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REGISTRATION NO. 33-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTEGCOM CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 412600 22-3690168
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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JAMES E. HENRY, PRESIDENT
C/O INTEGCOM CORP.
280 MIDLAND AVENUE
SADDLE BROOK, NEW JERSEY 07662
(201) 794-6500
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE AND AGENT AND
TELEPHONE NUMBER INCLUDING AREA CODE)
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PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
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KENNETH T. CASCONE, ESQ. RICHARD FRIEDMAN, ESQ.
CASCONE & COLE SICHENZIA, ROSS & FRIEDMAN, LLP
711 THIRD AVENUE, SUITE 1505 135 WEST 50TH STREET, 20TH FLOOR
NEW YORK, NY 10017 NEW YORK, NY 10020
TELEPHONE NO. (212) 599-4747 TELEPHONE NO. (212) 664-1200
TELECOPIER NO. (212) 599-7909 TELECOPIER NO. (212) 664-7329
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
(Cover continued on next page)
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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(Cover continued from previous page)
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
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Common Stock, par value $.01 per share(2).. 1,150,000 $7.50 $ 8,625,000.00 $2,398.00
Warrants to purchase shares of Common
Stock(2)................................. 1,150,000 $ .10 $ 115,000.00 $ 32.00
Common Stock, par value $.01 per share,
issuable upon exercise of Warrants(3).... 1,150,000 $9.75 $11,212,500.00 $3,118.00
Representative's Warrants to purchase
shares of Common Stock and Warrants...... 100,000 $.001 $ 100.00 $ .03
Common Stock, par value $.01 per share,
issuable upon exercise of
Representative's Warrants................ 100,000 $9.00 $ 900,000.00 $ 251.00
Total............................ $5,799.00
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 150,000 Shares or Warrants which may be issued upon the exercise of
an option granted to the Underwriters to cover over-allotments, if any. See
'UNDERWRITING.'
(3) Pursuant to Rule 416, additional securities as may be issued pursuant to the
anti-dilution provisions of the Warrants including the securities comprising
a portion thereof, are also being registered.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT THE SOLICITATION OF AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JANUARY , 2000
PRELIMINARY PROSPECTUS
[LOGO] INTEGCOM CORP.
1,000,000 UNITS
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This is an initial public offering of 1,000,000 units of InTegCom Corp.
Each unit consists of one share of common stock and one redeemable common stock
purchase warrant. The common stock and the warrants will be separately tradable
immediately after the completion of this offering.
Prior to this offering, no public market for the units exists. We
anticipate that the initial public offering price will be between $5.20 and
$7.50 per unit. This amount includes $.10 for each warrant.
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THIS INVESTMENT INVOLVES RISKS WHICH ARE DESCRIBED IN THE 'RISK FACTORS'
SECTION BEGINNING ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PER UNIT TOTAL
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Public offering price..................................... $ $
Underwriting discounts and commissions.................... $ $
Proceeds to InTegCom Corp. ............................... $ $
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We have granted the underwriters the right to purchase an additional
150,000 units at the initial public offering price, minus the underwriting
discount, to cover over-allotments. The underwriters are offering the units on a
firm commitment basis.
MASON HILL & CO., INC.
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THE DATE OF THIS PROSPECTUS IS , 2000
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Cautionary Note Regarding Forward-Looking Statements........ 10
Use of Proceeds............................................. 11
Dividend Policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Business.................................................... 21
Management.................................................. 32
Certain Transactions........................................ 40
Principal Stockholders...................................... 40
Description of Securities................................... 41
Shares Eligible For Future Sale............................. 44
Underwriting................................................ 44
Legal Matters............................................... 46
Experts..................................................... 46
How to Get More Information................................. 46
Change in Accountants....................................... 47
Financial Statements........................................ F-1
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, especially the risks of purchasing
our securities discussed under 'Risk Factors.' References in this prospectus to
'we', 'our' and 'us' refer to InTegCom Corp., ITC or its subsidiaries.
OUR BUSINESS
We are a systems integrator and manufacturer of security and communication
devices. As an integrator, we primarily design, customize, install, connect and
maintain closed circuit television and access control systems for customers in
the private and public sectors. Either together or on a stand-alone basis, these
systems detect and reduce crime, prevent unauthorized entry, and record evidence
of infractions or accidents. They are also an effective tool in improving
building and facility management. In our smaller manufacturing operations, we
develop and fabricate a line of video, audio and control devices with hardware
and software elements that are used for our own integration efforts as well as
those of other integrators.
Our customers encompass transit authorities, airports, universities, office
buildings, hospitals, banks, brokerage firms, hotels, airlines, utilities and
other entities with security needs. Our current projects involve New York City
Transit Authority, Motorola, Delta Airlines, Quest Communications Corp., Lucent
Technologies, Inc., Silverstein Properties, Ameritrade, Port Authority of New
York and New Jersey and Army, Air Force Exchange Services.
To keep our competitive edge, we consistently seek either to develop
in-house or to acquire from third parties advanced technologies applicable to
our customers' evolving needs.
Several new technological areas where we intend to focus are:
Mobile applications for our closed circuit television products on buses,
trains, armored cars, police vehicles and taxis, using high-level
compression techniques.
Communication link-ups for surveillance systems with high-quality,
multi-media transmissions over long distances on existing networks so
remote locations may be more easily connected to a central station.
A programmable key, on a stand-alone basis or as one element in a system,
that via a dedicated computer chip keeps track of where it has been and
which lock is using it, replaces numerous keys with one key, restricts and
controls its usage as well as changes locks electronically.
Our management considers its forty-five-year relationship with Motorola to
be one of its most important assets. We sell to Motorola and its authorized
service shops closed circuit television devices that we either distributed or
manufacture, and we support Motorola, its divisions and authorized service shops
with integration, consulting and maintenance services. From Motorola, we
purchase wireless technology products, including card readers and smart cards.
OUR STRATEGY
Our objective is to become a leading systems integrator in security and
communications that extends its customer base across the country. The key
elements of our strategy involve:
Continued application of new proven technological solutions for customer
problems.
Aggressive marketing to larger customers and projects regionally and
nationally.
Growth by acquisitions of, and joint ventures with, selected systems
integrators in other areas of the country.
Expansion of our work force in technical, marketing and managerial fields
as well as our dealer network to capitalize on emerging business
opportunities.
Establishment of additional offices in new regions.
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OUR OFFICES
Our headquarters are located at 280 Midland Avenue, Saddle Brook, New
Jersey, 07663; our telephone number is (201) 794-6500; and our web site, which
is still under development, can be accessed at www.viscomproducts.com.
Information to be contained in our web site is not part of this prospectus. We
also maintain an office for systems integration in Grand Prairie, Texas near the
Dallas - Ft. Worth airport.
CORPORATE BACKGROUND
Our current management began operations in the fall of 1989 when we
repurchased under the name of HBE Acquisition Corp., the original family
business of one of our principal officers and directors from Communications
Group, Inc., a publicly held company. Afterwards we established other
corporations, including HBE Central Management, Inc. and Viscom Products, Inc.
to operate different parts of our business acquired from others. See 'Business
History'. In mid-November, 1999, we organized InTegCom Corp. in Delaware and in
December of that year through an exchange of stock, those HBE and Viscom
companies became the wholly owned subsidiaries of ITC.
THE OFFERING
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Securities offered by us....................... 1,000,000 units, each consisting of one share of
common stock and one warrant to purchase one
share
Common stock outstanding after this offering... 5,000,000 shares, assuming the underwriters do
not exercise their over-allotment option
Warrants outstanding after this offering....... 1,000,000
Use of Proceeds................................ We intend to use the net proceeds of this
offering to:
Market systems integration, new products and
technologies
Expand our dealer and value-added reseller
network,
Open sales and services offices in targeted
regions
Make acquisitions of other systems integrators
and related businesses,
Hire upper/middle-level management and
marketing personnel,
Increase research and development on
proprietary products for identifiable markets
Use balance for working capital
As an indirect benefit, the infusion of equity
resulting from this offering should expand our
bonding capabilities and allow us to handle
larger projects and customers.
Proposed NASDAQ Symbol......................... ' ' and ' W'
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Except as noted, all of the information in this prospectus assumes that
neither the warrants that we will issue to the representative of the
underwriters or the underwriters' over-allotment option are exercised, and does
not reflect the issuance of any of our 500,000 shares of common stock available
under our 1999 incentive stock option plan.
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SUMMARY FINANCIAL DATA
You should read the following summary financial data together with the
section in this prospectus entitled 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and our financial statements and
notes thereto included elsewhere.
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YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
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1996 1997 1998 1998 1999
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STATEMENT OF OPERATIONS DATA
Sales......................... $4,908,375 $4,011,408 $6,783,267 $4,912,560 $5,253,051
Cost of goods sold............ 3,576,757 2,574,169 4,703,515 3,404,06 3,603,699
72.87% 64.17% 69.34% 69.29% 68.60%
Gross profit.................. 1,331,618 1,437,239 2,079,752 1,508,494 1,649,352
27.13% 35.83% 30.66% 30.71% 31.40%
Selling, G&A.................. 1,207,681 1,255,920 1,791,148 1,279,496 1,407,744
24.60% 31.31% 26.41% 26.05% 26.80%
Interest...................... 70,156 159,672 106,939 74,300 63,618
1.43% 3.98% 1.58% 1.51% 1.21%
Income before taxes........... 53,782 21,647 181,666 154,698 177,990
Income tax.................... 22,716 21,946 76,191 65,047 68,000
Net income (loss)............. 31,066 (299) 105,474 89,651 109,990
0.63% 0.01% 1.55% 1.82% 2.09%
Retained earning beginning.... 379,752 410,818 410,519 410,519 499,853
Deficit acquired in merger.... (16,141) 0 0
Retained earning end.......... 410,818 410,519 499,853 500,170 609,843
Earnings per share............
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The pro forma balance sheet below, as of September 30, 1999, has been
adjusted to reflect the issuance of $128,685 of promissory notes in
December, 1999. The pro forma as adjusted balance sheet below, as of
September 30, 1999, has been adjusted to reflect the sale of common stock and
warrants offered in this prospectus at an assumed initial public offering price
of $6.25 per share and $.10 per warrant representing the mid point of the filing
range, and the receipt of the estimated net proceeds therefrom.
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AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
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BALANCE SHEET DATA
Total working capital............................ $ 150,424 $1,379,008 $1,570,875
Total assets..................................... 2,697,848 3,054,800 3,411,919
Total liabilities................................ 2,076,029 2,343,647 2,590,776
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Total stockholder's equity....................... $ 621,819 $ 711,153 $ 821,143
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RISK FACTORS
An investment in our common stock and warrants involves a high degree of
risk. In addition to the other information contained in this prospectus, you
should carefully consider the following risk factors before investing in our
securities.
RISKS RELATING TO OUR BUSINESS
WE MAY NOT BE ABLE TO DEVELOP OR ACQUIRE NEW TECHNOLOGICAL SOLUTIONS NECESSARY
FOR OUR CUSTOMERS' REQUIREMENTS
Our success depends on applying new technological developments to satisfy
customer needs either through purchases from outside vendors or internal
research. Any failure or delay to deliver these advances on our part could have
a negative impact on business and its prospects. While rapid technological
change does not typically occur in the security market, from time to time we or
other vendors develop superior technology. In the past, we have been able to
invent or identify new technological advances early, incorporate their
applications into our systems design and provide them to our customers ahead of
our competition. However, in the future we may fail to develop or miss these
applications through our own neglect or because the vendors have made exclusive
arrangements with competitors.
WE ARE CURRENTLY DEPENDENT UPON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION
OF OUR REVENUES.
In the year ended December 31, 1997 NYC Transit accounted for 21% of these
revenues, Motorola for 7% and Silverstein Properties for 6%. In 1998 NYC Transit
represented 34% of these revenues, Motorola represented about 14% and
Silverstein Properties represented 8%. In the first nine months of 1999, NYC
Transit accounted for about 40% of these revenues, Port Authority nearly 8% and
Army/Air Force Exchange 6%.
The loss of or diminution of business from NYC Transit or any other of
these customers could have a material adverse effect on our business, financial
condition and results of operations. In nearly all these cases, individual
clients involve multiple projects and contracts which reduce the likelihood of a
total loss of anyone's business due to a single occurrence. From five to
forty-five years these customers have selected ITC to purchase new security
systems and to handle their maintenance services. Revenue derived from other
existing and new clients could offset any loss of these customers or a lessening
of their business.
FOR KEY DEVICES AND SOFTWARE, WE ARE ALSO DEPENDENT ON ONLY A FEW VENDORS AND WE
RELY ON TIMELY DELIVERIES OF EQUIPMENT FROM ALL OUTSIDE SOURCES
We obtain from sole sources devices and software for specific access
control and imaging, remote transmission, smart key and mobile applications. The
loss of any one of these companies as suppliers or our inability to develop or
acquire new technologies from other sources could have an adverse impact on our
business and its prospects.
Timely vendor deliveries of equipment meeting our stringent quality-control
standards from all suppliers are also important to our business because each
installed system requires a variety of elements to be fully functioning at once.
The failure to deliver any critical device or component, when needed in
operating condition, can delay a project, trigger vendor penalties, halt
progress payments or result in cancellation.
WE EXPERIENCE INTENSE COMPETITION FOR BUSINESS FROM A VARIETY OF SOURCES AND MAY
BE COMPELLED ON GOVERNMENT PROJECTS TO ENGAGE IN COMPETITIVE BIDDING OR
AFFIRMATIVE ACTION PROGRAMS WITH MINORITY CONTRACTORS
In system integration, ITC competes for new and existing businesses with
large construction firms, electrical contractors, consultants in the security
business and other systems integrators. In its
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manufacturing operations, InTegCom vies with numerous manufacturers such
as -- Vicon, Sensormatic, Pelco and Phillips. Many are much larger than ITC with
many more resources. Currently, our integration operations and other dealers,
including Motorola service shops which we supply, consume substantially all our
manufactured products.
Pursuit of government business typically requires competitive bidding under
an exacting set of varied rules. While a few public customers compel competitive
bidding, for the most part, we have avoided it. Because the low bidder is
generally awarded this contract, this type of business often means lower profit
margins. Instead, we prefer to specialize in design-build projects where ITC, in
effect, writes the specifications due to its advanced technical expertise and
then implements and completes the project in a timely and economic manner. This
is not always feasible or possible.
In the government arena, a winning bidder may also be compelled to
subcontract to or hire minority enterprises for security projects to satisfy the
requirements of existing or future affirmative action programs. In that event,
we may encounter difficulties finding technologically qualified subcontractors
that comply with these requirements.
WE RELY ON ONLY A FEW KEY EXECUTIVES
James E. Henry, Irvin F. Witcosky and Louis Massad, our three top officers
and directors, are employees vital to our business operations. The loss of any
one of them could have an adverse impact on our business, financial condition or
results of operations.
We have recently entered into five (5) year employment contracts with
Messrs. Henry, Witcosky and Massad. See 'Management -- Employment Agreements.'
In addition, we maintain key man insurance policies on the lives of Mr. Henry
and Mr. Witcosky, each in the amount of $1,000,000 with InTegCom as the primary
beneficiary.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN HIGHLY
SKILLED PERSONNEL
Our future success depends on our ability to attract, train, motivate and
retain highly skilled employees. If we are unable to hire and retain skilled
personnel, our growth may be restricted, the quality of our products and
services reduced and our revenues and the value of your investment reduced.
Competition for highly skilled employees is intense in our industry. We may be
unable to retain our skilled employees or attract, assimilate and retain other
highly skilled employees in the future. We have from time to time in the past
experienced, and we may experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications.
OUR PAST ANNUAL FINANCIAL RESULTS HAVE BEEN INCONSISTENT AND ARE NOT
PARTICULARLY IMPRESSIVE AND FUTURE RESULTS MAY BE SIMILAR OR WORSE.
For the year ended December 31, 1996, 1997 and 1998 our sales were
$4,908,375, $4,011,408 and $6,783,267, and our net income (loss) for those years
was $31,066, ($299) and $105,474. While these numbers demonstrate some growth,
they also reveal one year in which there was a sales decline. Our annual
profitability has not been continuous, and we actually suffered a small loss in
the year in which the sales decline occurred. In profitable years, our net
income was small in actual dollar amounts as well as in relationship to total
sales, representing from .6% to 1.6% of sales. We cannot predict whether the
future offers better or worse financial results. This financial pattern, if it
persists, could negatively affect your investment.
ECONOMIC DOWNTURNS OR RECESSIONS MAY DAMPEN THE DEMAND FOR OUR SECURITY SYSTEMS
Our previous experience indicates that during economic declines, some
decisions to implement security programs and install systems are deferred or
cancelled. In other cases, customers may increase their purchases of security
systems because they fear more inventory shrinkage and theft will occur due to
peoples' increasing economic need. With nearly eight years of national economic
growth, it is reasonable to anticipate some slowdown in economic activity in the
foreseeable future. However, we are
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not able to predict whether a slowdown will have a negative effect, and the
extent, if any, on ITC's business, financial condition and results of
operations.
IF WE DO NOT DEVELOP A SUFFICIENT SALES AND MARKETING FORCE, WE MAY NOT BE ABLE
TO IMPROVE PROFITABILITY AND INCREASE REVENUES SUFFICIENTLY
Currently, we engage in limited marketing activities, conducted primarily
by our senior management. We have obtained leads for new business mainly through
recommendations from existing clients and general word of mouth rather than
extensive marketing and sales campaigns. After the completion of this offering,
we will hire an in-house sales and marketing staff, but our efforts to develop a
sufficient sales and marketing campaign may prove to be inadequate. Our
inability to develop an effective sales and marketing group could have a
negative effect on our planned growth and profitability.
WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OR FORM JOINT VENTURES AS A
MEANS OF FOSTERING OUR GROWTH
We may not be able to identify suitable candidates for acquisitions or
joint ventures or consummate transactions with them. Since we are relying on
acquiring other companies and forming joint ventures with independent
integrators to promote our growth, our opportunities may be limited in this
regard.
If we make an acquisition of a company or form a joint venture, we could
have difficulty assimilating the acquired company's operations and personnel or
working with the joint adventurer which could increase our expenses and reduce
the value of your investment. These difficulties could disrupt our ongoing
business, distract our management and employees, increase our expenses and
charges as well as materially and adversely affect our revenues and the value of
your investment.
WE HAVE NO PATENTS, PATENTS PENDING OR COPYRIGHTS, AND WE MAY NOT BE ABLE TO
PROTECT OUR REMAINING PROPRIETARY RIGHTS AND MAY INFRINGE ON THE PROPRIETARY
RIGHTS OF OTHERS
We have no patents, patents pending or copyrights, but we regard our trade
secrets and similar intellectual property as important to our success. However,
our efforts to establish and protect our proprietary rights may be inadequate to
prevent misappropriation or infringement of our proprietary property. If we are
unable to safeguard our intellectual property rights, our business, operating
results and financial condition could be materially harmed. Third parties may
bring claims of copyright or trademark infringement against us or claim that our
use of certain technologies violates a patent. Third parties may also claim that
we have misappropriated their technology or otherwise infringed on their
proprietary rights. At present, we are not aware of any claims. Any claims of
infringement, with or without merit, could be time-consuming to defend, result
in costly litigation, divert management attention, require us to enter into
expensive royalty or licensing arrangements or prevent us from using important
technologies or methods. These eventualities, together or alone, could damage
our business and financial condition.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
'00', which the system might consider to be the year 1900 rather than the year
2000. This could result in system failures, delays or miscalculations, causing
disruptions to installed customer base and our own business operations. The
failure of systems to be Year 2000 compliant could cause us to incur significant
expense to remedy any problems, reduce our revenues or otherwise seriously
damage our business. Our failure to correct a material Year 2000 problem could
result in an interruption or a failure of some of our normal business activities
or operations as well as payments from customers. To date, we have incurred a
modest cost to update our accounting system to comply with the Year 2000
requirements, and we do not believe that we will incur significant costs for
other purposes in the foreseeable future. However, actual costs of compliance
may have a material adverse effect on our business, operating results and
financial position.
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WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS
Based on our current operating plan, we anticipate that the net proceeds of
this offering and funds provided by operations will allow us to meet our cash
requirements for the foreseeable future after the date of this prospectus. We
may require additional funding sooner than anticipated. Moreover, unplanned
acquisition and development opportunities and other contingencies may arise,
which could require us to raise more capital. Additional financing may not be
available on commercially reasonable terms, if at all. If we raise additional
capital through the sale of equity, including preferred stock or convertible
securities, the percentage ownership of our then existing stockholders will be
diluted.
