limitation of implied warranties, the above
limitation may
not apply to you.
6. LIMITATION OF REMEDIES AND DAMAGES. IN NO EVENT WILL
TELSYS, ITS
PARENT OR SUBSIDIARIES OR ANY OF THE LICENSORS, DIRECTORS,
OFFICERS,
EMPLOYEES OR AFFILIATES OF ANY OF THE FOREGOING BE LIABLE TO THE
LICENSEE
FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR SPECIAL
DAMAGES
WHATSOEVER(INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND
THE LIKE)
WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE
USE OF OR
INABILITY TO USE THE SOFTWARE OR ACCOMPANYING WRITTEN MATERIAL,
REGARDLESS
OF THE BASIS OF THE CLAIM AND EVEN IF TELSYS OR A TELSYS
REPRESENTATIVE HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. TELSYS'S
LIABILITY TO THE
LICENSEE FOR DIRECT DAMAGES FOR ANY CAUSE WHATSOEVER, AND
REGARDLESS OF THE
FORM OF THE ACTION, WILL BE LIMITED TO THE ACTUAL PRICE
PAID FOR THE
LICENSE TO USE THE SOFTWARE.
7. U.S. GOVERNMENT RESTRICTED RIGHTS. This License will be
construed
under the laws of the State of Maryland, except for that
body of law
dealing with conflicts of law. If any provision of this License
shall be
held by a court of competent jurisdiction to be contrary to
law, that
provision will be enforced to the maximum extent permissible,
and the
remaining provision of this License will remain in full force
and effect.
If the Licensee is a U.S. Government user then the Software is
provided
with "RESTRICTED RIGHTS" as set forth in subparagraphs (c)(1)
and (2) of
the Commercial Computer Software-Restricted Rights clause at FAR
52.227-19
or subparagraph (c)(1)(ii) of the Rights in Technical Data and
Computer
Software clause at DFARS 252.227-7013, as applicable.
F-
1
<PAGE>
SCHEDULE F: EXTENDED WARRANTY/MAINTENANCE AND REPAIR
(1) EXTENDED WARRANTY/MAINTENANCE
(a) Option and Orders
At any time during the Product Warranty period,
Unisys may require
Subcontractor to furnish extended warranty/maintenance
services, for
some or all of the Products purchased by Unisys
pursuant to this
Subcontract. This option to purchase these
services shall be
exercised from time to time by Unisys delivering to
Subcontractor
one or more written Purchase Orders. Each Purchase
Order shall
specify the following information: (1) the
Products to be
maintained; (2) the term of the Purchase Order (which
may be for a
single maintenance call or as long as the remaining
term of this
subcontract); (3) the prices for the maintenance
services specified
in the Purchase Order; and (4) such other information
as Unisys and
Subcontractor shall reasonably agree is necessary or
desirable to
further define the rights, liabilities, obligations
and duties of
the parties under each Purchase Order. Unisys may
order maintenance
Services provided a written Purchase Order is issued by
Unisys.
(b) Subcontractor shall provide an Extended Hardware
Warranty that will
consist of the following:
(1) The Extended Hardware Warranty, shall provide
coverage after
the commercial warranty concludes.
(2) If Extended Hardware Warranty is purchased for
equipment for
which the basic hardware warranty has previously
expired, the
Subcontractor is entitled to perform, at the
then current
hourly rates (provided in Attachment 1 to this
Schedule F),
within 15 days from the receipt of an order
requesting Extended
hardware Warranty, a pre-maintenance inspection
in order to
certify that, at the time that the
Subcontractor commences
Extended Hardware Coverage, the equipment
meets current
equipment specifications. If any equipment is not
up to current
Subcontractor revision levels by
Subcontractor standards,
Subcontractor shall submit an estimate, within
the 15 day
period, which shall detail the price of
labor and parts
required to bring that equipment up to
the required
Subcontractor's maintenance level. Unisys may
choose to accept
the Subcontractor's estimate and have the
Subcontractor the
upgrade. If Unisys chooses not to have the piece
of equipment
brought up to Subcontractor maintenance
level, then
Subcontractor is not obligated to maintain
that piece of
equipment.
(2) EXTENDED WARRANTY/MAINTENANCE PRICING DISCOUNTS
The pricing discounts for the maintenance services ordered by
Unisys shall
be specified in each Purchase Order based upon the level
and type of
maintenance services required and the applicable prices
therefore as set
forth in Schedule A.
(3) EXTENDED WARRANTY/MAINTENANCE SERVICES OPTIONS
Extended warranty/maintenance services for the Equipment
shall be provided
to keep such Equipment in, or restore such Equipment to,
good working
order and capable of performing in accordance with
the Applicable
specifications. Such support and maintenance shall be
provided by
subcontractor in accordance with the subcontractor's
maintenance plans, as
listed in Attachment 1 to this Schedule F.
(4) RETURN OF DEFECTIVE EQUIPMENT
All defective Product shall be returned by Unisys to the
vendor FOB
Destination. Subcontractor shall return repaired/replaced
product to
the designated site FOB Destination, inside delivery.
(5) SOFTWARE MAINTENANCE AND SUPPORT
Software support service shall be available for all
software/firmware
purchased under this contract. Software support shall be
provided directly
to the end-user. Subcontractor shall support all software,
including
modifications or revisions, for the full term of the
contract, in
accordance with the Subcontractor's standard commercial
practices.
Software support shall consist of correction revisions
through software
patches, updates, upgrades, and modifications, and technical
support for
problem resolution. Unisys shall receive the initial customer
call and
provide initial technical analysis and problem resolution. If
Unisys
cannot resolve the situation, then Subcontractor support
shall be
contacted.
(a) Extended Software/Firmware Warranty
Subcontractor shall make available an Extended
Software/Firmware
Warranty. The purchase of Extended Software/Firmware
Warranty
provides, for a period from the date of purchase, at no
additional
charge, the end-user with all new releases, updates,
upgrades,
modifications and patches to the associated hardware.
Subcontractor
shall deliver all new releases, updates, upgrades,
modifications and
patches covered by the Extended Software Warranty
directly to the
end-users entitled to receive them. Other
software/firmware warranty
functions which are in accordance with the
Subcontractor's standard
commercial warranty/maintenance practices shall be
included as part
of the Extended Software/Firmware Warranty. All
Software/Firmware
Extended Warranty pricing shall be firm for the full
term of the
SEWP II contract. All Software/Firmware Extended
Warranty pricing
are contained herein as part of Schedule A.
(b) Out-of Warranty Software/Firmware Upgrades
Subcontractor shall make available Software/Firmware
Upgrade pricing
for end-users who elect not to have Software/Firmware
covered by an
extended warranty plan. Said upgrades shall
comply with
Subcontractor's standard commercial upgrade terms, as
available to
the general public. All currently available out-
of warranty
Software/Firmware Upgrade pricing are contained herein
as part of
Schedule A.
(6) OUTSIDE OF WARRANTY REPAIRS
Subcontractor shall accept and fulfill Repair Orders
from Unisys on
Products and Parts outside their warranty periods,
according to the
Subcontractor's then current price list for repair parts,
labor and travel
(if necessary). Subcontractor warrants the Product/Part
repaired hereunder
against defective material, workmanship and construction
for a period of
ninety (90) days from the date of shipment to
Unisys/Customer. In the
event that any repaired Product/Part fails within thirty
(30) days after
shipment, Sucontractor agrees to consider this repair
"Defective Upon
Arrival", and shall repair or replace the malfunctioning
unit/part, at no
charge, as soon as practical. Should the Subcontractor
be unable to
repair or replace the unit/part, it shall provide a full
refund to Unisys,
upon request.
(7) CONTINUITY OF SERVICES
Subcontractor agrees that all the Extended
Warranty/Maintenance Services
defined in this Schedule F shall remain available to
Unisys' throughout
the term of this Subcontract and any renewals thereof."
(8) WARRANTY AND EXTENDED WARRANTY/MAINTENANCE POINT OF CONTACT
All contact concerning Warranty and Extended
Warranty/Maintenance issues
and questions shall be made between the following
individuals, or their
designees, during the term of this Agreement. Formal
notifications should
be sent in writing to the other party by certified mail,
return receipt
requested, or by wire communications (E.G., telex, telefax,
twx, etc.) to
the following addresses, or to such other address as the
party may, by
written notice, designate to the other from time to time.
UNISYS: COPY TO:
Unisys Corporation Unisys Corporation
7455-J New Ridge Road 8008 Westpark Drive
Hanover, Maryland 21076 McLean, Virginia 22102
Telephone: 410-684-2010 Telephone: 703-790-7733
Telefax: 410-684-2681 Telefax: 703-790-7825
Attn.: Dexter Berry Attn.: Gerald Cimarelli
Customer Service Manager Major Accounts Manager
SUBCONTRACTOR: COPY TO:
TSI TelSys Incorporated TSI TelSys Incorporated
7100 Columbia Gateway Drive 7100 Columbia Gateway Drive
Columbia, Maryland 21046 Columbia, Maryland 21046
Telephone: 410-872-3900 Telephone: 410-872-3900
Telefax: 410-872-3902 Telefax: 410-872-3902
Attn.: William Rohrs Attn.: Ed O'Malley
VP, Manufacturing Director, Contracts
F-
2
<PAGE>
SCHEDULE F
ATTACHMENT 1
EXTENDED WARRANTY/MAINTENANCE PRICING AND PLANS
TSI TELSYS, INC. ("TSI TELSYS")
EQUIPMENT MAINTENANCE, SOFTWARE MAINTENANCE, AND INSTALLATION
PROGRAM
TERMS AND CONDITIONS
1. SCOPE
a. TSI TELSYS SHALL BE OBLIGATED TO PROVIDE INSTALLATION AND/OR
MAINTENANCE
FOR ALL EQUIPMENT AS MAY BE REQUESTED BY THE CUSTOMER DURING
THE CONTRACT
TERM OF THIS AGREEMENT. SERVICES WILL BE PROVIDED IN
ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT.
b. THE SYSTEM INSTALLATION, SILVER MAINTENANCE, GOLD
MAINTENANCE, AND
PLATINUM MAINTENANCE OPTIONS DESCRIBED HEREIN ARE FOR
SERVICES RENDERED
WITHIN THE CONTINENTAL UNITED STATES (CONUS). ADDITIONAL
CHARGES FOR
OUTSIDE THE CONTINENTAL UNITED STATES (OCONUS) ARE STATED IN
PARAGRAPH 7.
c. THE SCOPE OF THIS AGREEMENT APPLIES TO INSTALLATION AND
MAINTENANCE
SERVICES ONLY. FOR PRODUCT REPAIR SERVICE PROGRAMS AND NON-
CONTRACT
MAINTENANCE SERVICES, CONTACT TSI TELSYS DIRECTLY.
2. TERM
The initial term of this Agreement shall be a period of one
(1) year from
the effective date of maintenance service (not applicable to
installation
service). This Agreement will automatically renew for an
additional one-
year term unless the Customer provides written notice of
cancellation
thirty (30) days prior to the expiration of this Agreement.
TSI may
increase the maintenance charges hereunder at the renewal of
a term,
however the revised charges shall not exceed the then-current
published
TSI TelSys rates for the same level and type of support.
3. OBLIGATIONS OF TSI TELSYS
a. TSI TELSYS WILL COMPLY WITH ALL REGULATIONS AND PROCEDURES
IN EFFECT AT
THE CUSTOMER SITE WHEN PROVIDING SERVICES UNDER THIS
AGREEMENT.
b. TSI TELSYS MAY USE NEW OR REFURBISHED REPLACEMENT PARTS
WHICH OPERATE
LIKE NEW PARTS IN EFFECTING REPAIRS. ALL PARTS WHICH HAVE
BEEN
REPLACED SHALL BECOME THE PROPERTY OF TSI TELSYS.
c. TSI TELSYS WILL PROVIDE THE CUSTOMER WITH A SITE
PREPARATION GUIDE AND
CHECKLIST, AND WILL SCHEDULE INSTALLATION WITH THE
CUSTOMER.
4. OBLIGATIONS OF CUSTOMER
a. CUSTOMER PERSONNEL SHALL NOT PERFORM MAINTENANCE OR
ATTEMPT REPAIRS TO
EQUIPMENT WHILE SUCH EQUIPMENT IS UNDER MAINTENANCE WITH
TSI TELSYS
UNLESS PRIOR WRITTEN APPROVAL IS PROVIDED BY TSI TELSYS.
b. THE CUSTOMER SHALL PERMIT ACCESS TO TSI TELSYS PERSONNEL
TO THE
EQUIPMENT WHICH REQUIRES MAINTENANCE OR INSTALLATION,
SUBJECT TO
REASONABLE SECURITY MEASURES. THE CUSTOMER SHALL SHIP THE
EQUIPMENT
BACK TO TELSYS AS NECESSARY AND IN ACCORDANCE WITH THIS
AGREEMENT.
c. IF SYSTEMS INSTALLATION SERVICE IS PURCHASED, THE CUSTOMER
SHALL
PREPARE THE SITE IN ACCORDANCE WITH THE SITE PREPARATION
GUIDE PROVIDED
BY TSI TELSYS AND FAX A COMPLETED SITE PREPARATION
CHECKLIST TO THE TSI
TELSYS SERVICE OPERATIONS CENTER PRIOR TO THE SCHEDULED
INSTALLATION
DATE, AND PROVIDE A SITE CONTACT FOR THE TSI TELSYS FIELD
ENGINEER.
d. THE CUSTOMER SHALL: (I) INSURE THAT THE EQUIPMENT IS
INSTALLED IN A
LOCATION WHICH MEETS THE ENVIRONMENTAL CONDITIONS CALLED
FOR BY TSI
TELSYS' PRODUCT SPECIFICATIONS; (II) MAINTAIN CURRENT
BACKUPS OF TSI
TELSYS SOFTWARE; (III) INSTALL ALL TSI TELSYS' SOFTWARE
UPDATES WITHIN
SIX MONTHS OF RECEIPT; AND (IV) LIMIT ACCESS TO ANY TSI
TELSYS
TECHNICAL INFORMATION TO CUSTOMER EMPLOYEES AND AGENTS
WITH A SPECIFIC
NEED RELATED TO USE OF THE SOFTWARE AND OTHER RELATED
DOCUMENTATION
PROVIDED BY TSI TELSYS.
5. AVAILABLE INSTALLATION AND REMEDIAL MAINTENANCE
A. STANDARD SYSTEM INSTALLATION (SSI) SERVICE - PROVIDES FOR CONUS
ON-SITE
INSTALLATION OF A TSI TELSYS PRODUCT, MONDAY THROUGH FRIDAY,
FROM 8 A.M. TO
5 P.M. EASTERN STANDARD TIME (EST).
FEATURES OF SSI SERVICE ARE:
(1) HARDWARE-UNPACK AND SET-UP IN RACK, SHELF, OR
TABLE;
(2) SOFTWARE-UNPACK MEDIA AND DOCUMENTATION, LOAD
SOFTWARE, AND
CONFIGURE AND INITIALIZE SOFTWARE TO COMPLY
WITH PUBLISHED
OPERATING STANDARDS AND MANUALS.
THE CUSTOMER MUST ORDER THE STANDARD SYSTEM INSTALLATION
SERVICE WHEN
PURCHASING TSI TELSYS EQUIPMENT UNLESS A WRITTEN WAIVER IS
REQUESTED BY
THE CUSTOMER AND APPROVED BY TSI TELSYS.
6. MAINTENANCE
a. Silver Maintenance (SM) Service - Provides for remedial
maintenance
and enhanced technical support for TSI TelSys products, Monday
through Friday,
from 8 a.m. to 5 p.m. (EST).
Features of Silver Maintenance service are:
(1) RETURN TO FACTORY REPAIR OF NON-FUNCTIONING
EQUIPMENT - TSI
TELSYS WILL SHIP THE REPAIRED EQUIPMENT BACK TO THE
CUSTOMER
WITHIN TEN (10) BUSINESS DAYS OF RECEIPT AT THE
TSOC;
(2) LABOR AND MATERIALS FOR THE REPAIR OF THE TELSYS
PRODUCT AT THE
TSOC;
(3) TOLL-FREE NUMBER ACCESS NUMBER TO THE TSOC;
(4) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(5) MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(6) NOTIFICATION OF RELEASED ENGINEERING CHANGES.
B. GOLD MAINTENANCE (GM) SERVICE - COMPRISES SILVER
MAINTENANCE SERVICE
PLUS THESE ADDITIONAL FEATURES
FEATURES OF GOLD MAINTENANCE SERVICE ARE:
(1) THE FEATURES OF SILVER MAINTENANCE PLUS;
(2) REMOTE DIAGNOSTICS PERFORMED BY THE TSOC
(SCHEDULED);
(3) SYSTEM SOFTWARE UPDATES (E.G., A MINOR REVISION
FROM VERSION
3.0 TO 3.1);
(4) 24 HOUR MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(5) HARDWARE UPDATES
(6) PREPAID SHIPPING (CARRIER) CHARGES WITH A VALID
RMA NUMBER FROM
THE TSOC .
C. FEATURES OF PLATINUM SERVICE ARE:
(1) GOLD MAINTENANCE SERVICE PLUS THESE ADDITIONAL
FEATURES;
(2) TELSYS WILL SHIP THE REPAIRED OR A REPLACEMENT PART
BACK THE
NEXT BUSINESS DAY AFTER RECEIPT AT THE TSOC;
(3) SYSTEM SOFTWARE UPGRADES (E.G., A MAJOR REVISION
FROM VERSION
3.1 TO 4.0) WHICH INCLUDE NEW FEATURES AND OPTIONS
IN ADDITION TO
SYSTEM OPERATIONAL ENHANCEMENTS AND BUG FIXES;
(4) ON-SITE MAINTENANCE SERVICE AT A CUSTOMER CONUS
SITE. A
QUALIFIED SERVICE TECHNICIAN WILL BE DISPATCHED TO
THE CUSTOMER
LOCATION WITHIN THE NEXT BUSINESS DAY PLUS
REASONABLE PREPARATION
AND TRAVEL TIME;
(5) ALL TRAVEL CHARGES ASSOCIATED WITH ON-SITE CONUS
SUPPORT
(6) HARDWARE UPDATES PROVIDED AT REGULAR INTERVALS;
(7) INSTALLATION OF PURCHASED TSI OPTIONS.
NOTE: TSI TELSYS WILL, AT ITS SOLE DISCRETION,
DETERMINE THE
NECESSITY AND APPROPRIATENESS OF AN ON-SITE CALL VERSUS
AN OFF-SITE
REPAIR OF THE EQUIPMENT AT THE TSOC. SHOULD TSI TELSYS
DETERMINE
THAT AN ON-SITE CALL IS REQUIRED, IT ALONE WILL DECIDE
ON THE
DURATION AND QUANTITY OF ON-SITE MAINTENANCE CALLS
NECESSARY TO
REPAIR THE EQUIPMENT
A. SOFTWARE SERVICE (SS) PROVIDES FOR REMEDIAL MAINTENANCE SUPPORT
AND UPGRADES
FOR TSI TELSYS' SOFTWARE PRODUCTS, MONDAY THROUGH FRIDAY, FROM
8 A.M. TO 5
P.M. (EST).
FEATURES OF THE SOFTWARE SERVICE ARE:
(1) SEMI-ANNUAL SYSTEM SOFTWARE UPGRADES;
(2) SYSTEM SOFTWARE ENHANCEMENTS;
(3) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(4) REMOTE DIAGNOSTICS VIA THE TSOC;
(5) TOLL-FREE ACCESS TO THE TSOC.
7. COVERAGE AND ELIGIBILITY- EQUIPMENT MAINTENANCE
a. TO BE ELIGIBLE FOR MAINTENANCE COVERAGE UNDER THIS
AGREEMENT, THE
EQUIPMENT MUST BE DETERMINED BY TSI TELSYS TO BE IN GOOD
OPERATING
CONDITION. IN ORDER TO DETERMINE THAT THE EQUIPMENT IS IN
GOOD
OPERATING CONDITION:
(1) THE EQUIPMENT MUST PRESENTLY BE UNDER A TSI TELSYS
WARRANTY OR
MAINTENANCE AGREEMENT;
(2) EQUIPMENT OUTSIDE OF A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT MUST HAVE BEEN REPAIRED BY TSI TELSYS
WITHIN NINETY
(90) DAYS OF THE REQUEST FOR A TSI TELSYS
DETERMINATION OF
CONDITION;
(3) IF THE EQUIPMENT IS OUTSIDE A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT, IT MUST BE EXAMINED BY TSI TELSYS AND
REPAIRED, IF
NECESSARY, AT THE CUSTOMER'S EXPENSE PRIOR TO
ISSUANCE OF A
MAINTENANCE AGREEMENT.
a. A WRITTEN MAINTENANCE ORDER SHALL BE THE ONLY BASIS FOR
MAINTENANCE IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
MAINTENANCE AGREEMENT.
TSI TELSYS WILL CONFIRM A MAINTENANCE ORDER BY PROVIDING
THE CUSTOMER
WITH A RETURN MATERIAL AUTHORIZATION (RMA) WITHIN TWENTY-
FOUR (24)
HOURS OF THE CUSTOMER'S REQUEST. ORDER RENEWALS WILL BE
AUTOMATICALLY
ACCEPTED FOR EQUIPMENT WHICH MAY HAVE BEEN DISCONTINUED
FROM USE FOR
TEMPORARY PERIODS OF TIME NOT LONGER THAN 120 CALENDAR
DAYS.
b. ALL WRITTEN CORRESPONDENCE FROM THE CUSTOMER SHALL BE
DIRECTED TO THE
TSOC.
c. MAINTENANCE SERVICE SHALL COMMENCE ON A MUTUALLY AGREED
DATE BETWEEN
THE CUSTOMER AND THE TSOC, WHICH WILL BE SPECIFIED IN THE
MAINTENANCE
ORDER. MAINTENANCE ORDERS SHALL NOT BE MADE EFFECTIVE
BEFORE THE
EXPIRATION OF ANY APPLICABLE MAINTENANCE OR WARRANTY
PERIODS.
8. TIME AND MATERIAL RATES FOR ON-SITE SERVICE (EQUIPMENT
MAINTENANCE)
Should the Customer request On-Site maintenance during the periods
below, the
following rates and conditions shall apply.
a. CONUS Support
TIME PERIOD RATE
(1) REGULAR HOURS (8 A.M. TO 5 P.M. LOCAL*
(2) AFTER HOURS (MONDAY THROUGH FRIDAY*
(3) AFTER HOURS (SATURDAY, SUNDAY, HOLIDAYS*
[*Confidential portions omitted and filed separately with the
Commission]
*ONLY APPLICABLE TO CUSTOMER REQUESTS UNDER THE SILVER AND GOLD
SERVICE
OPTIONS. THERE IS NO ADDITIONAL CHARGE FOR MAINTENANCE SERVICE
DURING
REGULAR HOURS FOR THE PLATINUM SERVICE OPTION.
THERE SHALL BE A FOUR (4) HOUR MINIMUM CHARGE FOR ON-SITE SERVICE.
A FULL HOUR
SHALL BE CHARGED FOR ANY SIXTY (60) MINUTE PERIOD OR ANY FRACTION
THEREOF. THE
REGULAR AND AFTER HOUR RATES DO NOT INCLUDE REASONABLE AND ACTUAL
TRAVEL
EXPENSES WHICH SHALL BE CHARGED TO THE CUSTOMER FOR EACH ON-SITE
SERVICE CALL.
B. OCONUS SUPPORT
SHOULD THE CUSTOMER REQUIRE THAT ON-SITE INSTALLATION AND/OR
MAINTENANCE BE
PERFORMED OCONUS, ADDITIONAL COSTS SHALL BE CHARGED TO THE
CUSTOMER. SUCH
CHARGES WILL BE LIMITED TO REASONABLE AND ACTUAL TRAVEL EXPENSES,
INCLUDING
TRAVEL COSTS, PER DIEM AND LODGING IF OVERNIGHT STAY IS NECESSARY.
THESE
EXPENSES WILL BE IN ADDITION TO THE HOURLY CHARGES DESCRIBED ABOVE
FOR CONUS
REGULAR AND AFTER HOURS SUPPORT. SUCH ADDITIONAL CHARGES WILL
APPLY TO EACH
ON-SITE MAINTENANCE REQUEST, AND IT WILL BE LIMITED TO ONE ROUND
TRIP PER
SERVICE CALL.
9. EQUIPMENT RETURN
a. PRODUCTS RETURNED TO TSI TELSYS FOR MAINTENANCE MUST BE PRE-
AUTHORIZED BY
TSI TELSYS WITH AN RMA NUMBER MARKED ON THE OUTSIDE OF THE
PACKAGE, AND SENT
PRE-PAID, INSURED, AND PACKAGED APPROPRIATELY FOR SAFE
SHIPMENT. THE
CUSTOMER SHALL BE RESPONSIBLE FOR RISK OF LOSS OR DAMAGE TO THE
EQUIPMENT
UNTIL RECEIVED AND ACCEPTED AT THE TSOC. TSI TELSYS SHALL BE
RESPONSIBLE
FOR RISK OF LOSS OR DAMAGE UNTIL THE EQUIPMENT HAS BEEN
RETURNED TO THE
CUSTOMER.
b. WHEN TSI TELSYS REMOVES EQUIPMENT FOR OFF-SITE REPAIR, IT SHALL
BE
RESPONSIBLE FOR ANY LOSS OR DAMAGE TO THE PRODUCT FROM THE TIME
OF REMOVAL
UNTIL THE TIME OF RETURN OF THE EQUIPMENT TO THE CUSTOMER.
10. EQUIPMENT MOVEMENT
Relocation of products to a site other than the site specified
initially by
Customer may affect the availability of service and will relieve
TSI TelSys'
obligation to provide On-Site service unless:
a) Customer notifies TSI TelSys thirty (30) days prior to such
relocation; b)
TSI TelSys confirms that the relocation does not affect the
availability of
service; and c) Customer agrees to pay any adjustment of charges
which may
result from the relocation.
Upon request of the Customer, TSI TelSys will supervise product
relocation,
including de-installation, crating, uncrating and reinstallation,
or perform
other associated services at the hourly rates denoted in Paragraph
7 of this
Agreement.