WE NEED TO MANAGE OUR GROWTH EFFECTIVELY
Our growth has placed, and will continue to place, a significant strain on
our managerial, operational and financial resources. Failure to manage our
growth effectively could have a material adverse effect on our business.
Eventually, we need to:
hire an administrative head and more project managers;
improve our financial and management controls, reporting systems and
procedures;
expand, train and supervise our work force for manufacturing,
installation, marketing and sales, and research and development; and
manage multiple relationships with key customers, strategic partners and
other third parties
RISKS RELATING TO THIS OFFERING
OUR MANAGEMENT WILL CONTROL ALMOST 80% OF OUR COMMON STOCK AFTER THIS OFFERING
AND THEIR INTERESTS MAY BE DIFFERENT FROM AND CONFLICT WITH YOURS
The interests of management could conflict with the interests of our other
stockholders. After this offering, Mr. Henry, Mr. Witcosky and Mr. Massad will
beneficially own a total of approximately 80% of our outstanding common stock if
the underwriters' over-allotment option is not exercised in full. Accordingly,
if they act together, they will have the power to control the election of all of
our directors and other issues for which the approval of our shareholders is
required. If you purchase shares of our common stock and warrants, you may have
no effective voice in our management.
OUR MANAGEMENT WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS OF THIS
OFFERING AND MAY NOT APPLY THEM EFFECTIVELY
Our management will have flexibility in applying the net proceeds of this
offering and may apply the proceeds in ways with which you do not agree. The
failure of our management to apply these funds effectively could materially harm
our business. The proposed allocation of this offering's net proceeds represents
our management's best estimate of the expected utilization of funds to finance
our activities in accordance with its current objectives and market conditions.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION
You will experience an immediate and substantial dilution of $5.11 per
share in the net tangible book value per share of common stock from the initial
public offering price, assuming an initial public offering price of $6.25 per
share, representing the mid point of the filing range. You may also experience
dilution if future stock options to purchase our shares, or if the warrants
issued to the public or to be issued to the representative of the underwriters,
are exercised. Accordingly, existing shareholders will benefit
disproportionately from this offering.
UNLESS A PUBLIC MARKET DEVELOPS FOR OUR SECURITIES, YOU MAY NOT BE ABLE TO SELL
YOUR SHARES
Prior to this offering, there has been no public market for our common
stock. Although we have applied to register or list our shares of common stock
and warrants on NASDAQ small cap market list
9
<PAGE>
and the Boston Stock Exchange, an active trading market may not develop or be
maintained. Failure to develop or maintain an active trading market could
negatively affect the price of our securities.
OUR STOCK PRICES MAY FLUCTUATE, WHICH MAY MAKE IT DIFFICULT TO RESELL YOUR
SHARES AT ATTRACTIVE PRICES
The market price of our common stock may be highly volatile. The market
prices of securities of other technologically oriented companies of similar size
are highly volatile. Factors that could cause volatility in our stock price
include:
fluctuations in our quarterly operating results;
changes in the market valuations of other security or technology companies
and stock market prices and volume fluctuations generally;
economic conditions specific to the security industry;
announcements by us or our competitors relating to new services or
technologies, significant acquisitions, strategic relationships, joint
ventures or capital commitments;
applicable regulatory developments; and
additions or departures of our key personnel.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements are
not historical facts, but rather are based on our current expectations,
estimates and projections about our industry, our beliefs and assumptions. Words
including 'may,' 'could,' 'would,' 'will,' 'anticipates,' 'expects,' 'intends,'
'plans,' 'projects,' 'believes,' 'seeks,' 'estimates' and similar expressions
are intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and other factors, some of which remain beyond our control, are difficult to
predict and could cause actual results to differ materially from those expressed
or forecasted in the forward-looking statements. These risks and uncertainties
are described in 'Risk Factors' and elsewhere in this prospectus. We caution you
not to place undue reliance on these forward-looking statements, which reflect
our management's view only as of the date of this prospectus. We are not
obligated to update these statements or publicly release the result of any
revisions to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
10
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $5,100,000
from our sale of the securities in this offering, assuming an initial public
offering price of $6.35, the mid-point of the filing range. If the underwriters
exercise their over-allotment option in full, we will receive net proceeds of
approximately $5,930,000. These amounts are derived after deducting estimated
underwriting discounts, commissions, fees and expenses of approximately
$1,250,000 and $1,373,000 payable by us. We currently intend to utilize the net
proceeds of this offering substantially as follows:
<TABLE>
<CAPTION>
PERCENT
AMOUNT (%)
------ ---
<S> <C> <C>
Market systems integration, new products and technologies... $900,000 17.6%
Expand dealer and Value-Added Resellers ('VAR') network..... $500,000 9.8%
Open additional sales and services offices.................. $500,000 9.8%
Make acquisitions of other systems integrators and related
businesses................................................ $750,000 14.7%
Hire management and marketing personnel..................... $600,000 11.8%
Increase research and development on proprietary products
for identifiable markets.................................. $600,000 11.8%
Repay bank loan in part..................................... $500,000 9.8%
Use balance for working capital............................. $750,000 14.7%
</TABLE>
MARKET SYSTEMS INTEGRATION SERVICES AND NEW PRODUCTS
We intend to actively solicit new customers and business by exhibiting at
trade shows, advertising in trade magazines and setting up a sales group to make
calls on prospective customers.
EXPAND DEALER AND VAR NETWORK
We must solicit and support additional dealers and VAR's to market more of
our products and services. To do so, we will identify experienced and qualified
resellers and dealers, send our representatives into the field to discuss
relationships with InTegCom and demonstrate our products, then enroll them.
OPEN ADDITIONAL SALES AND SERVICE OFFICES
In selected areas of the country, we intend to open new offices. These
locations have not been determined as yet, but the primary factors in their
selection will be the extent of business prospects and qualified personnel
available there. Having a presence in specific geographic markets should
increase our chances to develop new or additional business.
MAKE ACQUISITIONS OF OTHER SYSTEMS INTEGRATORS AND RELATED BUSINESSES
Although none have been identified, we anticipate acquiring other systems
integrators in the security industries of similar or smaller size than us and
related businesses. These concerns will in all probability be located in
geographic areas other than our current offices and will enable us to compete
for business in those areas or on a more national basis.
HIRE MANAGEMENT AND MARKETING PERSONNEL
We expect to hire additional management and marketing personnel in order to
grow our business. Management personnel will assist in directing existing and
new personnel for projects and overall business. We need to more actively market
our services and manufactured products. Since we have not done so in the past,
it is necessary to hire qualified personnel with marketing and sales experience
in selling security or technical devices.
11
<PAGE>
INCREASE RESEARCH AND DEVELOPMENT
Our research and development needs to be expanded. Work has already started
on a new specialized network product, and we seek to initiate other projects,
such as a graphic user interface and customized camera housings.
Initially we shall focus on selling products in the final phase of our
research and development, including a networking system, as well as digital
video recording devices manufactured by other vendors.
USE BALANCE FOR WORKING CAPITAL
We anticipate that our working capital needs will increase substantially as
we grow the business. Consequently, we will utilize more funds to pay for, among
other things, increased purchases from vendors, additional salaries and wages,
professional fees and expenses and other operating costs.
The increase in our equity and improvements in our balance sheet resulting
from this offering should also enable us to increase our bonding capabilities in
order to win larger projects. Keep in mind these allocations are estimates only
and may be revised from time to time to meet our requirements; any excess will
be added to working capital and any shortage will be deducted from working
capital. Allocations may also be changed in response to unanticipated
developments in InTegCom's business. Based upon our management's judgments, we
may re-allocate such amounts from time to time among these categories or to new
categories if we believe this to be in our best interest. In the event that the
underwriters' over-allotment option is exercised, we will realize additional net
proceeds which will be added to working capital.
Pending full utilization of the net proceeds of this offering, we intend to
make temporary investments in United States government or federally insured
securities. We believe that the net proceeds from this offering plus working
capital from operations and other sources of funds will be adequate to sustain
our operations for the foreseeable future. It is anticipated that such proceeds
will be utilized over the first 36 months after this offering.
DIVIDEND POLICY
We have never declared or paid any cash or stock dividends on our capital
stock. We presently intend to reinvest earnings to fund the development and
expansion of our business and hence do not anticipate paying cash dividends on
our common stock in the foreseeable future. The declaration of dividends will be
at the discretion of our board of directors and will depend upon our earnings,
capital requirements and financial position, general economic conditions and
other pertinent factors.
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1999 and
as adjusted gives effect to the issuance and sale of the 1,000,000 shares of
common stock and 1,000,000 warrants and the initial application of the estimated
net proceeds.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL ADJUSTED
------ --------
<S> <C> <C>
Indebtedness
Short-term debt, due to bank and others, including
current portion of long term debt.................... $ 81,622 $ 81,622
Long-term debt due to bank and third parties........... 1,367,738 1,367,738
Stockholder's equity
Preferred Stock, par value $.01 per share; 2,000,000
shares authorized, none issued
Common Stock, par value $.01 per share; 10,000,000
shares authorized, 5,000,000 shares issued and
outstanding as adjusted.............................. 40,000 50,000
Additional paid-in capital............................. 171,300 5,981,300
Retained earnings...................................... 609,843 609,843
---------- ----------
Total stockholder's equity........................ $ 821,143 $6,641,143
---------- ----------
---------- ----------
</TABLE>
The above table includes our:
bank debt in the aggregate of $1,239,053 with interest at the bank's prime
rate, which will vary plus 1/2% under a loan agreement dated September 8,
1999 and two related notes -- one in the amount of $2,000,000, due in full
on June 1, 2001 for working capital and the other in the amount of
$250,000 due in 60 consecutive monthly installments starting October 1,
2000 for equipment purchases, together aggregating $2,250,000. Interest
payments on these notes are due monthly from September or October 1, 1999.
All our assets and the personal guarantees of two of our top officers are
used to secure these notes.
settlement of debt aggregating $128,685, including deferred interest, owed
to a third party for money lent to us in October, 1989 under two
promissory notes due December 1, 2003 and 2004 at 10% interest per year.
This debt is personally guaranteed by Mr. Henry and Mr. Witcosky.
recapitalization in which we organized InTegCom Corp., issued an aggregate
of 4,000,000 shares of its common stock to Mr. Henry and Mr. Witcosky in
exchange for all the common stock they held in the following corporations:
HBE Acquisition Corp, Viscom Products Inc., HBE Central Management Inc. As
a result, all these companies are now wholly owned subsidiaries of
InTegCom.
However, the above table does not cover our:
1,000,000 shares of common stock issuable upon exercise of the warrants to
be sold in this public offering
up to 150,000 shares of common stock and 150,000 warrants to be issued on
their exercise to purchase the same number of shares under the
underwriters' over-allotment option
500,000 shares of common stock reserved for issuance under our incentive
stock option plan
100,000 shares of common stock to be issued on the exercise of the
representative's warrants.
13
<PAGE>
DILUTION
As of September 30, 1999, our net tangible book value was $593,000, or
approximately $.15 per share of common stock. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock issued and outstanding after
giving effect to the recapitalization described in this prospectus under
'Capitalization' and Note 1 to the financial statements included elsewhere.
After giving effect to the sale of the 1,000,000 shares of common stock at
$6.25 per share and 1,000,000 warrants in this public offering at $.10 per
warrant, and after deducting estimated underwriting discounts and offering
expenses, our pro forma as adjusted net tangible book value at September 30,
1999 would have been $5,693,000 or $1.14 per share of common stock. This
represents an immediate increase in net tangible book value of $.99 per share of
common stock to existing stockholders and an immediate dilution in net tangible
book value of $5.11 per share of common stock, or approximately 82%, to new
investors.
The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share of
common stock.......................................... $6.25
Net tangible book value per share prior to the
offering.............................................. $ .15
Increase in net tangible book value per share
attributable to the offering.......................... $ .99
Pro forma, as adjusted, net tangible book value per
share after the offering.............................. $1.14
Dilution of net tangible book value per share to
investors in the offering............................. $5.11
</TABLE>
If the underwriters' over-allotment option is exercised in full, our pro
forma as adjusted net tangible book value after the offering would have been
$6,527,791 or $1.27 per share of common stock. This represents an immediate
increase in net tangible book value of $.97 per share of common stock to
existing stockholders and an immediate dilution in net tangible book value of
$4.98 per share of common stock, or approximately 87%, to new investors.
The following table summarizes on a pro forma basis, as of September 30,
1999, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing stockholders
of common stock and the investors in this offering, assuming the sale of
1,000,000 shares and 1,000,000 warrants at the prices indicated above and
offered by this prospectus. The calculations are based upon total consideration
given by new investors and existing stockholders before any deduction of
underwriting discounts and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders................ 4,000,000 80% $ 821,000 11% $ .21
New investors........................ 1,000,000 20 6,350,000 89 6.35
--------- --- ---------- --- -----
Total........................... 5,000,000 100% $7,171,000 100% $6.56
--------- --- ---------- --- -----
--------- --- ---------- --- -----
</TABLE>
14
<PAGE>
SELECTED FINANCIAL INFORMATION
The historical selected financial data as of December 31, 1998 and for the
years ended December 31, 1996, 1997, and 1998 are derived from and should be
read in conjunction with our audited financial statements and their notes
included elsewhere in the prospectus. The historical selected financial data as
of September 30, 1999 and for the nine months ended September 30, 1998 and 1999
are derived from and should be read in conjunction with our unaudited financial
statements and their notes included elsewhere in the prospectus. In the opinion
of management, the unaudited financial statements include all material
adjustments, consisting of only normal, recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for the
period. The data presented below should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the financial statements and accompanying notes appearing
elsewhere.
Shares of common stock outstanding have been restated to reflect the
recapitalization described in Note 1 to the accompanying financial statements.
The pro forma balance sheet below, as of September 30, 1999, has been
adjusted to reflect the sale of common stock and warrants offered in this
prospectus at an assumed initial public offering price of $6.25 per share and
$.10 per warrant representing the mid point of the stock's filing range, and the
receipt and application of the estimated net proceeds from it.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Sales....................... $4,908,375 $4,011,408 $6,783,267 $4,912,560 $5,253,051
Cost of goods sold.......... $3,576,757 $2,574,169 $4,703,515 $3,404,066 $3,603,699
72.87% 64.17% 69.34% 69.29% 68.60%
Gross profit................ $1,331,618 $1,437,239 $2,079,752 $1,508,494 $1,649,352
27.13% 35.83% 30.66% 30.71% 31.40%
Selling, G&A................ $1,207,681 $1,255,920 $1,791,148 $1,279,496 $1,407,744
24.60% 31.31% 26.41% 26.05% 26.80%
Interest.................... $ 70,156 $ 159,672 $ 106,939 $ 74,300 $ 63,618
1.43% 3.98% 1.58% 1.51% 1.21%
Income before taxes......... $ 53,782 $ 21,647 $ 181,666 $ 154,698 $ 177,990
Income tax.................. $ 22,716 $ 21,946 $ 76,191 $ 65,047 $ 68,000
Net income (less)........... $ 31,066 $ (299) $ 105,474 $ 89,651 $ 109,990
0.63% 0.01% 1.55% 1.82% 2.09%
Retained earning $ 379,752 $ 410,818 $ 410,519 $ 410,519 $ 499,853
beginning.................
Deficit acquired in (16,141) 0 0
merger....................
Retained earning end........ $ 410,818 $ 410,519 $ 499,353 $ 500,170 $ 609,843
Earnings per share..........
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total working capital................................. $1,145,424 $1,379,008 $1,570,875
Total assets.......................................... 2,697,848 3,054,800 3,411,919
Total liabilities..................................... 2,076,029 2,343,647 2,590,776
Total stockholder's equity............................ $ 621,819 $ 711,153 $ 821,143
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of the financial
condition and results of operations should be read in conjunction with our
financial statements and their notes appearing elsewhere in this prospectus. In
addition to historical information, the management's discussion and analysis of
financial condition and results of operations as well as other parts of this
prospectus contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of factors, including but not
limited to, those set forth under 'Risk Factors' and elsewhere.
OVERVIEW
We were incorporated in 1989 under the name HBE Acquisition Corp. initially
to repurchase the Closed Circuit Television ('CCTV') division of Communications
Group, Inc. and to provide customers with systems integration services in the
security area. Other affiliated companies were formed to handle related
activities from 1990 to 1991. The companies also include Viscom Products Inc.
and HBE Central Management, Inc.
In November, 1999, we organized InTegCom Corp. in the state of Delaware in
preparation for this public offering. Immediately afterwards, Mr. Henry and Mr.
Witcosky exchanged the common stock that they held in the other affiliated
companies which we mentioned above, with InTegCom for its common stock.
Consequently, these companies are all wholly owned subsidiaries of ITC.
Our largest customer, NYC Transit, accounted for 40% and 31% of our
revenues in each of the nine month periods ended September, 1999 and 1998, 34%
and 21% of revenues in each of the fiscal years ended December 31, 1998 and
1997. We anticipate that NYC Transit will continue to account for a significant
portion of our revenues in the future.
Four other customers each accounted for from 2% of our revenues to 8%
during the same periods.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Sales
Sales increased to $5,253,051 for the nine months ended September 30, 1999
from $4,912,560 for the nine months ended September 30, 1998. The increase of
$340,491 or 7% was primarily due to an increase in sales volume from existing
and new customers.
Cost of Sales
Cost of sales increased to $3,603,699 or 69% of sales, for the nine months
ended September 30, 1999 from $3,404,066 or 69% of sales, for the nine months
ended September 30, 1998. This increase was primarily due to the increase in
sales volume in the first nine months of 1999.
OPERATING COSTS AND EXPENSES
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $1,407,744 or 27% of sales, for the nine
months ended September 30, 1999, from $1,279,496, or 26% of sales, for the nine
months ended September 30, 1998. A slight increase of $128,248 or 10% due
primarily to the cost incurred to update our computer network for Y2K and other
upgrades and enhancements.
Interest Expense, Net of Interest Income. Interest expense decreased to
$63,618 or 1.1% of sales for the nine months ended September 30, 1999 from
$74,300 or 1.5% of sales for the nine months ended September 30, 1998. The
decrease was primarily due to lesser borrowing against our line of credit due
16
<PAGE>
to more efficient cash flow generated through our collection, in addition to
lower interest rates prevailing in the general economy.
Net Income. For the nine months ended September 30, 1999, InTegCom's net
income totaled $109,990 or 2.09% of sales, as compared to $89,651 or 1.82% of
sales for the nine months ended September 30, 1998. This increase is principally
attributable to a growing sales volume.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO FISCAL YEAR ENDED
DECEMBER 31, 1996
Sales
Sales decreased to $4,011,408 for the year ended December 31, 1997 from
$4,908,375 for the year ended December 31, 1996. The $896,967 or 18.3% decrease
in sales was primarily due to our concentration on selected quality projects
with improved margins and the negotiation and design of a major integrated
security system for our largest customer.
Cost of Sales
Cost of sales for the year ended December 31, 1997 were $2,574,169 or 64%
of sales compared to $3,576,757 for the year ended December 31, 1996, or 73% of
sales. This represented an 9% decrease in cost of sales which reflects an
improvement in margins.
OPERATING COSTS AND EXPENSES
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $1,255,920 or 31% of sales for the year
ended December 31, 1997, from $1,207,681 or 25% of sales for the year ended
December 31, 1996. This increase of $48,239 was attributable to lower sales
volume and increased fixed costs.
Interest Expense, Net of Interest Income. Interest expenses increased to
$159,672 or 4% of sales for the year ended December 31, 1997, from $70,156 or
1.4% of sales for the year ended December 31, 1996. The $89,516 increase was the
result of additional borrowing to meet fixed costs, coupled with higher interest
rates due to economic conditions.
Net Income (loss). For the year ended December 31, 1997, InTegCom's net
loss totaled $(299) or (0.01%) of revenues, a marginal break-even as compared to
a net profit of $31,066 or 0.63% of revenues for the year ended December 31,
1996. The decrease in income was primarily due to a decrease in sales volume.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Sales
Sales increased to $6,783,267 for the year ended December 31, 1998 from
$4,011,408 for the year ended December 31, 1997. The $2,771,859 or 69% increase
in revenues was mainly attributable to increased sales from new customers and
additional business from existing customers. Our five largest customers
accounted for approximately 68% of revenues for the year ended December 31, 1998
compared to 40% of revenues for the year ended December 31, 1997.
Cost of Sales
Costs of sales for the year ended December 31, 1998 were $4,703,515 or 69%
of revenues, compared to $2,574,169 for the year ended December 31, 1997, or 64%
of sales. A 5% increase in cost occurred because of increased subcontract work
required for the projects and the introduction of new digital technology that
required more personnel training and integration effort.
OPERATING COSTS AND EXPENSES
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $1,791,148 or 26% of sales for the year
ended December 31, 1998 from $1,255,920 or 31% of sales for the year ended
December 31, 1997. This 1998 increase of $535,228 or 5% stemmed from increased
selling expenses.
17
<PAGE>
Interest Expense, Net of Interest Income. Interest expenses decreased to
$106,939 or 2% of sales for the year ended December 31, 1998, from $159,672 or
4% of sales for the year ended December 31, 1997. The $52,733 savings was the
result of better cash management, coupled with reduced interest rates prevalent
in the general economy.
Net Income. For the year ended December 31, 1998 InTegCom's net income
totaled $105,474 or 2% of sales, as compared to a net loss of $(299) of sales
for the year ended December 31, 1997. The difference can be attributed to higher
sales volume and better cash flow management.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through bank debt,
loans and equity from principals, loans from third parties and funds generated
by our business. As of September 30, 1999, we had $269,804 in cash.
Net Cash Provided by Operating Activities. Net cash used in operating
activities decreased to $11,979 for the year ended December 31, 1998 from a
negative cash flow $72,816 for the year ended December 31, 1997 resulting from
the increase of net income to $105,475 and customer deposit of $150,000.
Net Cash Used in Investing Activities. Net cash used in investing
activities increased to $200,974 for the year ended December 31, 1998 from
$155,498 for the year ended December 31, 1997; the increase was primarily
attributed to the purchase of new computer software and equipment for the year
2000 compliance.
Net Cash Provided From Financing Activities. Net cash generated from
financing activities increased to $223,955 for the year ended December 31, 1998
from $111,811 for the year ended December 31, 1997, a slight increase
considering the volume increase of 69% in revenues from $4,011,408 in the year
ended December 31, 1997 to $6,783,267 for the year ended December 31, 1998.
In September, 1999, InTegCom changed banks. The new bank granted us a line
of credit of $2,000,000 for working capital needs and $250,000 for new equipment
purchases. Only $973,000 from this new line was drawn down to repay the old bank
debt.
Our capital requirements have grown since our inception consistently with
the growth of our operations and staffing. We expect our capital requirements to
continue to increase in the future to expand and maintain our growth and to
remain a competitive force in our industry. We intend to use approximately
$3,850,000 of the net proceeds from this initial public offering for expansion
and improvements. See the section in this prospectus entitled 'Use of Proceeds.'
We believe that the cash flow from operations, combined with our borrowing
capabilities and the net proceeds from this offering will be sufficient to meet
our anticipated working capital and capital expenditure requirements for at
least the foreseeable future after this offering.
RECENTLY ISSUED ACCOUNTING STANDARDS
Effective October 1, 1997, we adopted the provisions of SFAS No. 130,
'Reporting Comprehensive Income.' SFAS No. 130 establishes standards for
reporting comprehensive income, defined as all changes in equity from non-owner
sources. Adoption of SFAS No. 130 did not have a material effect on our
financial position or net income.
Effective October 1, 1997, we adopted the provisions of SFAS No. 131,
'Disclosures About Segments of an Enterprise and Related Information.'
SFAS No. 131 establishes standards for the way the public enterprises report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments in
interim financial reports issued to stockholders. Adoption of SFAS No. 131 did
not have a material effect on our financial position or net income.
Effective October 1, 1997, we adopted American Institute of Certified
Public Accountants Statement of Position 97-2, 'Software Revenue Recognition.'
SOP 97-2 generally requires revenue earned on software arrangements involving
multiple elements, such as software products, upgrades, enhancements,
post-contract customer support, installation and training to be allocated to
each element based on the relative fair values of the elements. The adoption of
SOP 97-2 does have an effect on our financial position or net income.
18
<PAGE>
Effective December 29, 1997, we adopted Statement of Financial Accounting
Standards (SFAS) No. 132, 'Employers' Disclosures About Pensions and
Post-retirement Benefits,' which standardizes the disclosure requirements for
pensions and other Post-retirement benefits. The Statement addresses disclosure
only. It does not address liability measurement or expense recognition. There
was no effect on our financial position or net income as a result of adopting
SFAS No. 132.
In March 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, 'Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use,' which revised the accounting for software
development costs and will require the capitalization of certain costs. The
adoption of SOP 98-1 did not have an effect on our financial position or net
income.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These systems and
software products will need to accept four digit entire to distinguish 21st
century dates form 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
State of Readiness
We have made an assessment of our Year 2000 readiness as well as our
operating, financial and administrative systems, including the hardware and
software that support our systems. Our assessment consisted of:
quality assurance testing of our internally developed proprietary software
and hardware;
contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to the
delivery of our products and services;
contacting vendors of third-party systems;
assessing repair or replacement requirements;
implementing repair or replacement; and
creating contingency plans in the event of Year 2000 failures.
We have confirmed our Year 2000 compliance by obtaining representations by
third party vendors of their products' Year 2000 compliance, as well as specific
testing of our products.
Costs
We have not incurred significant costs to date complying with Year 2000
requirements, and we do not believe that we will incur significant costs for
these purposes in the foreseeable future. However, should products or systems
furnished or maintained by third parties or our products and systems fail to be
Year 2000 compliant, despite the representations of third parties and the
testing of our products, we could incur significant expenses to remedy any
problems. Such expenses could have a material adverse effect on our business,
results of operations and financial condition.
Risks
Our failure to identify and correct a Year 2000 problem could result in an
interruption of normal business activities and operations as well as those of
our customers where we have installed security and communications systems or
sold related devices. Although there is an inherent uncertainty in the Year 2000
issue, we believe the impact on our business will not be material. Most of the
equipment involved in delivering our services and products to our customers does
not make use of date information at all but some, like the video recording
systems, do. We believe our greatest risk to be from suppliers and utilities
whose Year 2000 programs are outside of our control. A disruption caused by a
utility or supplier whose systems are not compliant may have a direct and
negative effect on our business and those of our customers. To date, no problems
of this sort have occurred.
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Contingency Plan
We make use of redundancy as part of our general business model and those
of our customers to provide the best and most reliable service to them as
possible. We believe this model will continue to serve us in reducing business
risks associated with the Year 2000 problem. We have identified alternate
sources for critical supplies and equipment where alternate sources exist and we
have created a task force led by our chief technical and financial personnel to
address any Year 2000 issues as they arise. We have continued to develop a
contingency plan and expect to be fully compliant at such time.
Seasonality
Our business tends to be seasonal in that most of the orders are submitted
by customers in the fourth quarter from October to December.
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BUSINESS
OVERVIEW
In the commercial market place InTegCom furnishes its customers with
technologically advanced Closed Circuit Television ('CCTV') and access control
systems to secure and regulate their sites and locations. ITC designs,
integrates, manufactures, installs, maintains and purchases these systems and
their related devices and software. It then resells them as elements in an
integrated electronic security system to its customers often as part of their
building and facilities management. Our integrated systems encompass CCTV's,
intercoms, alarm-monitoring, video and audio recording, card access controls and
personnel identification devices, plus facility equipment sensors and building
controls.
INTEGRATED ELECTRONIC SECURITY SYSTEMS
CCTV systems for security applications provide video surveillance of many
locations on a continuous basis and extend the visual reach of human personnel
from central locations. These systems replace guards and watchmen, thereby
reducing labor costs, and at the same time improve and up-grade security. They
permit operators at a central location to survey the pictures and the activities
transmitted from multiple sites on a set of television monitors in their
presence and to record them automatically on analog video tape or digital
storage media. Recordings in digital format can be archived, transmitted to
other locations and retrieved for analysis. They can be useful in resolving
insurance claims, as evidence in legal proceedings, to train and manage
employees, or in verifying events and checking faculty status.
Access control systems often involve several card reader technologies. For
example, control systems rely on magnetic-stripped, proximity and/or smart cards
issued to select individuals to allow them to gain access to a secure area or
office. The holder presents the card at a card reader. If the card is authentic
and authorized, the holder is then admitted.
At times biometrics such as fingerprint reading, eye imaging, voice
verification and hand geometric devices or keypads, are used in these systems to
identify the correct person for entry and bar the unauthorized one. Some
customers employ both card and biometric systems for greater protection.
Frequently, a customer relies on video badging to identify its employees or
students. Under this technique, the badge with his or her picture is attached to
the front of the authorized person or is contained digitally in the computer.
When linked to a CCTV system, the security controller or the system itself views
the pictures on the badge or in the computer and matches it to the face of the
individual seeking entrance. If the picture matches the face, the controller or
system lets him in. If it does not, entry is barred.
Communication remains vital to the operational effectiveness of these
systems. For CCTV applications the obvious communications involve the video
component where pictures are transmitted to the monitoring personnel. These
transmissions can be in black and white or in color, must be clear and properly
focused without distortion. Today most customers select color cameras to obtain
better identification and clarity.
In both CCTV and access control systems, an audio component is often
present that allows voice communication between the controller and the
individual under video surveillance or seeking access. This may consist of a
telephone, radio, pager, or intercom hook-up or even a public address system. At
the very least, a controller can talk to this individual and in a two-way or
multiple setup the individual and others may speak with him.
Another element in the system may be alarms which signal unauthorized entry
or break-ins to monitoring personnel. Usually linked to motion detectors or door
contact switches, they discover the presence of an intruder and relay that event
to monitoring personnel or the alarm monitoring system. When connected to alarm
sensors, CCTV permits monitoring personnel to identify intruders and document
the intrusion.
Within these systems an array of sensors frequently gauge the physical
condition of equipment, such as computers, air conditioning, heating,
ventilation devices, as well as spaces themselves. These sensors include
temperature gauges, smoke detectors, humidity and air-quality testing devices.
They
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usually function to detect emergencies and prevent equipment breakdown or damage
and result in better and more efficient building and facility management.
Besides the video and audio aspects of the transmission, these systems also
move data from one location to another, and they must do it quickly, reliably
and without interruption. This data includes the pictures and accompanying voice
elements and needs to be stored in an organized fashion so that it can be easily
retrieved, analyzed and perhaps applied as evidence in a legal proceeding or to
resolve insurance claims.
Of course, these systems are comprised of many different devices involving
various technologies under computer control that are linked to one another,
sometimes over long distances. They are often hooked together over cables, which
consist of copper (standard telephone) wire or fiber optics. However, in today's
rapidly evolving environment, wireless (radio) link-ups have become more and
more necessary to reduce installation time and cost.
The devices in these systems each have different functions but are designed
and linked to work together. To that end dedicated computer hardware and
specially written software for the application concerned control them. Systems
integrators, like InTegCom, customize and tailor this equipment in light of the
requirements of each project and integrate the differing technologies and
disparate devices fabricated by many manufacturers, including its own in ITC's
case.
Security systems can be set up to communicate over networks -- local area
networks or wide area ones through standard telephone lines, fiber optics, the
internet, or special leased telephone lines with rapid transmission
capabilities. The method of communication selected for a network will depend on
the needed bandwidth. Bandwidth refers to the network's capacity to carry data
and the speed of transmission. Networks permit the transmission of digitized
pictures, voice and data to many more locations over longer distances, and,
depending on its band width, at faster speeds and in larger amounts.
The system integration specialists in the commercial arena remain highly
fragmented, and the industry is populated by many small and medium-sized
companies with only a few larger players. These companies tend to do business in
the geographic areas where their offices are physically located. It is unusual
when any one company can offer its services on a national basis. Outsiders, such
as large construction firms and electrical contractors, often seek to furnish
simplified integration services.
In contrast, manufacturers of security devices and systems come in many
different sizes. Their businesses are often national in scope, and their
products are distributed throughout the country and even abroad. Rarely, do they
encounter competition from companies outside the security industry selling
similar products.
As people's concerns about security grow, the customer base for CCTV and
access control systems has broadened in the commercial marketplace over the
years. Federal and state government agencies and large corporations have
frequently led the charge for greater security. However, smaller businesses,
local governments, schools and universities are not far behind in adopting these
systems to their special needs.
CCTV systems, for example, have become increasingly common fixtures in
today's society. Covert or overt, their high-resolution cameras, fixed or with
pan and tilt and zoom lens features, survey casinos, department and drug stores,
malls, office buildings, parks, factories, warehouses, banks, parking lots and
garages, transit operations and many other commercial, academic, and industrial
realms. More recently, these systems have also been incorporated into downtown
centers, vehicular traffic regulation and toll collection efforts.
Similarly, access control applications have infiltrated a wider territory
with many more varied types of customers. Once operative only in the domain of
highly security-conscious concerns like government intelligence agencies or
money-counting centers, access control systems now regulate and restrict the
internal movements of employees in a host of industries and government agencies
as well as students, faculty and administrators in school and university
settings. The rash of recent shootings at schools and churches throughout the
country merely heightens security concerns for those in charge of areas where
people gather in sufficient numbers and accelerates the drive for solutions
involving CCTV and access control systems.
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On the supply-side of the commercial security equation loom various trends
as well. In earlier phases, manufacturers of devices and related software
specialists tended to create proprietary products that locked customers into
their particular systems. This tendency made it more difficult for systems
integrators to meld different technical elements from separate manufacturers
into one fully functioning system. Recently, a propensity towards open
architecture in security devices and their software has gained acceptance. Now
neither customer nor the integrators are trapped into purchasing a particular
device, system or add-ons from a sole manufacturer or software supplier. It has
also become easier to marry disparate systems, devices and software.
In card access, proximity cards permit access control by communicating the
identity of the card via a wireless link to a specialized reader. Smart cards
with their multi-applications have also entered the marketplace, utilizing
similar wireless technology. Smart cards usually contain a computer chip and may
be scanned by a contactless reader. This speeds up their usage and reduces wear
and tear on the cards and their readers. Because smart cards are harder to
counterfeit than magstripped ones, the incidence of fraud are also lowered.
But perhaps even more crucial is smart cards' diverseness of functionality
though more expensive. By performing several functions at the same time, they
appear to have greater utility. For example, a debit transit card for riding
subways and buses can be used as an access card for transit employees. A student
card which controls entry to classrooms and dormitories at the same time can
serve as a debit card for purchases in a campus cafeteria or bookstore.
Security systems are more frequently designed to be linked to the
customer's own internal information management networks called virtual private
networks. This trend has accelerated as companies and agencies incorporate and
meld conventional copper wire installations with fiber optics to create these
networks for wider-area coverage. It reflects the further integration and
centralization of separate systems into a single overall communication network.
Customers for security applications, particularly larger ones, are seeking
systems integrators with national and even international capabilities. While a
local presence has always been critical in rendering effective service, bigger
customers with more extensive geographic needs are driving the market for
security systems beyond traditional local and regional boundaries. Accordingly,
this trend has spurred the management of InTegCom to seek acquisitions of system
integrators in different sections of the country, to enter into joint ventures
or other cooperative business arrangements with them and to open new offices
elsewhere.
CORPORATE HISTORY
In the early 1950's John Henry, the father of James E. Henry, the current
President of InTegCom, started a small television repair business in Paramus,
New Jersey that focused on retail consumers. Soon afterwards, John's oldest
brother, Ray Henry, joined him, and they both worked full time servicing
television sets. In mid 1950's, the health-care division of Motorola assigned or
subcontracted its hospital service business in the New York-New Jersey area to
the Henry Brothers who began to repair television sets in patient rooms as well
as the nurse call systems. This assignment initiated their entry into the
commercial marketplace and expanded their expertise to radio communications.
In 1960 they became an authorized Motorola Service Shop ('MSS'). This
relationship grew when Motorola encouraged them to enter the CCTV business. As a
result, they designed, installed, integrated and maintained CCTV and audio
systems. By 1965, the commercial side of their business exceeded their consumer
activities.
During the 1950's, Hartford Henry, another brother, served as an informal
business advisor to them. But as the business expanded, he also came on board on
a full-time basis as the chief financial officer and administrator. In the early
1960's, the business was incorporated in New Jersey under the name of Henry
Bros. Electronics, Inc. ('HBE').
By 1975, HBE had developed three separate divisions -- CCTV, two-way
radio/paging and consumer (sales and service of television sets). As part of the
radio-paging services, HBE owned and operated repeating towers in New Jersey,
and in the mid-1980's they began selling and servicing cellular telephones.
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As the brothers got older and sought retirement, they sold HBE to
Communications Group, Inc. ('CGI'), a publicly-held company, in July, 1986. At
the time of the sale, HBE had annual revenues of approximately $10,000,000 with
a history of profitability.
In October 1989, James E. Henry, who had worked continuously for HBE since
1978 and Irvin F. Witcosky, who had joined HBE in 1987, arranged a buy-back of
its CCTV division from CGI and the HBE name. In a separate transaction, other
employees of HBE repurchased the radio-paging division from CGI about the same
time.
In 1990, Mr. Henry and Mr. Witcosky purchased the assets of a former
Motorola CCTV factory, then owned by another company. These assets, under a new
corporation named Viscom Products, Inc., now a wholly-owned subsidiary of
InTegCom, were transferred from Chicago, Illinois to ITC's headquarters in
Saddle Brook, New Jersey. After the acquisition, Viscom provided support of
parts and maintenance for its older installed devices to the MSS's. Viscom also
redesigned and upgraded their aging products with the latest digital technology.
These products were sold to MSS's, as well as other HBE integration customers.
In 1991, HBE became a distributor for Motorola's two-way commercial radio
products, which it later sold in 1996. Also in 1991, HBE acquired the assets of
Advantage Security, Inc., a small Long Island-based company that specialized in
security system integration and alarm monitoring. In July 1995 HBE purchased the
assets of the security systems integration office of Ogden Allied, Inc., near
Dallas, Texas. Through this acquisition, ITC supports the expanding Motorola
business in the southwest as well as other commercial and government accounts.
In November, 1999, InTegCom was incorporated in Delaware. Soon afterwards
Mr. Henry and Mr. Witcosky exchanged the common stock held in various
HBE-related companies for the common stock of ITC. As a consequence, these
companies are currently wholly-owned subsidiaries of InTegCom.
SERVICES
In consultation with our customers we strive to identify their security
needs and then design, customize, install and maintain an appropriate system for
them. Because each customer's needs ordinarily differ, the CCTV and access
control systems designed by us will vary from project to project. As part of the
design phase, we typically evaluate and select equipment to be purchased from
third party vendors. We also manufacture CCTV devices in our own factory for
sale to customers of our systems integration services and other authorized
MSS's. Our emphasis in selecting equipment for a project is to provide each
customer with the most advanced proven technology. In this regard, we stress
speed and quality of communications, recording, storage and transmission
capacities, media presentation, including formatting, as well as equipment
reliability for cost-effective security solutions.
When in search of new technologies to apply, InTegCom personnel continually
reviews the technical literature, attends major trade shows, engages in research
and development, and plies an array of personal contacts in relevant industries.
On the supply side, InTegCom is quick to establish relationships with key
vendors, especially those with applicable advanced technologies, and earn their
loyalties. ITC also exploits its membership in PSA, an industry purchasing co-op
that offers members the opportunity to buy equipment at discounts, to train
personnel, and to exchange new business concepts.
After the design is completed, our engineers and technicians install,
customize and integrate the selected devices and related software. Where
off-the-shelf equipment and software are not available or applicable, we create
the missing link and incorporate it into the system. At the end we present the
customer with a turn-key operation that performs to its needs and
specifications. Often we connect and integrate systems to create networks for
our customers. In addition, we train their personnel to use the systems properly
and to maintain them to deliver maximum performance.
The systems designed and installed by us consist of:
video surveillance (CCTV) with remote monitoring and numerous cameras
public address, intercom call stations and wireless radio with remote
monitoring
video, audio and data transmission gateways over networks
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digital video recording and video badging
magnetic-stripped, proximity and smart card access control
alarm sensors monitoring unauthorized activity in restricted area with
remote/response
remote sensors and controls for interior environmental and computer
facility purposes
Many of our products represent new installations; others represent upgrades
where new equipment is added to an existing system or new equipment replaces
obsolete devices. For example, we may add 20 to 30 new video cameras, substitute
color for black and white cameras, install new monitors or control features at a
location or simply replace existing equipment with a newer set of devices.
After initial installations and upgrades, customers usually require
maintenance services. Under our standard maintenance contract, we provide repair
services during the normal work day or on 7 day, 24 hour-basis at the customer's
request. Typically, we charge a small percentage of the total equipment sales,
and we bill the customer either monthly or quarterly. We also bill non-contract
customers for repair services at fixed hourly rates plus the cost of materials.
Contracts for design and installation of systems vary widely, depending on
the customer and the project. Most contracts are at a fixed price, including
mark-up for profit, which represents the cost of the bonding, equipment,
installation, sub-contracting, labor and warranty. Change orders generally add
to the scope and increase the price. A mobilization charge including bonding,
when applicable, may be billed and collected initially. On longer-term jobs we
bill monthly to reflect the extent of our work, and the customer makes progress
payments each month until the project is completed. Ordinarily, a percent of the
contract price (between 2% and 15%) is withheld to guarantee satisfactory
completion. Cost overruns on government and other projects have been avoided or
minimized by meticulously applying cost estimates at the beginning of a project
and convincing customers to alter the scope of the work and terms of the
contract when necessary.