11. LIMITATIONS
TSI TelSys shall not be obligated under this Agreement to:
a. SERVICE ANY PRODUCT THAT HAS BEEN DAMAGED, ABUSED, OVERUSED
OR MISUSED AS
DEFINED BY TSI TELSYS AND THROUGH NO FAULT OF TSI TELSYS;
b. SERVICE ANY PRODUCT THAT HAS RECEIVED UNAUTHORIZED
MODIFICATION, REPAIR
OR SERVICE THAT IMPAIRS PERFORMANCE OR IMPEDES NORMAL
SERVICE;
c. PAINT OR REFINISH ANY PRODUCT FOR COSMETIC PURPOSES ONLY;
d. REPAIR ANY DAMAGE OR MALFUNCTION CAUSED BY THE USE OF NON-
TSI TELSYS
EQUIPMENT;
e. SERVICE ANY PRODUCT THAT HAS NOT RECEIVED THE REQUIRED USER
MAINTENANCE
AND CLEANING AT THE FREQUENCY AND AS PRESCRIBED IN THE USER
MANUAL.
f. PROVIDE OR REPLACE CONSUMABLE ITEMS USED WITH TSI EQUIPMENT
(I.E.
MAGNETIC MEDIA, LAMPS, ETC.)
ANY SERVICE IDENTIFIED IN 10.A-E ABOVE AND PROVIDED BY TSI
TELSYS AT THE
CUSTOMER'S REQUEST SHALL BE CHARGED TO CUSTOMER AT TSI
TELSYS' THEN
CURRENT RATES FOR PARTS AND AT THE HOURLY RATES IN PARAGRAPH
7 FOR
SERVICE.
12. WARRANTIES
a. TSI TelSys warrants new and refurbished "as new" parts for the
duration of
this maintenance Agreement or ninety (90) days after installation,
whichever is
later.
b. IN CONNECTION WITH THIS AGREEMENT, SERVICES RENDERED HEREUNDER
AND PARTS
SUPPLIED PURSUANT HERETO, TSI TELSYS MAKES NO WARRANTY, EITHER
EXPRESSED OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF FITNESS
FOR PARTICULAR
PURPOSE OR OF MERCHANTABILITY. TSI TELSYS' SOLE OBLIGATION SHALL
BE LIMITED TO
TSI TELSYS' REASONABLE EFFORTS AT THE MAINTENANCE, REPAIR, OR
REPLACEMENT OF
ANY DEFECTIVE PRODUCT. Some states do not allow the exclusion of
implied
warranties, so the exclusion above may not apply to the Customer.
13. LIMITATION OF LIABILITIES
TSI TELSYS AND/OR ITS REPRESENTATIVE'S LIABILITY UNDER OR ARISING
OUT OF THIS
AGREEMENT, WHETHER FOR BREACH OF CONTRACT, TORT, OR OTHERWISE
SHALL BE LIMITED
TO A REFUND OF THE PRO RATA ANNUAL MAINTENANCE CHARGES PAID, IF
ANY, FOR THE
ITEM OF PRODUCT INVOLVED IN THE CLAIM. IN NO EVENT WILL TSI
TELSYS OR ITS
REPRESENTATIVES BE LIABLE FOR ANY INDIRECT, SPECIAL
ORCONSEQUENTIAL DAMAGES,
INCLUDING, BUT NOT LIMITED TO, LOSSESOF BUSINESSAND/OR PROFITS,
WHETHER
FORESEEABLE OR NOT, CAUSED BY ITS PRODUCT OR SERVICES RELATED
THERETO. Some
states do not allow the limitation or exclusion of liability
forincidental or
consequential damages, so the limitation above may not apply to
the Customer.
14. BREACH OF CONTRACT AND REMEDIES
Should Customer: (i) default in the payment of any sum of money
due beyond the
thirtieth (30th) day after the same is due; or (ii) default in the
performance
of any other of its obligations under this Agreement, which
default continues
for thirty (30) days after receipt by Customer of notice thereof
from TSI
TelSys; or (iii) permit any person other than a TSI TelSys
authorized service
technician to alter or change any TSI TelSys product without TSI
TelSys' prior
written consent, then in any such event TSI TelSys may at its
option proceed
with the following: (a) terminate this Agreement; and (b) convert
any unpaid
and/or future charges for any and all services rendered to
Customer under this
Agreement to TSI TelSys' then-current rates. The rights afforded
TSI TelSys
under this Paragraph 13 will not be deemed to be exclusive, but
shall be in
addition to any rights or remedies provided by law.
15. MISCELLANEOUS
a. THIS AGREEMENT CONSTITUTES HE ENTIRE UNDERSTANDING BETWEEN THE
CUSTOMER AND
TSI TELSYS WITH RESPECT TO THE SUBJECT MATTER OF THE AGREEMENT
AND MAY BE
AMENDED OR MODIFIED ONLY BY WRITTEN AGREEMENT BETWEEN THE
PARTIES. IN THE
EVENT THAT THERE IS ANY VARIANCE BETWEEN THE TERMS OF THIS
AGREEMENT AND THE
CUSTOMER'S PURCHASE ORDER TERMS, THE TERMS AND CONDITIONS OF
THIS AGREEMENT
SHALL PREVAIL.
b. IF ANY TERM OR PROVISION OF THIS AGREEMENT SHALL BE FOUND TO BE
ILLEGAL OR
UNENFORCEABLE, THEN, NOTWITHSTANDING, THIS AGREEMENT SHALL
REMAIN IN FULL
FORCE AND EFFECT, AND SUCH TERM OR PROVISION WILL BE STRICKEN,
PROVIDED THAT
IN SUCH EVENT THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH
SUBSTITUTE
ENFORCEABLE PROVISIONS MOST NEARLY REFLECT THE PARTIES ORIGINAL
INTENT IN
ENTERING INTO THIS AGREEMENT.
c. THIS AGREEMENT SHALL BE BINDING ON THE PARTIES HERETO AND THEIR
SUCCESSORS
AND ASSIGNS, BUT IS NOT ASSIGNABLE BY CUSTOMER IN ANY PART
WITHOUT THE PRIOR
WRITTEN CONSENT OF TSI TELSYS, AND ANY ATTEMPTED ASSIGNMENT
WITHOUT SUCH
CONSENT SHALL BE NULL AND VOID. TSI TELSYS RESERVES THE RIGHT
TO ASSIGN THE
PERFORMANCE OF THIS AGREEMENT TO A QUALIFIED THIRD PARTY.
d. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MARYLAND.
e. NEITHER PARTY SHALL BE RESPONSIBLE TO THE OTHER FOR A DEFAULT,
DELAY OR
FAILURE TO PERFORM HEREUNDER IF SUCH DEFAULT, DELAY OR FAILURE
TO PERFORM
(INCLUDING, BUT NOT LIMITED TO, MEETING THE RESPONSE TIME
REQUIREMENT OF
THIS AGREEMENT) IS DUE TO ONE OR MORE CAUSES BEYOND ITS
REASONABLE CONTROL
INCLUDING, BUT NOT LIMITED TO, LABOR DISPUTES, CIVIL
DISTURBANCES,
EPIDEMICS, WAR, EMBARGOES, FIRE, ACTS OF GOD OR DEFAULT OF A
COMMON CARRIER
OR SUPPLIER. THIS SECTION SHALL NOT APPLY TO THE CUSTOMER'S
OBLIGATION TO
PAY THE FEE(S) SET FORTH IN THIS AGREEMENT.
G-
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<PAGE>
SCHEDULE G: OTHER SUBCONTRACTOR SERVICES
1) TRAINING
(a) Upon Unisys request, Subcontractor shall provide
training,at the rates
listed in Schedule A, to Unisys designated personnel
in the theory,
operations, installation and maintenance of the
Products, including
appropriate training manuals having logic diagrams and
explaining the
theory of operations. Such training shall be of 5 days
duration at Unisys
selected site for a maximum of 3 personnel, and shall be
sufficient to
enable those personnel to train other personnel of Unisys or
its designee.
(b) Upon Unisys request, Subcontractor shall provide training as
recited in
the preceding paragraph which is reasonably required by
Unisys relating to
changes in the Products and improvements thereof.
H-
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<PAGE>
SCHEDULE H: INSURANCE
RESERVED
I-
1
<PAGE>
SCHEDULE I: FEDERAL ACQUISITION REGULATION
This Subcontract incorporates the following Federal
Acquisition Regulation
clauses and Government supplements thereto by reference, with the
same force
and effect as if they were given in full text. The
obligations of the
Contractor to the Government as provided in said clauses shall be
deemed to be
the obligations of Subcontractor to Unisys. Wherever appropriate
to make the
incorporated clauses applicable to this Subcontract,
references in the
incorporated clauses to the "Government" or the "Contracting
Officer" shall be
deemed to refer to or (where appropriate) to include Unisys,
references to
"Contractor" shall be deemed to refer to Subcontractor, and
references to the
"Contract" shall be deemed to refer to this Subcontract. With
respect to any
clause granting rights of any kind or nature in patents,
licenses, copyrights
or other proprietary data, Government property, audit rights, or
where a right,
act or obligation can only be performed by the Government (see
Note 1 clauses),
or where otherwise specified below, references to the Government
shall not be
deemed to grant any rights to Unisys other than as may be
required to perfect
the Government's rights as granted in such clause.
NOTE 1: Designates clauses where rights and obligations flow
directly to and
from the Government.
NOTE 2: Designates clauses applicable to subcontracts over
$2,500.
NOTE 3: Designates clauses applicable to subcontracts over
$10,000.
NOTE 4: Designates clauses applicable to subcontracts over
$25,000.
NOTE 5: Designates clauses applicable to subcontracts over
$50,000.
NOTE 6: Designates clauses applicable to subcontracts over
$100,000.
NOTE 7: Designates clauses applicable to subcontracts over
$500,000.
NOTE 8: Designates clauses applicable to subcontracts over
$1,000,000.
NOTE 9: Designates clauses applicable to subcontracts over
$10,000,000.
I-
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<PAGE>
CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUES OR
EXECUTIVE ORDERS
- - COMMERCIAL ITEMS 52.212-5 (JAN 1996) MODIFIED
(a) The Contractor agrees to comply with the following FAR
clauses, which are
incorporated in this
contract by reference to implement provisions of law or executive
order
applicable to acquisitions of commercial items;
(1) 52.222-3, Convict Labor (E.O. 11755); and
(2) 52.233-3, Protest After Award (31 U.S.C 3553 and 40 U.S.C
759).
(b) The Contractor agrees to comply with the FAR / FIRMR clauses
in this
paragraph (b) which the
contracting officer has indicated as being incorporated in this
contract by
reference to implement provisions of law or executive orders
applicable to
acquisitions of commercial items or components.
CLAUSES INCORPORATED BY REFERENCE
FAR CLAUSES:
CLAUSE NO. TITLE DATE
52.203-06 Restrictions on Subcontractor Sales to the JUL
1985
Government (Note 1)
52.203-10 Price or Fee Adjustment for Illegal or Improper SEP
1990
Activity
52.219-08 Utilization of Small Business Concerns and FEB
1990
Small Disadvantaged Business Concerns
(Note 3: first tier only)
52.219-09 Small Business and Small Disadvantaged JAN
1991
Business Subcontracting Plan (Note 7:
not applicable to small business.)
52.222-26 Equal Opportunity (Note 3; exclude par. (a)) APR
1984
52.222-35 Affirmative Action for Special Disabled and APR
1984
Vietnam Era Veterans (Note 3)
52.222-36 Affirmative Action for Handicapped Workers APR
1984
(Note 2)
52.222-37 Employment Reports on Special Disabled Veterans JAN
1988
and Veterans of the Vietnam Era (Note 3)
52.225-03 Buy American Act - Supplies JAN
1989
CLAUSE NO. TITLE DATE
52.225-09 Buy American Act - Trade Agreements Act - APR
1991
Balance of Payments Program
52.225-21 Buy American Act - North American Free Trade
Agreement APR 1994
Implementation Act - Balance of Payments Program
52.247-64 Preference for Privately Owned U. S. - Flag
Commercial APR 1984
Vessels
FIRMR CLAUSES:
CLAUSE NO. TITLE DATE
201-39.5202-3 Procurement Authority SEP
1991
(C) Comptroller General Examination of Record. The Contractor
agrees to comply
with the provisions of this paragraph (c) if this contract was
awarded using
other than sealed bid, is in excess of the simplified
acquisition threshold,
and does not contain the clause at 52.215-2, Audit and Records-
Negotiation.
(1) The Comptroller General of the United States, or
an authorized
representative of the comptroller General, shall have access
to and right
to examine any of the Contractor's directly pertinent
records involving
transactions related to this contract.
(2) The Contractor shall make available at its offices at
all reasonable
times the records, materials, and other evidence for
examination, audit,
or reproduction, until 3 years after final payment under
this contract or
for any shorter period specified in FAR Subpart 4.7,
Contractor Records
Retention, of the other clauses of this contract. If
this contract is
completely or partially terminated, the records relating
to the work
terminated shall be made available for 3 years after any
resulting final
termination settlement. Records relating to appeals under
the disputes
clause or to litigation or the settlement of claims
arising under or
relating to this contract shall be made available until
such appeals,
litigation, or claims are finally resolved.
(3) As used in this clause, records include books,
documents, accounting
procedures and practices, and other data, regardless
of type and
regardless of form. This does not require the Contractor
to create or
maintain any record that the Contractor does not maintain in
the ordinary
course of business or pursuant to a provision of law.
(End of Provision)
(D) CONTRACT TERMS AND CONDITIONS--COMMERCIAL ITEMS 52.212-4
(OCT 1995)
A. Inspection/Acceptance. The Contractor shall only tender
for acceptance
those item that conform to the requirement of this contract.
The Government
reserves the right to inspect or test any supplies or
services that have
been tendered for acceptance. The Government may
require repair or
replacement of nonconforming supplies or reperformance of
nonconforming
services at no increase in contract price. The Government must
exercise its
post-acceptance rights (1) within a reasonable time after
the defect was
discovered or should have been discovered; and (2) before any
substantial
change occurs in the condition of the item, unless the change
is due to the
defect in th eitem.
B. Assignment. The Contractor or its assignee's right to be paid
amounts due
as a result of performance of this contract, may be assigned to
a bank,
trust company, or other financing institution, including any
Federal lending
agency in accordance with the Assignment of Claims Act (31
U.S.C. 3727).
C. Changes. Changes in the terms and conditions of this
contract may be made
only by written agreement of the parties.
D. Disputes. The Prime Contractor's contract is subject to the
Contract
Disputes Acts of 1978, as amended (41 U.S.C. 601-613). Failure
of the
parties to this contract to reach agreement on any request for
equitable
adjustment, claim, appeal or action arising under or relating
to this
contract shall be considered a dispute. The Subcontractor shall
proceed
diligently with performance of this contract, pending final
resolution of
any dispute arising under the contract.
E. Definitions. The clause at FAR 52.202-1, Definitions, is
incorporated
herein by reference.
F. Excusable Delays. The Contractor shall be liable for default
unless
nonperformance is caused by an occurrence beyond the reasonable
control of
the Contractor and without its fault or negligence such as,
acts of God or
the public enemy, acts of the Government in either its
sovereign or
contractual capacity, fires, floods, epidemics, quarantine
restrictions,
strikes, unusually severe weather, and delays of common
carriers. The
Contractor shall notify the Contracting Officer in writing as
soon as it is
reasonably possible after the commencement of any excusable
delay, setting
forth the full particulars in connection therewith, shall
remedy such
occurrence with all reasonable dispatch, and shall promptly
give written
notice to the Contracting Officer of the cessation of such
occurrence.
G. Patent Indemnity. The Contractor shall indemnify the
Government and its
officers, employees and agents against liability, including
costs for actual
or alleged direct or contributory infringement of, or
inducement to
infringe, any United States or foreign patent, trademark or
copyright,
arising out of the performance of this contract, provided the
Contractor is
reasonably notified of such claims and proceedings.
H. Risk of loss. Unless the contract specifically provides
otherwise, risk of
loss or damage to the supplies provided under this contract
shall remain
with the Contractor until, and shall pass to the Government
upon:
(1) Delivery of the supplies to a carrier, if transportation is
f.o.b.
origin; or
(2) Delivery of the supplies to the Government at the
destination specified
in the contract, if transportation is f.o.b. destination.
a. Taxes. The contract price includes all applicable Federal,
State, and local
taxes and duties.
b. Termination for the Government's convenience. The Government
reserves the
right to terminate this contract, or any part hereof, for its
sole
convenience. In the event of such termination, the Contractor
shall
immediately stop all work hereunder and shall immediately cause
any and all
of its suppliers and subcontractors to cease work. Subject to
the terms of
this contract, the Contractor shall be paid a percentage of the
contract
price reflecting the percentage of the work performed prior to
the notice of
termination, plus reasonable charge the contractor can
demonstrate to the
satisfaction of the Government using its standard record
keeping system,
have resulting from the termination. The contractor shall not
be required
to comply with the cost accounting standards or contract cost
principles for
this purpose. This paragraph does not give the Government any
right to
audit the contractor's records. The Contractor shall not be
paid for any
work performed or costs incurred which reasonably could have
been avoided.
c. Termination for cause. The Government may terminate this
contract, or any
part hereof, for cause in the event of any default by the
Contractor, or if
the Contractor fails to comply with any contract terms and
conditions, or
fails to provide the Government, upon request, with adequate
assurance of
future performance. In the event of termination for cause, the
Government
shall not be liable to the Contractor for any amount for
supplies or
services not accepted, and the Contractor shall be liable to
the Government
for any and all right and remedies provided by law. If it is
determined
that the Governmentimproperly terminated this contract for
default, such
termination shall be deemed a termination for convenience.
d. Title. Unless specified elsewhere in this contract, title to
items
furnished under this contract shall pass to the Government upon
acceptance,
regardless of when or where the Government takes physical
possession.
e. Warranty. The Contractor warrants and implies that the items
delivered
hereunder are merchantable and fit for use for the particular
purpose
described in this contract.
f. Limitation of liability. Except as otherwise provided by an
express or
implied warranty, the Contractor will not be liable to the
Government for
consequential damages resulting from any defect or deficiencies
in accepted
items.
g. Compliance. The Contractor shall comply with all applicable
Federal, State
and local laws, executive order, rules and regulations
applicable to its
performance under this contract.
h. Compliance with laws unique to Government contracts. The
Contractor agrees
to comply with 31 U.S.C. 1352 relating to limitations on the
use of
appropriated funds to influence certain Federal contracts; 18
U.S.C 431
relating to officials not to benefit; 40 U.S.C 327, et seq.,
Contract Work
Hours and Safety Standards act; 41 U.S.C. 51-58, Anti-Kickback
Act of 1986;
41 U.S.C. 251 related to whistle blower protections; and 49
U.S.C. 40118,
Fly American.
(End of Provision)
<PAGE>
SCHEDULE J: TECHNICAL SPECIFICATIONS
RESERVED
<PAGE>
SCHEDULE K: SUBCONTRACTOR REPRESENTATIONS AND
CERTIFICATIONS
<PAGE>
SCHEDULE L: SPECIAL REQUIREMENTS
(1) PRIORITY RATING
The Prime Contract has been given a priority rating of DOA7.
Subcontractor
agrees to follow the provisions of applicable Government
regulations and orders
in obtaining and providing Products and Services needed to
fulfill this
Subcontract.
(2) SEWP BOWL HARDWARE SUPPORT
At Prime contract award, upon request of the Government,
Subcontractor shall
supply to Unisys, at no cost, one set (hardware, software,
firmware and
cables) of the equipment offered by Subcontractor in response to
the
specifications of the base networking products. Said equipment
shall remain at
the SEWP BOWL for the duration of the contract, or until replaced
by a
Technology Refreshment upgrade. If Subcontractor submits to Unisys
a Technology
Refreshment proposal for a base networking product, Subcontractor
will provide
said replacement product to Unisys, at no cost, for the SEWP BOWL.
Title for
all product at the SEWP BOWL will remain with Subcontractor.
(3) SEWP BOWL TECHNICAL SUPPORT
Subcontractor shall provide to Unisys, in support of the SEWP
BOWL, and at no
expense, full technical support services including:
(a) Hot-line support for all products available for purchase
through the SEWP
Ordering Guide. Hot-line support authorizations for the SEWP BOWL
shall be
available prior to contract award.
(b) On-line access to bug and security patches. Access via the
World Wide Web
(WWW) is preferable.
(c) Non-disclosure briefings on emerging technologies relevant to
SEWP.
(d) Hard copy of commercially available technical specifications
for all base
networking components, with documents for all products available
on the SEWP
Ordering Guide by request.
(4) CUSTOMER SUPPORT SERVICES
Subcontractor shall provide to Unisys, at no expense, the
following customer
support services:
1. Timely dispatch of up-to-date hard and soft copy price lists
(both
commercial and GSA)
2. Timely hard copy, at no charge, of all available technical
specifications
for any products available through the SEWP Ordering Guide (per
customer's
request)
3. Configuration analysis to determine the suitability,
correctness and
availability of Subcontractor's offerings to potential customer
requirements.
(5) PROMOTING THE CONTRACT
Subcontractor shall assist the Unisys in promoting the SEWP
II contract to
all Federal Agencies during the life of the contract.
Subcontractor agrees
that the SEWP II contract shall be the Subcontractor's
preferred vehicle
for sales to the US Government. The Subcontractor's goals
shall be to:
(a) Make customers aware of the SEWP procurement vehicle.
(b) Make customers aware of the products and services available on
SEWP.
(c) Assist customers in creating timely and accurate purchase
orders.
(6) NETWORKING UPGRADE STRATEGY
Subcontractor shall, throughout the life of the Prime
Contract, provide a
viable upgrade approach, particularly when the upgrade
requires the
exchange of hardware or media. The approach should lend
itself well to a
migration strategy, as well as a cutover approach.
(7) SEWP II EXCLUSIVITY
Subcontractor agrees that Unisys will be the exclusive
provider for
Subcontractor's Products for the SEWP II program. This
exclusivity will
be inclusive of the twelve SEWP II prime contracts only.
(8) YEAR 2000 COMPATIBILITY
The products and services acquired under this Subcontract are
required to
include accurate processing of the date and date-related data
(including
but not limited to calculating, comparing and sequencing) by
all hardware
and software products delivered under this contract,
individually and in
combination, upon installation. This also includes the
manipulation of
data with dates prior to, through, and beyond January 1,
2000, and shall
be transparent to the user.
Hardware and software products provided under this contract
shall,
individually , and in combination, successfully transition
into the Year
2000 with the correct system date, without human
intervention, including
leap year calculations. Such products shall also provide
correct results
when moving forward or backward in time across the Year 2000
or
subsequent years.
<PAGE>
ATTACHMENT E
BIDDER<O~>S REPRESENTATIONS AND CERTIFICATIONS
(OVER $100,000)
BIDDER CERTIFIES THAT HE WILL SUBMIT A SUPERSEDING BIDDER<O~>S
REPRESENTATIONS AND CERTIFICATIONS WHENEVER THERE IS ANY CHANGE IN
THE
MATTERS COVERED BY THE REPRESENTATIONS AND CERTIFICATIONS.
I. INFLUENCE CERTAIN FEDERAL TRANSACTIONS
(52.203-11)
(a) The definition and prohibitions contained in the clause, at
FAR 52.203-
12, Limitation on Payments to Influence Certain Federal
Transactions,
included in this solicitation, are hereby incorporated by
reference in
paragraph (b) of this certification.
(b) The offeror, by signing its offer, hereby certifies to the
best of his
or her knowledge and belief that on or after December 23, 1989,-
(1) No Federal appropriated funds have been paid to any person for
influencing or attempting to influence an officer or employee of
any
agency, a Member of Congress, and officer or employee of Congress,
or an
employee of a Member of Congress on his or her behalf in
connection with
the awarding of any Federal contract, the making of any Federal
grant, the
making of any Federal loan, the entering into of any cooperative
agreement,
and the extension, continuation, renewal, amendment or
modification of any
Federal contract, grant, loan, or cooperative agreement;
(2) If any funds other than Federal appropriated funds (including
profit or
fee received under a covered Federal transaction) have been paid,
or will
be paid, to any person for influencing or attempting to influence
an
officer or employee of any agency, a Member of Congress, an
officer or
employee of Congress, or an employee of a Member of Congress on
his or her
behalf in connection with this solicitation, the offeror shall
complete and
submit, with its offer, OMB standard form LLL, Disclosure of
Lobbying
Activities, to the Contracting Officer; and
(3) He or she will include the language of this certification in
all
subcontract awards at any tier and require that all recipients of
subcontract awards in excess of $100,000 shall certify and
disclose
accordingly.
(c) Submission of this certification and disclosure is a
prerequisite for
making or entering into this contract imposed by section 1352,
title 31,
United States Code. Any person who makes an expenditure
prohibited under
this provision, or who fails to file or amend the disclosure form
to be
filed or amended by this provision, shall be subject to a civil
penalty of
not less than $10,000, and not more than $100,000, for each such
failure.
II. CERTIFICATION REGARDING DEBARMENT, SUSPENSION, PROPOSED
DEBARMENT, AND
OTHER RESPONSIBILITY MATTERS (52.209-5)
(a)(1) The Offeror certifies, to the best of its knowledge and
belief,
that-
(i) The Offeror and/or any of its Principals-
(A) Are NOT presently debarred, suspended, proposed for debarment,
or
declared ineligible for the award of contracts by any Federal
Agency;
(B) Have NOT, (within a three-year period preceding this offer,
been
convicted of or had a civil judgment rendered against them for:
commission
of fraud or a criminal offense in connection with obtaining,
attempting to
obtain, or performing a public (Federal, state or local) contract
or
subcontract; violation of Federal or state antitrust statutes
relating to
the submission of offers; or commission of embezzlement, theft,
forgery,
bribery, falsification or destruction of records, making false
statements,
or receiving stolen property; and
(C) Are NOT, (presently indicted for, or otherwise criminally or
civilly
charged by a governmental entity with, commission of any of the
offenses
enumerated in subdivision (a) (l) (1) (B) of this provision.
(ii) The Offeror has (has not, (within a three-year period
preceding this
offer, had one or more contracts terminated for default by any
Federal
agency.