On certain projects, ITC is a prime contractor and for others a
subcontractor. When the installation is large in scope or must be performed by
union labor, this work is subcontracted to independent electrical installers. On
government projects, minority enterprises frequently have mandated preferences
by law for this type of work.
PRODUCTS
In our manufacturing operations, we produce equipment related primarily to
CCTV installations. The devices set forth below comprise the standard products
that we manufacture in-house.
Keyboard Encoders -- Basic Control, Full Function Control with Audio
Option in either Desktop or Rackmount -- Encoders send control and routing
signals to the Digital Decoders, Audio Call Stations and Matrix Switches.
These devices come in three different models and allow the operator to
select many cameras from a remote viewing location and present their
pictures on monitors and control cameras to pan, tilt or zoom. In two
models the operator can speak to, and hear from, persons being viewed by
the camera if the audio option is selected.
Digital Decoder -- This device permits the Encoder operator to operate
pan/tilt motors and to move the camera and adjust its lens. It acts upon
the signal from the Encoder.
Audio Call Station -- This device is a two-way intercom that allows the
Encoder operator to respond to a person seeking entry from a remote
location who has signaled by pushing a call button. The operator, if
certain the individual is authorized, can open a door in or outside the
restricted area to let him in. It must be remotely controlled by the
keyboard encoder.
Matrix Switches -- These switches route camera signals to monitors
according to instructions from keyboard encoders. The small system model
can accept up to 64 cameras and route their pictures onto 8 monitors
sequentially or automatically when an alarm signals an unauthorized entry.
The largest system model has a minimum capacity of up to 128 cameras
routed to 32 monitors which can be expanded in increments of 128 cameras
or 32 monitors.
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Distribution Amplifier -- Video signals from cameras are often required to
feed numerous devices in the system. The amplifier, while maintaining
signal integrity, accepts up to 16 camera inputs for distribution to a
programmable number of outlets (32).
Video Cameras and Housings -- The cameras produce video images in
low-light or demanding environments. Housings cover, support and protect
the cameras in their positions or movements. These housings are primarily
used in environmentally or architecturally demanding applications and, as
a consequence, meet special customer requests for rough treatment or
aesthetics.
MANUFACTURE AND SUPPLY
We design and engineer all of these devices, purchase their components from
third parties and assemble and test the final products. Given our limited
in-house production needs, we design our own printed circuit boards for
fabrication at outside shops. Components are then manually inserted on the
boards with our personnel doing the soldering. Typically, these boards are of
multi-layered design for both space efficiency and signal integrity. At present,
we do not envision the need for surface-mount production equipment that will
automatically place the chips on the board because the quantities we manufacture
are limited and our applications do not require it.
We do not assemble our products on a continuous mass-production basis.
Instead they are usually assembled on a batch basis in which products in
different forms move irregularly from station to station. Further testing of
products is generally accomplished at the end of the assembly process as part of
our extensive quality control procedure. The manufacture of devices is done in
response to specific customer purchase orders either from outside dealers or for
our own HBE project installations.
We utilize modern equipment for the design, engineering, assembly and
testing of our products. We intend to expand our manufacturing capacity only to
supply the needs of our system integration activities and the MSS's that we
currently supply.
We usually purchase hardware, supplies and components from vendors under
written purchase orders of both individual and blanket variety. Blanket purchase
orders entail the purchase of a larger amount at fixed prices for delivery and
payment on specific dates. We rarely issue blanket orders without supporting
customer purchase orders.
We rely on many manufacturers of different sizes and capabilities located
throughout the United States. Certain equipment and software used in our systems
are obtained from sole sources. We have occasionally experienced delays in
deliveries of equipment and may experience similar problems in the future. In an
attempt to minimize these problems, we constantly monitor new orders to justify
investment in an inventory of equipment that are generally more difficult to
obtain. However, any interruption, suspension or termination of component
deliveries from our suppliers could have a material adverse effect on our
business and cause our redesign and resourcing to minimize the impact on
installation schedules.
Although we believe that there will be alternate sources and redesigns,
inevitably time would be required to find substitutes. During any interruption
in supplies, we may have to curtail the production and sale of our equipment for
an indefinite period. Any interruption could have a negative impact on our
systems integration business and prevent us from meeting project deadlines on a
timely basis. However, we consider this to be a remote possibility.
Our design, engineering and assembly facilities are located in the Saddle
Brook, New Jersey headquarters. At present we have not secured Underwriters'
Laboratory approval of our manufactured products or met the quality management
and assurance standards of an international rating organization (ISO 9000) due
to our low production volume. As volumes increase and customers' needs require,
we intend to obtain UL approval as well as qualifying under ISO 9000.
The Company has taken some measures to qualify under these standards. Yet
meeting such criteria involve a long, complicated process of new planning,
documentation and other factors. Qualification should improve our marketing
opportunities internationally or with certain domestic customers. But we may not
achieve these standards or may not increase the sales of our products in the
future even if they are met.
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PURCHASED PRODUCTS
InTegCom has entered into licensing or reselling arrangements for certain
hardware and software elements contained in, or used in conjunction with, its
devices. These agreements are usually non-exclusive, sometimes provide for
volume purchases, charge fixed prices to be paid by us to the particular
licensor or supplier, run for a limited term and encourage sales for specific
territories.
Some devices and components purchased from third party manufacturers, we
insert in our products or place our name and label on; others we resell under
the name of its manufacturer.
We are a member/owner of Professional Security Alliance ('PSA') based in
Denver, Colorado. In addition, Mr. Witcosky has been a founding member and past
president of PSA. A buying co-op for the security industry, PSA has about 140
members that generate approximately $60,000,000 in annual purchases. Established
in 1974, PSA provides central purchasing, training, marketing and other support
for its membership. PSA allows us to achieve 10% to 15% discounts on equipment
purchased under its auspices and grants us patronage dividends related to our
annual purchasing volume and its own profitability. Typically, we purchase from
30% to 40% of our outside requirements through PSA. Along with our MSS
affiliations, membership in PSA furnishes contacts so we can team with other
member integrators in different regions for customers operating on a national or
sectional basis.
The following table reflects primary suppliers of products and related
technology which we consider important to our current business and prospects.
The loss of any one of these suppliers could have a material adverse impact on
our growth:
<TABLE>
<CAPTION>
NAME OF BRIEF DESCRIPTION TYPE OF EXPIRATION OF TERM
SUPPLIER OF PRODUCTS SUPPLY CONTRACT AND TERRITORY
-------- ----------- --------------- -------------
<S> <C> <C> <C>
Lenel Systems Software and hardware Non-exclusive Annual, terminable on
International, Inc. for video badging, resale/licensing with 90 days prior notice
(Rochester, NY) access control, alarm fixed pricing New York & Dallas
monitoring, network Metropolitan Area
communications,
Mavix Ltd. (Israel) Audio, video and data Master distributor Annual U.S.
network interface exclusive sales
products for fast, resale agreement
remote transmissions
(software and
hardware)
Sungjin C&C Ltd. Digital video OEM exclusive for Annual U.S.
(Seoul, Korea) recording and transit;
transmission products non-exclusive for
for mobile and fixed fixed sites
applications
Intellikey Smart programmable Non-exclusive resale Annual U.S.
Corporation key agreement
(Melbourne,
Florida)
</TABLE>
WARRANTIES AND MAINTENANCE
We offer warranties on all our products, including parts and labor, that
range from one year to four years depending upon the type of product concerned.
For products made by others, we pass along the manufacturer's warranty to the
end-user. For years ended December 31, 1997 net expenses attributable to
warranties were approximately $50,591 and $12,264 for the year 1998 and for the
nine months ended September 30, 1998, approximately $4,330 and $30,045 for the
same period in 1999.
On non-warranty items, we perform repair services for our products sold
either at our New Jersey or Texas facilities or at customer locations. In regard
to maintenance services for years ended December 31, 1997 and 1998, we generated
revenue of approximately $482,686 and $52,128 and for the nine months ended
September 30, 1998, $331,854 and approximately $279,213 for the same period in
1999. Our devices generally have a long operating life.
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NEW PRODUCTS FROM THIRD PARTIES
DIGITAL VIDEO RECORDER
Over the years, we have specialized on mass transit applications and
private commercial sites. Generally, we install security systems at fixed sites
like money-counting centers, badging operations or metro card printing
facilities. Our prime customers for this emerging technology have been
Silverstein Properties, New York City Transit Authority, Port Authority and
several other public transit agencies.
Now we are extending our security expertise and equipment sales for CCTV to
the mobile transit operations -- the buses and trains themselves as well as
armored cars, police cars and wagons, fire engines and taxis. Until recently,
attempts to harness existing analog cameras and VCR's to on-board vehicles were
crude and only marginally reliable. However, in our opinion, one manufacturer,
Sungjin of Seoul, Korea, has developed an advanced digital video recording
system, ruggedized enough for mobile operations.
Sungjin products have demonstrated high-quality performance with proven
stability and reliability as well as unmatched storage and transmission
efficiency. The key to Sungjin technology involves the application of
compression techniques that minimize file size, thereby enhancing storage
capacity and maximizing transmission speed.
In December 1999 we entered an exclusive OEM arrangement with Sungjin
covering the United States for mobile applications. Initially, we plan to bring
this device to market through the MSS network. For fixed sites, we have a
non-exclusive reselling arrangement with Sungjin.
INTELLIKEY
In access control, as in CCTV, we have actively sought to keep up with new
technological developments and products. Intellikey represents one of our recent
discoveries. It produces a smart key and lock with dedicated computer elements
that can operate on a stand-alone basis or as an integral part of a central
access control system.
The key can be programmed to restrict its use to specific locks and entry
points as well as specific days and hours. If an unauthorized key is used to
access a restricted area, entry is barred. Instead of having to carry a bundle
of keys on one chain to unlock multiple doors, with Intellikey, a single key
will do. In the smart lock, the key itself and its controllers, a record is kept
by time and date where the key has been and who has been using it. Locks can be
changed electronically and keys can be aborted without the need and expense of a
locksmith. By just replacing the mechanical lock cylinder with an intelligent
one and attaching a small electronic controller to the door, Intellikey can be
installed into existing doors and locks.
Both the keys and the lock contain a microprocessor, which is programmed
with a unique digital code. When the key is inserted, this code and the
customer's parameters restricting users and entry points are transmitted via
secure encrypted infra-red optics. If the controller recognizes the code and
parameters, the door opens. If an unauthorized key is utilized, the door remains
firmly locked, and the key can be disabled.
We have a non-exclusive distribution agreement with Intellikey Corporation
to resell this product. It is our intention either to incorporate this new
technology into the access control systems that we will install in the future or
to resell it to our customers as a stand-alone product.
DIGITAL NETWORK INTERFACE
In July 1999, we entered into an exclusive distribution agreement with
Mavix, Ltd., an Israel company to distribute its digital transmission products
and software in the U.S. This device and its special software interface and
control other security and monitoring equipment and communicate video, audio and
data rapidly back to a central station over a variety of transmission media.
The product digitizes and compresses analogue information gathered from
remote sites and then packages and routes this information through standard
communication systems using its special TCP/IP protocol. At a monitoring
station, the data is then recorded, decompressed and viewed or converted to
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analogue signals. Flexible and easily modified for customization or expansion,
the product offers the customer a cost-effective means of connecting remote
locations to central stations over long distances quickly through internet,
intranet, virtual private network, telephone lines or dedicated fiber cables.
THE MOTOROLA RELATIONSHIP
We have a long-standing, professional relationship with Motorola, Inc..
Initially, Motorola encouraged HBE's entry into the commercial CCTV and two-way
communications markets. Now involved in a more multi-faceted arrangement, we
provide installation, repair, maintenance and consulting services for specific
contracts with several Motorola divisions. We also furnish Motorola with devices
manufactured by us and others for integration into complex communication
systems.
In addition, we purchase from Motorola wireless products incorporating card
readers and smart cards. For authorized Motorola service shops and selected
systems integrators servicing older Motorola equipment, we repair, install and
upgrade Motorola-originated devices manufactured by us or equipment, including
software, purchased from others. Moreover, we encourage the MSS's to adopt
integrated systems generally in their operations and to seek mobile CCTV
applications.
BONDING
Many projects require InTegCom to provide performance and payment bonds
from an established surety company. This means that ITC must perform to pre-set
specifications of the customer within a specific time frame and to assure
payment of its employees, suppliers and subcontractors on that project, and if
InTegCom fails to meet these obligations, the surety company must assume
responsibility to complete the commitments.
Bonds are usually required in all government-related projects and private
construction or capital improvement projects above $100,000. These bonds insure
that when the project is completed, it is free and clear of any liens for the
customer. To date, no claims have been filed against us or our insurance
coverage regarding the services we have performed on these projects.
Presently, we carry an umbrella bonding policy of $5,000,000 issued by the
Reliance Insurance Company. Should our business continue to grow, we anticipate
the need to increase our bonding capabilities to assume larger projects and
customers. The capital infusion resulting from the completion of this offering
should improve our financial condition to permit higher levels of bonding.
MARKETING AND SALES
In the past, we have done little direct marketing of our services and
products. Nearly all of our business is generated by referrals from customers,
PSA or others in the security industry. InTegCom develops, maintains and
distributes product literature for its own devices and those manufactured by
others. It also publishes and distributes an extensive catalogue listing its own
equipment as well as the devices manufactured by others. In the past, our
advertising has been limited. While our personnel attend relevant trade shows on
a regular basis to keep up industry contacts and investigate new technology, we
usually do not exhibit products and services at these shows.
After this offering, we plan to apply a portion of the proceeds to mobilize
an industry-specific sales and marketing program. Accordingly, we will hire
additional sales and marketing personnel, advertise in trade magazines, exhibit
at selected trade shows, expand our dealer and VAR network and open new sales
and service offices in targeted regions.
CUSTOMERS
We sell our products and services directly to end-users in the public and
private sectors. These are often state and city government agencies in transit
and transportation, owners and operators of urban office buildings, public
utilities, universities, large industrial and technology corporations, airlines,
banks, oil, insurance and telecommunications companies, brokerage houses and
retailers.
29
<PAGE>
The table below sets forth the approximate percentage of total revenues
done with each of our six largest customers for the years ended December 31,
1997 and 1998 and the 9 months ended September 30, 1999.
<TABLE>
<CAPTION>
1997 1998 SEPTEMBER 30, 1999
NAME OF CUSTOMER % OF TOTAL REVENUES % OF TOTAL REVENUES % OF TOTAL REVENUES
---------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
New York City Transit............ 21% 34% 40%
Motorola......................... 7% 14% 4%
Silverstein Properties........... 6% 8% 3%
New York State DOT............... 2% 6% 3%
Port Authority................... 1% 2% 8%
Army/Air Force Exchange
Services....................... 5% 6% 6%
</TABLE>
BACKLOG
As of January 10, 2000, our backlog was approximately $4,190,000 as
compared with a backlog of approximately $3,517,000 as of January 10, 1999. One
customer accounted for more than 33% of such backlog as of January 10, 2000 and
another for 24%. We presently expect to manufacture and/or deliver most of the
devices and systems and perform the installation services recorded in our
backlog within the next 12 months.
Nearly all our backlog figures are based on written purchase orders or
contracts executed by the customer and involve product deliveries and
engineering services. All orders or contracts may be cancelled.
RESEARCH AND DEVELOPMENT
InTegCom maintains an engineering staff consisting of 4 individuals whose
functions include the improvement of existing products, modification of products
to meet customer needs and the engineering, research and development of new
products and applications. Engineering and research and development expenses
were approximately $241,536 in the year ended December 31, 1996, $251,184 in
1997 and $358,230 for 1998 and $327,299 and $386,549 for the nine months ended
September 30, 1998 and 1999. Usually, we only perform research and development
in response to a purchase order or contract from a specific customer. However,
we typically retain all rights to the products developed and may use it again at
no additional cost in other applications. Currently, we are working to complete
a specialized network controller, a graphical user interface and customized
camera housings with call station and control features. The controller has the
capacity to integrate numerous diverse security systems and meld them together
into a single network. The interface, in contrast, is a combined
software/hardware package that automatically manages, controls and monitors
various security devices. The customized camera housings are designed to match
architecturally the up-scale lobbies and spaces where they are installed.
COMPETITION
We compete for systems integration business in the security area with
electrical contractors, large construction firms, consultants and other systems
integrators. Some of these concerns are much larger than we and have greater
financial, marketing, personnel and other resources. While many companies
manufacture similar security devices to ours, we generally compete with them
only on a limited basis because the products we make fulfill the in-house needs
of our systems integration group and those of the MSS's with which we have had a
long relationship. Moreover, because these products are often upgraded versions
of former Motorola-supplied devices which can be easily integrated with older
Motorola systems, we possess a competitive advantage when dealing with the
MSS's.
In the public sector in which competitive bidding procedures frequently
apply, we have concentrated on design-build projects where specifications for
our equipment and technology are prescribed for the job ahead of time. This too
gives us a competitive advantage.
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<PAGE>
We compete for systems integration business on the basis of reputation,
technological sophistication, overall know-how, local presence and understanding
of customers' needs. In the manufacturing arena, performance, features and
delivery schedules represent the primary determinants. Price is usually a lesser
consideration than features for currently targeted customers and markets.
However, price may become a critical factor in the foreseeable future as we seek
to penetrate new markets.
EMPLOYEES
As of January 1, 2000, we had 47 full time employees including our
officers, of whom 4 were engaged in manufacturing, 26 in systems installation
and repair services, 8 in administration and financial control, 4 in engineering
and research and development, and 5 in marketing and sales.
None of our employees are covered by a collective bargaining agreement or
are represented by a labor union. We consider our relationship with our
employees to be satisfactory.
The design and manufacture of our equipment and the installation of our
systems require substantial technical capabilities in many disparate disciplines
from mechanics and computer science to electronics and mathematics. While we
believe that the capability and experience of our technical employees compares
favorably with other similar systems integrators and manufacturers, we may not
be able to retain existing employees or attract and hire the highly capable
technical employees necessary in the future on terms deemed favorable to us, if
at all.
However, we do emphasize continued training for new and existing technical
personnel. Accordingly, we conduct training classes and seminars in-house, send
them to technical schools and avail ourselves of training opportunities offered
by equipment manufacturers and other specialists on a regular basis.
PROPERTIES AND FACILITIES
Since July 15, 1990, we have leased a 17,055 square foot facility in Saddle
Brook, New Jersey, for our corporate headquarters, integration operations and
later for our manufacturing plant. This facility is a one-story, modern brick
building in a commercial-industrial area. The lease on this space which has been
extended twice, terminates on June 30, 2001, and provides for a fixed annual
rent of $88,800 until that date, payable in equal monthly installments of
$7,400. We are also responsible for the cost of property taxes, utilities,
repairs, maintenance, alterations, cleaning and insurance. These facilities
should meet our operational needs for the foreseeable future.
We also lease a 3,500 square foot office facility, in Grand Prairie, Texas,
between Dallas and Ft. Worth. A single-story, cinder block building in an office
complex, this space is leased until January 31, 2001 at a fixed annual rental of
$31,500, payable in equal monthly installments of $2,625 with additional costs
to us for insurance, repairs and alterations, utilities, taxes and cleaning.
In addition, we lease several automobiles, truck, office, production and
testing equipment and expect to continue to lease this equipment after the
offering.
LEGAL PROCEEDINGS
We know of no material litigation or proceeding, pending or threatened, to
which we are or may become a party.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our current directors and officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James E. Henry............... 46 President, Chief Executive Officer and Director
Irvin F. Witcosky............ 61 Executive Vice President, Secretary and Director
Louis Massad................. 61 Vice President, Treasurer, Chief Financial Officer
and Director
Theodore Gjini............... 34 Vice President of Operations
Leroy Kirchner............... 57 Director
C. Jay Pelliconi............. 67 Director
</TABLE>
BACKGROUND INFORMATION ABOUT EXECUTIVE OFFICERS AND DIRECTORS
JAMES E. HENRY
Mr. Henry co-founded InTegCom in 1989 with Mr. Witcosky and has served as
its president, chief executive officer and director since that date.
A graduate of the University of New Hampshire with a bachelor of science
degree in electrical engineering, he worked on a part-time basis for Henry Bros.
Electronics, Inc. ('HBE') as a technician from 1968 to 1978 servicing and
installing CCTV, audio and radio communication systems. A full time employee
starting in 1978, Mr. Henry continued to work for HBE as a systems engineer
until 1989. During this period, he designed, integrated and installed extensive
and sophisticated communication and control systems in microwave, laser, fiber
optic and infra technologies for larger corporations, utilities and government
agencies in the New York Metropolitan Area.
Then in 1989 he and Mr. Witcosky arranged the repurchase of HBE from CGI,
and Mr. Henry has continued to design, install, integrate and market security
and communications systems while serving as InTegCom's chief executive officer
and a director.
IRVIN F. WITCOSKY
A co-founder of InTegCom, Mr. Witcosky has served as its executive vice
president, secretary and director to date. Previously, he had also acted as its
treasurer and general manager.
A graduate of California Polytechnic University with a bachelor of science
degree in aeronautical engineering, Mr. Witcosky entered the workforce at the
Naval Weapons Center as a civilian engineer. There, from 1960 to 1974, he became
involved in research, development, testing and production of rocket-assisted
projectiles for naval guns and guided missiles, including the Agile missile. As
a recipient of a special Michelson Laboratories Award of Fellow in Ordinance
Science and co-inventor on a Navy patent for a new rocket propellant, Mr.
Witcosky managed and coordinated six Navy laboratories and upwards of 100
engineers on various projects along with the civilian contractor's personnel at
Thiokol and Hughes Aircraft.
From 1974 to 1983, Mr. Witcosky founded and ran Photoscan, a CCTV company
for security systems in Salt Lake City, Utah and from 1977 to 1981 he formed
another corporation, Beehive Video, a video specialty concern for industrial and
retail markets, where he acted as president.
From 1978 to 1981 Mr. Witcosky served as president of PSA, the security
industry buying co-op in which ITC is a member/owner. He later worked for VCS,
Inc., the former Motorola CCTV factory, now a subsidiary of InTegCom, in the
capacity of vice president of marketing from 1981 through 1986.
In 1987 Mr. Witcosky joined HBE and became a vice president and general
manager. There to the present he has supervised, coordinated and managed
installations, marketing and manufacturing of security and communication systems
and their components.
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<PAGE>
LOUIS MASSAD
Mr. Massad joined InTegCom in 1997 as a financial advisor and became a vice
president, treasurer and chief financial officer in 1999. He holds bachelor of
science and masters degrees in accounting from Cairo University in Egypt and a
masters in business administration in finance from Long Island University. From
1960 to 1970, Mr. Massad worked as an auditor for a large foreign certified
public accounting firm in its overseas offices.
During 1970 and 1971, he was employed as a senior auditor at First Fidelity
Bank of Newark, New Jersey. From 1971 to 1974, he served as a controller to
Magnus Organ Corp., a manufacturer of electronic organs. During the 1974-1976
period, Brunswick Corporation, a large manufacturer of many products and
equipment, employed him as a controller of one of its divisions. In 1976 to 1981
he held the positions of vice president of finance and treasurer of Mediscience
Technology Corp., a publicly held company that manufactured medical equipment.
From 1981 to 1982, the Beattie Manufacturing Company, a carpet manufacturer,
employed Mr. Massad as its controller, chief financial officer and a director.
Then in 1982 he began a lengthy involvement with Computer Power Inc., a publicly
held manufacturer of power supply equipment for computers and emergency lighting
equipment. There, he worked continuously until 1996 as vice president of
finance, controller, and director. From 1996 to 1999 he functioned as an
independent accountant and financial advisor to several companies, including
ITC.
THEODORE GJINI
Elected Vice President in December, 1999, Mr. Gjini also serves as
operations manager and supervises the coordination of ITC personnel and their
activities in sales and marketing, project installations and maintenance. He has
acted in that capacity as well as sales engineer and project manager for
InTegCom since 1988.
A graduate of New Jersey Institute of Technology with a bachelor of science
degree in electrical engineering and William Paterson College with a masters in
business administration, he previously worked for Allied Signal Corporation as a
research technician during 1986 and as a security officer for Nabisco from 1985
to 1988.
LEROY KIRCHNER
Mr. Kirchner was elected to our board of directors in December, 1999.
Having earned bachelor of science and masters in business administration degrees
from Fairleigh Dickinson University, he had continuously worked in various
capacities for Motorola Inc., primarily in sales and marketing from 1966 through
1998. Between 1992 to 1996, he served as a Motorola vice president in charge of
dealer sales for the eastern U.S. where he managed over 300 dealers and
successfully directed a nation-wide task force to increase specialized mobile
radio sales. From 1996 through 1998, he also functioned as vice president and
strategist for a Motorola subsidiary engaged in sales of related radio equipment
and systems. Afterwards to date, Mr. Kirchner has acted as an independent
consultant to the communications industry.
C. JAY PELLICONI
Mr. Pelliconi was also elected to our board in December, 1999 and holds a
bachelor of arts degree in economics from Wagner College. Since 1959, he has
been actively engaged in commercial and investment banking. During that time he
served as a vice president of public finance with a major New York Stock member
firm, secretary of the metropolitan loan committee of a New York money center
bank, manager of the municipal bond department of another member firm and a
municipal bond trader at two other investment concerns.
More recently, he has worked as a vice president in charge of office sales
for another member firm from 1986 to 1989, vice president for corporate finance
at Jesup Josephthal & Co., Inc. from 1989 to 1991, manager of private placements
at Jay Partners Holding, Inc. and registered representative of Du Pasquier & Co.
Inc., both from 1991 to 1997. Starting in 1997 to the present, he has acted as
an
33
<PAGE>
administrative manager and a leading member of the corporate finance group at
Mason Hill & Co., Inc., the representative of the underwriters in this offering.
BACKGROUND INFORMATION ABOUT CERTAIN KEY EMPLOYEES
EMIL J. MARONE
Since 1965 Mr. Marone has worked continuously for HBE and ITC as a hospital
communication system specialist, security systems supervisor, systems engineer
and quality control specialist.
In his current position, he is responsible for the development of special
products and testing procedures as well as quality assurance and management. He
holds an associate science degree from Bergen County Community College and has
attended New Jersey Institute of Technology and Fairleigh Dickinson University
taking courses in mathematics, computer sciences and engineering.
GERARD ROMOLO
Mr. Romolo joined our company in 1994 and has continuously worked for us as
a technician, manufacturer's liaison, project manager and quality control
specialist. Since then, he has attended Orange and Ulster Counties Boces taking
courses in electronics and Orange County Community College studying accounting
and business administration. He has received other training and certification
from the National Burglar Fire Alarm Association, Edicon, PSA, Lenel, Mavix,
Sungjin, Intellikey and MDI in alarms, computers and software.
From 1988 to 1994, he worked for Prontronics Fire & Alarm Company, Inc. as
a quality control manager, trouble-shooter and installer. In 1986 to 1988, he
was employed by Rickel Home Center as a department manager supervising
employees, ordering products and maintaining all other aspects of his
department.
CARL J. ERICKSON
Mr. Erickson joined InTegCom as chief systems engineer in December, 1999.
From 1998 through 1999, he served as a project manager for Lockheed Martin on
the new Austin/Bergstrom International Airport in Texas. In this position, he
supervised the design and installation of the power distribution, access
control, CCTV, gate control and control center systems. He also coordinated and
managed the subcontractors, the local Lockheed team, negotiated contracts and
administered and supervised the construction effort.
Between 1987 and 1998, Texas Instruments/Raytheon employed him as a project
manager. In this capacity, he managed the development, design and installation
of fire detection, CCTV, Intercom, card access, paging and other systems for a
wide variety of corporate and government projects. A graduate of Brigham Young
University with a bachelor of science degree in electrical engineering, Mr.
Erickson has in prior years acted as a consultant to architectural and
engineering firms, contractors and owners for communications, electronic control
and security systems located in airports, hotels, hospitals, penal institutions,
malls and corporate.
ROBERT H. GREENQUIST
Mr. Greenquist joined us in 1991 and has continuously worked for ITC as a
production and engineering manager. In these capacities, he has been in charge
of electro-mechanical and analogue designs of equipment and oversees
engineering, manufacturing and quality control activities.
From 1986 to 1991, he served as president of Alpha-Tronics, an engineering
consulting firm specializing in analogue designs. During 1976 to 1986, he owned
and operated Research Development Corp., an R&D consulting firm to manufacturers
of high-end assemblies for echo cardiology and medical imaging equipment as well
as avionics equipment in large commercial jet aircrafts. Since 1965 to 1976, he
owned and operated GHV Electronics, Inc., a manufacturer of audio/visual
products, where he also functioned as a design engineer for new products.
34
<PAGE>
ALBERTO SID
Mr. Sid has acted as an engineering manager with ITC since early 1995.
Before that he held positions of director of R&D and hardware engineering
manager at Graphex Imaging Systems, Inc., a manufacturer of imaging, plotter and
scanner products, from 1991 until his employment by IntegCom. In 1989 to 1991,
he served as president of Telec Research and Engineering, a start-up
manufacturer of products using robotic controls, high-resolution positioning
devices, multiprocessors and smart light fixtures.
From 1984 to 1989, he was a senior technical specialist at Scitex America
Corp., where he lent technical, maintenance and marketing support to customers.
A graduate of Technion Israel Institute with a bachelor of science degree in
electrical engineering, Polytechnic University of New York with a masters degree
in computer science, and New York Institute of Technology with an MBA, he worked
for several Israel companies from 1978 to 1984 as a technical specialist,
project leader, design engineer and electronic technician.
CHARLES R. ADAMS, JR.
Mr. Adams started working for ITC in 1995 and has continued until the
present. In our Texas office, he oversees service and installation projects,
interfacing with customers, general contractors, architects and vendors.
From 1993 to 1995, he was employed as a service and installation supervisor
for Ogden Government Services. During 1984 to 1993, he worked for Walker
Engineering as foreman on projects involving security conduits, hook-ups for
airport lighting, power distribution, lighting and wiring. Previously, he held
positions as a wirer and electronic technician at Cal Electric, Tristar Electric
and Western Electric from 1971 to 1984.
DAVID R. JONES
Mr. Jones has been in ITC's employ as a general manager since 1995. He
oversees sales, marketing, and customer relations in our Texas office, reviews
blueprints for new projects and performs financial analysis for them. From 1993
to 1995 he worked for Ogden Security Services as an operations manager where he
supervised personnel, scheduled manpower on projects and interfaced with
customers.
In 1981 to 1993, Kastle Security Systems employed Mr. Jones as a general
manager. There he prepared and handled budgets and other financial reports. From
1979 to 1981, he served as an installation and service supervisor at SETEC
Protection Service and worked for the Federal Bureau of Investigation from 1977
to 1979, specializing in and coordinating telecommunications between regional
offices and headquarters. Mr. Jones holds a bachelor of arts degree in business
administration from the University of Kentucky.
INGE FOLEY
Ms. Foley has served as our office manager from 1989 to the present. In
this position, she has supervised the office staff, acted as a controller and
overseen the purchase of equipment and parts for us.
Having attended Rutgers University in business administration, she had
worked previously, starting in 1966 to 1989, as a sales administrator and an
operations manager for Tele-Measurement, Inc., another security systems
integrator.
JANE MCCALLUM
From 1998 to date, Ms. McCallum has managed our Texas office where she is
responsible for the administration, finance, budgeting and purchasing. In 1996
to 1998, she served as a staffing manager for Personal Touch Home Care, Inc., a
concern that provides nursing service to patients in their homes. In 1995 to
1996, she acted as business service manager of RedBird Health, Inc., another
health care company, where she supervised the office and clerical staff, billing
and accounts payable and receivable.
35
<PAGE>
From 1990 to 1995, she was employed by Techcord Consulting Group, Inc., a
security consultant, as office manager in charge of marketing, public relations,
payroll, collections and invoices. Starting in 1982 to 1989, she acted as a
clerical and collection supervisor for GTE directories and oversaw public
relations, training and office finances.
Potential investors should consider the backgrounds of our officers,
directors and key employees whether or not they have the necessary experience
and capabilities to operate our business and develop it effectively.
Management's experience and ability are often deemed to be the most significant
factors in the success of any business. ITC's management believes that it
currently possesses the necessary ability and experience to operate its business
effectively. Should either Mr. Henry or Mr. Witcosky leave our employ, we would
be operating at a definite disadvantage. While ITC may be in a position to
replace them with comparable personnel, that would not necessarily be the case,
and in any event delays in locating suitable replacements are likely to occur.
BOARD COMPOSITION
At each annual meeting of our stockholders, all of our directors will be
elected to serve from the time of election and qualification until the next
annual meeting election. In addition, our bylaws provide that the authorized
number of directors, which is a minimum of three and a maximum of fifteen, may
be changed only by resolution of the board of directors.
Each officer is elected by, and serves at the discretion of, our board of
directors. Each of our officers and directors, other than non-employee
directors, devotes his full time to our affairs. Our non-employee directors
devote such time to our business as is necessary to discharge their duties.
There are no family relationships among any of our directors, officers or key
employees.
BOARD COMMITTEES
We have established both a compensation committee and an audit committee, a
majority of which is composed of independent, outside members of our board of
directors. The audit committee reviews with our independent public accountants
the scope and adequacy of the audit to be performed by the independent public
accountants, the accounting practices, our procedures and policies, and all
related party transactions. The compensation committee recommends to our board
of directors the compensation to be paid to our officers and directors,
administers our stock option plan and approves the grant of options under the
plan. We have appointed Mr. Pelliconi, Mr. Witcosky and Mr. Kirchner as the
members of both committees.
DIRECTOR'S COMPENSATION
Directors who are also our employees receive no additional compensation for
attendance at board meetings. Non-employee directors will receive $500 for
attendance at each board meeting or any committee of the board that they attend
unless the board and committee meetings are held on the same day, in which case
they should be considered as one and paid accordingly. Also, these directors
will be reimbursed for their travel, lodging and other out-of-pocket expenses
related to their attendance at board and committee meetings. Additional
compensation for these directors may be arranged for special projects. No
directors' fees have been paid to date. We anticipate that our board of
directors will hold regularly scheduled meetings on a quarterly basis.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid to our president
and chief executive officer and each other executive officer whose 1999
compensation equaled or exceeded $60,000.
36
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SALARY AND
NAME AND PRINCIPAL POSITION YEAR BONUSES
- --------------------------- ---- -------
<S> <C> <C>
James E. Henry ............................................. 1999 $60,000
President and CEO 1998 $60,000
1997 $60,000
Irvin F. Witcosky .......................................... 1999 $60,000
Executive Vice President 1998 $60,000
1997 $60,000
</TABLE>
The aggregate compensation paid to all persons who served in the capacity
of director or executive officer during our fiscal year ended December 31, 1999
(2 persons) was approximately $120,000.
EMPLOYMENT AGREEMENTS
Messrs. Henry and Witcosky are each serving as ITC's President and
Executive Vice President under written employment contracts for five years
commencing January 1, 2000. These agreements provide for an initial annual
compensation of $135,000, unspecified bonuses approved by the board of directors
and the compensation committee, an increase of 10% in compensation in each of
the third, fourth and fifth years and a one-year non-competition covenant
covering the security business that commences after termination of employment.
Mr. Massad has entered into a five year written employment contract with
ITC commencing January 1, 2000. His initial annual compensation under such
contract is $110,000, and it also provides for unspecified bonuses, a 10%
increase per annum in each of the third, fourth and fifth years. All these
contracts may be terminated or modified by us if we fail to complete our initial
public offering of securities by June 30, 2000.
INCENTIVE STOCK OPTION PLAN
On December 23, 1999, our directors and shareholders approved the adoption
of our Incentive Stock Option Plan. Under the Plan, options to purchase a
maximum of 500,000 shares of its common stock may be granted to officers and
other key employees of ITC. Options granted under the Plan are intended to
qualify as incentive stock options as defined in the Internal Revenue Code of
1986, as amended.
ADMINISTRATION
Our board of directors has appointed three of its members as the
compensation committee to administer the Plan. This committee determines which
persons are to receive options, the number of options granted and the options'
exercise prices. The compensation committee may also prescribe the rules and
regulations for administering the Plan, and it is this committee which decides
questions arising under the Plan or any of its rules and regulations.
OPTION TERM AND PRICE
The maximum term of any option is ten years, and the option price per share
may not be less than the fair market value of our shares at the date the option
is granted. However, options granted to persons owning more than 10% of our
voting shares (or a combination of our voting shares and those of any subsidiary
of ours) will have a term not in excess of five years, and the option price per
share will not be less than 110% of fair market value.
An optionee may exercise these options only if and to the extent that these
options are vested at that time. Unless otherwise determined by our compensation
committee, vesting generally occurs at the rate of 33 1/3% per year of
continuous employment with InTegCom.
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<PAGE>
OPTION GRANTS
As of the date of this prospectus, we have granted options covering a total
of 100,000 shares to 44 employees at an exercise price per share equal to 90% of
the initial offering price per share of the shares offered in this prospectus
under the Plan.
TRANSFERABILITY AND ANTI-DILUTION
Options granted under the Plan are not transferable other than by will or
by the laws of descent and distribution. Options granted under the Plan are
protected by so called anti-dilution provisions which both modify the number of
shares issuable under it and adjust the exercise price of an option to account
for stock dividends, stock splits and the like.
TERMINATION OF EMPLOYMENT
Despite the term of an option, it will expire when an optionee's employment
ends. The precise timing depends on the reason for the termination of
employment. In the event of retirement or disability, his right extends for
three (3) months afterwards. In the case of death it runs for a year after
termination, while in the case of voluntary termination it occurs upon
termination. When an optionee's employment is terminated involuntarily, his
option runs for 30 days, except if the involuntary termination is for cause.
Then the right expires as of the date of the event which triggers the
termination.
PLAN TERMINATION
The Plan will terminate on December 23, 2009 or on such earlier date as the
board of directors may determine. Any option outstanding at the termination date
will remain outstanding until it expires or is exercised in full, whichever
occurs first.
TAX TREATMENT
If shares are treated as being received under a Plan qualified as an
Incentive Stock Option within the meaning of the Internal Revenue Code of 1986,
as amended, and if the shares acquired are not disposed of by the optionee
within two years from the date of the grant of the option nor within one year
from the transfer of the shares to the optionee, then no income is recognized by
the optionee upon his receipt of the option or its exercise. If the shares are
disposed of within either the first two years of the option's grant or one year
from the acquisition of the shares, then compensation income in the amount of
the difference between the value of the shares at the time they were acquired
and the price actually paid for them will be recognized by the optionee in the
year of the disposition, and an equal deduction will be allowed to ITC.
If the aggregate fair market value of the shares of common stock
(determined at the time the option is granted) with respect to which incentive
stock options are exercisable for the first time by such optionee during any
calendar year (under all such plans) exceeds $100,000, then only the first
$100,000 of such shares so purchased will be treated as exercised under the Plan
and any excess over $100,000 so purchased shall be treated as options which are
not incentive stock options. This rule is applied by taking options into account
in the order or sequence in which they are granted.
SIMPLE IRA PLAN
On October 1, 1999, we adopted a Simple IRA Plan for our employees to
accommodate their pension needs. Under this plan, we shall contribute on behalf
of each participant for the plan year an amount equal, dollar for dollar, to
that amount which these participants contribute to their retirement accounts
under the plan.
Our matching contributions are limited to 3% of each participant's
compensation or $6,000, as adjusted, whichever is less. Each employee may elect
to make contributions to his retirement account by means of reductions from his
salary or his personal contribution of a specific dollar amount not to
38
<PAGE>
exceed $6,000. From time to time, the U.S. Secretary of the Treasury may adjust
these limitations on both our matching contributions and the employees'
contributions for cost of living increases. The employees' portion of his
account vests immediately in full and cannot be forfeited. Our contributions
under this Plan are generally deductible for taxable year for which they were
made.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation and bylaws limit the liability of
directors and officers to the maximum extent permitted by Delaware law. We will
indemnify any person who was or is a party, or is threatened to be made a party
to, an action, suit or proceeding, whether civil, criminal, administrative or
investigative, if that person is or was our director, officer, employee or agent
or serves or served any other enterprise at our request.
In addition, our certificate of incorporation provides that a director
shall not be personally liable to us or our stockholders for monetary damages
for breach of the director's fiduciary duty. However, the certificate does not
eliminate or limit the liability of a director for any of the following reasons:
breach of the director's duty of loyalty to us or our stockholders;
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law;
the unlawful payment of a dividend or unlawful stock purchase or
redemption; and
any transaction from which the director derives an improper personal
benefit.
We intend to purchase and will maintain directors' and officers' insurance
in the amount of $ . This insurance will insure directors against any
liability arising out of the director's status as our director, regardless of
whether we have the power to indemnify the director against the liability under
applicable law.