(2) <O`>Principals,<O'> for the purposes of this certification,
means
officers; directors; changes; partners; and, persons having
primary
management or supervisory responsibilities within a business
entity (e.g.,
general manager; plant manager; head of a subsidiary, division, or
business
segment, and similar positions).
This certification concerns a matter within the jurisdiction of an
agency
of the United States and the making of a false, fictitious, or
fraudulent
certification may render the maker subject to prosecution under
section
1001, title 18, United States Code.
(b) The Offeror shall provide immediate written notice if, at any
time
prior to contract award, the Offeror learns that its certification
was
erroneous when submitted or has become erroneous by reason of
changed
circumstances.
III. SMALL BUSINESS CONCERN REPRESENTATION (52.219-1)
(a) Representation. Representation. The offeror represents and
certifies
as part of its offer that it is not a small business concern.
(b) Definition.
Small business concern, as used in this provision, means a
concern,
including its affiliates, that is independently owned and
operated, not
dominant in the field of operation in which it is bidding on
Government
contracts, and qualified as a small business under the criteria
and size
standards in this solicitation.
IV. SMALL DISADVANTAGED BUSINESS CONCERN REPRESENTATION (52.219-2)
(a) Representation. The offeror represents that it is not a small
disadvantaged business concern.
(b) Definitions.
Asian Pacific Americans, as used in this provision, means United
States
citizens whose origins are in Japan, China, the Philippines,
Vietnam,
Korea, Samoa, Guam, the U.S. Trust Territory of the Pacific
Islands
(Republic of Palau), the Northern Mariana Islands, Laos, Kampuchea
(Cambodia), Taiwan, Burma, Thailand, Malaysia, Indonesia,
Singapore,
Brunei, Republic of the Marshall Islands, or the Federated States
of
Micronesia.
Indian tribe, as used in this provision, means any Indian tribe,
band,
nation, or other organized group or community of Indians,
including any
Alaska Native Corporation as defined in 13 CFR 124.100 which is
recognized
as eligible for the special programs and services provided by the
U.S. to
Indians because of their status as Indians, or which is recognized
as such
by the State in which such tribe, band, nation, group, or
community
resides.
Native Americans, as used in this provision, means American
Indians,
Eskimos, Aleuts, and Native Hawaiians.
Native Hawaiian Organization, as used in this provision, means any
community service organization serving Native Hawaiians in, and
chartered
as a not-for-profit organization by, the State of Hawaii, which is
controlled by Native Hawaiians, and whose business activities will
principally benefit such Native Hawaiians.
Small business concern, as used in this provision, means a
concern,
including its affiliates, that is independently owned and
operated, not
dominant in the field of operation in which it is bidding on
Government
contracts, and qualified as a small business under the criteria
and size
standards in 13 CFR 121.
Small disadvantaged business concern, as used in this provision,
means a
small business concern that (a) is at least 51 percent
unconditionally
owned by one or more individuals who are both socially and
economically
disadvantaged, or a publicly owned business having at least 51
percent of
its stock unconditionally owned by one or more socially and
economically
disadvantaged individuals and (b) has its management and daily
business
controlled by one or more such individuals. This term also means
a small
business concern that is at least 51 percent unconditionally owned
by an
economically disadvantaged Indian tribe or Native Hawaiian
Organization, or
a publicly owned business having at least 51 percent of its stock
unconditionally owned by one of these entities which has its
management and
daily business controlled by members of an economically
disadvantaged
Indian tribe or Native Hawaiian Organization, and which meets the
requirements of 13 CFR part 124.
Subcontinental Asian Americans, as used in this provision means
United
states citizens whose origins are in India, Pakistan, Bangladesh,
Sri
Lanka, Bhutan, or Nepal.
(c) Qualified groups. The offeror shall presume that socially and
economically disadvantaged individuals include Black American,
Hispanic
Americans, Native American, Asian-Pacific Americans, Subcontinent
Asian
Americans, and other individuals found to be qualified by SBA
under 13 CFR
124. The offeror shall presume that socially and economically
disadvantaged entities also include Indian tribes and Native
Hawaiian
Organizations.
V. WOMEN-OWNED SMALL BUSINESS REPRESENTATIONS (52.219-3)
(a) Representation. The offeror represents that it is not a women-
owned
small business concern.
(b) Definitions.
<O`>Small business concern,<O'> as used in this provision, means
a
concern, including its affiliates, that is independently owned and
operated, not dominant in the field of operation in which it is
bidding on
Government contracts, and qualified as a small business under the
criteria
and size standards in 13 CFR 121.
<O`>Women-owned,<O'> as used in this provision, means a small
business
that is at least 51 percent owned by a woman or women who are U.S.
citizens
and who also control and operate the business.
VI. CERTIFICATION OF NONSEGREGATED FACILITIES (52.222-21)
(a) <O`>Segregated facilities<O'>, as used in the provision, means
any
waiting rooms, work areas, rest rooms and wash rooms, restaurants
and other
eating areas, time clocks, locker rooms and other storage or
dressing
areas, parking lots, drinking fountains, recreation or
entertainment areas,
transportation, and housing facilities provided for employees,
that are
segregated on the basis or race, color, religion, or national
origin
because of habit, local custom, or otherwise.
(b) By the submission of this offer, the offeror certifies that it
does not
and will not maintain or provide for its employees any segregated
facilities at any of its establishments, and that it does not and
will not
permit its employees to perform their services at any location
under its
control where segregated facilities are maintained. The offeror
agrees
that a breach of this certification is a violation of the Equal
Opportunity
clause in the contract.
(c) The offeror further agrees that (except where it has obtained
identical
certifications from proposed subcontractors for specific time
periods) it
will-
(1) Obtain identical certifications from proposed subcontractors
before the
award of subcontracts under which the subcontractor will be
subject to the
Equal Opportunity clause:
(2) Retain the certifications in the files: and
(3) Forward the following notice to the proposed subcontractors
except if
the proposed subcontractors have submitted identical
certifications for
specific time periods):
NOTICE TO PROSPECTIVE SUBCONTRACTORS OR REQUIREMENT FOR
CERTIFICATIONS OF
NONSEGREGATED FACILITIES
A Certification of Nonsegregated Facilities must be submitted
before the
award of a subcontract under which the subcontractor will be
subject to the
Equal Opportunity clause. The certification may be submitted
either for
each subcontract or for all subcontracts during a period (i.e.,
quarterly,
semiannually, or annually).
VII. PREVIOUS CONTRACTS AND COMPLIANCE REPORTS
(52.222-22)
The offeror represents that-
(a) It has participated in a previous contract or subcontract
subject
either to the Equal Opportunity clause of this solicitation, the
clause
originally contained in Section 310 of Executive Order No. 10925,
or the
clause contained in Section 201 Executive Order No. 11114;
(b) It has filed all required compliance reports; and
(c) Representations indicating submission of required compliance
reports,
signed by proposed subcontractors, will be obtained before
subcontract
awards.
VIII. AFFIRMATIVE ACTION COMPLIANCE (52.222-25)
The offeror represents that (1) it has developed and has on file
at each
establishment, affirmative action programs required by the rules
and
regulations of the Secretary of Labor (41 CFR 60-1 and 60-2),
(2) It has not previously had contracts subject to the written
affirmative
action programs requirement of the rules and regulations of the
Secretary
of Labor.
IX. CLEAN AIR AND WATER CERTIFICATION (52.223-1)
The offeror certifies that-
(a) Any facility to be used in the performance of this proposed
contract is
not listed on the Environmental Protection Agency (EPA) List of
Violating
Facilities;
(b) The offeror will immediately notify the Contracting Officer,
before
award, of the receipt of any communication from the Administrator,
or a
designee, of the EPA, indicating that any facility that the
Offeror
proposes to use for the performance of the contract is under
consideration
to be listed on the EPA list of Violating Facilities; and
(c) The offeror will include a certification substantially the
same as this
certification, including this paragraph (c), in every nonexempt
subcontract.
X. REPRESENTATION OF LIMITED RIGHTS DATA AND RESTRICTED COMPUTER
SOFTWARE
(52.227-15)
REPRESENTATION CONCERNING DATA RIGHTS
Offeror has reviewed the requirements for the delivery of data or
software
and states (offeror check appropriate block)-
Data proposed for fulfilling such requirements qualify as limited
rights
data or restricted computer software and are identified as
follows:
All Software on Schedule A <O`>Product Pricing Sheet<O'>
XI. COST ACCOUNTING STANDARDS NOTICES AND CERTIFIACTION (52.230-1)
Note: This notice does not apply to small business or foreign
governments.
This notice is in three parts, identified by Roman numerals 1
through III.
XII. REPRESENTATION OF EXTENT OF TRANSPORTATION OF SUPPLIES BY SEA
(252.247-7022)
The clause at 252.247-7022, Transportation of Supplies by Sea,
will be
included in any contract resulting from this solicitation. The
Offeror is
required to indicate whether transportation by sea is anticipated
under the
resultant contract by checking the appropriate blank as follows:
The Offeror represents that it does not anticipate that supplies,
as
defined in the clause at 252.247-7023, Transportation of Supplies
by Sea,
will be transported by sea in the performance of any contract or
subcontract resulting from this solicitation.
XIII. DISCLOSURE OF OWNERSHIP OR CONTROL GOVERNMENT OF A TERRORIST
COUNTRY
(252.209-7001)
(a) Definitions.
As used in this provision-
(1) <O`>Government of a terrorist country<O'> includes the state
and the
government of a terrorist country, as well as any political
subdivision
agency, or instrumentally thereof.
(2) <O`>Terrorist country<O'> means a country determined by the
Secretary
of State, under section 6(j) (1) (A) of the Export Administration
Act of
1979 (50 U.S.C. App. 2405 (j)(I)(A), to be a country the
government of
which has repeatedly provided support for acts of international
terrorism.
As of the date of this provision, terrorist countries include:
Cuba, Iran,
Iraq, Libua, North Korea, Sudan, and Syria.
(3) <O`>Significant interest<O'> means-
(i) Ownership of or beneficial interest in 5 percent or more of
the
form<O~>s or subsidiary<O~>s securities. Beneficial interest
included
holding 5 percent or more of any class of the firm<O~>s securities
in
<O`>nominee share, <O`> <O`>street names,<O'> or some other method
of
holding securities that does not disclose the beneficial owner,
(ii) Holding a management position in the firm, such as a director
or
officer.
(iii) Ability to control or influence the election, appointment,
or tenure
of directors or officer in the firm;
(iv) Ownership of 10 percent or more of the assets of a firm such
as
equipment, buildings, real estate, or other tangible assets of the
firm; or
(v) Holding 50 percent or more of the indebtedness of a firm.
(b) Prohibition on award.
In accordance with 10 U.S.C. 2327, no contract may be awarded to a
firm or
a subsidiary of a firm if the government of a terrorist country
has a
significant interest in the form or subsidiary, unless a waiver is
granted
by the Secretary of Defense.
(c) Disclosure.
If the government of a terrorist country has a significant
interest in the
Offeror or subsidiary of the Offeror, the Offeror shall disclose
such
interest in an attachment to its offer. If the offeror is a
subsidiary, it
shall also disclose any significant interest the government of a
terrorist
country has in any firm that owns or controls the subsidiary. The
disclosure shall include-
(1) Identification of each government holding a significant
interest; and
(2) A description of the significant interest hold by each
government.
XIV. ETHICS AND INTEGRITY CERTIFICATION
Offeror certifies that, to his knowledge, no employee on Unisys
related
work has:
1) Offered or accepted any kickbacks as that term is defined in
the Anti-
kickback Enforcement Act of 1986;
2) Offered any Unisys employee anything of value including any
gift or
promotional item;
3) Entered into any collusive bidding arrangement for any
requirement
Unisys is attempting to buy;
4) Made any <O`>product substitution<O'> or failed to deliver
products
which meet or exceed the requirements of the Unisys contract;
5) Attempted to cause a Unisys employee to act in such a manner
that would
cause that employee to violate the Unisys Code of Ethical Conduct.
BIDDER<O~>S SIGNATURE
TSI TELSYS INC.
Edward J. O<O~>Malley, Jr
6/20/97
<PAGE>
PART III: GENERAL PROVISIONS
DEFINITIONS
As used in this Subcontract, the following terms shall have
the following
meanings:
A. ACCEPTANCE DATE.
"Acceptance Date" means the date on which the Government
notifies Unisys
that the Products or Services have been accepted by the
Government.
B. APPLICABLE SPECIFICATIONS.
"Applicable Specifications" means the functional,
performance and
operational characteristics and other requirements of the
Products as such
are described in: (1) the Prime Contract, including the
applicable Federal
Information Processing Standards; (2) the descriptions
and technical
specifications contained in all documents comprising or
referenced in this
Subcontract, including Schedule J, STATEMENT OF WORK;
and (3) the
published technical specifications for the Products.
C. DAY.
"Day" means calendar day unless otherwise specified.
D. EQUIPMENT.
"Equipment" means the hardware and equipment products
and features
(including firmware, microcode, and parts) listed on
Schedule A,
EQUIPMENT.
E. PRODUCTS.
"Products" shall collectively refer to the
Equipment, Software,
documentation and technical data listed on Schedules A, B and
C.
F. SERVICES.
"Services" means all services to be rendered by
Subcontractor hereunder
and as specified in Schedules F and G.
G. SOFTWARE.
"Software" means the licensed systems and programs
including all related
documentation and material pertaining to said systems
or programs
(including firmware and microcode), listed on Schedule
B, SOFTWARE,
including all corrections, improvements, enhancements,
upgrades and
updates thereto, and any supporting programs necessary for
the proper
functioning thereof.
H. SYSTEM.
"System" means a combination of Equipment and Software in
a particular
configuration and in strict accordance with the Applicable
Specifications.
2. TERM OF PRIME CONTRACT
Notwithstanding anything herein provided, this Subcontract
(including any
issued but unfilled Purchase Orders) may be terminated by Unisys
in whole or in
part in the event of termination, expiration or nonrenewal
of the Prime
Contract for any reason, including, but not limited to, a
termination for
convenience, default or termination pursuant to any provision
of the Prime
Contract or direction by the Government to terminate this
Subcontract. Unisys
shall give written notice to Subcontractor as promptly as
practicable after
receipt by Unisys of any notice, written or otherwise, of
termination,
expiration of or intent not to renew the Prime Contract. If
this Subcontract
is so terminated, Unisys shall not be liable for any Services
performed by
Subcontractor or Products tendered pursuant to this Subcontract
after the date
of Unisys first giving of any notice (oral or written) of
termination of the
Prime Contract and this Subcontract.
3. PURCHASE ORDERS
A. PURCHASE ORDER COMPLETION.
Except as specifically directed by Unisys, any Purchase Order
issued during the
Term of this Subcontract and not completed within that
period shall be
completed by Subcontractor within the time specified in the
Purchase Order, and
shall continue to be subject to the terms of this Subcontract.
4. PRICE AND PAYMENT
A. ALL INCLUSIVE PRICE.
The purchase price/license fee specified in the Schedules is an
all-inclusive
price for the Products and Services and includes all taxes
(federal, state and
local). There shall be no additional charges for Products or
Services provided
by Subcontractor, or for fulfillment of Subcontractor's
obligations herein,
unless expressly set forth in this Subcontract.
5. TITLE AND RISK OF LOSS
A. TITLE.
Title to Products purchased hereunder shall pass directly from
Subcontractor to
the Government on the date(s) of formal acceptance by the
Government,
regardless of when or where the Government takes physical
possession, unless
the Prime Contract or this Subcontract specifically provides
for earlier
passage of title.
B. RISK OF LOSS.
Subcontractor shall be responsible for all risk of loss or
damage to the
Products ordered hereunder until the Acceptance Date, unless
such loss is
caused by the fault or negligence of Unisys or the Government,
and without
contribution thereto by Subcontractor.
6. CONFIDENTIAL INFORMATION AND DISCLOSURE
A. Any information which either party may disclose to the
other party shall
not be deemed to be confidential and shall be acquired
free from any
restriction, unless the information is proprietary to the
disclosing party and,
if it is disclosed in tangible form, the disclosing party
marks such
information as being confidential to it by marking such
information as
"Proprietary," "Restricted," or "Confidential." Any
confidential information
disclosed verbally will be identified as confidential at the time
of disclosure
and thereafter reduced to tangible form with a copy,
prominently marked as
aforesaid, delivered to the receiving party within ten (10) days
of the verbal
disclosure. When a writing contains both confidential and
nonconfidential
information, the disclosing party shall specifically note the
information which
is confidential.
B. Each party shall exercise the same degree of care to avoid
the publication
or dissemination of the confidential information of the other
party as it
affords to its own confidential information of a similar
nature which it
desires not to be published or disseminated. Confidential
information
disclosed under this Subcontract shall only be used by the
receiving party in
the furtherance of this Subcontract or the performance of
its obligations
hereunder.
C. The obligation of the parties not to disclose confidential
information
shall survive the termination or cancellation of this
Subcontract. However,
neither party shall be obligated to protect confidential
information of the
other party which: (1) is rightfully received by the
receiving party from
another party without restriction; (2) is known to or
developed by the
receiving party independently without use of the confidential
information; (3)
is or becomes generally known to the public by other than a
breach of duty
hereunder by the receiving party; (4) has been or is hereafter
furnished to
others without restriction on disclosure; or (5) is known or
available to the
receiving party by inspection or analysis of products available in
the market.
D. The obligation not to use or disclose said confidential
information shall
end five (5) years after the date of receipt of said confidential
information,
except with respect to any Software, for which the obligation
shall continue
until the occurrence of any of the events listed in
Subparagraph C, above.
Nothing contained herein shall be construed as preventing
Unisys from
sublicensing or marketing Software or documentation to the
Government. Unisys
shall be permitted to disclose confidential information to
its affiliated
entities, third parties and subcontractors for their use in the
furtherance of
the Program; provided, however, that such affiliated entities,
third parties
and subcontractors agree to protect such information to the
extent provided
herein.
E. Unisys is authorized to incorporate Subcontractor-
provided Proprietary
Information in submissions to the Government provided such
Proprietary
Information bears an appropriate restrictive legend.
7. INDEPENDENT CONTRACTORS
It is agreed that the relationship between the parties is that
of independent
contractors, and nothing contained in this Subcontract shall be
construed or
implied to create the relationship of partners, joint
ventures, agent and
principal, employer and employee, or any relationship other
than that of
independent contractors. At no time shall either party make any
commitments or
incur any charges or expenses for or in the name of the other
party.
8. INFRINGEMENT INDEMNIFICATION
A. Subcontractor agrees to indemnify and hold harmless
Unisys and the
Government from any claim, liability, damage or expense
including but not
limited to legal expenses of whatever kind for, or on account
of, patent
infringement, copyright infringement, misappropriation of trade
secrets or
violation of other proprietary rights in connection with or
relating to the
use, copying, reproduction, distribution, licensing or other
disposition of any
portion of the Products. Subcontractor agrees to defend or
settle, at
Subcontractor's expense, all suits or proceedings arising out
of any of the
foregoing; provided, however, that Unisys shall give
Subcontractor prompt
written notice of all suits or threats of suit and other such
claims concerning
patent or copyright infringement or misappropriation of trade
secrets and other
intellectual property against Unisys or the Government.
Unisys, at its own
expense, shall have the right to participate in Subcontractor's
defense of any
such action through Unisys own counsel. In the event that
Subcontractor fails
after notice, to adequately defend or settle under this Section,
Unisys shall
have the right of prosecuting and defending such action or
actions and to
collect such costs and expenses (including attorneys' fees) from
Subcontractor
and shall further have the right to charge Subcontractor with
any and all
awards, damages and court costs in such action or actions and to
collect such
awards, damages and court costs from Subcontractor.
B. If the Products are held to be an infringement or
misappropriation for
which Unisys is indemnified by Subcontractor, and its use
is enjoined,
Subcontractor shall, at Subcontractor's option and expense,
either: (1)
procure for Unisys the right to continue using or
reselling/sublicensing the
Products, and for the Government the right to continue using the
Products; or
(2) replace or modify the Products in such a way that they shall
not constitute
an infringement or misappropriation, provided all Prime
Contract and
Subcontract specifications of performance are met. In the event
Subcontractor
is unable to secure such right of use for Unisys and the
Government or to
secure a suitable replacement product, Subcontractor shall
indemnify Unisys and
the Government for losses or damages sustained. Subcontractor
shall not be
liable under this Section if the Products have been modified by
any of the
indemnified parties and such modification is solely the
cause of any such
infringement or misappropriation unless such modifications
were made in
accordance with Subcontractor's instructions.
9. INDEMNIFICATIONS
A. Each party (the "Indemnifying Party") shall hold harmless
the other party
from any claims of personal injury or property damage arising
from any act or
omission of the Indemnifying Party.
B. In the event any price included in the Prime Contract
is reduced or
liquidated or other damages or credits are assessed against Unisys
because of:
(1) any violation by Subcontractor of any law, regulation or
order required to
be complied with hereunder;
(2) any undisclosed failure on the part of Subcontractor to
timely furnish any
Product or Service required by the terms of this Subcontract
or any other
breach of this Subcontract by Subcontractor;
(3) any failure on the part of Subcontractor to provide any
certification,
report or supporting information required hereunder;
(4) any adverse finding against Subcontractor by the DCAA or
other cognizant
audit agency;
(5) any false claim submitted by Subcontractor, or
misrepresentation of fact
or fraud by Subcontractor;
then, and in that event, Subcontractor shall indemnify
Unisys to the full
extent of any damages, costs, credits or charges assessed by
the Government
against Unisys, which are due to the fault or failure to
perform of
Subcontractor, and not due to the fault or failure to perform of
the Government
or Unisys.
10. RELEASE OF INFORMATION
Any Subcontractor news release, public announcement, advertisement
or publicity
concerning this Subcontract or the Prime Contract will be
subject to prior
written approval of Unisys. Subcontractor shall not disclose
any information
relating to this Subcontract to any person not authorized by
Unisys or the
Government to receive it.
11. SUBCONTRACTOR PERSONNEL
Subcontractor shall be responsible for selecting and supervising
personnel who
are well qualified to perform the required services and for
ensuring that such
personnel comply with Unisys and Government security and
Prime Contract
requirements. Unisys may direct Subcontractor to remove any
employee from an
assignment to perform Services under this Subcontract for
reasons of security
or misconduct, or failure to perform in a manner reasonably
acceptable to
Unisys or the Government.
12. CONFLICT OF INTEREST
Subcontractor agrees that it will not engage directly or
indirectly either for
itself, or with or for any other person or entity in any work
or undertaking
which shall conflict with or create any legal
impediment against
Subcontractor's performance of its obligations under this
Subcontract and the
rights and licenses granted to Unisys hereunder. Subcontractor
represents that
there is no such present conflict of interest nor any such legal
impediment.
13. NOTICE OF DELAY.
A. Time is of the essence in this Subcontract.
B. Whenever any occurrence is delaying or threatens to delay
Subcontractor's
timely performance under this Subcontract, Subcontractor shall
promptly give
notice thereof, including all relevant information with respect
thereto, to
Unisys.
14. DISCLAIMER
EXCEPT AS EXPRESSLY STATED HEREIN, NEITHER PARTY HAS MADE ANY
WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED BY OPERATION OF LAW OR
OTHERWISE,
CONCERNING THE PRODUCTS TO BE PROVIDED HEREUNDER, THE SCOPE OR
DURATION OF ANY
MARKETING EFFORT WHICH UNISYS MAY UNDERTAKE, OR THE
SUCCESS OF ANY SUCH
MARKETING EFFORT. NEITHER PARTY HAS RELIED ON ANY EXPRESS
OR IMPLIED
REPRESENTATION OF THE OTHER PARTY, WRITTEN OR ORAL, AS AN
INDUCEMENT TO
ENTERING INTO THIS AGREEMENT.
15. LIMITATION OF LIABILITY
EXCEPT AS PROVIDED IN THE INDEMNIFICATION PROVISIONS OF THIS
SUBCONTRACT, IN NO
EVENT SHALL EITHER PARTY BE RESPONSIBLE OR LIABLE TO THE OTHER
OR ANY THIRD
PARTY FOR INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR
LOST PROFITS OR REVENUES OF THE OTHER OR ANY THIRD PARTY, EVEN
IF THE OTHER
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
16. STATUTE OF LIMITATIONS
No party may commence an action under this Subcontract more than
two (2) years
after the occurrence of the event upon which such action is
based, or, if the
event upon which such action is based is not discoverable by the
injured party
when it has occurred, more than two (2) years after such default
could, in the
exercise of due diligence, have been discovered by such
party; provided,
however, if the Government commences any action under the
Prime Contract
against Unisys, which action directly or indirectly concerns this
Subcontract,
then this limitation does not apply.
17. ASSIGNMENT
Subcontractor shall not assign or transfer its rights, interests
or obligations
under this Subcontract without the prior written consent of
Unisys. Any
unauthorized assignment or transfer shall be null and void, and
Subcontractor
shall remain liable to Unisys for full performance of its
obligations
hereunder.
18. CAPTION/HEADINGS
The captions and headings of the articles, sections and
paragraphs contained
herein have been inserted for the convenience of the parties and
shall not be
construed as a part of or modifying any provisions of this
Subcontract.
19. WAIVER
The failure of either party to insist, in any one or more
instances, upon the
performance of any of the terms, covenants or conditions of this
Subcontract or
to exercise any right hereunder, shall not be construed as a
waiver of the
future performance of any such term, covenant or condition or
the future
exercise of such right.
20. GOVERNING LAW
This Subcontract shall be construed, governed and interpreted
in accordance
with the laws, but not the rules relating to the choice of
law, of the
Commonwealth of Virginia, provided, however, that to the extent
Federal common
law of government contracts (I.E., decisions of federal courts
or boards of
contract appeals) exists on substantive matters requiring
construction under
this Subcontract, such Federal common law shall apply in lieu of
state law.
21. SEVERABILITY
If any provision of this Subcontract is held or determined to
be invalid or
unenforceable, the remaining provisions shall continue in full
force and effect
as if this Subcontract had been executed with the invalid
provision eliminated.
22. SURVIVAL OF PROVISIONS
In addition to the rights and obligations which survive as
expressly provided
for elsewhere in this Subcontract, the articles and provisions
which by their
nature should survive shall survive and continue after any
termination or
cancellation of this Subcontract.
23. ENTIRE AGREEMENT
This Subcontract, together with the Schedules annexed hereto and
the documents
incorporated herein by reference, constitute the entire agreement
between the
parties with respect to the subject matter hereof and supersedes
all previous
proposals, negotiations, representations, commitments, writings,
agreements and
other communications, both oral and written, between the
parties. This
Subcontract may not be released, discharged, changed or modified
except by an
instrument in writing signed by a duly authorized representative
of each of the
parties.
PURCHASE ORDER Exhibit 10.5
From Cornes & Co. Ltd., Tokyo
Date: 8 July 1998
Page: 1 of 1
Our Fax: 03-5821-1632
To: TSI TelSys Inc.
Attn: Mr. Chuck Kozlowski, Director, Sales
Cc: Mr. Kent Koji Matsumoto
From: Norio Ogita, Manager, Business Administration
Subject: Booking
(Destination: Tokyo)
Please book following Products under Order No. ZLS-2164/97B
(AMEND)
<TABLE>
<CAPTION>
Model No. Description Qty Order
Amount
DRTS Program
for Tsukuba Secondary Station
Low Rate System BBE #1A
* *
<S> <C> <C> <C>
Software for Low Rate System
BBE #1A * *
High-rate BBE #1
* *
High-Rate BBE #2
* *
Mission BBE -OPR
* *
Software of Mission BBE-OPR
Peripheral Equipment * *
System Design Support * *
Request for Total
Shipping Customer: Price
30-Nov-98 NEC- Yokohama US$1,088,800
*Confidential portions omitted and filed separately with
the Commission.
</TABLE>
Appendix
1. Program: DRTS
-- Please be advised that the previous two POs, #ZLS-
2164/97-1A and ZLS-
2164/97-2A, are put together into this on P.O. # ZLS-2163/97B
1. Our Ref: TSI's Quote #1297009-02 (dated 17/Dec/97)
DRTS Delivery/Payment Schedule chart issued by TSI (dated
16/Apr/98)
2. Payment terms:
#1) 10% of the total amount - US$108,880
-- After TSI's acknowledgement of this purchase order (Net
30) Completed
-- Note:: US$42,710 out of US$108,880 was paid in Feb/98
under our P.O.
#ZLS-2164/97-1A
-- Note: The remaining US$66,170 was paid in Feb/98 under
our P.O. #ZLS-
2164/97-2A
#2) 10% of the total amount - US$108,880
-- After TSI's acknowledgment of this purchase order (Net 30)
Completed
-- Note:: US$42,710 out of US$108,880 was paid in Feb/98
under our P.O.
#ZLS-2164/97-1A
-- Note: The remaining US$66,170 was paid in Feb/98 under
our P.O. #ZLS-
2164/97-2A
#3) 60% of the total amount - US$653,280
-- After completion of the FAT at TSI (Immediate)
#4) 20% of the total amount - US$217,760
-- After NEC's witness at NEC (Net 30)
3. The shipping request should read as ""FAT at TSI to be
completed then the
system to be shipped from TSI by 30/Nov/98 after NEC's
approval of the
shipment".
4. THE #3 AND #4 PAYMENTS SHALL BE MADE IN ACCORDANCE WITH AN
ACTUAL SCHEDULE.
BEST REGARDS,
Norio Ogita
MANAGER
Business Administration
CORNES & CO. LTD., TOKYO
(SALES ENGINEER IN CHARGE: M. SAKURABA)
<PAGE>
December 17, 1997
Mr. Masaki Sakuraba
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: DRTS Program- Revised Firm Fixed Price Proposal
Reference: NEC/Cornes and TSI TelSys Negotiation dated December
16, 1997
Dear Sakuraba-San:
TSI TelSys Inc. is pleased to provide our revised firm fixed price
proposal for
the DRTS Program Base-Band Equipment which incorporates the
results of the
reference negotiation. A negotiation overview sheet is attached
for your
convenience and provides a review of the pricing, delivery,
technical and
contractual elements of this proposal.
This quote shall remain valid from the above date to December 25,
1997. The
information contained in this proposal is considered proprietary
to TSI TelSys
and must be kept confidential in accordance with our non-
disclosure agreement.
Please extend our thanks and congratulations to the Cornes &
Company team, who
have contributed a great deal to the success of this DRTS
proposal/negotiation
process. We sincerely look forward to continuing this success
with Cornes on
the many opportunities ahead of us in Japan.
Should you have any technical questions regarding this proposal,
please contact
Mr. Jeff Shi at (410) 872-3955. Any contractual questions may be
addressed to
Mr. Edward J. O'Malley at (410) 872-3943.
Sincerely,
TSI TelSys Inc.
James R. Chesney
President
Enclosures
<PAGE>
Attachment A - DRTS Negotiation Overview
December 17, 1997
I. Pricing -The pricing negotiated is based upon the
VME/VIPstation
configurations attached herewith.
II. Delivery - The following delivery schedules were agreed
upon*:
a) Tsukuba Primary Station - Nov. 30, 1998
b) Tsukuba Secondary Station (Low Rate) - Oct. 30,1998
c) Tsukuba Secondary Station (High Rate) - Apr. 30, 2000
d) Hatoyama (EOC) Station - June 30, 1998
e) Redu (ESA) Station - Sept. 30, 1998
The NRE effort described on the attached sheet "NEC DRTS
Custom
Engineering Work" dated December 17, 1997, shall be performed
in parallel
with the delivery of the Hatoyama (EOC) Station (40% of the
engineering
effort will be linked to this effort), Redu Station (40% of
the
engineering effort will be linked to this effort), Tsukuba
Primary Station
(10% linked to this effort), and Tsukuba Secondary Station
Low Rate System
(10% linked to this effort).
* These delivery commitments are based upon contract award
and acceptance
by TSI TelSys by December 25, 1997, unless otherwise agreed
to in writing.
I. Technical Baseline - Our technical basis is the NEC Technical
Specification "BBE Requirement (CCSDS-N-001)" received on
November 21,
1997, as revised by the negotiation minutes dated December
16, 1997.
Based upon this specification and subsequent negotiation, we
have provided
configuration descriptions/diagrams, and an NRE list for the
DRTS program
which identifies what customization is included in this
proposal. TSI
TelSys substantially meets the technical requirements found
in the
specification noted above, however, TSI TelSys takes
exception to and/or
requires clarification to a few requirements and these are
noted on the
NRE list.
II. Terms and Conditions - The terms and conditions negotiated
with Cornes and
documented in Revision 5 dated December 2, 1997, will apply
to this order
with the exception of payment terms. Payment terms are under
consideration by NEC/Cornes at this time. TSI TelSys proposed
a 20%
payment at the time of contract acceptance (Net 30), 60% at
Factory
Acceptance Test (Net 0), and 20% at the time of NEC
Acceptance (Net 30).
We anticipate closure on this issue prior to December 25,
1997. Payment
of the NRE is proposed to be on the same percentage basis as
a deliverable
and will be linked to the Hatoyama Station (40%), Redu
Station (40%),
Tsukuba Primary Station (10%), and Tsukuba Secondary Station
Low Rate
System (10%).
<PAGE>
November 12, 1997
Mr. Norio Ogita
Manager, Business Administration
Cornes & Co. Ltd.
Ryukakusan Bldg., 5F, 2-5-12
Higashi Kanda, Chiyoda-ku
Tokyo 101
JAPAN
Subject: CORNES - TSI TELSYS INTERNATIONAL SALES REPRESENTATIVE
AGREEMENT
Dear Mr. Ogita:
TSI TelSys is pleased to offer two originals of the final
version of the
International Sales Representative Agreement between Cornes &
Co. and TSI
TelSys for Cornes's review and signature. The entire
agreement between the
parties consists of the following documents:
<circle> TSI TelSys Inc. International Sales Representative
Agreement,
including Exhibits A - D.
<circle> TSI TelSys letter dated September 16, 1997, detailing
the Standard
Payment Terms for Cornes purchase orders.
<circle> Cornes facsimile message dated October 7, 1997,
acknowledging and
agreeing to the payment terms and suggesting minor revisions.
<circle> TSI TelSys letter dated November 4, 1997, agreeing to
the revisions
and confirming the parties' agreement that the payment terms
outlined in the
September 16 letter control any conflicting terms in
Exhibit B to the
International Sales Representative Agreement.
Please note that your requested change to Section 5 of the
Agreement has been
modified. We believe this modification is consistent with
the intent and
spirit of your request.
If these documents meet with Cornes's approval, we ask that you
sign and date
the Agreement on page 11 and initial and date the first page
of each of the
other three documents to confirm Cornes's acceptance. If you
would return all
the documents with Cornes's signatures to us, we will execute
the original
documents and return one set of original documents to you for your
records.
Thank you for your continued confidence in TSI TelSys. We look
forward to a
growing, mutually beneficial relationship with Cornes.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley, Jr.
Director, Contracts and Procurement
Attachments: International Sales Representative Agreement
September 16, 1997 Standard Payment Terms
October 7, 1997 Cornes Agreement to Standard Payment
Terms
November 4, 1997 Confirmation of Standard Payment Terms
cc: Kent Koji Matsumoto, Counsel (w/attachments)
<PAGE>
TSI TelSys Terms - Cornes - Rev 5 - 12/2/97
Exhibit B
TSI TELSYS INC.
INTERNATIONAL TERMS AND CONDITIONS OF SALE
1. PRICES
TSI TelSys prices are exclusive of taxes, shipping, and insurance.
2. QUOTATIONS
Unless otherwise indicated therein, TSI TelSys quotations shall be
valid for
thirty (30) days from date of issuance.
3. CONTRACTS/PURCHASE ORDERS
A contract will be formed only upon TSI TelSys' acceptance of
Customer's or
Representatives written purchase order or contract specifying the
model number,
options, and quantities of each product ordered, and the requested
shipping
dates, shipping destinations, and invoice point.
Customer's submission of a purchase order or contract in response
to any
quotation including these terms and conditions shall be deemed
acceptance of
these terms and conditions to the exclusion of any other terms or
conditions
appearing in such purchase order or contract unless otherwise
agreed to in
writing by TSI TelSys. TSI TelSys' acknowledgment of Customer's
order is
expressly made conditional upon Customer's assent to the terms
and conditions
detailed herein, which assent shall be presumed conclusively from
Customer's
failure to reasonably object in writing or from Customer's
acceptance of any or
all of the products ordered.
4. SCHEDULING OF SHIPMENTS
TSI TelSys will schedule shipments based on Customer's request and
TSI TelSys'
shipping capability at the time Customer's order is accepted.
Upon such
acceptance, TSI TelSys will issue an acknowledgment which will
indicate the
estimated shipping dates.
5. RESCHEDULING AND CANCELLATION
Customer may request that orders be rescheduled or canceled only
by written
request submitted to the TSI TelSys. All such requests shall be
subject to
acceptance by TSI TelSys in its sole discretion. Any request to
cancel shall
be subject to payment of cancellation charges as follows:
Cancellation Date Charge
Within 30 Days ARO* 30% of Order Amount
31-59 Days ARO 50% of Order Amount
60 Days + ARO Noncancellable
* After receipt of order
6. SOFTWARE LICENSES AND WARRANTY
Software products are furnished subject to a separate license
agreement which
includes a limited software warranty, a copy of which is attached.
7. SHIPPING AND DELIVERY
Delivery is FOB TSI TelSys, Columbia, Maryland, USA. TSI TelSys
shall arrange
for shipment to the attention of Cornes & Co. at the Tokyo, Japan
Airport or
other specified location. Cornes & Co. shall be responsible for
import
duties/requirements and the reimbursement of all shipping expenses
to TSI
TelSys.
TSI TelSys will not be held responsible for delays due to the
denial, revocation, suspension, or governmental delay in the
issuance of any
export license or authorization, the inability of Cornes to meet
its payment
obligations under this contract or for delays in delivery because
of causes
beyond its reasonable control (e.g, Acts of God - floods, fire,
etc.).
8. INSPECTION/ACCEPTANCE
TSI TelSys shall only tender for acceptance those items that
conform to its
technical specifications. If the product has been customized to
meet the
specific Customer requirements, the Customer may inspect or test
any supplies
or services that have been tendered for acceptance subject to
mutually
agreeable inspection acceptance test procedures. In the event that
inspection
and test is required, the customer must complete this process
within 15
calendar days.
9. INTELLECTUAL PROPERTY RIGHTS
TSI TelSys shall own all rights in patents, copyrights, computer
software,
data, trade secrets and other intellectual property rights related
to the
design and development of its commercial hardware systems and
software.
10. EXPORT RESTRICTIONS
Customer shall neither export, reexport, nor transfer, directly or
indirectly,
any product or technical data received hereunder, to any country
or user in
which such export, reexport or transfer is restricted by United
States or local
country law or regulations without first obtaining any required
governmental
license, authorization, certification, or approval.
If Customer resells or otherwise disposes of any product or
technical data
purchased hereunder, it shall comply with any export restrictions
applicable to
such transfer.
The Customer shall notify TSI TelSys prior to the export,
reexport, or transfer
of technical data or the product from its original destination.
The Customer
shall include name of the end user, end use and country
destination and the
documentation required by the U.S Export Administration in its
submission to
TSI TelSys.
TSI TelSys shall have no liability for delayed delivery or non-
delivery
resulting from denial, revocation, suspension, or governmental
delay in
issuance of any necessary export license or authorization.
11. TITLE, RISK OF LOSS, AND SECURITY INTEREST
Title and risk of loss for all hardware products shall pass to
Customer upon
tender of the products by TSI TelSys to the carrier. Title to
software
products and all copies thereof shall remain in TSI TelSys or
others from whom
TSI TelSys has obtained a licensing right. TSI TelSys reserves a
security
interest in each hardware product shipped until the entire amount
due therefore
has been paid.
12. TAXES
Any and all state and local sales, use, excise, privilege, and
similar taxes
imposed on TSI TelSys, or which TSI TelSys has a duty to collect
in connection
with the sale, delivery, or use of any product, will appear as
separate items
on the invoice, and will be paid by Customer. If sales to
Customer are exempt
from such taxes, Customer shall furnish to TSI TelSys a
certificate of
exemption.
13. PAYMENT
TSI TelSys shall submit an invoice to Cornes and Co. for all
payment
milestones. Cornes & Co. shall pay 25% of the contract value upon
contract
award. Upon receipt of satisfactory evidence of successful
factory acceptance
test (FAT) completion, Cornes & Co. will pay 65% of the contract
value.
Shipment of the product is contingent on receipt of this FAT
payment. Upon
delivery of the product and the receipt of valid shipping
documentation, Cornes
& Co. shall release the final payment of 10%.
All orders shall be paid by Cornes & Co. via wire transfer to TSI
TelSys'
specified account and be made in United States dollars. The
following bank
information is provided for this purpose:
Bank Information:
Nations Bank N.A.
10320 Little Patuxent Parkway, Suite 814
Acct. No. 20-0370-9508
Lois V. Warden, Vice President (410) 964-6634.
All orders shall be shipped F.O.B. TSI TelSys Plant, 7100 Columbia
Gateway Dr.,
Columbia, Maryland, USA. Should Customer become delinquent in
the payment of
any amount due hereunder, TSI TelSys, at its option and upon
notice to
Customer, may suspend performance under any outstanding order.
Customer agrees
to pay any third-party collection expenses, including attorney's
fees, that
may become necessary to affect collection of any unpaid amounts.
14. HARDWARE WARRANTY
Hardware products are furnished subject to a separate warranty
agreement, a
copy of which is attached. TELSYS SPECIFICALLY DISCLAIMS ANY AND
ALL IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. UNLESS MODIFIED IN WRITING AND
SIGNED BY THE
AUTHORIZED REPRESENTATIVES OF BOTH PARTIES, THIS WARRANTY IS
UNDERSTOOD TO BE
THE COMPLETE AND EXCLUSIVE WARRANTY BETWEEN THE PARTIES. NO
TELSYS SALES
REPRESENTATIVE, DEALER, RESELLER, AGENT OR EMPLOYEE IS AUTHORIZED
TO MAKE ANY
MODIFICATION, EXTENSION, OR ADDITION TO THIS WARRANTY UNLESS
OTHERWISE ALLOWED
BY THIS AGREEMENT
15. INFRINGEMENT
TSI TelSys, at its expense, will defend Customer against any
claim based on an
allegation that a product furnished hereunder infringes a patent
or copyright
of another in the United States, and TSI TelSys will pay any
resulting costs,
damages, and attorneys' fees finally awarded against Customer that
are
attributable to such claim, or will pay the part of any settlement
that is
attributable to such claim; provided, that: 1) Customer notifies
TSI TelSys
promptly in writing of the claim; 2) TSI TelSys is permitted to
control the
defense or settlement of the claim; and 3) Customer cooperates
reasonably in
such defense or settlement at TSI TelSys' expense.
In its defense of settlement of any such claim, TSI TelSys may:
1) procure for
Customer the right to continue using the product; 2) modify the
product so
that it becomes non-infringing; or 3) replace the product with an
equivalent
product not subject to such claim. If the use of any product
furnished
hereunder is enjoined and none of the preceding alternatives is
reasonably
available to TSI TelSys, TSI TelSys will provide Customer an
opportunity to
return the product and receive a refund of the purchase price
paid, less a
reasonable allowance for use.
TSI TelSys shall have no liability to Customer for claims of
infringement based
upon: 1) the use of any product in combination with any product
not supplied
by TSI TelSys or; 2) the use of any product designed,
manufactured, or modified
to the specifications of Customer.
The foregoing states the entire obligation and liability of TSI
TelSys with
respect to infringement and claims thereof.
16. LIMITATION OF LIABILITY
EXCEPT AS PROVIDED IN THE PRECEDING SECTION REGARDING
INFRINGEMENT, IN NO EVENT
SHALL TSI TELSYS OR ITS VENDORS BE LIABLE FOR ANY DIRECT,
INDIRECT, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF CUSTOMER'S
PURCHASE OR USE
OF ANY PRODUCT, EVEN IF TSI TELSYS OR THE VENDOR HAS ADVANCE
NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES.
17. WAIVER
The failure of either party to enforce at any time any provision
of these terms
and conditions shall not be construed to be a waiver of such
provision or the
right thereafter to enforce each and every provision. No waiver
by either
party, either express or implied, of any breach of any of these
terms and
conditions shall be construed as a waiver of any other breach of
such term or
condition.
18. ASSIGNMENT
Customer may not assign or otherwise transfer its rights or
obligations
hereunder without the prior written consent of TSI TelSys. No
attempt to
assign or transfer in violation of this provision shall be valid
or binding
upon TSI TelSys.
19. GOVERNING LAW
The rights of the parties hereunder shall be governed by the laws
of the State
of Maryland, USA.
20. NOTICES
All notices required or authorized by these terms and conditions
shall be
given in writing and shall be deemed effective upon receipt (this
includes
facsimile receipts). Notices to Customer shall be sent to the
address shown in
the Customer's order.
21. DISPUTES
Any disputes arising under this contract shall be settled by
compulsory,
binding arbitration between the parties hereto in accordance with
the
commercial arbitration rules of the State of Maryland, USA. If
the parties
cannot agree upon an arbitrator within thirty (30) days after
demand by either
of them, either or both parties may request the State of Maryland
to name a
panel of five (5) arbitrators. TSI TelSys shall strike the names
of two (2) on
this list, the Representative shall then strike two (2) names, and
the
remaining name shall be the arbitrator. Any reviews of the
Arbitrator's
decision shall be made in accordance with the Maryland Uniform
Arbitration Act
<PAGE>
TSI TelSys Inc.'s Limited Hardware Warranty
V6A 4/8/97
TSI TelSys Inc.'s ("TELSYS") Warranty obligations are limited to
the terms set
forth below:
1. LIMITED WARRANTY. TELSYS warrants this hardware product
against defects in
materials and workmanship, under normal use and service, for a
period of one
(1) year from the date of receipt by the Purchaser.
If the Purchaser discovers a defect within the warranty period,
TELSYS will, at
its discretion, repair the product with either new or refurbished
replacement
parts at no charge. If TELSYS is unable to restore the product to
good working
order, TELSYS will replace the product with either new or
refurbished
equipment, at its discretion. In the event that TSI TelSys is
unable to repair
or replace the defective equipment, it will provide a refund for
the purchase
price of the product. All products that are replaced will become
the property
of TELSYS. Any replaced or repaired product is warranted for the
remainder of
the initial warranty period or ninety days, whichever is longer.
TELSYS shall
not be responsible for any software, firmware, information or
memory data of
the Purchaser contained in, stored on, or integrated with any
products for
system components returned to TELSYS pursuant to any warranty.
2. RETURN PROCEDURES. To obtain service under this warranty
within the
established period, the Purchaser must:
Call TELSYS Technical Service Support Operations at 1-888-849-CARE
(2273)
between 8 a.m. and 5 p.m. EST, Monday through Friday, excluding
holidays.
To insure that your product qualifies for return to factory
warranty service,
you will be asked to provide the model and serial number of your
product, the
date of original purchase, and the Purchaser's name, address, and
phone number.
Products returned to TELSYS' Technical Service Support Operations
must be pre-
authorized by TELSYS with a Return Material Authorization (RMA)
number marked
on the outside of the package, and sent prepaid, insured, and
packaged
appropriately for safe shipment. The repaired or replaced item
will be shipped
to the Purchaser at TELSYS' expense, not later than (90) ninety
days after
receipt by TELSYS.
3. APPLICABILITY.
This warranty applies only to hardware products (including
internal components)
supplied by TELSYS that can be identified by the "TELSYS"
trademark, trade
name, or logo affixed to them. Any warranty on external third-
party hardware
(i.e., Sun Workstation) installed by TELSYS with this product is
provided by
the hardware vendor, not TELSYS. This warranty does not apply to
damage caused
by accident, abuse, misuse, improper installation or testing,
misapplication,
or service (including upgrades and expansions) performed by anyone
who is not a
TELSYS Authorized Service Provider or any other cause beyond the
range of the
intended use, or by fire, lightning, or other hazard; if the
product has been
modified without the written permission of TELSYS; if any TELSYS
serial number
has been removed or defaced; or if you cannot provide proof of
original
purchase as described above.
4. LIMITATIONS OF REMEDIES AND DAMAGES.
IN NO EVENT WILL TELSYS, ITS PARENT OR SUBSIDIARIES OR ANY OF THE
LICENSORS,
DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES OF ANY OF THE
FOREGOING BE LIABLE
TO THE PURCHASER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
SPECIAL DAMAGES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND
THE LIKE,)
WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE USE OF OR
INABILITY TO
USE THE SOFTWARE OR ACCOMPANYING WRITTEN MATERIAL, REGARDLESS OF
THE BASIS OF
THE CLAIM AND EVEN IF TELSYS OR A TELSYS REPRESENTATIVE HAS BEEN
ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. TELSYS'S LIABILITY TO THE PURCHASER
FOR DIRECT
DAMAGES FOR ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF
THE ACTION,
WILL BE LIMITED TO THE ACTUAL PURCHASE PAID FOR THE PRODUCT.
Some states do not allow the exclusion or limitation of incidental
or
consequential damages or exclusion of implied warranties, so the
above
limitations or exclusions may not apply to the Purchaser. This
warranty gives
the Purchaser specific legal rights, and the Purchaser may also
have other
rights that vary from state to state.
THE WARRANTY AND REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN
LIEU OF ALL
OTHERS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED. TELSYS
SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT
LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. UNLESS
MODIFIED IN WRITING AND SIGNED BY THE AUTHORIZED REPRESENTATIVES
OF BOTH
PARTIES, THIS WARRANTY IS UNDERSTOOD TO BE THE COMPLETE AND
EXCLUSIVE WARRANTY
BETWEEN THE PARTIES. NO TELSYS SALES REPRESENTATIVE, DEALER,
RESELLER, AGENT
OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR
ADDITION TO
THIS WARRANTY UNLESS OTHERWISE ALLOWED BY THIS AGREEMENT.
<PAGE>
Addendum A to Limited Hardware Warranty
April 8, 1997
TSI TelSys agrees to indemnify and hold Cornes & Co. harmless from
all claims,
demands and actions arising out of TSI TelSys equipment defects
and/or failure
provided that Cornes & Co. follows the instructions detailed in
this paragraph.
This indemnification is only applicable where Cornes & Co. is the
importer of
TSI TelSys products. In the event that Cornes & Co. is sued as a
result of
"alleged" defects in TSI TelSys products, Cornes & Co. shall
notify TSI TelSys
immediately (in writing) upon verbal or written notice by the end
customer.
Cornes & Co. agrees to allow TSI TelSys to control the defense or
settlement of
the claim and will cooperate reasonably in such defense or
settlement at TSI
TelSys' expense. Despite this indemnification, TSI TelSys'
standard
hardware/software warranties shall apply to all purchase orders
issued by
Cornes & Co. who shall pass on these limited warranties to the end
user and
these shall become the basis for any claims from end users that
our products
did not perform in accordance with TSI TelSys stated warranty
provisions.
<PAGE>
TSI TelSys Inc.'s Software License
V5A 4/8/97
The enclosed computer program(s)("Software") is licensed, not
sold, to you by
TSI TelSys, Inc. ("TELSYS") for use only under the terms of this
License, and
TELSYS reserves any rights not expressly granted to the Licensee.
The Licensee
owns the disk(s) on which the Software is recorded or fixed, but
TELSYS retains
ownership of the Software itself.
1. LICENSE. This License allows the Licensee to:
(a) Use one copy of the Software on a single computer at a time.
To "use" the
Software means that the Software is either loaded in the temporary
memory (i.e.
RAM) of a computer or installed on the permanent memory of a
computer (i.e.
hard disk, CD ROM, etc.) The Licensee may install the Software on
a common
storage device which is accessible by multiple computers, provided
that if more
computers have access to the common storage device than the number
of licensed
copies of the Software, you must have some Software mechanism
which locks-out
any concurrent users in excess of the number of licensed copies of
the Software
(an additional license is not needed for the one copy of Software
installed on
the common storage device accessed by multiple computers provided
the number of
licensed copies is not exceeded by the number of concurrent
users.).
(b) Make one copy of the Software in machine readable form solely
for backup
purposes.