We have been advised that in the opinion of the Security Exchange
Commission insofar as the indemnification provisions referred to above may be
invoked to disclaim liability for damages arising under the Securities Act,
these provisions are against public policy as expressed in the Act and are,
therefore, unenforceable.
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<PAGE>
CERTAIN TRANSACTIONS
In October, 1989, as part of the repurchase of HBE assets and name,
Mr. Henry lent us approximately $100,000 to finance this acquisition. This loan
was converted to equity in December, 1993. From 1989 until 1994, Mr. Witcosky
lent us an aggregate of about $100,000 to finance our business which has since
been converted to equity.
In the early 1990's, we had orally agreed with a former joint adventurer of
Mr. Henry and Mr. Witcosky in connection with the HBE asset acquisition from CGI
to repay his $50,000 loan and to extinguish his equity claims. That agreement
was finally memoralized in writing in December, 1999.
Under these arrangements, we are obligated to repay an aggregate of
$128,685 to him at the rate of 10% per annum until December 1, 2003 in monthly
installments under two promissory notes. Mr. Henry and Mr. Witcosky are also
obligors under these notes. In addition, Mr. Witcosky paid this joint adventurer
$40,000 to extinguish his equity claim regarding an InTegCom subsidiary, HBE
Acquisition Corp.
On December 30, 1999, Messrs. Henry and Witcosky each sold 80,000 shares of
their InTegCom common stock for a total of 160,000 shares to Mr. Massad for an
aggregate of $24,000 under restrictive conditions involving his continued
employment. On or about the same date, Messrs. Henry and Witcosky each also
transferred 20,000 of their InTegCom shares, totaling 40,000 shares, to John,
Ray and Hartford Henry as a part settlement of our debt to them.
Under a bank loan agreement between us and Hudson United Bank dated
September 1, 1999, Mr. Henry and Mr. Witcosky have personally guaranteed up to
$2,250,000 of our indebtedness to the bank, plus accrued interest, and have
agreed to subordinate nearly $140,000 of Henry Brothers' loans made to us to the
bank's loans. Upon completion of this offering, we anticipate that these
guarantees and subordinations will be eliminated.
POLICY REGARDING LOANS AND OTHER AFFILIATED TRANSACTIONS
Nearly all of the affiliated transactions and loans described above were
entered into when there were less than two disinterested independent directors
on our board of directors, and accordingly we lacked sufficient disinterested
independent directors to approve or ratify such transactions and loans at the
time they were initiated. However, we believe that all such transactions and
loans were made on terms that are as favorable to us as those which were
generally available from unaffiliated third parties at that time.
We currently have and will maintain at least two independent directors on
our board of directors. All future material affiliated transactions and future
loans and loan guarantees with our officers, directors, 5% shareholders, or
their respective affiliates, will be on terms that are as favorable to us as
those generally available from unaffiliated third parties; and all such future
transactions and loans, and any forgiveness of such loans, shall be approved or
ratified by a majority of our independent directors who do not have an interest
in the transactions and who will have access, at our expense, to ITC's attorneys
or an independent legal counsel. We do not intend to make any future loans to or
guarantee loans on behalf of our officers, directors and employees, other than
(i) advances for travel, business expense, and similar ordinary operating
expenditures; (ii) loans or loan guarantees made for the purchase of our
securities; and (iii) loans for relocation.
PRINCIPAL STOCKHOLDERS
The table below sets forth information with respect to the beneficial
ownership of our common stock, as of the date of this prospectus for the
following persons:
each person known by us to be the beneficial owner of more than 5% of our
common stock;
each of our directors;
each of our executive officers; and
our executive officers and directors as a group.
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<PAGE>
Beneficial ownership has been determined in accordance with the rules and
regulations of the Securities and Exchange Commission and includes voting or
investment power with respect to the shares. Unless otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
the number of shares indicated as beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage ownership
for each person listed below includes shares of common stock, underlying options
or warrants held by the person that are exercisable within 60 days of the date
of this prospectus, but excludes shares of common stock underlying options or
warrants held by any other person. Common stock beneficially owned and
percentage ownership are based on 4,000,000 shares outstanding before this
offering and 5,000,000 shares to be outstanding after the completion of this
offering, assuming no exercise of the underwriters' over-allotment option.
Unless otherwise indicated, the address of each beneficial owner is c/o
ITC, 280 Midland Avenue, Saddle Brook, New Jersey 07662.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
NUMBER OF BENEFICIALLY OWNED
SHARES -------------------
NAME, ADDRESS AND TITLE BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------- ----- -------- --------
<S> <C> <C> <C>
James E. Henry, CEO, President and Director.............. 1,900,000 47.5% 38.0%
Irvin F. Witcosky, Executive Vice President, Secretary
and Director........................................... 1,900,000 47.5% 38.0%
Louis Massad, CFO, Principal Accounting Officer,
Treasurer and Director(1).............................. 160,000 4.0% 3.2%
Theodore Gjini(2)........................................ 12,000 0.3% 0.2%
Leroy Kirchner........................................... -- -- --
C. Jay Pelliconi......................................... -- -- --
All executive officers and directors as a group
(6 persons)............................................ 3,972,000 99.3% 79.4%
</TABLE>
- ------------
(1) Holds 40,000 shares currently but the remaining 120,000 shares are held in
escrow and will only be released to him at the rate of 40,000 shares per
year of continuous employment with InTegCom.
(2) Represents shares of common stock issuable upon exercise of unvested options
under the incentive stock option plan.
DESCRIPTION OF SECURITIES
SECURITIES OFFERED
The 1,000,000 Units offered by the prospectus are comprised of 1,000,000
shares of common stock and 1,000,000 warrants to purchase an equal number of
shares of common stock. These shares and warrants will be traded separately upon
the effectiveness of this offering.
Our authorized capital stock consists of 10,000,000 shares of common stock,
par value $.01 per share, and 2,000,000 shares of preferred stock, par value
$.01 per share, the rights and preferences of which may be established from time
to time by our board of directors. Assuming no exercise of the underwriters'
over-allotment option, upon completion of this offering, there will be 5,000,000
shares of our common stock issued and outstanding, no preferred stock
outstanding, and excluding the representative's warrants, there will be
1,000,000 public warrants outstanding.
The description of our securities are summaries and do not contain all the
information that may be important to you. For more complete information, you
should read our certificate of incorporation, and the forms of representative's
warrants, public warrant agreement and the public warrant which are filed as
exhibits to the registration statement of which this prospectus forms a part.
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<PAGE>
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of our common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Apart from preferences that may be applicable
to any shares of preferred stock outstanding at the time, holders of our common
stock are entitled to receive dividends ratably, if any, as may be declared from
time to time by our board of directors out of funds legally available therefor.
Upon the liquidation, dissolution or winding up of ITC, the holders of our
common stock are entitled to receive ratably, our net assets available after the
payment of all liabilities and liquidation preferences on any outstanding
preferred stock. Holders of our common stock have no preemptive, subscription,
redemption or conversion rights, and there are no redemption or sinking fund
provisions applicable to the common stock. The outstanding shares of our common
stock are, and the shares offered in this offering will be, when issued and paid
for, validly issued, duly authorized, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
PREFERRED STOCK
Our board of directors is authorized, without further stockholder approval,
to issue up to 2,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of these shares,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, and to fix the number of shares constituting any
series and the designations of these series. These shares may have rights senior
to our common stock. The issuance of preferred stock may have the effect of
delaying or preventing a change in control of us. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock or could adversely affect the rights
and powers, including voting rights, of the holders of our common stock. At
present, we do not intend to issue any shares of our preferred stock in the
foreseeable future. No preferred stock will be issued for two years from the
date of this prospectus without the consent of the representative, which shall
not be unreasonably withheld.
WARRANTS
We are authorized to issue three-year warrants to purchase an aggregate of
1,000,000 shares of common stock (exclusive of 150,000 warrants issuable upon
exercise of the underwriters' over-allotment option). We have reserved an
equivalent number of shares for issuance upon exercise of these warrants. Each
warrant represents the right to purchase one share of common stock, commencing
on the effective date of this offering and until the expiration of three years
from the date of this prospectus. The exercise price of the warrants is
$ per share, until , 2003 and during their term. After
expiration, the warrants will be void and of no value.
From , 2001 until the close of business on , 2003,
the warrants are subject to earlier redemption as follows: If the average of the
closing bid prices of the common stock (if the common stock is then traded in
the over-the counter market) or the average of the closing prices of the common
stock (if the common stock is then traded on a national securities exchange or
the NASDAQ National Market or Small Cap System) exceeds for any
consecutive 20 trading days, then upon at least 30 days prior written notice,
given within 60 days of the period, we will be able to call all (but not less
than all) of the warrants for redemption at a price of $.25 per warrant.
The warrants contain provisions that protect their holders against dilution
by adjustment of the exercise price and number of shares issuable upon exercise
on the occurrence of specific events, such as stock dividends or other changes
in the number of outstanding shares except for shares issued under any ITC stock
option plans for the benefit of its employees, directors and agents, the
warrants offered hereby, the representative's warrants, the underwriters'
over-allotment option and any equity securities for which adequate consideration
is received. We are not required to issue fractional shares. In lieu of the
issuance of fractional shares, we will pay cash to holders of the warrants. In
computing the cash
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<PAGE>
payable to holders, a share of common stock will be valued at its price
immediately prior to the close of business on the expiration date. The holder of
a warrant will not possess any rights as a stockholder of ITC unless he
exercises his warrant.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW
Section 203 of the Delaware General Corporation Law contains provisions
that may make the acquisition of control of our company by means of a tender
offer, open market purchase, proxy fight or otherwise, more difficult. We must
comply with the provisions of this law. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a 'business combination'
with an 'interested stockholder' for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner.
A 'business combination' includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An 'interested
stockholder' is a person who, together with affiliates and associates, owns, or,
in some cases, within three years prior, did own, 15% or more of the
corporation's voting stock. Under Section 203, a business combination between
InTegCom and an interested stockholder is prohibited unless it satisfies one of
the following three conditions:
our board of directors must have previously approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder.
upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by (1) persons who are directors and also
officers and (2) employee stock plans, in some instances; and
the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by the
affirmative vote of the holders of at least 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.
LISTING ON NASDAQ SMALL CAP SYSTEM AND BOSTON STOCK EXCHANGE
After the offering we anticipate that the common stock and warrants will be
quoted on the National Association of Securities Dealers, Inc. (NASDAQ), Small
Cap System and the Boston Stock Exchange ('BSE') under the symbols ' ' and
' W'. Applications to list such securities on these system and exchange
will be filed shortly.
We cannot assure that the prices of our securities will be so quoted or
that a trading market for our securities will develop or be sustained, or at
what price the securities will trade. In addition, even if these securities are
listed and traded initially on NASDAQ and BSE, we may fail to meet subsequently
certain minimum standards for continued listing. In that event, these securities
will consequently be delisted, and their price will no longer be quoted in this
system. These results may make it extremely difficult to sell or trade our
securities.
TRANSFER AND WARRANT AGENT AND REGISTER
Jersey Transfer & Trust Co. is the transfer and warrant agent and registrar
for our securities.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of our shares could drop as a result of sales of
substantial amounts of them in the public market after this offering or the
perception that these sales may occur. This set of circumstances could also make
it more difficult for us to raise funds through future offerings of stock.
The 1,000,000 shares and 1,000,000 warrants that we are offering will be
freely tradable without restriction except for any shares held by our
'affiliates' as defined in Rule 144 under the Securities Act or those otherwise
restricted under the Act. In addition, if the underwriters exercise their over-
allotment option, in part or in full, up to 150,000 additional shares and
150,000 additional warrants will be issued and freely tradable.
Our remaining 4,000,000 outstanding shares are 'restricted securities' as
defined in Rule 144. Those shares may only be resold if there is an effective
registration statement under the Securities Act covering those shares or an
exemption from registration under Rule 144 or otherwise is available. The
primary holders of all currently outstanding 4,000,000 shares have agreed that
they will not sell any shares without the prior consent of the representative of
the underwriters for a period of 365 days from the effective date of this
offering. Shares covered by such registration will be eligible for resale in the
public market, subject to Rule 144 limitations applicable to 'affiliates' and to
the lock-up agreements previously described. Furthermore, we will be issuing
warrants to the representative of the underwriters at the closing of this
offering which, if exercised in full, will yield another 100,000 shares. After
this offering, we eventually intend to register all 500,000 shares reserved for
issuance under our stock option plan.
Our stock options and warrants are likely to be exercised, if at all, at a
time when we otherwise could obtain a price for the sale of our shares that is
higher than the exercise price per share of the options or warrants. Any
exercise or the possibility of an exercise may impede our efforts to obtain
further financing through the sale of additional securities or make that
financing more costly.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement between
the Company and Mason Hill & Co., Inc., the representative of the several
underwriters, a copy of which agreement is filed as an exhibit to the
registration statement of which this prospectus forms a part, we have agreed to
sell to the underwriters named below, and the underwriters have agreed to
purchase all 1,000,000 shares of common stock and 1,000,000 warrants to purchase
shares of common stock offered.
<TABLE>
<CAPTION>
NUMBER OF
---------------------
UNDERWRITER NUMBER OF ADDRESS SHARES WARRANTS
- ----------- ----------------- ------ --------
<S> <C> <C> <C>
Mason Hill & Co., Inc......... 110 Wall Street
New York, NY 10005............
--------- ---------
Total.................................................... 1,000,000 1,000,000
--------- ---------
--------- ---------
</TABLE>
The representative has advised us that the underwriters will offer the
shares and warrants as set forth on the cover page of this prospectus, which
includes the underwriting discount indicated there, and that the underwriters
will initially allow concessions not in excess of $ per share and
$ per warrant on sales to certain dealers. After the initial public
offering, concessions to dealers terms may be changed by the representative.
The representative has advised us that the underwriters do not intend to
confirm sales of the shares and warrants to any account over which they exercise
discretionary authority in an aggregate amount in excess of five (5%) percent of
the total securities offered hereby.
We have granted to the underwriters an option which expires 45 days after
the date of this prospectus, exercisable as provided in the underwriting
agreement, to purchase up to an additional
44
<PAGE>
150,000 shares and 150,000 warrants at a net price of $ per share and
$.10 per warrant (90% of the public offering price) which option may be
exercised only for the purpose of covering over-allotments, if any, in the sale
of 1,000,000 shares and 1,000,000 warrants offered in this prospectus.
The underwriting agreement provides that upon the closing of the sale of
the securities offered, the representative will be paid a non-accountable
expense allowance equal to 3% of the aggregate public offering price (including
the over-allotment option) of which $50,000 has been paid to date. The
underwriting agreement provides for reciprocal indemnification between us and
the underwriters against certain liabilities in connection with the registration
statement, including liabilities under the Securities Act of 1933, as amended.
The underwriting agreement further provides that we and each of our directors
individually will, upon completion of the public offering, for a period of no
less than three years, support for election a designee of the representative to
our board of directors.
In connection with this public offering, we have agreed to sell to the
representative or its designees, at a price of $10, representative's warrants
covering 100,00 shares which may not be transferred before , 2000,
except to officers of the representative or to other members of their
underwriting group or to partners or officers of these members. The exercise
price of these warrants will equal 120% of the initial offering price of the
shares of common stock. The representative's warrants are exercisable for a
period of four years beginning one year after the date of this prospectus. These
warrants will contain certain anti-dilution provisions and have also been
included in the registration statement of which this prospectus forms a part but
may not be publicly offered unless and until a post-effective amendment or new
registration statement with respect thereto has been filed and becomes
effective. We have agreed to prepare and file one post-effective amendment (or
registration statement, if required) during this four-year period if requested
by the representative and to bear its expense, and in addition, the
representative has certain rights to include these warrants, and the underlying
stock in any other registration statement filed by us during the four-year
period. Any profit realized from the sale of these warrants or underlying stock
may be deemed additional underwriting compensation. The exercise of the
underwriters' over-allotment option will not result in increasing the securities
underlying the representative's warrants or in the granting of any additional
warrants to the representative.
We have agreed that the representative shall have a preferential right for
three years commencing on the date of this prospectus to purchase for its own
account or to act as underwriter or placement agent for subsequent public or
private offerings of our securities or those of our subsidiaries made by us.
Our officers and directors, who are current shareholders of our outstanding
shares, have agreed not to sell any shares of common stock owned by them,
without the prior written consent of the representative, for a period of 12
months after the effective date of the registration statement of which this
prospectus forms a part. In addition, we have granted the representative the
right for three years to name a member of its choice to our board of directors
which it has exercised with the selection of C. Jay Pelliconi to the board.
Mason Hill commenced operations in March 1995. It has co-managed or managed
only four public offerings of securities although it has participated in
numerous public offerings as a member of the underwriters' and dealers' groups.
Accordingly, the representative has limited experience as a managing underwriter
of public offerings.
Its lack of experience as lead underwriter may impair our ability to
develop a public market for our securities. The representative may not be able
to participate as a market maker of our common stock and warrants should our
securities trade below the minimum prices set by the NASDAQ for small cap
listings. Nor can we be certain that any broker-dealer will become a market
maker for our common stock and warrants. If there are no market makers, our
common stock and warrants may be delisted from NASDAQ.
The representative may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and 'passive' market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering
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<PAGE>
transactions involve purchases of the shares of common stock or warrants in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representative to reclaim a
selling concession from a syndicate member when the shares of common stock or
warrants originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. In 'passive' market
making, market makers in the securities who are underwriters or prospective
underwriters may, subject to certain limitations, make bids for or purchases of
the securities until the time, if any, at which a stabilizing bid is made. these
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the common stock or warrants to be higher than they would
otherwise be in the absence of these transactions. These transactions may be
effected on the over-the-counter Bulletin Board or otherwise and, if commenced,
may be discontinued at any time.
Prior to this offering, there has been no public market for common stock or
warrants. Consequently, the public offering prices of our securities have been
determined by negotiation between us and the representative. Factors considered
in determining the public offering prices of these securities and the exercise
price of the warrants included our net worth and earnings, the amount of
dilution per share of common stock to the public investors, the estimated amount
of proceeds believed necessary to accomplish our proposed goals, prospects for
our business and the industry in which we operate, the present state of our
activities and the general condition of the securities markets at the time of
the offering.
The underwriters intend to reserve approximately ten (10%) percent of the
securities offered by this prospectus to our employees, directors, their friends
and relatives as well as our vendors and customers.
LEGAL MATTERS
The legality of the securities offered in this prospectus will be passed
upon for us by Cascone & Cole, 711 Third Avenue, New York, New York 10017.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Sichenzia, Ross & Friedman, LLP, 135 West 50th Street, 20th
Floor, New York, NY 10020.
EXPERTS
Our financial statements of December 31, 1998, 1997 and 1996 appearing in
this prospectus and registration statement have been included herein and in the
registration statement in reliance upon the report of Demetrius & Company, LLC,
independent certified public accountants, and upon the authority of this firm as
experts in accounting and auditing.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, DC 20549, and at the Commission's Regional
Offices located at 7 World Trade Center, Suite 1300, New York, New York, 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issues that file electronically with the Commission.
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<PAGE>
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and we
intend to furnish our shareholders annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial statements for each of the first three
quarters of each year.
We have applied for the listing of our common stock on the NASDAQ Small Cap
Market and BSE under the symbol ' ' and ' W'. After this offering is
effective, you may obtain certain information about us on NASDAQ Internet Site
(http://www.Nasdaq-Amex.com) and BSE Internet site (www.bostonstock.com).
CHANGE IN ACCOUNTANTS
In September 1999 our prior auditors, Schwack and Katz resigned solely
because we had decided to pursue an initial public offering, and Schwack and
Katz had no public offering experience. On or about the same time, we engaged
Demetrius & Company, LLC to audit our financial statements for the fiscal years
ended December 31, 1996, 1997 and 1998. The decision to change accountants was
made with the approval of our board of directors.
We believe and we have been advised by Schwack and Katz that it concurs in
such belief that, during its tenure with us, we did not have any disagreement on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Schwack and Katz would have caused it to make reference in
connection with its report on our financial statements to the subject matter of
the disagreement.
No report of Schwack and Katz on our financial statements for either of the
past three fiscal years contained an adverse opinion, a disclaimer of opinion or
a qualification or was modified as to uncertainty, audit, scope or accounting
principles. During such fiscal periods, there were no 'reportable events' within
the meaning of Item 304(a)(1) of Regulation S-B promulgated under the Securities
Act of 1933.
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<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (unaudited)........................ F-4
Combined Statement of Operations and Retained Earnings for
the Years Ended December 31, 1996, 1997 and 1998 and for
the nine months ended September 30, 1998 and 1999
(unaudited)............................................... F-5
Combined Statements of Cash Flows for the Years Ended
December 31, 1996, 1997, 1998 and for the nine months
ended September 30, 1998 and 1999 (unaudited)............. F-6
Notes to Financial Statements............................... F-7 - F-13
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
INTEGCOM CORP.
We have audited the accompanying consolidated balance sheets of IntegCom
Corp. and Subsidiaries at December 31, 1998 and 1997, and the related
consolidated statements of operations and retained earnings and cash flows for
each of the years in the three-year period ended December 31, 1998, in
accordance with standards established by the American Institute of Certified
Public Accountants. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly
in all material respects the consolidated financial position of IntegCom and
Subsidiaries as of December 31, 1998 and 1997, and the consolidated results of
their operations for each of the years in the three year period ended
December 31, 1998 in conformity with generally accepted accounting principles.
DEMETRIUS & COMPANY, L.L.C.
Wayne, New Jersey
December 23, 1999
F-3
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1997 1998 1999
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................... $ 185,769 $ 196,771 $ 269,804
Accounts receivable -- net of allowance for
doubtful accounts of $84,721, $52,544 and
$52,544.......................................... 1,141,553 1,375,786 1,475,616
Inventory.......................................... 757,288 809,209 997,249
Other current assets............................... 75,435 62,881 51,244
---------- ---------- ----------
Total current assets.......................... 2,160,045 2,444,647 2,793,913
Property and equipment, net of depreciation of $391,023,
$501,708 and $534,193................................. 311,524 319,486 313,875
Computer software product cost -- net of amortization of
$75,150, $135,442 and $180,442........................ 185,146 207,181 228,527
Other assets............................................ 41,133 83,486 75,604
---------- ---------- ----------
$2,697,848 $3,054,800 $3,411,919
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 796,317 $ 658,774 $ 933,417
Accrued taxes and expenses......................... 188,951 207,590 207,999
Notes payable bank................................. 575,554 -- --
Long-term debt current portion..................... -- -- 20,393
Capitalized lease obligations, current portion..... 24,070 32,898 61,229
Loans payable...................................... 429,729 16,377 --
Customer deposits held............................. -- 150,000 --
---------- ---------- ----------
Total current liabilities..................... 2,014,621 1,065,639 1,223,038
Capitalized lease obligations, less current portion..... 35,063 54,631 --
Long-term debt, less current portion.................... -- 1,191,475 1,367,738
Deferred tax liability.................................. 26,345 31,902 --
Stockholders' equity:
Preferred stock -- par value $.01
Authorized 2,000,000 shares
Issued None
Common stock -- par value $.01
Authorized 10,000,000 shares
Issued and outstanding 4,000,000 shares......... 40,000 40,000 40,000
Additional paid-in capital.............................. 171,300 171,300 171,300
Retained earnings....................................... 410,519 499,853 609,843
---------- ---------- ----------
Total shareholders' equity.................... 621,819 711,153 821,143
---------- ---------- ----------
$2,697,848 $3,054,800 $3,411,919
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the statements.
F-4
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.............................. $4,908,375 $4,011,408 $6,783,267 $4,912,560 $5,253,051
Cost of sales...................... 3,576,757 2,574,169 4,703,515 3,404,066 3,603,699
---------- ---------- ---------- ---------- ----------
Gross profit....................... 1,331,618 1,437,239 2,079,752 1,508,494 1,649,352
---------- ---------- ---------- ---------- ----------
Operating expenses
Selling, general and
administrative.............. 1,207,680 1,255,920 1,791,147 1,279,496 1,407,744
Interest expense.............. 70,156 159,672 106,939 74,300 63,618
---------- ---------- ---------- ---------- ----------
Total operating
expenses............... 1,277,836 1,415,592 1,898,086 1,353,796 1,471,362
---------- ---------- ---------- ---------- ----------
Income before income taxes.... 53,782 21,647 181,666 154,698 177,990
Provision for income taxes......... 22,716 21,946 76,191 65,047 68,000
---------- ---------- ---------- ---------- ----------
Net income (loss).................. 31,066 (299) 105,475 89,651 109,990
Retained
earnings -- beginning....... 379,752 410,818 410,519 410,519 499,853
Deficit acquired in merger.... -- -- (16,141) -- --
---------- ---------- ---------- ---------- ----------
Retained
earnings -- end........ $ 410,818 $ 410,519 $ 499,853 $ 500,170 $ 609,843
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Basic and diluted earnings per
common share:
Basic earnings per common
share....................... $.008 $.000 $.026 $.022 $.027
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Weighted average common
shares...................... 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Pro forma basic earnings per
share (unaudited)........... $.021 $.022
----- -----
----- -----
Weighted average shares used
in comparing pro forma basic
earnings per share
(unaudited)................. 5,000,000 5,000,000
Pro forma diluted earnings per
common share (unaudited).... $.017 $.018
----- -----
----- -----
Pro forma weighted average
diluted common shares
(unaudited)................. 6,200,000 6,200,000
</TABLE>
The accompanying notes are an integral part of the statements.
F-5
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) for the year....... $ 31,066 $ (299) $ 105,475 $ 89,949 $ 109,988
Adjustments to reconcile net income
to net cash provided by (applied
to) operating activities:
Depreciation and amortization... 123,286 151,230 167,702 124,815 77,485
(Increase) decrease in accounts
receivable.................... 34,892 171,900 (234,233) (217,969) (99,830)
(Increase) decrease in
inventory..................... (99,181) (342,636) (51,921) (331,005) (188,040)
(Increase) decrease in prepaid
expenses...................... (44,122) (27,953) 14,054 50,146 11,637
(Increase) decrease in other
assets........................ 7,779 21,674 (56,719) 1,491 7,882
Increase (decrease) in accounts
payable....................... 77,442 (113,120) (137,543) 102,687 274,645
Increase (decrease) in accrued
taxes and expenses............ (41,254) 1,342 18,639 21,794 409
Increase (decrease) in other
liabilities................... 19,336 65,046 12,567 (323,871) (619,846)
Increase (decrease) in customer
deposits held................. (40,114) -- 150,000 -- --
--------- --------- --------- --------- ---------
Cash flows provided by
(applied to) operating
activities............... 69,130 (72,816) (11,979) (481,963) (425,670)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Computer software development
costs.............................. (184,205) (76,091) (82,327) (59,789) (66,346)
Acquisition of treasury stock........ -- (500) -- -- --
Purchase of property and equipment
and leasehold improvements......... (145,364) (78,907) (118,647) (64,610) (26,874)
Proceeds of sale of property and
equipment.......................... 47,347 -- -- -- --
--------- --------- --------- --------- ---------
Cash used in investing
activities............... (282,222) (155,498) (200,974) (124,399) (93,220)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds of loans.................... 372,659 -- -- -- --
Repayments of loans from
shareholders....................... 6,000 45,169 1,084 -- --
Proceeds of installment loans........ -- -- 352,144 (300) --
Repayments of demand loans........... -- -- (875,554) 7,010 --
Proceeds of demand loans............. 77,619 125,554 822,177 30,407 --
Capitalized lease obligation
payments........................... (27,146) (24,718) (30,063) (31,563) 12,753
Repayments of notes -- term.......... (8,990) (34,194) (45,833) 507,509 579,170
--------- --------- --------- --------- ---------
Cash provided by financing
activities............... 420,142 111,811 223,955 513,063 591,923
--------- --------- --------- --------- ---------
Net cash increase (decrease).............. 207,050 (116,503) 11,002 (93,299) 73,033
Cash -- beginning......................... 95,222 302,272 185,769 185,769 196,771
--------- --------- --------- --------- ---------
Cash -- ending............. $ 302,272 $ 185,769 $ 196,771 $ 92,470 $ 269,804
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosure of cash flow
information:
Taxes paid........................... $ 35,688 $ 50,873 $ 29,254 -- $ 32,500
Interest paid........................ $ 64,844 $ 129,826 $ 93,537 $ 49,858 $ 53,795
</TABLE>
The accompanying notes are an integral part of the statements.
F-6
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
NATURE OF OPERATIONS
IntegCom Corp. was incorporated under the laws of the State of Delaware on
November 19, 1999. Also, on November 30, 1999 the Company acquired all the
outstanding shares of HBE Acquisition Corp. (T/A Henry Bros. Electronics) Viscom
Products, Inc. and HBE Central Management, Inc. The Company is a systems
integrator providing design, installation and support services for a wide
variety of security, communications and control systems. IntegCom specializes in
turnkey systems that integrate many different technologies. Systems are
customized to meet the specified needs of the client. The Company markets
nationwide with an emphasis on the New York and Dallas metropolitan areas.
Customers are primarily Fortune 500 companies and government agencies.
The Company's headquarters and manufacturing facility is located in Saddle
Brook, New Jersey. A sales and service facility is located near Dallas, Texas.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- The Company acquired all the HBE Acquisition
Corp., Viscom Products, Inc. and HBE Central Management, Inc. through an
exchange of 4,000,000 shares of common stock for all the outstanding stock of
the acquired companies. The business combination has been accounted as a pooling
of interest.
The accompanying consolidated financial statements have been restated to
give effect to the combination. All significant transactions and balances have
been eliminated in consolidation.
Income Recognition -- Sales revenues from systems installations are
generally recognized on the completed-contract method, in which revenue is
recognized when the contract is substantially complete. Most contracts are
completed in less than a year. Contracts that are expected to be completed in
more than a year are accounted for on the percentage of completion method. This
method recognizes revenue on a proportional basis as work on the contract
progresses.
Service contracts are billed either monthly or quarterly on the first day
of the month covered by the contract. Accordingly, revenue from service
contracts is recognized when billed.
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 amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- Cash and cash equivalents includes cash on
hand, demand deposits and short term investments with initial maturities of
three months or less.
Property and Equipment -- Property and equipment are stated at cost, net of
accumulated depreciation. Depreciation is computed on a straight-line basis over
estimated useful lives of five to ten years. Leasehold improvements are
depreciated over the shorter of related lease terms or the estimated useful
lives. Upon retirement or sale, the costs of the assets disposed and the related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is included in the determination of income. Repairs and maintenance costs
are expensed as incurred.
Computer Software Product Cost -- The Company accounts for software
development costs in accordance with Statement of Financial Accounting Standards
No. 86 'Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed' ('FAS 86') under which certain software development costs
incurred subsequent to the establishment of technological feasibility are
capitalized and amortized over the estimated lives of the related products.
Technological feasibility is established upon completion of a working model. All
costs incurred prior to demonstrating technical feasibility have been charged to
cost of sales. To date, costs incurred subsequent to the establishment of
F-7
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
technological feasibility were $342,623, $260,296 and $408,969, respectively at
December 31, 1998 and 1997 and September 30, 1999. These costs are capitalized
and amortized over the estimated product life using the straight line method.
Amortization expense charged to operations for the years ended December 31,
1998, 1997 and 1996 is $60,292, $44,450 and $30,700, respectively and for the
nine months ended September 30, 1999 and 1998 is $45,000 and $45,219,
respectively.
Impairment of Long Lived Assets -- Long-lived assets consist of intangible
assets and certain capital assets. The carrying value of these assets is
regularly reviewed to verify that they are valued properly. If the facts and
circumstances suggest that the value has been impaired, the carrying value of
the assets will be reduced appropriately. The Company has identified no such
impairment losses.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash,
cash equivalents and accounts receivable. At December 31, 1998 and 1997 and
September 30, 1999, the Company had cash balances at certain financial
institutions in excess of federally insured limits. However, the Company does
not believe that it is subject to unusual credit risk beyond the normal credit
risk associated with commercial banking relationships.
At December 31, 1998 and September 30, 1999 approximately 52% and 54% of
accounts receivable were due from Federal and local government agencies
respectively. Also, at December 31, 1998 and September 30, 1999 approximately
96% and 92% of accounts receivable were concentrated in customers located in the
Dallas, Texas and New York City metropolitan areas.
Income Taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. Under the asset and liability method
of SFAS No. 109, deferred income tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred income tax assets and liabilities are measured
using statutory tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Fair Value of Financial Instruments -- The carrying amounts of the
Company's financial instruments, which include cash equivalents, accounts
receivable, notes receivable, accounts payable, accrued expenses and notes
payable approximate their fair values at December 31, 1997 and 1998 and
September 30, 1999.
Advertising Costs -- The Company expenses advertising costs when the
advertisement occurs. Total advertising expense amounted to approximately
$17,000, $18,000 and $19,000 for the years ended December 31, 1996, 1997 and
1998.
Comprehensive Income -- The Company adopted SFAS No. 130, Reporting
Comprehensive Income (SFAS 130), effective January 1, 1998. SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is
the change in equity of a business enterprise during a period from certain
transactions and the events and circumstances from non-owner sources. For the
periods presented in the accompanying combined statements of operations,
comprehensive income equals the amounts of net income reported on the
accompanying combined statements of operations.
Warranty -- The Company offer warranties on all products, including parts
and labor, that range from one year to four years depending upon the type of
product concerned. For products made by others, the Company passes along the
manufacturer's warranty to the end user. The Company charges operations with
warranty expenses as incurred. For the years ended December 31, 1996, 1997 and
1998 net warranty expense was $43,742, $50,591 and $12,264, respectively.
Historical Net Income Per Share -- The Company computes net income per
common share in accordance with SFAS No. 128, 'Earnings per Share' and SEC Staff
Accounting Bulletin No. 98
F-8
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
('SAB 98'). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted
net loss per common share is computed by dividing the net income available to
common shareholders for the period by the weighted average number of shares of
common stock outstanding during the period. Accordingly, the number of weighted
average shares outstanding as well as the amount of net income per share are the
same for basic and diluted per share calculations for all periods reflected in
the accompanying financial statements.
Reclassifications -- Certain reclassifications to the 1996, 1997 and 1998
financial statements have been made to conform to the 1999 presentation.
Segment Information -- In June 1997, Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 131, 'Disclosure
About segments of an Enterprise and Related Information' ('Statement 131'),
effective for financial statements for fiscal years beginning after December 15,
1997. Statement 131 establishes standards for the reporting by public business
enterprises of financial and descriptive information about reportable operating
segments in annual financial statements and interim financial reports issued by
shareholders. The Company primarily provides installation services for companies
in need of closed-circuit access control systems that are located throughout the
United States and considers all of its operations as one segment because
expenses support multiple products and services. Management uses one measurement
of profitability and does not disaggregate its business for internal reporting.
Sales to local government agencies were 21%, 34% and 40% of sales for the
years ended December 31, 1997, 1998 and the nine months ended September 30,
1999, respectively.
Interim Financial Statements (Unaudited) -- Data and information as of
September 30, 1999 and for the nine months ended September 30, 1999 and 1998 are
unaudited. In the opinion of management, the September 30, 1999 and 1998
unaudited interim financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for that period. The results of
operations for the nine-month period ended September 30, 1999 are not
necessarily indicative of results for the entire fiscal year or future periods.
2. INVENTORIES
Inventories at December 31, 1997 and 1998 and September 30, 1999 consist of
the following:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Raw materials......................................... $521,384 $562,288 $620,099
Work-in process....................................... 40,000 246,921 377,150
Finished goods........................................ 195,904 -- --
-------- -------- --------
$757,288 $809,209 $997,249
-------- -------- --------
-------- -------- --------
</TABLE>
F-9
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
3. PROPERTY AND EQUIPMENT
Property, plant and equipment at December 31, 1997 and 1998 and September
30, 1999 consists of the following:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Office equipment...................................... $ 10,640 $109,756 $137,743
Demo and testing equipment............................ 219,702 227,830 228,445
Warehouse equipment................................... 46,515 46,515 --
Vehicles.............................................. 178,316 204,274 204,273
Computer equipment.................................... 128,374 211,819 256,607
Leasehold improvements................................ 21,000 21,000 21,000
-------- -------- --------
702,547 821,194 848,068
Accumulated depreciation......................... 391,023 501,708 534,193
-------- -------- --------
$311,524 $319,486 $313,875
-------- -------- --------
-------- -------- --------
</TABLE>
4. PAYABLE TO BANK
Under the terms of a revolving credit agreement with a bank, dated
September 8, 1999, the Company may borrow up to $2,000,000 at 1/2% above the
bank's prime interest rate through June 1, 2001. The aggregate principal amount
of the advances up to $1,500,000 shall not exceed 80% of the face amount of
qualified accounts receivable. In addition, the Company may borrow up to
$500,000 to be used for the purchase of inventory and expenses related to large
contracts awarded to borrower. The bank has additionally granted an equipment
line of credit of up to $250,000. Amounts owed under this agreement are due on
June 1, 2001. A portion of the proceeds of this loan was used to refinance
$784,677 of short-term notes, and accordingly $572,177 of that amount has been
classified as long-term debt at December 31, 1998.
Substantially all the Company's assets are pledged as collateral for this
loan. Among other provisions the loan agreement requires the Company to maintain
net tangible networth, as defined, and maintain appropriate insurance coverage
on tangible and intangible assets. In addition, the agreement prohibits the
Company from, among other things, purchasing or making capital improvements in
excess of defined limits in any one year, merge or consolidate with or into any
corporation or acquire more than 5% of the shares of any corporation or
substantially all of the assets of any other person, firm or corporation and
sell, assign, transfer or dispose of any assets without obtaining the bank's
consent in writing.
5. LONG-TERM DEBT
As of December 1999, loans payable of $421,446 due officers, shareholders
and others, including accrued interest of $155,246 were refinanced with the
proceeds from the long term revolving credit (see Note 4). Accordingly, $421,446
of loans payable have been reclassified to long-term debt at December 31, 1998
and September 30, 1999. Notes payable in the amount of $128,685 were issued to a
non-related party in exchange for their loan and accrued interest. These notes
are payable at the rate of $3,264 a month, including interest at 10% per annum,
with final payments due on December 1, 2003. The remaining amount due to related
parties was repaid from the revolving credit line.
Long-term debt as reclassified consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 AT SEPTEMBER 30, 1999
-------------------- ---------------------
<S> <C> <C>
Revolving credit -- bank...................... $1,062,790 $1,239,053
Notes payable -- other........................ 128,685 128,685
---------- ----------
$1,191,475 $1,367,738
---------- ----------
---------- ----------
</TABLE>
F-10
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
Annual maturities of long-term debt as of December 31, 1998:
<TABLE>
<S> <C> <C>
Year ending December 31: 1999.................................. --
2000.................................. $ 27,536
2001.................................. 1,093,210
2002.................................. 33,605
2003.................................. 37,124
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
(a) LEASES
The Company leases its facilities under operating leases expiring through
2002. The Company also leases certain equipment under capital lease. The future
minimum rental payments under noncancelable leases and equipment loans as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
--------- -------
<S> <C> <C>
1999..................................................... $117,900 $35,034
2000..................................................... 120,300 35,034
2001..................................................... 47,025 20,186
2002..................................................... 12,385
Thereafter...............................................
-------- -------
Total............................................... $285,225 102,639
--------
--------
Interest expense......................................... 15,110
-------
Net present value of future payments..................... 87,529
Current portion of capital lease obligations............. 32,898
-------
$54,631
-------
-------
</TABLE>
Rent expense under operating leases was approximately $116,000, $111,000
and $126,000, for the years ended December 31, 1996, 1997 and 1998,
respectively, and $93,000 for each of the nine months ended September 30, 1998
and 1999.
(b) EMPLOYMENT AGREEMENTS
In December 1999, the Company entered into five-year employment agreements
with three of its officers. The employment agreements provide for minimum
aggregate annual compensation of $380,000 for the years 2000 through 2004, as
well as unspecified annual bonuses. The contracts increase 10% in each of the
third, fourth and fifth years. Also, there is a one-year non-competition
covenant that commences after termination of employment. All these employment
contracts may be terminated or modified by the Company if it fails to complete
an initial public offering of securities by June 30, 2000.
7. INCOME TAXES
The years ended December 31, 1996, 1997 and 1998 include the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Federal
Current............................................. $(8,573) $ 8,277 $52,056
Deferred............................................ 26,333 (1,614) 8,089
State
Current............................................. 4,956 15,283 16,046
------- ------- -------
$22,716 $21,946 $76,191
------- ------- -------
------- ------- -------
</TABLE>
F-11
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
The components of the deferred tax asset (liability) as of December 31,
1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Total deferred tax assets (included in other current
assets)................................................... $ 10,414 $ 7,882
Total deferred tax liability (non-current).................. (26,345) (31,902)
Total valuation allowance................................... -- --
-------- --------
Net Deferred Tax Asset (Liability).......................... $(15,931) $(24,020)
-------- --------
-------- --------
</TABLE>
The reconciliation of estimated income taxes attributed to operations at
the United States statutory tax rate to reported provision for income taxes is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Provision for taxes computed using
statutory rate......................................... $ 8,100 $ 3,200 $54,100
State taxes, net of Federal benefit...................... 4,100 1,700 10,900
Depreciation and amortization............................ 8,516 16,246 9,191
Non-deductible expenses.................................. 2,000 800 2,000
------- ------- -------
Provision for income taxes.......................... $22,716 $21,946 $76,191
------- ------- -------
------- ------- -------
</TABLE>
8. SHARE OFFERING
In December 1999, pursuant to an initial offering, the board of Directors
authorized management to file a registration statement with the Securities and
Exchange Commission to permit the Company to offer 1,000,000 units consisting of
one share of common stock and one warrant to purchase one share of common stock
(the 'Offering').