2. PROPRIETARY MATERIAL AND RESTRICTIONS. "Proprietary
Material" shall mean
the Programs(s) in any form and the algorithms, technology and
know-how
embodied therein and all documentation, manuals and other material
related
thereto. Customer expressly acknowledges that the Proprietary
Material is
confidential and proprietary property of TELSYS and hereby agrees
to receive
and maintain it as it would its own confidential and proprietary
material.
Licensee shall not cause or permit disclosure of any Proprietary
Material to
any person other than the Licensee's employees and consultants
whose
responsibilities require access to such material without the prior
written
consent of TELSYS.
The Software contains trade secrets in its human perceivable form
and, to
protect them, the Licensee may not REVERSE ENGINEER, DECOMPILE,
DISASSEMBLE OR
OTHERWISE REDUCE THE SOFTWARE TO ANY HUMAN PERCEIVABLE FORM.
LICENSEE MAY NOT
MODIFY, ADAPT, TRANSLATE, RENT, LEASE, LOAN OR CREATE DERIVATIVE
WORKS BASED
UPON THE SOFTWARE OR ANY PART THEREOF.
3. TERMINATION. This License is effective until terminated.
This License
will terminate immediately without notice from TELSYS or judicial
resolution if
Licensee fails to comply with any provision of this License. Upon
such
termination you must destroy the Software, all accompanying
written materials
and all copies thereof, and Sections 2, 5, 6, and 7 will survive
any
termination.
4. EXPORT LAW ASSURANCES. You agree that neither the Software
nor any direct
product thereof is being or will be shipped, transferred or
reexported,
directly or indirectly, into any country prohibited by the United
States Export
Administration Act and the regulations thereunder or will be used
for any
purpose prohibited by the Act.
5. LIMITED WARRANTY. TELSYS warrants that the Software programs
(which
include embedded third party software) licensed from it will
perform in
substantial conformance to the program specifications therefor for
a period of
one year from the date of receipt from TELSYS. TELSYS warrants
the storage
media containing Software against failure during the warranty
period. No
updates are provided. TELSYS' obligation hereunder shall be to
replace any
defective media with Software which substantially conforms to
TELSYS'
applicable published specifications or in the event that that
replacement is
not possible, to refund the purchase price paid by the Licensee
for any
defective Software products. TELSYS makes no warranty that its
Software
products will work in combination with any hardware or
applications Software
products independently purchased by the Customer from third party
vendors.
THIS LIMITED WARRANTY IS THE ONLY WARRANTY PROVIDED BY TELSYS AND
TELSYS
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESSED OR
IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS
FOR A PARTICULAR PURPOSE WITH REGARD TO THE SOFTWARE AND
ACCOMPANYING WRITTEN
MATERIALS. Because some jurisdictions do not allow the exclusion
or limitation
of implied warranties, the above limitation may not apply to you.
6. LIMITATION OF REMEDIES AND DAMAGES. IN NO EVENT WILL TELSYS,
ITS PARENT OR
SUBSIDIARIES OR ANY OF THE LICENSORS, DIRECTORS, OFFICERS,
EMPLOYEES OR
AFFILIATES OF ANY OF THE FOREGOING BE LIABLE TO THE LICENSEE FOR
ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR SPECIAL DAMAGES
WHATSOEVER(INCLUDING,
WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION AND THE LIKE) WHETHER
FORESEEABLE OR
UNFORESEEABLE, ARISING OUT OF THE USE OF OR INABILITY TO USE THE
SOFTWARE OR
ACCOMPANYING WRITTEN MATERIAL, REGARDLESS OF THE BASIS OF THE
CLAIM AND EVEN IF
TELSYS OR A TELSYS REPRESENTATIVE HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH
DAMAGE. TELSYS'S LIABILITY TO THE LICENSEE FOR DIRECT DAMAGES FOR
ANY CAUSE
WHATSOEVER, AND REGARDLESS OF THE FORM OF THE ACTION, WILL BE
LIMITED TO THE
ACTUAL PRICE PAID FOR THE LICENSE TO USE THE SOFTWARE.
7. U.S. GOVERNMENT RESTRICTED RIGHTS. This License will be
construed under
the laws of the State of Maryland, except for that body of law
dealing with
conflicts of law. If any provision of this License shall be held
by a court of
competent jurisdiction to be contrary to law, that provision will
be enforced
to the maximum extent permissible, and the remaining provision of
this License
will remain in full force and effect. If the Licensee is a U.S.
Government
user then the Software is provided with "RESTRICTED RIGHTS" as set
forth in
subparagraphs (c)(1) and (2) of the Commercial Computer Software-
Restricted
Rights clause at FAR 52.227-19 or subparagraph (c)(1)(ii) of the
Rights in
Technical Data and Computer Software clause at DFARS 252.227-7013,
as
applicable.
<PAGE>
EXHIBIT C
V2 2/28/97
TSI TELSYS, INC. ("TSI TELSYS")
EQUIPMENT MAINTENANCE, SOFTWARE MAINTENANCE, AND INSTALLATION
PROGRAM
TERMS AND CONDITIONS
1. SCOPE
1. TSI TELSYS SHALL BE OBLIGATED TO PROVIDE INSTALLATION
AND/OR
MAINTENANCE FOR ALL EQUIPMENT AS MAY BE REQUESTED BY THE
CUSTOMER
DURING THE CONTRACT TERM OF THIS AGREEMENT. SERVICES WILL
BE PROVIDED
IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
2. The System Installation, Silver Maintenance, Gold
Maintenance, and
Platinum Maintenance Options described herein are for
services rendered
within the Continental United States (CONUS). Additional
charges for
Outside the Continental United States (OCONUS) are stated
in Paragraph
7.
3. THE SCOPE OF THIS AGREEMENT APPLIES TO INSTALLATION AND
MAINTENANCE
SERVICES ONLY. FOR PRODUCT REPAIR SERVICE PROGRAMS AND
NON-CONTRACT
MAINTENANCE SERVICES, CONTACT TSI TELSYS DIRECTLY.
2. TERM
The initial term of this Agreement shall be a period of one
(1) year from
the effective date of maintenance service (not applicable to
installation
service). This Agreement will automatically renew for an
additional one-
year term unless the Customer provides written notice of
cancellation
thirty (30) days prior to the expiration of this Agreement.
TSI may
increase the maintenance charges hereunder at the renewal of
a term,
however the revised charges shall not exceed the then-current
published
TSI TelSys rates for the same level and type of support.
3. OBLIGATIONS OF TSI TELSYS
A. TSI TELSYS WILL COMPLY WITH ALL REGULATIONS AND PROCEDURES IN
EFFECT AT THE
CUSTOMER SITE WHEN PROVIDING SERVICES UNDER THIS AGREEMENT.
B. TSI TELSYS MAY USE NEW OR REFURBISHED REPLACEMENT PARTS WHICH
OPERATE LIKE
NEW PARTS IN EFFECTING REPAIRS. ALL PARTS WHICH HAVE BEEN
REPLACED SHALL
BECOME THE PROPERTY OF TSI TELSYS.
C. TSI TELSYS WILL PROVIDE THE CUSTOMER WITH A SITE PREPARATION
GUIDE AND
CHECKLIST, AND WILL SCHEDULE INSTALLATION WITH THE CUSTOMER.
4. OBLIGATIONS OF CUSTOMER
a. CUSTOMER PERSONNEL SHALL NOT PERFORM MAINTENANCE OR
ATTEMPT REPAIRS TO
EQUIPMENT WHILE SUCH EQUIPMENT IS UNDER MAINTENANCE WITH
TSI TELSYS
UNLESS PRIOR WRITTEN APPROVAL IS PROVIDED BY TSI TELSYS.
b. THE CUSTOMER SHALL PERMIT ACCESS TO TSI TELSYS PERSONNEL
TO THE
EQUIPMENT WHICH REQUIRES MAINTENANCE OR INSTALLATION,
SUBJECT TO
REASONABLE SECURITY MEASURES. THE CUSTOMER SHALL SHIP THE
EQUIPMENT
BACK TO TELSYS AS NECESSARY AND IN ACCORDANCE WITH THIS
AGREEMENT.
c. IF SYSTEMS INSTALLATION SERVICE IS PURCHASED, THE CUSTOMER
SHALL
PREPARE THE SITE IN ACCORDANCE WITH THE SITE PREPARATION
GUIDE PROVIDED
BY TSI TELSYS AND FAX A COMPLETED SITE PREPARATION
CHECKLIST TO THE TSI
TELSYS SERVICE OPERATIONS CENTER PRIOR TO THE SCHEDULED
INSTALLATION
DATE, AND PROVIDE A SITE CONTACT FOR THE TSI TELSYS FIELD
ENGINEER.
d. THE CUSTOMER SHALL: (I) INSURE THAT THE EQUIPMENT IS
INSTALLED IN A
LOCATION WHICH MEETS THE ENVIRONMENTAL CONDITIONS CALLED
FOR BY TSI
TELSYS' PRODUCT SPECIFICATIONS; (II) MAINTAIN CURRENT
BACKUPS OF TSI
TELSYS SOFTWARE; (III) INSTALL ALL TSI TELSYS' SOFTWARE
UPDATES WITHIN
SIX MONTHS OF RECEIPT; AND (IV) LIMIT ACCESS TO ANY TSI
TELSYS
TECHNICAL INFORMATION TO CUSTOMER EMPLOYEES AND AGENTS
WITH A SPECIFIC
NEED RELATED TO USE OF THE SOFTWARE AND OTHER RELATED
DOCUMENTATION
PROVIDED BY TSI TELSYS.
5. AVAILABLE INSTALLATION AND REMEDIAL MAINTENANCE
A. STANDARD SYSTEM INSTALLATION (SSI) SERVICE - PROVIDES FOR CONUS
ON-SITE
INSTALLATION OF A TSI TELSYS PRODUCT, MONDAY THROUGH FRIDAY,
FROM 8 A.M. TO
5 P.M. EASTERN STANDARD TIME (EST).
FEATURES OF SSI SERVICE ARE:
1) HARDWARE-UNPACK AND SET-UP IN RACK, SHELF, OR TABLE;
2) SOFTWARE-UNPACK MEDIA AND DOCUMENTATION, LOAD
SOFTWARE, AND
CONFIGURE AND INITIALIZE SOFTWARE TO COMPLY WITH
PUBLISHED
OPERATING STANDARDS AND MANUALS.
THE CUSTOMER MUST ORDER THE STANDARD SYSTEM INSTALLATION
SERVICE WHEN
PURCHASING TSI TELSYS EQUIPMENT UNLESS A WRITTEN WAIVER IS
REQUESTED BY
THE CUSTOMER AND APPROVED BY TSI TELSYS.
6. MAINTENANCE
a. Silver Maintenance (SM) Service - Provides for remedial
maintenance
and enhanced technical support for TSI TelSys products, Monday
through Friday,
from 8 a.m. to 5 p.m. (EST).
Features of Silver Maintenance service are:
(1) RETURN TO FACTORY REPAIR OF NON-FUNCTIONING
EQUIPMENT - TSI
TELSYS WILL SHIP THE REPAIRED EQUIPMENT BACK TO THE
CUSTOMER
WITHIN TEN (10) BUSINESS DAYS OF RECEIPT AT THE
TSOC;
(2) LABOR AND MATERIALS FOR THE REPAIR OF THE TELSYS
PRODUCT AT THE
TSOC;
(3) TOLL-FREE NUMBER ACCESS NUMBER TO THE TSOC;
(4) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(5) MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(6) NOTIFICATION OF RELEASED ENGINEERING CHANGES.
B. GOLD MAINTENANCE (GM) SERVICE - COMPRISES SILVER
MAINTENANCE SERVICE
PLUS THESE ADDITIONAL FEATURES
FEATURES OF GOLD MAINTENANCE SERVICE ARE:
(1) THE FEATURES OF SILVER MAINTENANCE PLUS;
(2) REMOTE DIAGNOSTICS PERFORMED BY THE TSOC
(SCHEDULED);
(3) SYSTEM SOFTWARE UPDATES (E.G., A MINOR REVISION
FROM VERSION
3.0 TO 3.1);
(4) 24 HOUR MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(5) HARDWARE UPDATES
(6) PREPAID SHIPPING (CARRIER) CHARGES WITH A VALID
RMA NUMBER FROM
THE TSOC .
C. FEATURES OF PLATINUM SERVICE ARE:
(1) GOLD MAINTENANCE SERVICE PLUS THESE ADDITIONAL
FEATURES;
(2) TELSYS WILL SHIP THE REPAIRED OR A REPLACEMENT PART
BACK THE
NEXT BUSINESS DAY AFTER RECEIPT AT THE TSOC;
(3) SYSTEM SOFTWARE UPGRADES (E.G., A MAJOR REVISION
FROM VERSION
3.1 TO 4.0) WHICH INCLUDE NEW FEATURES AND OPTIONS
IN ADDITION TO
SYSTEM OPERATIONAL ENHANCEMENTS AND BUG FIXES;
(4) ON-SITE MAINTENANCE SERVICE AT A CUSTOMER CONUS
SITE. A
QUALIFIED SERVICE TECHNICIAN WILL BE DISPATCHED TO
THE CUSTOMER
LOCATION WITHIN THE NEXT BUSINESS DAY PLUS
REASONABLE PREPARATION
AND TRAVEL TIME;
(5) ALL TRAVEL CHARGES ASSOCIATED WITH ON-SITE CONUS
SUPPORT
(6) HARDWARE UPDATES PROVIDED AT REGULAR INTERVALS;
(7) INSTALLATION OF PURCHASED TSI OPTIONS.
NOTE: TSI TELSYS WILL, AT ITS SOLE DISCRETION,
DETERMINE THE
NECESSITY AND APPROPRIATENESS OF AN ON-SITE CALL VERSUS
AN OFF-SITE
REPAIR OF THE EQUIPMENT AT THE TSOC. SHOULD TSI TELSYS
DETERMINE
THAT AN ON-SITE CALL IS REQUIRED, IT ALONE WILL DECIDE
ON THE
DURATION AND QUANTITY OF ON-SITE MAINTENANCE CALLS
NECESSARY TO
REPAIR THE EQUIPMENT
A. SOFTWARE SERVICE (SS) PROVIDES FOR REMEDIAL MAINTENANCE SUPPORT
AND UPGRADES
FOR TSI TELSYS' SOFTWARE PRODUCTS, MONDAY THROUGH FRIDAY, FROM
8 A.M. TO 5
P.M. (EST).
FEATURES OF THE SOFTWARE SERVICE ARE:
(1) SEMI-ANNUAL SYSTEM SOFTWARE UPGRADES;
(2) SYSTEM SOFTWARE ENHANCEMENTS;
(3) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(4) REMOTE DIAGNOSTICS VIA THE TSOC;
(5) TOLL-FREE ACCESS TO THE TSOC.
7. COVERAGE AND ELIGIBILITY- EQUIPMENT MAINTENANCE
a. TO BE ELIGIBLE FOR MAINTENANCE COVERAGE UNDER THIS
AGREEMENT, THE
EQUIPMENT MUST BE DETERMINED BY TSI TELSYS TO BE IN GOOD
OPERATING
CONDITION. IN ORDER TO DETERMINE THAT THE EQUIPMENT IS IN
GOOD
OPERATING CONDITION:
(1) THE EQUIPMENT MUST PRESENTLY BE UNDER A TSI TELSYS
WARRANTY OR
MAINTENANCE AGREEMENT;
(2) EQUIPMENT OUTSIDE OF A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT MUST HAVE BEEN REPAIRED BY TSI TELSYS
WITHIN NINETY
(90) DAYS OF THE REQUEST FOR A TSI TELSYS
DETERMINATION OF
CONDITION;
(3) IF THE EQUIPMENT IS OUTSIDE A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT, IT MUST BE EXAMINED BY TSI TELSYS AND
REPAIRED, IF
NECESSARY, AT THE CUSTOMER'S EXPENSE PRIOR TO
ISSUANCE OF A
MAINTENANCE AGREEMENT.
a. A WRITTEN MAINTENANCE ORDER SHALL BE THE ONLY BASIS FOR
MAINTENANCE IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
MAINTENANCE AGREEMENT.
TSI TELSYS WILL CONFIRM A MAINTENANCE ORDER BY PROVIDING
THE CUSTOMER
WITH A RETURN MATERIAL AUTHORIZATION (RMA) WITHIN TWENTY-
FOUR (24)
HOURS OF THE CUSTOMER'S REQUEST. ORDER RENEWALS WILL BE
AUTOMATICALLY
ACCEPTED FOR EQUIPMENT WHICH MAY HAVE BEEN DISCONTINUED
FROM USE FOR
TEMPORARY PERIODS OF TIME NOT LONGER THAN 120 CALENDAR
DAYS.
b. ALL WRITTEN CORRESPONDENCE FROM THE CUSTOMER SHALL BE
DIRECTED TO THE
TSOC.
c. MAINTENANCE SERVICE SHALL COMMENCE ON A MUTUALLY AGREED
DATE BETWEEN
THE CUSTOMER AND THE TSOC, WHICH WILL BE SPECIFIED IN THE
MAINTENANCE
ORDER. MAINTENANCE ORDERS SHALL NOT BE MADE EFFECTIVE
BEFORE THE
EXPIRATION OF ANY APPLICABLE MAINTENANCE OR WARRANTY
PERIODS.
8. TIME AND MATERIAL RATES FOR ON-SITE SERVICE (EQUIPMENT
MAINTENANCE)
Should the Customer request On-Site maintenance during the periods
below, the
following rates and conditions shall apply.
a. CONUS Support
TIME PERIOD RATE
(1) REGULAR HOURS (8 A.M. TO 5 P.M. LOCAL) * **
(2) AFTER HOURS (MONDAY THROUGH FRIDAY) *
(3) AFTER HOURS (SATURDAY, SUNDAY, HOLIDAYS) *
* Confidential portions omitted and filed separately with the
Commission.
**ONLY APPLICABLE TO CUSTOMER REQUESTS UNDER THE SILVER AND
GOLD SERVICE
OPTIONS. THERE IS NO ADDITIONAL CHARGE FOR MAINTENANCE SERVICE
DURING
REGULAR HOURS FOR THE PLATINUM SERVICE OPTION.
THERE SHALL BE A FOUR (4) HOUR MINIMUM CHARGE FOR ON-SITE SERVICE.
A FULL HOUR
SHALL BE CHARGED FOR ANY SIXTY (60) MINUTE PERIOD OR ANY FRACTION
THEREOF. THE
REGULAR AND AFTER HOUR RATES DO NOT INCLUDE REASONABLE AND ACTUAL
TRAVEL
EXPENSES WHICH SHALL BE CHARGED TO THE CUSTOMER FOR EACH ON-SITE
SERVICE CALL.
B. OCONUS SUPPORT
SHOULD THE CUSTOMER REQUIRE THAT ON-SITE INSTALLATION AND/OR
MAINTENANCE BE
PERFORMED OCONUS, ADDITIONAL COSTS SHALL BE CHARGED TO THE
CUSTOMER. SUCH
CHARGES WILL BE LIMITED TO REASONABLE AND ACTUAL TRAVEL EXPENSES,
INCLUDING
TRAVEL COSTS, PER DIEM AND LODGING IF OVERNIGHT STAY IS NECESSARY.
THESE
EXPENSES WILL BE IN ADDITION TO THE HOURLY CHARGES DESCRIBED ABOVE
FOR CONUS
REGULAR AND AFTER HOURS SUPPORT. SUCH ADDITIONAL CHARGES WILL
APPLY TO EACH
ON-SITE MAINTENANCE REQUEST, AND IT WILL BE LIMITED TO ONE ROUND
TRIP PER
SERVICE CALL.
9. EQUIPMENT RETURN
a. PRODUCTS RETURNED TO TSI TELSYS FOR MAINTENANCE MUST BE PRE-
AUTHORIZED BY
TSI TELSYS WITH AN RMA NUMBER MARKED ON THE OUTSIDE OF THE
PACKAGE, AND SENT
PRE-PAID, INSURED, AND PACKAGED APPROPRIATELY FOR SAFE
SHIPMENT. THE
CUSTOMER SHALL BE RESPONSIBLE FOR RISK OF LOSS OR DAMAGE TO THE
EQUIPMENT
UNTIL RECEIVED AND ACCEPTED AT THE TSOC. TSI TELSYS SHALL BE
RESPONSIBLE
FOR RISK OF LOSS OR DAMAGE UNTIL THE EQUIPMENT HAS BEEN
RETURNED TO THE
CUSTOMER.
b. WHEN TSI TELSYS REMOVES EQUIPMENT FOR OFF-SITE REPAIR, IT SHALL
BE
RESPONSIBLE FOR ANY LOSS OR DAMAGE TO THE PRODUCT FROM THE TIME
OF REMOVAL
UNTIL THE TIME OF RETURN OF THE EQUIPMENT TO THE CUSTOMER.
10. EQUIPMENT MOVEMENT
Relocation of products to a site other than the site specified
initially by
Customer may affect the availability of service and will relieve
TSI TelSys'
obligation to provide On-Site service unless:
a) Customer notifies TSI TelSys thirty (30) days prior to such
relocation; b)
TSI TelSys confirms that the relocation does not affect the
availability of
service; and c) Customer agrees to pay any adjustment of charges
which may
result from the relocation.
Upon request of the Customer, TSI TelSys will supervise product
relocation,
including de-installation, crating, uncrating and reinstallation,
or perform
other associated services at the hourly rates denoted in Paragraph
7 of this
Agreement.
11. LIMITATIONS
TSI TelSys shall not be obligated under this Agreement to:
a. SERVICE ANY PRODUCT THAT HAS BEEN DAMAGED, ABUSED, OVERUSED
OR MISUSED AS
DEFINED BY TSI TELSYS AND THROUGH NO FAULT OF TSI TELSYS;
b. SERVICE ANY PRODUCT THAT HAS RECEIVED UNAUTHORIZED
MODIFICATION, REPAIR
OR SERVICE THAT IMPAIRS PERFORMANCE OR IMPEDES NORMAL
SERVICE;
c. PAINT OR REFINISH ANY PRODUCT FOR COSMETIC PURPOSES ONLY;
d. REPAIR ANY DAMAGE OR MALFUNCTION CAUSED BY THE USE OF NON-
TSI TELSYS
EQUIPMENT;
e. SERVICE ANY PRODUCT THAT HAS NOT RECEIVED THE REQUIRED USER
MAINTENANCE
AND CLEANING AT THE FREQUENCY AND AS PRESCRIBED IN THE USER
MANUAL.
f. PROVIDE OR REPLACE CONSUMABLE ITEMS USED WITH TSI EQUIPMENT
(I.E.
MAGNETIC MEDIA, LAMPS, ETC.)
ANY SERVICE IDENTIFIED IN 10.A-E ABOVE AND PROVIDED BY TSI
TELSYS AT THE
CUSTOMER'S REQUEST SHALL BE CHARGED TO CUSTOMER AT TSI
TELSYS' THEN
CURRENT RATES FOR PARTS AND AT THE HOURLY RATES IN PARAGRAPH
7 FOR
SERVICE.
12. WARRANTIES
a. TSI TelSys warrants new and refurbished "as new" parts for the
duration of
this maintenance Agreement or ninety (90) days after installation,
whichever is
later.
b. IN CONNECTION WITH THIS AGREEMENT, SERVICES RENDERED HEREUNDER
AND PARTS
SUPPLIED PURSUANT HERETO, TSI TELSYS MAKES NO WARRANTY, EITHER
EXPRESSED OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF FITNESS
FOR PARTICULAR
PURPOSE OR OF MERCHANTABILITY. TSI TELSYS' SOLE OBLIGATION SHALL
BE LIMITED TO
TSI TELSYS' REASONABLE EFFORTS AT THE MAINTENANCE, REPAIR, OR
REPLACEMENT OF
ANY DEFECTIVE PRODUCT. Some states do not allow the exclusion of
implied
warranties, so the exclusion above may not apply to the Customer.
13. LIMITATION OF LIABILITIES
TSI TELSYS AND/OR ITS REPRESENTATIVE'S LIABILITY UNDER OR ARISING
OUT OF THIS
AGREEMENT, WHETHER FOR BREACH OF CONTRACT, TORT, OR OTHERWISE
SHALL BE LIMITED
TO A REFUND OF THE PRO RATA ANNUAL MAINTENANCE CHARGES PAID, IF
ANY, FOR THE
ITEM OF PRODUCT INVOLVED IN THE CLAIM. IN NO EVENT WILL TSI
TELSYS OR ITS
REPRESENTATIVES BE LIABLE FOR ANY INDIRECT, SPECIAL
ORCONSEQUENTIAL DAMAGES,
INCLUDING, BUT NOT LIMITED TO, LOSSESOF BUSINESSAND/OR PROFITS,
WHETHER
FORESEEABLE OR NOT, CAUSED BY ITS PRODUCT OR SERVICES RELATED
THERETO. Some
states do not allow the limitation or exclusion of liability
forincidental or
consequential damages, so the limitation above may not apply to
the Customer.
14. BREACH OF CONTRACT AND REMEDIES
Should Customer: (i) default in the payment of any sum of money
due beyond the
thirtieth (30th) day after the same is due; or (ii) default in the
performance
of any other of its obligations under this Agreement, which
default continues
for thirty (30) days after receipt by Customer of notice thereof
from TSI
TelSys; or (iii) permit any person other than a TSI TelSys
authorized service
technician to alter or change any TSI TelSys product without TSI
TelSys' prior
written consent, then in any such event TSI TelSys may at its
option proceed
with the following: (a) terminate this Agreement; and (b) convert
any unpaid
and/or future charges for any and all services rendered to
Customer under this
Agreement to TSI TelSys' then-current rates. The rights afforded
TSI TelSys
under this Paragraph 13 will not be deemed to be exclusive, but
shall be in
addition to any rights or remedies provided by law.
15. MISCELLANEOUS
a. THIS AGREEMENT CONSTITUTES HE ENTIRE UNDERSTANDING BETWEEN THE
CUSTOMER AND
TSI TELSYS WITH RESPECT TO THE SUBJECT MATTER OF THE AGREEMENT
AND MAY BE
AMENDED OR MODIFIED ONLY BY WRITTEN AGREEMENT BETWEEN THE
PARTIES. IN THE
EVENT THAT THERE IS ANY VARIANCE BETWEEN THE TERMS OF THIS
AGREEMENT AND THE
CUSTOMER'S PURCHASE ORDER TERMS, THE TERMS AND CONDITIONS OF
THIS AGREEMENT
SHALL PREVAIL.
b. IF ANY TERM OR PROVISION OF THIS AGREEMENT SHALL BE FOUND TO BE
ILLEGAL OR
UNENFORCEABLE, THEN, NOTWITHSTANDING, THIS AGREEMENT SHALL
REMAIN IN FULL
FORCE AND EFFECT, AND SUCH TERM OR PROVISION WILL BE STRICKEN,
PROVIDED THAT
IN SUCH EVENT THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH
SUBSTITUTE
ENFORCEABLE PROVISIONS MOST NEARLY REFLECT THE PARTIES ORIGINAL
INTENT IN
ENTERING INTO THIS AGREEMENT.
c. THIS AGREEMENT SHALL BE BINDING ON THE PARTIES HERETO AND THEIR
SUCCESSORS
AND ASSIGNS, BUT IS NOT ASSIGNABLE BY CUSTOMER IN ANY PART
WITHOUT THE PRIOR
WRITTEN CONSENT OF TSI TELSYS, AND ANY ATTEMPTED ASSIGNMENT
WITHOUT SUCH
CONSENT SHALL BE NULL AND VOID. TSI TELSYS RESERVES THE RIGHT
TO ASSIGN THE
PERFORMANCE OF THIS AGREEMENT TO A QUALIFIED THIRD PARTY.
d. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MARYLAND.
e. NEITHER PARTY SHALL BE RESPONSIBLE TO THE OTHER FOR A DEFAULT,
DELAY OR
FAILURE TO PERFORM HEREUNDER IF SUCH DEFAULT, DELAY OR FAILURE
TO PERFORM
(INCLUDING, BUT NOT LIMITED TO, MEETING THE RESPONSE TIME
REQUIREMENT OF
THIS AGREEMENT) IS DUE TO ONE OR MORE CAUSES BEYOND ITS
REASONABLE CONTROL
INCLUDING, BUT NOT LIMITED TO, LABOR DISPUTES, CIVIL
DISTURBANCES,
EPIDEMICS, WAR, EMBARGOES, FIRE, ACTS OF GOD OR DEFAULT OF A
COMMON CARRIER
OR SUPPLIER. THIS SECTION SHALL NOT APPLY TO THE CUSTOMER'S
OBLIGATION TO
PAY THE FEE(S) SET FORTH IN THIS AGREEMENT.
<PAGE>
September 16, 1997
Mr. Norio Ogita, Manager, Business Administration
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: Cornes Purchase Orders
Standard Payment Terms
Dear Mr. Ogita:
A few weeks ago, I had the pleasure of meeting Ishibashi-San and
we had very
fruitful and beneficial discussion on a variety of business
topics. One of the
primary issues we discussed involved the payment terms for future
orders. An
overview of our discussions on payment terms is provided below for
your
confirmation and approval:
Scenario #1:
This scenario is characterized by an on-site (at TSI TelSys)
customer witness
and approval of factory acceptance testing. The milestones for
payment of this
type of contract are detailed as follows:
Milestone Amount Payment Terms
Contract Award 25% of CV* Net 30 days
FAT 55% of CV Immediate
Customer Acceptance 20% of CV Net 30 days
* Contract Value
Scenario #2:
This scenario is characterized by customer witness and approval of
acceptance
testing at the customer site only. The milestones for payment of
this type of
contract are detailed as follows:
Milestone Amount Payment Terms
Contract Award 25% of CV Net 30 days
Customer Acceptance 75% of CV Per terms of LOC
The letter of credit terms are proposed as a separate addendum to
this letter.
In this scenario, since TSI TelSys will not receive payment until
the letter of
credit terms are satisfied, it is appropriate that title pass upon
End-Customer
acceptance at their plant. Therefore, the F.O.B. point for these
types of
orders shall be "Customer's Plant". TSI TelSys will take
responsibility for
shipment of the products to the Tokyo Airport and request that
Cornes, as our
importer, take responsibility on our behalf in transporting the
equipment to
the Customer site. All additional costs related to transporting
the equipment
(including, but not limited to, freight forwarder, shipping, and
insurance
costs) will be billed separately to Cornes and shall be paid on
Net 30 day
terms.
In the unlikely event that Customer acceptance is not granted
within thirty
(30) days of installation, TSI TelSys reserves the right to
require return of
the equipment to facilitate remediation or negotiate other
arrangements with
Cornes, at TSI TelSys' sole discretion.
Scenario #3:
In the rare cases that our contract situation does not fit into
the first two
scenarios, the parties agreed to remain open minded and
cooperative in
discussing alternative payment terms which are appropriate for
that contract.
Please indicate your acceptance to this change to this proposal by
signing the
block below and returning a copy via facsimile to my attention.
Thank you for
your consideration.
Should you have any questions regarding this letter, please
contact me at (410)
872-3943.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley
Director, Contracts and Procurement
Acknowledged and Agreed:
Cornes & Co. Ltd
_________________________
Signature
_________________________
Name
_________________________
Title
_________________________
Date
<PAGE>
FACSIMILE MESSAGE
From Cornes & Co. Ltd., Tokyo
Date: 7 October 1997
TO: TSI TelSys Inc.
ATTN: Mr. K. Matsumoto
CC: Mr. E. O'Malley
From: Norio Ogita, Manager, Business Administration
Subject: Agreement
Thank you for your fax of 18 September and we will make the
following comments.
We agree with your proposal of scenario 1, 2 and 3. These 3
scenarios might be
stipulated in the side letter attached to the formal agreement and
you remain
the old (you proposed previously) wording in the formal agreement,
i.e. Art.
No. 13 of Exhibit B, Payment. Please refer the last paragraph of
our fax of 24
July 1997.
As far as we understand, scenario 3 should be applicable, if we
can not obtain
the customer's consent of payment of 25% at the time of contract,
although we
will try to avoid such a case.
We should be pleased, if you would confirm this before signing.
We put our signature and return the attached document on the
payment.
One thing we would like to comment is the wording on L/C.
We normally receive a document from our bank and they state on the
document
"irrevocable documentary credit" in stead of stating "irrevocable,
non-
transferable letter of credit".
Best regards,
N. Ogita
Manager, Business Administration
<PAGE>
November 4, 1997
Mr. Norio Ogita, Manager, Business Administration
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: Cornes Purchase Orders
Standard Payment Terms
Reference: Cornes facsimile dated October 7, 1997
Dear Mr. Ogita:
TSI TelSys Inc. is pleased to confirm our agreement to the
reference letter.
Specifically, we will consider our letter of September 16, 1997,
to be
incorporated into our previously negotiated terms of April 8,
1997, via
attachment. These payment terms will supersede those relevant
sections found
in Article 13 of Exhibit B.
TSI TelSys agrees to handle scenario 3 on a case-by-case basis and
has no
problem with Cornes position on this issue. We agree to revise
the letter of
credit wording from "irrevocable, non-transferable letter of
credit" to an
"irrevocable documentary credit" as Cornes proposed.
Thank you for your patience and follow-up in bringing these issues
to closure.
Should you have any questions regarding this letter, please
contact me at (410)
872-3943.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley
Director, Contracts and Procurement
<PAGE>
TSI TelSys Proposed Letter of Credit Terms for Cornes
TSI TelSys proposes the following letter of credit terms for
Cornes
consideration:
Seventy-five (75%) of the total order amount shall be paid via an
irrevocable,
non-transferable Letter of Credit, confirmed by a U.S. Bank
acceptable to TSI
TelSys Inc., payable at sight to the order of TSI TelSys Inc. in
U.S. funds at
the counter of its advising bank above upon presentation of the
appropriate
documents as defined below.
1) Reimbursement Criteria:
"Presentation of the original End-Customer Acceptance Test
Approval Form signed
by the TSI TelSys and End-Customer representative(s) (see attached
form)."
2) TSI TelSys bank information is as follows:
Advising Bank Reimbursement Bank (payments made
to this
bank)
Nations Bank N.A. Nations Bank N.A.
Attn: LC Dept. 10320 Little Patuxent Parkway,
Suite 814
121 West Trade Street Acct. No. 20-0370-9508
21st Floor Lois V. Warden, Vice President
(410) 964-6634
Charlotte, NC 28244
3) Accompanying Documentation:
This is defined as the original End-Customer Acceptance Test
Approval Form
signed by the TSI TelSys and End-Customer representative (see
attached form).
4) Cornes shall assure that the Issuing bank's internal bank
reference number
is included on the letter of credit.
Cornes shall provide an advance copy of the letter of credit via
facsimile to
TSI TelSys Inc. for review and approval prior to providing a final
version to
its bank. The letter of credit must be in place and acknowledged
by TSI
TelSys' bank within ten (10) business days of the order placement
with TSI
TelSys. Delays in opening the letter of credit by the Customer
will result in
delay of the contracted shipment date.
PURCHASE ORDER Exhibit
10.6
From Cornes & Co. Ltd., Tokyo
DATE: 8 July 1998
Page: 1 of 1
Our Fax: 03-5821-1632
To: TSI TelSys Inc.
Attn: Mr. Chuck Kozlowski, Director, Sales
Cc: Mr. Kent Koji Matsumoto
From: Norio Ogita, Manager, Business Administration
Subject: Booking
(Destination: Tokyo)
Please book following Products under Order No. ZLS-2163/97B
(AMEND)
<TABLE>
<CAPTION>
DRTS Program
for Tsukuba Primary Station
Model No. Description Qty Order
Amount
Low Rate System BBE #1A
* *
<S> <C> <C> <C>
Software for Low Rate System
BBE #1A * *
High-rate BBE #1
* *
High-Rate BBE #2
* *
Mission BBE 0 OPR
* *
Software of Mission BBE-OPR
Peripheral Equipment *
System design support * *
Request for Total
Shipping Customer: Price
30- April NEC- Yokohama US$1,088,800
2000
* Confidential portions omitted and filed separately with the
Commission.
</TABLE>
Appendix
A. Program: DRTS
B. Our Ref: TSI's Quote #1297009-02 (dated 17/Dec/97)
DRTS Delivery/Payment Schedule chart issued by TSI (dated
16/Apr/98)
C. Payment terms:
#1) 10% of the total amount - US$108,880
-- After TSI's acknowledgement of this purchase order (Net
30) Completed
-- Note:: The payment was completed in Feb/98 under our PO
#ZLS-2163/97A.
#2) 10% of the total amount - US$108,880
-- After TSI's acknowledgment of this purchase order (Net 30)
Completed
-- Note: The payment was completed in Feb/98 under our PO
#ZLS 2163/97A.
#3) 6.5% of the total amount - US$71,040
-- After completion of design plus drawing package,
-1) 75% of US$71,040 (US$53,280), payable in Jun/98 (net 30)
-2) 25% of US$71,040 (US$17,760), payable in Jul/98 (net 30)
#4) 55.1% of the total amount - US$600,000
-- After completion of FAT at TSI (Immediate)
#5) 18.4% of the total amount - US$200,000
-- After NEC's witness at NEC (Net 30)
D. The shipping request should read as "FAT at TSI to be completed
then the
system to be shipped from TSI by 30/Apr/2000 after NEC's
approval of the
shipment".
E. THE #4 AND #5 PAYMENTS SHALL BE MADE IN ACCORDANCE WITH AN
ACTUAL SCHEDULE.
BEST REGARDS,
Norio Ogita
MANAGER
Business Administration
CORNES & CO. LTD., TOKYO
(Sales Engineer in Charge: M. Sakuraba)
<PAGE>
December 17, 1997
Mr. Masaki Sakuraba
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: DRTS Program- Revised Firm Fixed Price Proposal
Reference: NEC/Cornes and TSI TelSys Negotiation dated December
16, 1997
Dear Sakuraba-San:
TSI TelSys Inc. is pleased to provide our revised firm fixed price
proposal for
the DRTS Program Base-Band Equipment which incorporates the
results of the
reference negotiation. A negotiation overview sheet is attached
for your
convenience and provides a review of the pricing, delivery,
technical and
contractual elements of this proposal.
This quote shall remain valid from the above date to December 25,
1997. The
information contained in this proposal is considered proprietary
to TSI TelSys
and must be kept confidential in accordance with our non-
disclosure agreement.
Please extend our thanks and congratulations to the Cornes &
Company team, who
have contributed a great deal to the success of this DRTS
proposal/negotiation
process. We sincerely look forward to continuing this success
with Cornes on
the many opportunities ahead of us in Japan.
Should you have any technical questions regarding this proposal,
please contact
Mr. Jeff Shi at (410) 872-3955. Any contractual questions may be
addressed to
Mr. Edward J. O'Malley at (410) 872-3943.
Sincerely,
TSI TelSys Inc.
James R. Chesney
President
Enclosures
<PAGE>
Attachment A - DRTS Negotiation Overview
December 17, 1997
I. Pricing -The pricing negotiated is based upon the
VME/VIPstation
configurations attached herewith.
II. Delivery - The following delivery schedules were agreed
upon*:
a) Tsukuba Primary Station - Nov. 30, 1998
b) Tsukuba Secondary Station (Low Rate) - Oct. 30,1998
c) Tsukuba Secondary Station (High Rate) - Apr. 30, 2000
d) Hatoyama (EOC) Station - June 30, 1998
e) Redu (ESA) Station - Sept. 30, 1998
The NRE effort described on the attached sheet "NEC DRTS
Custom
Engineering Work" dated December 17, 1997, shall be performed
in parallel
with the delivery of the Hatoyama (EOC) Station (40% of the
engineering
effort will be linked to this effort), Redu Station (40% of
the
engineering effort will be linked to this effort), Tsukuba
Primary Station
(10% linked to this effort), and Tsukuba Secondary Station
Low Rate System
(10% linked to this effort).
* These delivery commitments are based upon contract award
and acceptance
by TSI TelSys by December 25, 1997, unless otherwise agreed
to in writing.
I. Technical Baseline - Our technical basis is the NEC Technical
Specification "BBE Requirement (CCSDS-N-001)" received on
November 21,
1997, as revised by the negotiation minutes dated December
16, 1997.
Based upon this specification and subsequent negotiation, we
have provided
configuration descriptions/diagrams, and an NRE list for the
DRTS program
which identifies what customization is included in this
proposal. TSI
TelSys substantially meets the technical requirements found
in the
specification noted above, however, TSI TelSys takes
exception to and/or
requires clarification to a few requirements and these are
noted on the
NRE list.
II. Terms and Conditions - The terms and conditions negotiated
with Cornes and
documented in Revision 5 dated December 2, 1997, will apply
to this order
with the exception of payment terms. Payment terms are under
consideration by NEC/Cornes at this time. TSI TelSys proposed
a 20%
payment at the time of contract acceptance (Net 30), 60% at
Factory
Acceptance Test (Net 0), and 20% at the time of NEC
Acceptance (Net 30).
We anticipate closure on this issue prior to December 25,
1997. Payment
of the NRE is proposed to be on the same percentage basis as
a deliverable
and will be linked to the Hatoyama Station (40%), Redu
Station (40%),
Tsukuba Primary Station (10%), and Tsukuba Secondary Station
Low Rate
System (10%).
<PAGE>
November 12, 1997
Mr. Norio Ogita
Manager, Business Administration
Cornes & Co. Ltd.
Ryukakusan Bldg., 5F, 2-5-12
Higashi Kanda, Chiyoda-ku
Tokyo 101
JAPAN
Subject: CORNES - TSI TELSYS INTERNATIONAL SALES REPRESENTATIVE
AGREEMENT
Dear Mr. Ogita:
TSI TelSys is pleased to offer two originals of the final
version of the
International Sales Representative Agreement between Cornes &
Co. and TSI
TelSys for Cornes's review and signature. The entire
agreement between the
parties consists of the following documents:
<circle> TSI TelSys Inc. International Sales Representative
Agreement,
including Exhibits A - D.
<circle> TSI TelSys letter dated September 16, 1997, detailing
the Standard
Payment Terms for Cornes purchase orders.
<circle> Cornes facsimile message dated October 7, 1997,
acknowledging and
agreeing to the payment terms and suggesting minor revisions.
<circle> TSI TelSys letter dated November 4, 1997, agreeing to
the revisions
and confirming the parties' agreement that the payment terms
outlined in the
September 16 letter control any conflicting terms in
Exhibit B to the
International Sales Representative Agreement.
Please note that your requested change to Section 5 of the
Agreement has been
modified. We believe this modification is consistent with
the intent and
spirit of your request.
If these documents meet with Cornes's approval, we ask that you
sign and date
the Agreement on page 11 and initial and date the first page
of each of the
other three documents to confirm Cornes's acceptance. If you
would return all
the documents with Cornes's signatures to us, we will execute
the original
documents and return one set of original documents to you for your
records.
Thank you for your continued confidence in TSI TelSys. We look
forward to a
growing, mutually beneficial relationship with Cornes.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley, Jr.
Director, Contracts and Procurement
Attachments: International Sales Representative Agreement
September 16, 1997 Standard Payment Terms
October 7, 1997 Cornes Agreement to Standard Payment
Terms
November 4, 1997 Confirmation of Standard Payment Terms
cc: Kent Koji Matsumoto, Counsel (w/attachments)
<PAGE>
TSI TelSys Terms - Cornes - Rev 5 - 12/2/97
Exhibit B
TSI TELSYS INC.
INTERNATIONAL TERMS AND CONDITIONS OF SALE
1. PRICES
TSI TelSys prices are exclusive of taxes, shipping, and insurance.
2. QUOTATIONS
Unless otherwise indicated therein, TSI TelSys quotations shall be
valid for
thirty (30) days from date of issuance.
3. CONTRACTS/PURCHASE ORDERS
A contract will be formed only upon TSI TelSys' acceptance of
Customer's or
Representatives written purchase order or contract specifying the
model number,
options, and quantities of each product ordered, and the requested
shipping
dates, shipping destinations, and invoice point.
Customer's submission of a purchase order or contract in response
to any
quotation including these terms and conditions shall be deemed
acceptance of
these terms and conditions to the exclusion of any other terms or
conditions
appearing in such purchase order or contract unless otherwise
agreed to in
writing by TSI TelSys. TSI TelSys' acknowledgment of Customer's
order is
expressly made conditional upon Customer's assent to the terms
and conditions
detailed herein, which assent shall be presumed conclusively from
Customer's
failure to reasonably object in writing or from Customer's
acceptance of any or
all of the products ordered.
4. SCHEDULING OF SHIPMENTS
TSI TelSys will schedule shipments based on Customer's request and
TSI TelSys'
shipping capability at the time Customer's order is accepted.
Upon such
acceptance, TSI TelSys will issue an acknowledgment which will
indicate the
estimated shipping dates.
5. RESCHEDULING AND CANCELLATION
Customer may request that orders be rescheduled or canceled only
by written
request submitted to the TSI TelSys. All such requests shall be
subject to
acceptance by TSI TelSys in its sole discretion. Any request to
cancel shall
be subject to payment of cancellation charges as follows:
Cancellation Date Charge
Within 30 Days ARO* 30% of Order Amount
31-59 Days ARO 50% of Order Amount
60 Days + ARO Noncancellable
* After receipt of order
6. SOFTWARE LICENSES AND WARRANTY
Software products are furnished subject to a separate license
agreement which
includes a limited software warranty, a copy of which is attached.
7. SHIPPING AND DELIVERY
Delivery is FOB TSI TelSys, Columbia, Maryland, USA. TSI TelSys
shall arrange
for shipment to the attention of Cornes & Co. at the Tokyo, Japan
Airport or
other specified location. Cornes & Co. shall be responsible for
import
duties/requirements and the reimbursement of all shipping expenses
to TSI
TelSys.
TSI TelSys will not be held responsible for delays due to the
denial, revocation, suspension, or governmental delay in the
issuance of any
export license or authorization, the inability of Cornes to meet
its payment
obligations under this contract or for delays in delivery because
of causes
beyond its reasonable control (e.g, Acts of God - floods, fire,
etc.).
8. INSPECTION/ACCEPTANCE
TSI TelSys shall only tender for acceptance those items that
conform to its
technical specifications. If the product has been customized to
meet the
specific Customer requirements, the Customer may inspect or test
any supplies
or services that have been tendered for acceptance subject to
mutually
agreeable inspection acceptance test procedures. In the event that
inspection
and test is required, the customer must complete this process
within 15
calendar days.
9. INTELLECTUAL PROPERTY RIGHTS
TSI TelSys shall own all rights in patents, copyrights, computer
software,
data, trade secrets and other intellectual property rights related
to the
design and development of its commercial hardware systems and
software.
10. EXPORT RESTRICTIONS
Customer shall neither export, reexport, nor transfer, directly or
indirectly,
any product or technical data received hereunder, to any country
or user in
which such export, reexport or transfer is restricted by United
States or local
country law or regulations without first obtaining any required
governmental
license, authorization, certification, or approval.
If Customer resells or otherwise disposes of any product or
technical data
purchased hereunder, it shall comply with any export restrictions
applicable to
such transfer.
The Customer shall notify TSI TelSys prior to the export,
reexport, or transfer
of technical data or the product from its original destination.
The Customer
shall include name of the end user, end use and country
destination and the
documentation required by the U.S Export Administration in its
submission to
TSI TelSys.
TSI TelSys shall have no liability for delayed delivery or non-
delivery
resulting from denial, revocation, suspension, or governmental
delay in
issuance of any necessary export license or authorization.
11. TITLE, RISK OF LOSS, AND SECURITY INTEREST
Title and risk of loss for all hardware products shall pass to
Customer upon
tender of the products by TSI TelSys to the carrier. Title to
software
products and all copies thereof shall remain in TSI TelSys or
others from whom
TSI TelSys has obtained a licensing right. TSI TelSys reserves a
security
interest in each hardware product shipped until the entire amount
due therefore
has been paid.
12. TAXES
Any and all state and local sales, use, excise, privilege, and
similar taxes
imposed on TSI TelSys, or which TSI TelSys has a duty to collect
in connection
with the sale, delivery, or use of any product, will appear as
separate items
on the invoice, and will be paid by Customer. If sales to
Customer are exempt
from such taxes, Customer shall furnish to TSI TelSys a
certificate of
exemption.
13. PAYMENT
TSI TelSys shall submit an invoice to Cornes and Co. for all
payment
milestones. Cornes & Co. shall pay 25% of the contract value upon
contract
award. Upon receipt of satisfactory evidence of successful
factory acceptance
test (FAT) completion, Cornes & Co. will pay 65% of the contract
value.
Shipment of the product is contingent on receipt of this FAT
payment. Upon
delivery of the product and the receipt of valid shipping
documentation, Cornes
& Co. shall release the final payment of 10%.
All orders shall be paid by Cornes & Co. via wire transfer to TSI
TelSys'
specified account and be made in United States dollars. The
following bank
information is provided for this purpose:
Bank Information:
Nations Bank N.A.
10320 Little Patuxent Parkway, Suite 814
Acct. No. 20-0370-9508
Lois V. Warden, Vice President (410) 964-6634.
All orders shall be shipped F.O.B. TSI TelSys Plant, 7100 Columbia
Gateway Dr.,
Columbia, Maryland, USA. Should Customer become delinquent in
the payment of
any amount due hereunder, TSI TelSys, at its option and upon
notice to
Customer, may suspend performance under any outstanding order.
Customer agrees
to pay any third-party collection expenses, including attorney's
fees, that
may become necessary to affect collection of any unpaid amounts.
14. HARDWARE WARRANTY
Hardware products are furnished subject to a separate warranty
agreement, a
copy of which is attached. TELSYS SPECIFICALLY DISCLAIMS ANY AND
ALL IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. UNLESS MODIFIED IN WRITING AND
SIGNED BY THE
AUTHORIZED REPRESENTATIVES OF BOTH PARTIES, THIS WARRANTY IS
UNDERSTOOD TO BE
THE COMPLETE AND EXCLUSIVE WARRANTY BETWEEN THE PARTIES. NO
TELSYS SALES
REPRESENTATIVE, DEALER, RESELLER, AGENT OR EMPLOYEE IS AUTHORIZED
TO MAKE ANY
MODIFICATION, EXTENSION, OR ADDITION TO THIS WARRANTY UNLESS
OTHERWISE ALLOWED
BY THIS AGREEMENT
15. INFRINGEMENT
TSI TelSys, at its expense, will defend Customer against any
claim based on an
allegation that a product furnished hereunder infringes a patent
or copyright
of another in the United States, and TSI TelSys will pay any
resulting costs,
damages, and attorneys' fees finally awarded against Customer that
are
attributable to such claim, or will pay the part of any settlement
that is
attributable to such claim; provided, that: 1) Customer notifies
TSI TelSys
promptly in writing of the claim; 2) TSI TelSys is permitted to
control the
defense or settlement of the claim; and 3) Customer cooperates
reasonably in
such defense or settlement at TSI TelSys' expense.
In its defense of settlement of any such claim, TSI TelSys may:
1) procure for
Customer the right to continue using the product; 2) modify the
product so
that it becomes non-infringing; or 3) replace the product with an
equivalent
product not subject to such claim. If the use of any product
furnished
hereunder is enjoined and none of the preceding alternatives is
reasonably
available to TSI TelSys, TSI TelSys will provide Customer an
opportunity to
return the product and receive a refund of the purchase price
paid, less a
reasonable allowance for use.
TSI TelSys shall have no liability to Customer for claims of
infringement based
upon: 1) the use of any product in combination with any product
not supplied
by TSI TelSys or; 2) the use of any product designed,
manufactured, or modified
to the specifications of Customer.
The foregoing states the entire obligation and liability of TSI
TelSys with
respect to infringement and claims thereof.
16. LIMITATION OF LIABILITY
EXCEPT AS PROVIDED IN THE PRECEDING SECTION REGARDING
INFRINGEMENT, IN NO EVENT
SHALL TSI TELSYS OR ITS VENDORS BE LIABLE FOR ANY DIRECT,
INDIRECT, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF CUSTOMER'S
PURCHASE OR USE
OF ANY PRODUCT, EVEN IF TSI TELSYS OR THE VENDOR HAS ADVANCE
NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES.
17. WAIVER
The failure of either party to enforce at any time any provision
of these terms
and conditions shall not be construed to be a waiver of such
provision or the
right thereafter to enforce each and every provision. No waiver
by either
party, either express or implied, of any breach of any of these
terms and
conditions shall be construed as a waiver of any other breach of
such term or
condition.
18. ASSIGNMENT
Customer may not assign or otherwise transfer its rights or
obligations
hereunder without the prior written consent of TSI TelSys. No
attempt to
assign or transfer in violation of this provision shall be valid
or binding
upon TSI TelSys.
19. GOVERNING LAW
The rights of the parties hereunder shall be governed by the laws
of the State
of Maryland, USA.
20. NOTICES
All notices required or authorized by these terms and conditions
shall be
given in writing and shall be deemed effective upon receipt (this
includes
facsimile receipts). Notices to Customer shall be sent to the
address shown in
the Customer's order.
21. DISPUTES
Any disputes arising under this contract shall be settled by
compulsory,
binding arbitration between the parties hereto in accordance with
the
commercial arbitration rules of the State of Maryland, USA. If
the parties
cannot agree upon an arbitrator within thirty (30) days after
demand by either
of them, either or both parties may request the State of Maryland
to name a
panel of five (5) arbitrators. TSI TelSys shall strike the names
of two (2) on
this list, the Representative shall then strike two (2) names, and
the
remaining name shall be the arbitrator. Any reviews of the
Arbitrator's
decision shall be made in accordance with the Maryland Uniform
Arbitration Act
<PAGE>
TSI TelSys Inc.'s Limited Hardware Warranty
V6A 4/8/97
TSI TelSys Inc.'s ("TELSYS") Warranty obligations are limited to
the terms set
forth below:
1. LIMITED WARRANTY. TELSYS warrants this hardware product
against defects in
materials and workmanship, under normal use and service, for a
period of one
(1) year from the date of receipt by the Purchaser.
If the Purchaser discovers a defect within the warranty period,
TELSYS will, at
its discretion, repair the product with either new or refurbished
replacement
parts at no charge. If TELSYS is unable to restore the product to
good working
order, TELSYS will replace the product with either new or
refurbished
equipment, at its discretion. In the event that TSI TelSys is
unable to repair
or replace the defective equipment, it will provide a refund for
the purchase
price of the product. All products that are replaced will become
the property
of TELSYS. Any replaced or repaired product is warranted for the
remainder of
the initial warranty period or ninety days, whichever is longer.
TELSYS shall
not be responsible for any software, firmware, information or
memory data of
the Purchaser contained in, stored on, or integrated with any
products for
system components returned to TELSYS pursuant to any warranty.
2. RETURN PROCEDURES. To obtain service under this warranty
within the
established period, the Purchaser must:
Call TELSYS Technical Service Support Operations at 1-888-849-CARE
(2273)
between 8 a.m. and 5 p.m. EST, Monday through Friday, excluding
holidays.
To insure that your product qualifies for return to factory
warranty service,
you will be asked to provide the model and serial number of your
product, the
date of original purchase, and the Purchaser's name, address, and
phone number.
Products returned to TELSYS' Technical Service Support Operations
must be pre-
authorized by TELSYS with a Return Material Authorization (RMA)
number marked
on the outside of the package, and sent prepaid, insured, and
packaged
appropriately for safe shipment. The repaired or replaced item
will be shipped
to the Purchaser at TELSYS' expense, not later than (90) ninety
days after
receipt by TELSYS.
3. APPLICABILITY.
This warranty applies only to hardware products (including
internal components)
supplied by TELSYS that can be identified by the "TELSYS"
trademark, trade
name, or logo affixed to them. Any warranty on external third-
party hardware
(i.e., Sun Workstation) installed by TELSYS with this product is
provided by
the hardware vendor, not TELSYS. This warranty does not apply to
damage caused
by accident, abuse, misuse, improper installation or testing,
misapplication,
or service (including upgrades and expansions) performed by anyone
who is not a
TELSYS Authorized Service Provider or any other cause beyond the
range of the
intended use, or by fire, lightning, or other hazard; if the
product has been
modified without the written permission of TELSYS; if any TELSYS
serial number
has been removed or defaced; or if you cannot provide proof of
original
purchase as described above.
4. LIMITATIONS OF REMEDIES AND DAMAGES.
IN NO EVENT WILL TELSYS, ITS PARENT OR SUBSIDIARIES OR ANY OF THE
LICENSORS,
DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES OF ANY OF THE
FOREGOING BE LIABLE
TO THE PURCHASER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
SPECIAL DAMAGES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND
THE LIKE,)
WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE USE OF OR
INABILITY TO
USE THE SOFTWARE OR ACCOMPANYING WRITTEN MATERIAL, REGARDLESS OF
THE BASIS OF
THE CLAIM AND EVEN IF TELSYS OR A TELSYS REPRESENTATIVE HAS BEEN
ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE. TELSYS'S LIABILITY TO THE PURCHASER
FOR DIRECT
DAMAGES FOR ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF
THE ACTION,
WILL BE LIMITED TO THE ACTUAL PURCHASE PAID FOR THE PRODUCT.
Some states do not allow the exclusion or limitation of incidental
or
consequential damages or exclusion of implied warranties, so the
above
limitations or exclusions may not apply to the Purchaser. This
warranty gives
the Purchaser specific legal rights, and the Purchaser may also
have other
rights that vary from state to state.
THE WARRANTY AND REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN
LIEU OF ALL
OTHERS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED. TELSYS
SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT
LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. UNLESS
MODIFIED IN WRITING AND SIGNED BY THE AUTHORIZED REPRESENTATIVES
OF BOTH
PARTIES, THIS WARRANTY IS UNDERSTOOD TO BE THE COMPLETE AND
EXCLUSIVE WARRANTY
BETWEEN THE PARTIES. NO TELSYS SALES REPRESENTATIVE, DEALER,
RESELLER, AGENT
OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR
ADDITION TO
THIS WARRANTY UNLESS OTHERWISE ALLOWED BY THIS AGREEMENT.
<PAGE>
Addendum A to Limited Hardware Warranty
April 8, 1997
TSI TelSys agrees to indemnify and hold Cornes & Co. harmless from
all claims,
demands and actions arising out of TSI TelSys equipment defects
and/or failure
provided that Cornes & Co. follows the instructions detailed in
this paragraph.
This indemnification is only applicable where Cornes & Co. is the
importer of
TSI TelSys products. In the event that Cornes & Co. is sued as a
result of
"alleged" defects in TSI TelSys products, Cornes & Co. shall
notify TSI TelSys
immediately (in writing) upon verbal or written notice by the end
customer.
Cornes & Co. agrees to allow TSI TelSys to control the defense or
settlement of
the claim and will cooperate reasonably in such defense or
settlement at TSI
TelSys' expense. Despite this indemnification, TSI TelSys'
standard
hardware/software warranties shall apply to all purchase orders
issued by
Cornes & Co. who shall pass on these limited warranties to the end
user and
these shall become the basis for any claims from end users that
our products
did not perform in accordance with TSI TelSys stated warranty
provisions.
<PAGE>
TSI TelSys Inc.'s Software License
V5A 4/8/97
The enclosed computer program(s)("Software") is licensed, not
sold, to you by
TSI TelSys, Inc. ("TELSYS") for use only under the terms of this
License, and
TELSYS reserves any rights not expressly granted to the Licensee.
The Licensee
owns the disk(s) on which the Software is recorded or fixed, but
TELSYS retains
ownership of the Software itself.
1. LICENSE. This License allows the Licensee to:
(a) Use one copy of the Software on a single computer at a time.
To "use" the
Software means that the Software is either loaded in the temporary
memory (i.e.
RAM) of a computer or installed on the permanent memory of a
computer (i.e.
hard disk, CD ROM, etc.) The Licensee may install the Software on
a common
storage device which is accessible by multiple computers, provided
that if more
computers have access to the common storage device than the number
of licensed
copies of the Software, you must have some Software mechanism
which locks-out
any concurrent users in excess of the number of licensed copies of
the Software
(an additional license is not needed for the one copy of Software
installed on
the common storage device accessed by multiple computers provided
the number of
licensed copies is not exceeded by the number of concurrent
users.).
(b) Make one copy of the Software in machine readable form solely
for backup
purposes.
2. PROPRIETARY MATERIAL AND RESTRICTIONS. "Proprietary
Material" shall mean
the Programs(s) in any form and the algorithms, technology and
know-how
embodied therein and all documentation, manuals and other material
related
thereto. Customer expressly acknowledges that the Proprietary
Material is
confidential and proprietary property of TELSYS and hereby agrees
to receive
and maintain it as it would its own confidential and proprietary
material.
Licensee shall not cause or permit disclosure of any Proprietary
Material to
any person other than the Licensee's employees and consultants
whose
responsibilities require access to such material without the prior
written
consent of TELSYS.
The Software contains trade secrets in its human perceivable form
and, to
protect them, the Licensee may not REVERSE ENGINEER, DECOMPILE,
DISASSEMBLE OR
OTHERWISE REDUCE THE SOFTWARE TO ANY HUMAN PERCEIVABLE FORM.
LICENSEE MAY NOT
MODIFY, ADAPT, TRANSLATE, RENT, LEASE, LOAN OR CREATE DERIVATIVE
WORKS BASED
UPON THE SOFTWARE OR ANY PART THEREOF.
3. TERMINATION. This License is effective until terminated.
This License
will terminate immediately without notice from TELSYS or judicial
resolution if
Licensee fails to comply with any provision of this License. Upon
such
termination you must destroy the Software, all accompanying
written materials
and all copies thereof, and Sections 2, 5, 6, and 7 will survive
any
termination.
4. EXPORT LAW ASSURANCES. You agree that neither the Software
nor any direct
product thereof is being or will be shipped, transferred or
reexported,
directly or indirectly, into any country prohibited by the United
States Export
Administration Act and the regulations thereunder or will be used
for any
purpose prohibited by the Act.
5. LIMITED WARRANTY. TELSYS warrants that the Software programs
(which
include embedded third party software) licensed from it will
perform in
substantial conformance to the program specifications therefor for
a period of
one year from the date of receipt from TELSYS. TELSYS warrants
the storage
media containing Software against failure during the warranty
period. No
updates are provided. TELSYS' obligation hereunder shall be to
replace any
defective media with Software which substantially conforms to
TELSYS'
applicable published specifications or in the event that that
replacement is
not possible, to refund the purchase price paid by the Licensee
for any
defective Software products. TELSYS makes no warranty that its
Software
products will work in combination with any hardware or
applications Software
products independently purchased by the Customer from third party
vendors.
THIS LIMITED WARRANTY IS THE ONLY WARRANTY PROVIDED BY TELSYS AND
TELSYS
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESSED OR
IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS
FOR A PARTICULAR PURPOSE WITH REGARD TO THE SOFTWARE AND
ACCOMPANYING WRITTEN
MATERIALS. Because some jurisdictions do not allow the exclusion
or limitation
of implied warranties, the above limitation may not apply to you.
6. LIMITATION OF REMEDIES AND DAMAGES. IN NO EVENT WILL TELSYS,
ITS PARENT OR
SUBSIDIARIES OR ANY OF THE LICENSORS, DIRECTORS, OFFICERS,
EMPLOYEES OR
AFFILIATES OF ANY OF THE FOREGOING BE LIABLE TO THE LICENSEE FOR
ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR SPECIAL DAMAGES
WHATSOEVER(INCLUDING,
WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION AND THE LIKE) WHETHER
FORESEEABLE OR
UNFORESEEABLE, ARISING OUT OF THE USE OF OR INABILITY TO USE THE
SOFTWARE OR
ACCOMPANYING WRITTEN MATERIAL, REGARDLESS OF THE BASIS OF THE
CLAIM AND EVEN IF
TELSYS OR A TELSYS REPRESENTATIVE HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH
DAMAGE. TELSYS'S LIABILITY TO THE LICENSEE FOR DIRECT DAMAGES FOR
ANY CAUSE
WHATSOEVER, AND REGARDLESS OF THE FORM OF THE ACTION, WILL BE
LIMITED TO THE
ACTUAL PRICE PAID FOR THE LICENSE TO USE THE SOFTWARE.
7. U.S. GOVERNMENT RESTRICTED RIGHTS. This License will be
construed under
the laws of the State of Maryland, except for that body of law
dealing with
conflicts of law. If any provision of this License shall be held
by a court of
competent jurisdiction to be contrary to law, that provision will
be enforced
to the maximum extent permissible, and the remaining provision of
this License
will remain in full force and effect. If the Licensee is a U.S.
Government
user then the Software is provided with "RESTRICTED RIGHTS" as set
forth in
subparagraphs (c)(1) and (2) of the Commercial Computer Software-
Restricted
Rights clause at FAR 52.227-19 or subparagraph (c)(1)(ii) of the
Rights in
Technical Data and Computer Software clause at DFARS 252.227-7013,
as
applicable.
<PAGE>
EXHIBIT C
V2 2/28/97
TSI TELSYS, INC. ("TSI TELSYS")
EQUIPMENT MAINTENANCE, SOFTWARE MAINTENANCE, AND INSTALLATION
PROGRAM
TERMS AND CONDITIONS
1. SCOPE
1. TSI TELSYS SHALL BE OBLIGATED TO PROVIDE INSTALLATION
AND/OR
MAINTENANCE FOR ALL EQUIPMENT AS MAY BE REQUESTED BY THE
CUSTOMER
DURING THE CONTRACT TERM OF THIS AGREEMENT. SERVICES WILL
BE PROVIDED
IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
2. The System Installation, Silver Maintenance, Gold
Maintenance, and
Platinum Maintenance Options described herein are for
services rendered
within the Continental United States (CONUS). Additional
charges for
Outside the Continental United States (OCONUS) are stated
in Paragraph
7.
3. THE SCOPE OF THIS AGREEMENT APPLIES TO INSTALLATION AND
MAINTENANCE
SERVICES ONLY. FOR PRODUCT REPAIR SERVICE PROGRAMS AND
NON-CONTRACT
MAINTENANCE SERVICES, CONTACT TSI TELSYS DIRECTLY.
2. TERM
The initial term of this Agreement shall be a period of one
(1) year from
the effective date of maintenance service (not applicable to
installation
service). This Agreement will automatically renew for an
additional one-
year term unless the Customer provides written notice of
cancellation
thirty (30) days prior to the expiration of this Agreement.
TSI may
increase the maintenance charges hereunder at the renewal of
a term,
however the revised charges shall not exceed the then-current
published
TSI TelSys rates for the same level and type of support.
3. OBLIGATIONS OF TSI TELSYS
A. TSI TELSYS WILL COMPLY WITH ALL REGULATIONS AND PROCEDURES IN
EFFECT AT THE
CUSTOMER SITE WHEN PROVIDING SERVICES UNDER THIS AGREEMENT.
B. TSI TELSYS MAY USE NEW OR REFURBISHED REPLACEMENT PARTS WHICH
OPERATE LIKE
NEW PARTS IN EFFECTING REPAIRS. ALL PARTS WHICH HAVE BEEN
REPLACED SHALL
BECOME THE PROPERTY OF TSI TELSYS.
C. TSI TELSYS WILL PROVIDE THE CUSTOMER WITH A SITE PREPARATION
GUIDE AND
CHECKLIST, AND WILL SCHEDULE INSTALLATION WITH THE CUSTOMER.
4. OBLIGATIONS OF CUSTOMER
a. CUSTOMER PERSONNEL SHALL NOT PERFORM MAINTENANCE OR
ATTEMPT REPAIRS TO
EQUIPMENT WHILE SUCH EQUIPMENT IS UNDER MAINTENANCE WITH
TSI TELSYS
UNLESS PRIOR WRITTEN APPROVAL IS PROVIDED BY TSI TELSYS.
b. THE CUSTOMER SHALL PERMIT ACCESS TO TSI TELSYS PERSONNEL
TO THE
EQUIPMENT WHICH REQUIRES MAINTENANCE OR INSTALLATION,
SUBJECT TO
REASONABLE SECURITY MEASURES. THE CUSTOMER SHALL SHIP THE
EQUIPMENT
BACK TO TELSYS AS NECESSARY AND IN ACCORDANCE WITH THIS
AGREEMENT.
c. IF SYSTEMS INSTALLATION SERVICE IS PURCHASED, THE CUSTOMER
SHALL
PREPARE THE SITE IN ACCORDANCE WITH THE SITE PREPARATION
GUIDE PROVIDED
BY TSI TELSYS AND FAX A COMPLETED SITE PREPARATION
CHECKLIST TO THE TSI
TELSYS SERVICE OPERATIONS CENTER PRIOR TO THE SCHEDULED
INSTALLATION
DATE, AND PROVIDE A SITE CONTACT FOR THE TSI TELSYS FIELD
ENGINEER.
d. THE CUSTOMER SHALL: (I) INSURE THAT THE EQUIPMENT IS
INSTALLED IN A
LOCATION WHICH MEETS THE ENVIRONMENTAL CONDITIONS CALLED
FOR BY TSI
TELSYS' PRODUCT SPECIFICATIONS; (II) MAINTAIN CURRENT
BACKUPS OF TSI
TELSYS SOFTWARE; (III) INSTALL ALL TSI TELSYS' SOFTWARE
UPDATES WITHIN
SIX MONTHS OF RECEIPT; AND (IV) LIMIT ACCESS TO ANY TSI
TELSYS
TECHNICAL INFORMATION TO CUSTOMER EMPLOYEES AND AGENTS
WITH A SPECIFIC
NEED RELATED TO USE OF THE SOFTWARE AND OTHER RELATED
DOCUMENTATION
PROVIDED BY TSI TELSYS.
5. AVAILABLE INSTALLATION AND REMEDIAL MAINTENANCE
A. STANDARD SYSTEM INSTALLATION (SSI) SERVICE - PROVIDES FOR CONUS
ON-SITE
INSTALLATION OF A TSI TELSYS PRODUCT, MONDAY THROUGH FRIDAY,
FROM 8 A.M. TO
5 P.M. EASTERN STANDARD TIME (EST).
FEATURES OF SSI SERVICE ARE:
1) HARDWARE-UNPACK AND SET-UP IN RACK, SHELF, OR TABLE;
2) SOFTWARE-UNPACK MEDIA AND DOCUMENTATION, LOAD
SOFTWARE, AND
CONFIGURE AND INITIALIZE SOFTWARE TO COMPLY WITH
PUBLISHED
OPERATING STANDARDS AND MANUALS.
THE CUSTOMER MUST ORDER THE STANDARD SYSTEM INSTALLATION
SERVICE WHEN
PURCHASING TSI TELSYS EQUIPMENT UNLESS A WRITTEN WAIVER IS
REQUESTED BY
THE CUSTOMER AND APPROVED BY TSI TELSYS.
6. MAINTENANCE
a. Silver Maintenance (SM) Service - Provides for remedial
maintenance
and enhanced technical support for TSI TelSys products, Monday
through Friday,
from 8 a.m. to 5 p.m. (EST).
Features of Silver Maintenance service are:
(1) RETURN TO FACTORY REPAIR OF NON-FUNCTIONING
EQUIPMENT - TSI
TELSYS WILL SHIP THE REPAIRED EQUIPMENT BACK TO THE
CUSTOMER
WITHIN TEN (10) BUSINESS DAYS OF RECEIPT AT THE
TSOC;
(2) LABOR AND MATERIALS FOR THE REPAIR OF THE TELSYS
PRODUCT AT THE
TSOC;
(3) TOLL-FREE NUMBER ACCESS NUMBER TO THE TSOC;
(4) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(5) MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(6) NOTIFICATION OF RELEASED ENGINEERING CHANGES.
B. GOLD MAINTENANCE (GM) SERVICE - COMPRISES SILVER
MAINTENANCE SERVICE
PLUS THESE ADDITIONAL FEATURES
FEATURES OF GOLD MAINTENANCE SERVICE ARE:
(1) THE FEATURES OF SILVER MAINTENANCE PLUS;
(2) REMOTE DIAGNOSTICS PERFORMED BY THE TSOC
(SCHEDULED);
(3) SYSTEM SOFTWARE UPDATES (E.G., A MINOR REVISION
FROM VERSION
3.0 TO 3.1);
(4) 24 HOUR MODULE EXCHANGE (SUBJECT TO AVAILABILITY);
(5) HARDWARE UPDATES
(6) PREPAID SHIPPING (CARRIER) CHARGES WITH A VALID
RMA NUMBER FROM
THE TSOC .
C. FEATURES OF PLATINUM SERVICE ARE:
(1) GOLD MAINTENANCE SERVICE PLUS THESE ADDITIONAL
FEATURES;
(2) TELSYS WILL SHIP THE REPAIRED OR A REPLACEMENT PART
BACK THE
NEXT BUSINESS DAY AFTER RECEIPT AT THE TSOC;
(3) SYSTEM SOFTWARE UPGRADES (E.G., A MAJOR REVISION
FROM VERSION
3.1 TO 4.0) WHICH INCLUDE NEW FEATURES AND OPTIONS
IN ADDITION TO
SYSTEM OPERATIONAL ENHANCEMENTS AND BUG FIXES;
(4) ON-SITE MAINTENANCE SERVICE AT A CUSTOMER CONUS
SITE. A
QUALIFIED SERVICE TECHNICIAN WILL BE DISPATCHED TO
THE CUSTOMER
LOCATION WITHIN THE NEXT BUSINESS DAY PLUS
REASONABLE PREPARATION
AND TRAVEL TIME;
(5) ALL TRAVEL CHARGES ASSOCIATED WITH ON-SITE CONUS
SUPPORT
(6) HARDWARE UPDATES PROVIDED AT REGULAR INTERVALS;
(7) INSTALLATION OF PURCHASED TSI OPTIONS.
NOTE: TSI TELSYS WILL, AT ITS SOLE DISCRETION,
DETERMINE THE
NECESSITY AND APPROPRIATENESS OF AN ON-SITE CALL VERSUS
AN OFF-SITE
REPAIR OF THE EQUIPMENT AT THE TSOC. SHOULD TSI TELSYS
DETERMINE
THAT AN ON-SITE CALL IS REQUIRED, IT ALONE WILL DECIDE
ON THE
DURATION AND QUANTITY OF ON-SITE MAINTENANCE CALLS
NECESSARY TO
REPAIR THE EQUIPMENT
A. SOFTWARE SERVICE (SS) PROVIDES FOR REMEDIAL MAINTENANCE SUPPORT
AND UPGRADES
FOR TSI TELSYS' SOFTWARE PRODUCTS, MONDAY THROUGH FRIDAY, FROM
8 A.M. TO 5
P.M. (EST).
FEATURES OF THE SOFTWARE SERVICE ARE:
(1) SEMI-ANNUAL SYSTEM SOFTWARE UPGRADES;
(2) SYSTEM SOFTWARE ENHANCEMENTS;
(3) SYSTEM SOFTWARE BUG FIXES (PATCHES);
(4) REMOTE DIAGNOSTICS VIA THE TSOC;
(5) TOLL-FREE ACCESS TO THE TSOC.
7. COVERAGE AND ELIGIBILITY- EQUIPMENT MAINTENANCE
a. TO BE ELIGIBLE FOR MAINTENANCE COVERAGE UNDER THIS
AGREEMENT, THE
EQUIPMENT MUST BE DETERMINED BY TSI TELSYS TO BE IN GOOD
OPERATING
CONDITION. IN ORDER TO DETERMINE THAT THE EQUIPMENT IS IN
GOOD
OPERATING CONDITION:
(1) THE EQUIPMENT MUST PRESENTLY BE UNDER A TSI TELSYS
WARRANTY OR
MAINTENANCE AGREEMENT;
(2) EQUIPMENT OUTSIDE OF A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT MUST HAVE BEEN REPAIRED BY TSI TELSYS
WITHIN NINETY
(90) DAYS OF THE REQUEST FOR A TSI TELSYS
DETERMINATION OF
CONDITION;
(3) IF THE EQUIPMENT IS OUTSIDE A TSI TELSYS WARRANTY OR
MAINTENANCE
AGREEMENT, IT MUST BE EXAMINED BY TSI TELSYS AND
REPAIRED, IF
NECESSARY, AT THE CUSTOMER'S EXPENSE PRIOR TO
ISSUANCE OF A
MAINTENANCE AGREEMENT.
a. A WRITTEN MAINTENANCE ORDER SHALL BE THE ONLY BASIS FOR
MAINTENANCE IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
MAINTENANCE AGREEMENT.
TSI TELSYS WILL CONFIRM A MAINTENANCE ORDER BY PROVIDING
THE CUSTOMER
WITH A RETURN MATERIAL AUTHORIZATION (RMA) WITHIN TWENTY-
FOUR (24)
HOURS OF THE CUSTOMER'S REQUEST. ORDER RENEWALS WILL BE
AUTOMATICALLY
ACCEPTED FOR EQUIPMENT WHICH MAY HAVE BEEN DISCONTINUED
FROM USE FOR
TEMPORARY PERIODS OF TIME NOT LONGER THAN 120 CALENDAR
DAYS.
b. ALL WRITTEN CORRESPONDENCE FROM THE CUSTOMER SHALL BE
DIRECTED TO THE
TSOC.
c. MAINTENANCE SERVICE SHALL COMMENCE ON A MUTUALLY AGREED
DATE BETWEEN
THE CUSTOMER AND THE TSOC, WHICH WILL BE SPECIFIED IN THE
MAINTENANCE
ORDER. MAINTENANCE ORDERS SHALL NOT BE MADE EFFECTIVE
BEFORE THE
EXPIRATION OF ANY APPLICABLE MAINTENANCE OR WARRANTY
PERIODS.
8. TIME AND MATERIAL RATES FOR ON-SITE SERVICE (EQUIPMENT
MAINTENANCE)
Should the Customer request On-Site maintenance during the periods
below, the
following rates and conditions shall apply.
a. CONUS Support
TIME PERIOD RATE
(1) REGULAR HOURS (8 A.M. TO 5 P.M. LOCAL) $ * **
(2) AFTER HOURS (MONDAY THROUGH FRIDAY) $ *
(3) AFTER HOURS (SATURDAY, SUNDAY, HOLIDAYS) $ *
* Confidential portions omitted and filed separately with the
Commission.
**ONLY APPLICABLE TO CUSTOMER REQUESTS UNDER THE SILVER AND
GOLD SERVICE
OPTIONS. THERE IS NO ADDITIONAL CHARGE FOR MAINTENANCE SERVICE
DURING
REGULAR HOURS FOR THE PLATINUM SERVICE OPTION.
THERE SHALL BE A FOUR (4) HOUR MINIMUM CHARGE FOR ON-SITE SERVICE.
A FULL HOUR
SHALL BE CHARGED FOR ANY SIXTY (60) MINUTE PERIOD OR ANY FRACTION
THEREOF. THE
REGULAR AND AFTER HOUR RATES DO NOT INCLUDE REASONABLE AND ACTUAL
TRAVEL
EXPENSES WHICH SHALL BE CHARGED TO THE CUSTOMER FOR EACH ON-SITE
SERVICE CALL.
B. OCONUS SUPPORT
SHOULD THE CUSTOMER REQUIRE THAT ON-SITE INSTALLATION AND/OR
MAINTENANCE BE
PERFORMED OCONUS, ADDITIONAL COSTS SHALL BE CHARGED TO THE
CUSTOMER. SUCH
CHARGES WILL BE LIMITED TO REASONABLE AND ACTUAL TRAVEL EXPENSES,
INCLUDING
TRAVEL COSTS, PER DIEM AND LODGING IF OVERNIGHT STAY IS NECESSARY.
THESE
EXPENSES WILL BE IN ADDITION TO THE HOURLY CHARGES DESCRIBED ABOVE
FOR CONUS
REGULAR AND AFTER HOURS SUPPORT. SUCH ADDITIONAL CHARGES WILL
APPLY TO EACH
ON-SITE MAINTENANCE REQUEST, AND IT WILL BE LIMITED TO ONE ROUND
TRIP PER
SERVICE CALL.
9. EQUIPMENT RETURN
a. PRODUCTS RETURNED TO TSI TELSYS FOR MAINTENANCE MUST BE PRE-
AUTHORIZED BY
TSI TELSYS WITH AN RMA NUMBER MARKED ON THE OUTSIDE OF THE
PACKAGE, AND SENT
PRE-PAID, INSURED, AND PACKAGED APPROPRIATELY FOR SAFE
SHIPMENT. THE
CUSTOMER SHALL BE RESPONSIBLE FOR RISK OF LOSS OR DAMAGE TO THE
EQUIPMENT
UNTIL RECEIVED AND ACCEPTED AT THE TSOC. TSI TELSYS SHALL BE
RESPONSIBLE
FOR RISK OF LOSS OR DAMAGE UNTIL THE EQUIPMENT HAS BEEN
RETURNED TO THE
CUSTOMER.
b. WHEN TSI TELSYS REMOVES EQUIPMENT FOR OFF-SITE REPAIR, IT SHALL
BE
RESPONSIBLE FOR ANY LOSS OR DAMAGE TO THE PRODUCT FROM THE TIME
OF REMOVAL
UNTIL THE TIME OF RETURN OF THE EQUIPMENT TO THE CUSTOMER.
10. EQUIPMENT MOVEMENT
Relocation of products to a site other than the site specified
initially by
Customer may affect the availability of service and will relieve
TSI TelSys'
obligation to provide On-Site service unless:
a) Customer notifies TSI TelSys thirty (30) days prior to such
relocation; b)
TSI TelSys confirms that the relocation does not affect the
availability of
service; and c) Customer agrees to pay any adjustment of charges
which may
result from the relocation.
Upon request of the Customer, TSI TelSys will supervise product
relocation,
including de-installation, crating, uncrating and reinstallation,
or perform
other associated services at the hourly rates denoted in Paragraph
7 of this
Agreement.
11. LIMITATIONS
TSI TelSys shall not be obligated under this Agreement to:
a. SERVICE ANY PRODUCT THAT HAS BEEN DAMAGED, ABUSED, OVERUSED
OR MISUSED AS
DEFINED BY TSI TELSYS AND THROUGH NO FAULT OF TSI TELSYS;
b. SERVICE ANY PRODUCT THAT HAS RECEIVED UNAUTHORIZED
MODIFICATION, REPAIR
OR SERVICE THAT IMPAIRS PERFORMANCE OR IMPEDES NORMAL
SERVICE;
c. PAINT OR REFINISH ANY PRODUCT FOR COSMETIC PURPOSES ONLY;
d. REPAIR ANY DAMAGE OR MALFUNCTION CAUSED BY THE USE OF NON-
TSI TELSYS
EQUIPMENT;
e. SERVICE ANY PRODUCT THAT HAS NOT RECEIVED THE REQUIRED USER
MAINTENANCE
AND CLEANING AT THE FREQUENCY AND AS PRESCRIBED IN THE USER
MANUAL.
f. PROVIDE OR REPLACE CONSUMABLE ITEMS USED WITH TSI EQUIPMENT
(I.E.
MAGNETIC MEDIA, LAMPS, ETC.)
ANY SERVICE IDENTIFIED IN 10.A-E ABOVE AND PROVIDED BY TSI
TELSYS AT THE
CUSTOMER'S REQUEST SHALL BE CHARGED TO CUSTOMER AT TSI
TELSYS' THEN
CURRENT RATES FOR PARTS AND AT THE HOURLY RATES IN PARAGRAPH
7 FOR
SERVICE.
12. WARRANTIES
a. TSI TelSys warrants new and refurbished "as new" parts for the
duration of
this maintenance Agreement or ninety (90) days after installation,
whichever is
later.
b. IN CONNECTION WITH THIS AGREEMENT, SERVICES RENDERED HEREUNDER
AND PARTS
SUPPLIED PURSUANT HERETO, TSI TELSYS MAKES NO WARRANTY, EITHER
EXPRESSED OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF FITNESS
FOR PARTICULAR
PURPOSE OR OF MERCHANTABILITY. TSI TELSYS' SOLE OBLIGATION SHALL
BE LIMITED TO
TSI TELSYS' REASONABLE EFFORTS AT THE MAINTENANCE, REPAIR, OR
REPLACEMENT OF
ANY DEFECTIVE PRODUCT. Some states do not allow the exclusion of
implied
warranties, so the exclusion above may not apply to the Customer.
13. LIMITATION OF LIABILITIES
TSI TELSYS AND/OR ITS REPRESENTATIVE'S LIABILITY UNDER OR ARISING
OUT OF THIS
AGREEMENT, WHETHER FOR BREACH OF CONTRACT, TORT, OR OTHERWISE
SHALL BE LIMITED
TO A REFUND OF THE PRO RATA ANNUAL MAINTENANCE CHARGES PAID, IF
ANY, FOR THE
ITEM OF PRODUCT INVOLVED IN THE CLAIM. IN NO EVENT WILL TSI
TELSYS OR ITS
REPRESENTATIVES BE LIABLE FOR ANY INDIRECT, SPECIAL
ORCONSEQUENTIAL DAMAGES,
INCLUDING, BUT NOT LIMITED TO, LOSSESOF BUSINESSAND/OR PROFITS,
WHETHER
FORESEEABLE OR NOT, CAUSED BY ITS PRODUCT OR SERVICES RELATED
THERETO. Some
states do not allow the limitation or exclusion of liability
forincidental or
consequential damages, so the limitation above may not apply to
the Customer.
14. BREACH OF CONTRACT AND REMEDIES
Should Customer: (i) default in the payment of any sum of money
due beyond the
thirtieth (30th) day after the same is due; or (ii) default in the
performance
of any other of its obligations under this Agreement, which
default continues
for thirty (30) days after receipt by Customer of notice thereof
from TSI
TelSys; or (iii) permit any person other than a TSI TelSys
authorized service
technician to alter or change any TSI TelSys product without TSI
TelSys' prior
written consent, then in any such event TSI TelSys may at its
option proceed
with the following: (a) terminate this Agreement; and (b) convert
any unpaid
and/or future charges for any and all services rendered to
Customer under this
Agreement to TSI TelSys' then-current rates. The rights afforded
TSI TelSys
under this Paragraph 13 will not be deemed to be exclusive, but
shall be in
addition to any rights or remedies provided by law.
15. MISCELLANEOUS
a. THIS AGREEMENT CONSTITUTES HE ENTIRE UNDERSTANDING BETWEEN THE
CUSTOMER AND
TSI TELSYS WITH RESPECT TO THE SUBJECT MATTER OF THE AGREEMENT
AND MAY BE
AMENDED OR MODIFIED ONLY BY WRITTEN AGREEMENT BETWEEN THE
PARTIES. IN THE
EVENT THAT THERE IS ANY VARIANCE BETWEEN THE TERMS OF THIS
AGREEMENT AND THE
CUSTOMER'S PURCHASE ORDER TERMS, THE TERMS AND CONDITIONS OF
THIS AGREEMENT
SHALL PREVAIL.
b. IF ANY TERM OR PROVISION OF THIS AGREEMENT SHALL BE FOUND TO BE
ILLEGAL OR
UNENFORCEABLE, THEN, NOTWITHSTANDING, THIS AGREEMENT SHALL
REMAIN IN FULL
FORCE AND EFFECT, AND SUCH TERM OR PROVISION WILL BE STRICKEN,
PROVIDED THAT
IN SUCH EVENT THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH
SUBSTITUTE
ENFORCEABLE PROVISIONS MOST NEARLY REFLECT THE PARTIES ORIGINAL
INTENT IN
ENTERING INTO THIS AGREEMENT.
c. THIS AGREEMENT SHALL BE BINDING ON THE PARTIES HERETO AND THEIR
SUCCESSORS
AND ASSIGNS, BUT IS NOT ASSIGNABLE BY CUSTOMER IN ANY PART
WITHOUT THE PRIOR
WRITTEN CONSENT OF TSI TELSYS, AND ANY ATTEMPTED ASSIGNMENT
WITHOUT SUCH
CONSENT SHALL BE NULL AND VOID. TSI TELSYS RESERVES THE RIGHT
TO ASSIGN THE
PERFORMANCE OF THIS AGREEMENT TO A QUALIFIED THIRD PARTY.
d. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MARYLAND.
e. NEITHER PARTY SHALL BE RESPONSIBLE TO THE OTHER FOR A DEFAULT,
DELAY OR
FAILURE TO PERFORM HEREUNDER IF SUCH DEFAULT, DELAY OR FAILURE
TO PERFORM
(INCLUDING, BUT NOT LIMITED TO, MEETING THE RESPONSE TIME
REQUIREMENT OF
THIS AGREEMENT) IS DUE TO ONE OR MORE CAUSES BEYOND ITS
REASONABLE CONTROL
INCLUDING, BUT NOT LIMITED TO, LABOR DISPUTES, CIVIL
DISTURBANCES,
EPIDEMICS, WAR, EMBARGOES, FIRE, ACTS OF GOD OR DEFAULT OF A
COMMON CARRIER
OR SUPPLIER. THIS SECTION SHALL NOT APPLY TO THE CUSTOMER'S
OBLIGATION TO
PAY THE FEE(S) SET FORTH IN THIS AGREEMENT.
<PAGE>
September 16, 1997
Mr. Norio Ogita, Manager, Business Administration
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: Cornes Purchase Orders
Standard Payment Terms
Dear Mr. Ogita:
A few weeks ago, I had the pleasure of meeting Ishibashi-San and
we had very
fruitful and beneficial discussion on a variety of business
topics. One of the
primary issues we discussed involved the payment terms for future
orders. An
overview of our discussions on payment terms is provided below for
your
confirmation and approval:
Scenario #1:
This scenario is characterized by an on-site (at TSI TelSys)
customer witness
and approval of factory acceptance testing. The milestones for
payment of this
type of contract are detailed as follows:
Milestone Amount Payment Terms
Contract Award 25% of CV* Net 30 days
FAT 55% of CV Immediate
Customer Acceptance 20% of CV Net 30 days
* Contract Value
Scenario #2:
This scenario is characterized by customer witness and approval of
acceptance
testing at the customer site only. The milestones for payment of
this type of
contract are detailed as follows:
Milestone Amount Payment Terms
Contract Award 25% of CV Net 30 days
Customer Acceptance 75% of CV Per terms of LOC
The letter of credit terms are proposed as a separate addendum to
this letter.
In this scenario, since TSI TelSys will not receive payment until
the letter of
credit terms are satisfied, it is appropriate that title pass upon
End-Customer
acceptance at their plant. Therefore, the F.O.B. point for these
types of
orders shall be "Customer's Plant". TSI TelSys will take
responsibility for
shipment of the products to the Tokyo Airport and request that
Cornes, as our
importer, take responsibility on our behalf in transporting the
equipment to
the Customer site. All additional costs related to transporting
the equipment
(including, but not limited to, freight forwarder, shipping, and
insurance
costs) will be billed separately to Cornes and shall be paid on
Net 30 day
terms.
In the unlikely event that Customer acceptance is not granted
within thirty
(30) days of installation, TSI TelSys reserves the right to
require return of
the equipment to facilitate remediation or negotiate other
arrangements with
Cornes, at TSI TelSys' sole discretion.
Scenario #3:
In the rare cases that our contract situation does not fit into
the first two
scenarios, the parties agreed to remain open minded and
cooperative in
discussing alternative payment terms which are appropriate for
that contract.
Please indicate your acceptance to this change to this proposal by
signing the
block below and returning a copy via facsimile to my attention.
Thank you for
your consideration.
Should you have any questions regarding this letter, please
contact me at (410)
872-3943.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley
Director, Contracts and Procurement
Acknowledged and Agreed:
Cornes & Co. Ltd
_________________________
Signature
_________________________
Name
_________________________
Title
_________________________
Date
<PAGE>
FACSIMILE MESSAGE
From Cornes & Co. Ltd., Tokyo
Date: 7 October 1997
TO: TSI TelSys Inc.
ATTN: Mr. K. Matsumoto
CC: Mr. E. O'Malley
From: Norio Ogita, Manager, Business Administration
Subject: Agreement
Thank you for your fax of 18 September and we will make the
following comments.
We agree with your proposal of scenario 1, 2 and 3. These 3
scenarios might be
stipulated in the side letter attached to the formal agreement and
you remain
the old (you proposed previously) wording in the formal agreement,
i.e. Art.
No. 13 of Exhibit B, Payment. Please refer the last paragraph of
our fax of 24
July 1997.
As far as we understand, scenario 3 should be applicable, if we
can not obtain
the customer's consent of payment of 25% at the time of contract,
although we
will try to avoid such a case.
We should be pleased, if you would confirm this before signing.
We put our signature and return the attached document on the
payment.
One thing we would like to comment is the wording on L/C.
We normally receive a document from our bank and they state on the
document
"irrevocable documentary credit" in stead of stating "irrevocable,
non-
transferable letter of credit".
Best regards,
N. Ogita
Manager, Business Administration
<PAGE>
November 4, 1997
Mr. Norio Ogita, Manager, Business Administration
Cornes & Co. Ltd.,
Ryukakusan Bldg., 5F., 2-5-12
Higashi Kanda, Chiyoda-ku,
Tokyo, 101 Japan
Subject: Cornes Purchase Orders
Standard Payment Terms
Reference: Cornes facsimile dated October 7, 1997
Dear Mr. Ogita:
TSI TelSys Inc. is pleased to confirm our agreement to the
reference letter.
Specifically, we will consider our letter of September 16, 1997,
to be
incorporated into our previously negotiated terms of April 8,
1997, via
attachment. These payment terms will supersede those relevant
sections found
in Article 13 of Exhibit B.
TSI TelSys agrees to handle scenario 3 on a case-by-case basis and
has no
problem with Cornes position on this issue. We agree to revise
the letter of
credit wording from "irrevocable, non-transferable letter of
credit" to an
"irrevocable documentary credit" as Cornes proposed.
Thank you for your patience and follow-up in bringing these issues
to closure.
Should you have any questions regarding this letter, please
contact me at (410)
872-3943.
Sincerely,
TSI TelSys Inc.
Edward J. O'Malley
Director, Contracts and Procurement
<PAGE>
TSI TelSys Proposed Letter of Credit Terms for Cornes
TSI TelSys proposes the following letter of credit terms for
Cornes
consideration:
Seventy-five (75%) of the total order amount shall be paid via an
irrevocable,
non-transferable Letter of Credit, confirmed by a U.S. Bank
acceptable to TSI
TelSys Inc., payable at sight to the order of TSI TelSys Inc. in
U.S. funds at
the counter of its advising bank above upon presentation of the
appropriate
documents as defined below.
1) Reimbursement Criteria:
"Presentation of the original End-Customer Acceptance Test
Approval Form signed
by the TSI TelSys and End-Customer representative(s) (see attached
form)."
2) TSI TelSys bank information is as follows:
Advising Bank Reimbursement Bank (payments made
to this
bank)
Nations Bank N.A. Nations Bank N.A.
Attn: LC Dept. 10320 Little Patuxent Parkway,
Suite 814
121 West Trade Street Acct. No. 20-0370-9508
21st Floor Lois V. Warden, Vice President
(410) 964-6634
Charlotte, NC 28244
3) Accompanying Documentation:
This is defined as the original End-Customer Acceptance Test
Approval Form
signed by the TSI TelSys and End-Customer representative (see
attached form).
4) Cornes shall assure that the Issuing bank's internal bank
reference number
is included on the letter of credit.
Cornes shall provide an advance copy of the letter of credit via
facsimile to
TSI TelSys Inc. for review and approval prior to providing a final
version to
its bank. The letter of credit must be in place and acknowledged
by TSI
TelSys' bank within ten (10) business days of the order placement
with TSI
TelSys. Delays in opening the letter of credit by the Customer
will result in
delay of the contracted shipment date.
EXHIBIT 21.1
Subsidiaries of TSI TelSys Corporation
TSI TelSys, Inc., incorporated under the laws of Maryland.
TSI Technology, Inc. incorporated under the laws of Maryland.
Contour Appliance Distributors Ltd., incorporated under the laws
of British
Columbia.
Contour Distributors Ltd., incorporated under the laws of British
Columbia.
Exhibit 23.3
The Board of Directors
TSI Telsys Corporation
We consent to the use of our report dated February 27, 1998 with
respect to the
consolidated balance sheets of TSI Telsys Corporation and
subsidiaries as at
December 31, 1997 and 1996 and the related consolidated statements
of
operations, stockholders' equity (deficiency) and cash flows for
the years
ended December 31, 1997 and 1996, which report appears in the Form
S-4 dated on
or about December 18, 1998. Our report includes additional
comments for U.S.
readers on Canada-U.S. reporting differences with respect to
conditions and
events that cause substantial doubt as to TSI Telsys Corporation's
ability to
continue as a going concern. The consolidated financial
statements do not
include any adjustments that might result from the outcome of that
uncertainty.
We also consent to the reference to our firm under the heading
"Experts" in the
prospectus.
/s/"KPMG LLP"
Chartered Accountants
Vancouver, Canada
December 18, 1998
Exhibit 8.2
CLARK, DRUMMIE & COMPANY
BARRISTERS AND SOLICITORS
40 WELLINGTON ROW
SAINT JOHN, N.B.
CANADA
December
22, 1998
TSI TelSys Corporation
7100 Columbia Gateway Drive
Columbia, MD 21046
Dear Sirs:
Re: Registration Statement on Form S-4 Relating to
9,754,202 Shares of the Common stock of TSI TelSys Corporation
We have acted as Canadian counsel to TSI TelSys Corporation, a New
Brunswick
business corporation (the "Company"), in connection with the
continuance or
domestication of the Company as a corporation (the "Continuance")
under the
Delaware General Corporation Law (the "DGCL"), the simultaneous
discontinuance
of the Company as a corporation under the New Brunswick Business
Corporations
Act (the "NBBCA") and the deemed issuance, in connection
therewith, of up to
9,754,202 shares (the "Shares") of the common stock, par value
$.01 per share,
of the Company, as described in the Registration Statement on Form
S-4 of the
Company (as the same may be amended from time to time, the
"Registration
Statement") filed by the Company with the Securities and Exchange
Commission
(the "Commission") pursuant to the Securities Act of 1933 (the
"Act").
In connection with the formulation of this opinion, we have
examined or are
otherwise familiar with the Registration Statement and such other
documents as
we have deemed necessary or appropriate as a basis for our
opinion. In our
examination, we have assumed without independent verification the
genuineness
of all signatures, the authenticity of all documents submitted to
us as
originals, the conformity to original documents of all documents
submitted to
us as certified or photostatic copies and the authenticity of the
originals of
such copies. As to any facts material to this opinion that we did
not
independently establish or verify, we have relied solely upon
statements and
representations of officers and other representatives of the
Company. In
addition, this opinion is subject to the receipt by counsel of
certain written
representations of TSI, dated as of the date hereof.
<PAGE>
Based upon and subject to the foregoing, the discussion contained
in the Proxy
Statement/Prospectus included as part of the Registration
Statement (the
"Prospectus") under the caption "Certain Canadian Federal Income
Tax
Consequences of the Reclassification and the Continuance", except
as otherwise
indicated, expresses our opinion as to the application of Canadian
Federal
income tax laws arising under the Income Tax Act (Canada) existing
judicial
decisions, administrative regulations and published rulings and
procedures.
It is possible that contrary positions may be taken by Revenue
Canada and that
a court may agree with such contrary positions. Furthermore, no
assurance can
be given that future legislation, judicial or administrative
changes, either on
a perspective or retroactive basis would not adversely affect the
accuracy of
the conclusions stated herein.
This opinion is furnished to you solely for use in connection
with the
Registration Statement and is strictly limited to the matters
expressly set
forth herein and no statements or opinions should be inferred
beyond such
matters. We hereby consent to the filing of this opinion as an
exhibit to the
Registration Statement and to the reference to Clark, Drummie &
Company under
the heading "Certain Federal Income Tax Consequences of the
Reclassification
and the Continuance" in the Registration Statement and on the face
page of
the Registration Statement.
Yours very truly,
CLARK, DRUMMIE & COMPANY
William C. Kean
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the financial
statements of TSI TelSys Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 OCT-02-1998
<PERIOD-END> DEC-31-1997 OCT-02-1998
<CASH> 2,124,734 1,416,400
<SECURITIES> 0 0
<RECEIVABLES> 1,236,445 2,397,786
<ALLOWANCES> 0 0
<INVENTORY> 549,964 619,228
<CURRENT-ASSETS> 4,069,001 4,580,184
<PP&E> 1,327,291 1,075,607
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 5,863,392 5,962,702
<CURRENT-LIABILITIES> 5,573,356 7,868,031
<BONDS> 0 0
0 0
0 0
<COMMON> 16,509,995 16,509,995
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 5,863,392 5,962,702
<SALES> 4,215,940 7,210,262
<TOTAL-REVENUES> 4,215,940 7,210,262
<CGS> 3,711,580 4,910,917
<TOTAL-COSTS> 3,711,580 4,910,917
<OTHER-EXPENSES> 7,064,054 4,299,373
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,546,167) (2,184,710)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,546,167) (2,184,710)
<EPS-PRIMARY> (.69) (.22)
<EPS-DILUTED> (.69) (.22)
</TABLE>
Exhibit 8.1
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, MD 21201
December 21, 1998
TSI TelSys Corporation
7100 Columbia Gateway Drive
Columbia, MD 21046
Re: Registration Statement on Form S-4 relating to
9,754,202 SHARES OF THE COMMON STOCK OF TSI TELSYS
CORPORATION
Ladies and Gentlemen:
We have acted as United States counsel to TSI TelSys
Corporation, a
New Brunswick business corporation (the "Company"), in
connection with
the continuance or domestication of the Company as a
corporation (the
"Continuance") under the Delaware General Corporation Law (the
"DGCL"),
the simultaneous discontinuance of the Company as a corporation
under the
New Brunswick Business Corporations Act (the "NBBCA") and the
deemed
issuance, in connection therewith, of up to 9,754,202
shares (the
"Shares") of the common stock, par value $.01 per share, of the
Company,
as described in the Registration Statement on Form S-4 of the
Company (as
the same may be amended from time to time, the "Registration
Statement")
filed by the Company with the Securities and Exchange
Commission (the
"Commission") pursuant to the Securities Act of 1933 (the "Act").
In connection with the formulation of this opinion, we have
examined
or are otherwise familiar with the Registration Statement and
such other
documents as we have deemed necessary or appropriate as a basis
for our
opinion. In our examination, we have assumed without
independent
verification the genuineness of all signatures, the authenticity
of all
documents submitted to us as originals, the conformity to
original
documents of all documents submitted to us as certified or
photostatic
copies and the authenticity of the originals of such copies. As
to any
facts material to this opinion that we did not independently
establish or
verify, we have relied solely upon statements and
representations of
officers and other representatives of the Company. In
addition, this
opinion is subject to the receipt by counsel of certain
written
representations of TSI, dated as of the date hereof.
Based upon and subject to the foregoing, the discussion
contained in
the Proxy Statement/Prospectus included as part of the
Registration
Statement (the "Prospectus") under the caption "Certain United
States
Federal Income Tax Consequences," except as otherwise
indicated,
expresses our opinion as to the material United States Federal
income tax
consequences applicable to TSI and certain of its shareholders.
In rendering our opinion, we have considered the
applicable
provisions of the Internal Revenue Code of 1986, as amended,
Treasury
regulations promulgated thereunder, pertinent judicial
authorities,
interpretive rulings of the Internal Revenue Service and such
other
authorities as we have considered relevant. It should be
noted that
statutes, regulations, judicial decisions and
administrative
interpretations are subject to change at any time and,
in some
circumstances, with retroactive effect. A change in the
authorities upon
which our opinion is based could affect our conclusions. In
addition,
there can be no assurance that the Internal Revenue Service will
not take
a position contrary to our conclusions.
This opinion is furnished to you solely for use in
connection with
the Registration Statement and is strictly limited to the
matters
expressly set forth herein and no statements or opinions
should be
inferred beyond such matters. We assume no obligation to
update the
opinion set forth herein. We hereby consent to the filing
of this
opinion as an exhibit to the Registration Statement and to the
reference
to Venable, Baetjer & Howard, LLP under the heading "Certain
Federal
Income Tax Consequences" in the Registration Statement
and the
Prospectus.
Very truly yours,
/s/ VENABLE, BAETJER and HOWARD, LLP