9. INCENTIVE STOCK OPTION PLAN
On December 23, 1999, the directors and shareholders approved the adoption
of an Incentive Stock Option Plan (the 'Plan'). Under the Plan, options to
purchase a maximum of 500,000 shares of its common stock may be granted to
officers and other key employees of the Company.
The maximum term of any option is ten years, and the option price per share
may not be less than the fair market value of the Company's shares at the date
the option is granted. However, options granted to persons owning more than 10%
of the voting shares will have a term not in excess of five years, and the
option price will not be less than 110% of fair market value. Options granted to
an optionee will usually vest 33 1/3% of each full year beginning on the first
anniversary of the options grant subject to the discretion of the Compensation
Committee of the Board of Directors.
The plan will terminate at December 23, 2009 or on such earlier date as the
board of directors may determine. Any option outstanding at the termination date
will remain outstanding until it expires or is exercised in full, which ever
occurs first.
As of December 23, 1999, options to acquire an aggregate of 100,000 shares
of common stock, all at an exercise price of 90% of the public offering price
(see Note 8), had been granted under the Plan to key employees of the Company.
An optionee may exercise these options only if and to the extent that these
options are vested at that time.
10. EMPLOYEE BENEFIT PLAN
As of October 1, 1999, the Company began a 'Simple IRA' plan for all
eligible employees wishing to contribute. An eligible employee is one that has
1,000 or more hours a year. The Company will match
F-12
<PAGE>
INTEGCOM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
the employees contribution up to 3% of salary to a maximum of $6,000. The
employee's contribution cannot exceed $6,000 in any one year.
11. UNAUDITED PRO FORMA -- EARNINGS PER SHARE
Upon the closing of the offering contemplated by this prospectus, an
additional 1,000,000 shares of common stock will be outstanding together with
another 1,000,000 warrants to purchase a 1,000,000 shares of common stock. In
addition, the Company will sell at a nominal amount, to the underwriter warrants
to purchase 10% of the initial common stock public offering or 100,000 shares.
These proformas also have considered the employee incentive stock options
granted for 100,000 shares (see Note 9). The unaudited pro forma earnings per
share and fully diluted for the year December 31, 1998 and the nine months
September 30, 1999 assume this contemplated offering.
12. RELATED PARTY TRANSACTIONS
The Company has borrowed from officers and/or shareholders various sums
during the period. The amounts due them at December 31, 1997, 1998 and
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Loans................................................. $192,493 $193,577 $192,200
Accrued interest...................................... 100,736 100,346 92,946
</TABLE>
Amounts of interest charged to income on the above loans for the three
years ended December 31, 1996, 1997 and 1998 were $20,000, $20,000 and $19,000,
respectively.
As of December, 1999 these loans along with accrued interest were
refinanced from the proceeds of the long term debt (See notes 4 and 5).
F-13
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on unauthorized information. This prospectus does not offer to sell or buy
any shares in any jurisdiction where it is unlawful. The information in this
prospectus is current only as of the date of this prospectus.
INTEGCOM CORP.
1,000,000 UNITS
CONSISTING OF 1,000,000 SHARES OF COMMON STOCK
AND 1,000,000 WARRANTS
MASON HILL & CO., INC.
, 2000
You should rely only on the information contained in this document or to
those which we have referred you. We have not authorized anyone to provide you
with any other information. This document may be used only where it is legal to
sell these securities. The information in this document may not be accurate
after the date on its cover.
Until , 2000 (25 days after the date of this prospectus) all
dealers that buy, sell or trade these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Board of Director has authorized it to provide a general
indemnification to its officers, directors, employees and agents regarding any
claims or liabilities incurred in the course of their employment. In addition,
its certificate of incorporation and by-laws provide for such indemnification.
The Registrant was organized as a corporation in the state of Delaware on
November 18, 1999. The Delaware General Corporation Law ('DGCL') provides that
each officer, director, employee and agent of the Registrant shall be
indemnified by it against certain costs, expenses and liabilities which he or
she may incur in his or her capacity as such.
Section #145 of DGCL -- 'Indemnification of Officers, Directors, Employees
and Agents; Insurance' provides:
'(a) A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgements, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person 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
his conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made 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 action or suit
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 indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
II-1
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation 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 such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to 'the corporation'
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to 'other enterprises'
shall include employee benefit plans; references to 'fines' shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to 'serving at the request of the corporation' shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner 'not opposed to the best interests of the
corporation' as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit to the
heirs, executors and administrators of such a person.'
II-2
<PAGE>
(k) the Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
ITEM 25. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
Registration fee............................................ $5,799
NASD filing fee............................................. $2,086
Blue Sky fees and expenses..................................
NASDAQ listing fee.......................................... ***
Boston Stock Exchange listing fee and expenses..............
Representatives's Non-accountable expense allowance......... **
Legal fees and expenses..................................... **
Accounting fees and expenses................................ **
Printing and engraving...................................... **
Miscellaneous............................................... **
------
Total.................................................. $ **
------
------
</TABLE>
- ------------
* All expenses will be paid by Registrant and, other than the non-accountable
expense allowance, are estimated.
** To be supplied by amendment.
*** if the Underwriters' over-allotment option is exercised in full.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On November 30, 1999, Registrant issued an aggregate of 4,000,000 shares of
its common stock, par value $.01 per share, to James E. Henry and Irvin F.
Witcosky in exchange for all their shareholdings in HBE Acquisition Corp., HBE
Central Management, Inc., and Viscom Products, Inc., which are now wholly-owned
subsidiaries of Registrant. This transaction was done in reliance upon the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended.
ITEM 27. EXHIBITS
The following is a list of exhibits filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT METHOD
NUMBER DESCRIPTION OF DOCUMENT OF FILING
- ------ ----------------------- ---------
<C> <S> <C>
1.1 -- Underwriting Agreement................................... *
1.2 -- Agreement Among Underwriters............................. *
1.3 -- Selected Dealer Agreement................................ *
1.5 -- Form of Representative's Warrants to purchase Shares..... *
3.1 -- Certificate of Incorporation of Registrant............... Filed Herewith
3.2 -- By-laws of the Registrant................................ Filed Herewith
4.1 -- Specimen Common Stock Certificate of Registrant.......... *
4.2 -- Warrant Certificate and Warrant Agreement of
Registrant............................................... *
5.1 -- Counsel's Opinion re: legality of securities............. *
10.1 -- Employment Agreement between Registrant and James E.
Henry.................................................... Filed Herewith
10.2 -- Employment Agreement between Registrant and Irvin F.
Witcosky................................................. Filed Herewith
10.3 -- Employment Agreement between Registrant and Louis
Massad................................................... Filed Herewith
10.4 -- 1999 Incentive Stock Option Plan and form of Stock Option
Agreement................................................ Filed Herewith
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD
NUMBER DESCRIPTION OF DOCUMENT OF FILING
- ------ ----------------------- ---------
<C> <S> <C>
10.6 -- Original Office Lease and Amendments between Registrant
and Midland Holding Co., Inc. (Saddle Brook, NJ)......... Filed Herewith
10.7 -- Office Lease between Registrant and Eagle-DFW, Inc.
(Grand Prairie, Texas)................................... Filed Herewith
10.8 -- Sales Agreement between Registrant and Mavix, Ltd........ Filed Herewith
10.9 -- Authorized Reseller Agreement between Registrant and
Lenel Systems International, Inc......................... Filed Herewith
10.10 -- Resale Agreement between Registrant and Intellikey
Corporation.............................................. *
10.11 -- OEM Agreement between Registrant and Sungjin C&C, Ltd.... *
16.1 -- Change of Accountants' Letter............................ *
23.1 -- Consent of Independent Certified Public Accountants...... Filed Herewith
23.3 -- Consent of Counsel (to be included in its opinion to be
filed as Exhibit 5.1).................................... *
</TABLE>
- ------------
* To be filed by Amendment
ITEM 28. UNDERTAKINGS
Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriting Agreement to permit prompt delivery to
each purchaser.
(2) 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 foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, 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.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements of filing on Form SB-2 and has authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
Town of Saddle Brook, New Jersey on January 10, 2000.
INTEGCOM CORP.
By: /s/ James E. Henry
...................
JAMES E. HENRY
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Irvin Witcosky or Louis Massad; his true and
lawful attorney-in-fact and agent with full power of substitution, for and in
his name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES E. HENRY President, Chief Executive January 10, 2000
......................................... Officer and Director
(JAMES E. HENRY)
/s/ IRVIN F. WITCOSKY Executive Vice President, January 10, 2000
......................................... Secretary and Director
(IRVIN F. WITCOSKY)
/s/ LOUIS MASSAD Vice President, Treasurer, January 10, 2000
......................................... Chief Financial Officer and
(LOUIS MASSAD) Director
/s/ LEROY KIRCHNER Director January 10, 2000
.........................................
(LEROY KIRCHNER)
/s/ C. JAY PELLICONI Director January 10, 2000
.........................................
(C. JAY PELLICONI)
</TABLE>
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as................................. 'TM'
The registered trademark symbol shall be expressed as...................... 'r'
II-5
<PAGE>
CERTIFICATE OF INCORPORATION
OF
INTEGCOM CORP.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, does hereby set forth
as follows:
FIRST: The name of the corporation is IntegCom Corp.
SECOND:The address of the initial registered and principal office of
this corporation in this state is c/o United Corporate Services, Inc., 15 East
North Street, in the City of Dover, County of Kent, State of Delaware 19901 and
the name of the registered agent at said address is United Corporate Services,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH:The corporation shall be authorized to issue an aggregate of
12,000,000 shares of stock in the following manner:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
----- ---------------- ---------
<S> <C> <C>
Common Stock 10,000,000 $.01
Preferred Stock 2,000,000 $.01
</TABLE>
The designations and the powers, preferences and rights, and the
qualifications or restrictions of the Preferred Stock are as follows:
Shares of Preferred Stock shall be issued from time to time in one or
more series, with such distinctive serial designations as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
shares from time to time adopted by the board of directors; and in such
resolution or resolutions providing for the issue of shares of each particular
series; the board of directors is expressly authorized to fix the annual rate or
rates of dividends for the particular series; the dividend payment dates for the
particular series and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend payment date shall be
cumulative; the
<PAGE>
redemption price or prices for the particular series; the voting powers for the
particular series; the rights, if any, of holders of the shares of the
particular series to convert the same into shares of any other series or class
or other securities of the corporation, with any provisions for the subsequent
adjustment of such conversion rights; and to classify or reclassify any unissued
preferred shares by fixing or altering from time to time any of the foregoing
rights, privileges and qualifications.
All shares of Preferred Stock in any one series shall be identical with
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative; and all shares of Preferred Stock shall be of equal rank, regardless
of the series, and shall be identical in all respects except as to the
particulars fixed by the board as hereinabove provided or as fixed herein.
FIFTH: The name and address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Kenneth T. Cascone c/o Cascone & Cole
711 Third Avenue
New York, NY 10017
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the by-laws so provide.
(2) The board of directors shall have power without the assent or vote
of the stockholders:
(a) To make, alter, amend, change, add to or repeal the by-laws
of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and
liens upon all or any part of the property of the corporation; to
determine the use and disposition of any surplus or net profits; and to
fix the times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what times and
places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be open
to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the
2
<PAGE>
stockholders called for the purpose of considering any such act or contract,
and any contract or act that shall be approved or be ratified by the vote of
the holders of a majority of the stock of the corporation which is represented
in person or by proxy at such meeting and entitled to vote thereat (provided
that a lawful quorum of stockholders be there represented in person or by proxy)
shall be as valid and as binding upon the corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder
of the corporation, whether or not the contract or act would otherwise be open
to legal attack because of directors' interest, or for any other reason.
In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to time made by the
stockholders; provided, however, that no by-laws so made shall invalidate any
prior act of the directors which would have been valid if such by-law had not
been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH:Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or the class of
creditors and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said
3
<PAGE>
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this 16th day of November, 1999.
------------------------------------
Kenneth T. Cascone, Incorporator
4
<PAGE>
BY LAWS
OF
INTEGCOM CORP.
- --------------------------------------------------------------------------------
ARTICLE I - OFFICES
1. Registered Office
The registered office shall be established and maintained in the State of
Delaware in the designated offices of the United Corporate Services or similar
company selected by the Corporation.
2. Principal Office
The principal office of the Corporation shall be located at 280 Midland Avenue,
Saddle Brook, New Jersey until relocated to another place as selected by the
Corporation's board of directors.
ARTICLE II - SHAREHOLDERS
1. Place of Meetings.
Meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of Delaware as
the board shall authorize.
2. Annual Meetings.
The annual meeting of the shareholders of the Corporation shall be held at 10:00
A.M. on the last Tuesday of the fifth month in each year commencing in 2001
after the close of the fiscal year of the Corporation, if such date is not a
legal holiday and if a legal holiday, then on the next business day following at
the same hour, at which time the shareholders shall elect a board of directors,
and transact such other business as may properly come before the meeting.
3. Special Meetings.
Special meetings of the shareholders may be called at any time by the board or
by the president, and shall be called by the president or the secretary at the
written request of the holders or fifteen per cent (15%) of the outstanding
shares entitled to vote thereat, or as otherwise required by law.
<PAGE>
4. Notice of Meetings.
Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
personally, or by mail. Such notice shall be served not less than ten (10) nor
more than sixty (60) days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by the person calling the meeting. If, at any
meeting, action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their shares, the notice of such meeting
shall include a statement of that purpose and to that effect. If mailed, such
notice shall be directed to each such shareholder at his address, as it appears
on the records of the shareholders of the Corporation, unless he shall have
previously filed with the secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in which event, it
shall be mailed to the address designated in such request.
5. Waiver.
Notice of any meeting need not be given to any shareholder who submits a signed
waiver of notice either before or after a meeting. The attendance of any
shareholder at a meeting, in person or by proxy, shall constitute a waiver of
notice by such shareholder.
6. Fixing Record Date.
For the purpose of determining the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or to express consent
to or dissent from any proposal without a meeting, or for the purposes of
determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the board shall
fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than sixty (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. If no record date is fixed, it shall be determined in
accordance with the provisions of law.
7. Quorum.
(a) Except as otherwise provided by the Certificate of Incorporation, at all
meetings of shareholders of the Corporation, the presence at the commencement of
such meetings, in person or by proxy, of shareholders holding a majority of the
total number of shares of the Corporation then issued and outstanding on the
records of the Corporation and entitled to vote, shall be necessary and
sufficient to constitute a quorum for the transaction of any business. If a
specified time of business is required to be voted on by a class or classes, the
holder of a majority of the shares of such class or classes shall constitute a
quorum for the transaction of such specified item of business. The
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withdrawal of any shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been established at such
meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting.
8. Voting.
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation,
(1) directors shall be elected by a plurality of the votes cast; and
(2) all other corporate action to be taken by vote of the shareholders,
shall be authorized by a majority of votes cast;
at a meeting of shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of shares
of the Corporation entitled to vote, shall be entitled to vote for each share of
stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact duly authorized in writing. No proxy shall
be voted or acted upon after three (3) years, unless the proxy shall specify the
length of time it is to continue in force. The proxy shall be delivered to the
secretary at the meeting and shall be filed with the records of the Corporation.
Every proxy shall be revocable at the pleasure of the shareholder executing it,
unless the proxy states that it is irrevocable, except as otherwise provided by
law.
(d) Any action that may be taken by vote may be taken without a meeting on
written consent. Such action shall constitute action by such shareholders with
the same force and effect as if the same had been approved at a duly called
meeting of shareholders and evidence of such approval signed by all of the
shareholders shall be inserted in the minute book of the Corporation.
ARTICLE III - BOARD OF DIRECTORS
1. Number.
The number of the directors of the Corporation shall range from three (3) to
fifteen (15), until or unless otherwise determined by a vote of the board.
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2. Election.
Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the board need not be shareholders and shall be
elected by a majority of the votes cast at a meeting of shareholders, by the
holders of the shares entitled to vote in the election.
3. Term of Office.
Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
4. Duties and Powers.
The board shall be responsible for the control and management of the affairs,
property and interests of the Corporation, and may exercise all powers of the
Corporation, except those powers expressly conferred upon or reserved to the
shareholders.
5. Annual Meetings.
Regular annual meetings of the board shall be held immediately following the
annual meeting of shareholders or if no such meeting of shareholders is held in
that year, then when so fixed by the board but no later than June 30th of each
year.
6. Regular Meetings and Notice.
The board may provide by resolution for the holding of regular meetings of the
board of directors, and may fix the time and place thereof.
Notice of regular meetings shall not be required to be given and, if given, need
not specify the purpose of the meeting; provided, however, that in case the
board shall fix or change the time or place of any regular meeting, notice of
such action be given to each director who shall not have been present at the
meeting at which such action was taken within the time limited, and in the
manner set forth in Section 7 of this Article III, unless such notice shall be
waived.
7. Special Meetings and Notice.
(a) Special meetings of the board shall be held whenever called by the president
or by one of the directors, at such time and place as may be specified in the
respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each director,
addressed to him at the address designated by him for such purpose or at his
usual place of business, at least two (2) business days before the day on which
the meeting is to be held, or delivered
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to him personally or given to him orally, not later than the business day before
the day on which the meeting is to be held.
(c) Notice of a special meeting shall not be required to be given to any
director who shall attend such meeting, or who submits a signed waiver of
notice.
8. Chairman.
At all meetings of the board, the chairman, if present, shall preside. If there
shall be no chairman, or he shall be absent, then the president shall preside.
In his absence, the chairman shall be chosen by the directors present.
9. Quorum and Adjournments.
(a) At all meetings of the board, the presence of a majority of the entire board
shall be necessary to constitute a quorum for the transaction of business,
except as otherwise provided by law, by the Certificate of Incorporation, or by
these By-Laws. Participation of any one or more members of the board by means of
a conference telephone or similar communications equipment, allowing all persons
participating in the meeting to hear each other at the same time, shall
constitute presence in person at any such meeting.
(b) A majority of the directors present at any regular or special meeting,
although less than a quorum, may adjourn the same from time to time without
notice, until a quorum shall be present.
10. Manner of Acting.
(a) At all meetings of the board, each director present shall have one vote.
(b) Except as otherwise provided by law, by the Certificate of Incorporation, or
these By-Laws, the action of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the board. Any action
authorized, in writing, by all of the directors entitled to vote thereon and
filed with the minutes of the Corporation shall be the act of the board with the
same force and effect as if the same had been passed by unanimous vote at a duly
called meeting of the board.
11. Vacancies.
Any vacancy in the board of directors resulting from an increase in the number
of directors to more than three or the death, resignation, disqualification,
removal or inability to act of any director, shall be filled for the unexpired
portion of the term by a majority vote of the remaining directors, though less
than a quorum, at any regular meeting or special meeting of the board called for
that purpose.
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12. Resignation.
Any director may resign at any time by giving written notice to the board, the
president or the secretary of the corporation. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt thereof by
the board or such officer, and the acceptance of such resignation shall not be
necessary to make it effective.
13. Removal.
Any director may be removed, with or without cause, at any time by the holders
of a majority of the shares then entitled to vote at an election of directors,
at a special meeting of the shareholders called for that purpose, and may be
removed for cause by action of the board.
14. Compensation.
No compensation shall be paid to directors as such, for their services, but by
resolution of the board, a fixed sum and expenses for actual attendance may be
authorized for attendance at each regular or special meeting of the board.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
15. Contracts.
(a) No contract or other transaction between this Corporation and any other
business shall be affected or invalidated, nor shall any director be liable in
any way by reason of the fact that a director of this Corporation is interested
in, or is a director, officer, or is financially interested in such other
business; provided, however, such fact is disclosed to the board.
(b) Any director may be a party to or may be interested in any contract or
transaction of this Corporation individually, and no director shall be liable in
any way by reason of such interest; provided, however, that the fact of such
participation or interest be disclosed to the board and that the board shall
authorize or ratify such contract or transaction by the vote (not counting the
vote of any such director) of a majority of the quorum, notwithstanding the
presence of any such director at the meeting at which such action is taken. Such
director may be counted in determining the presence of a quorum at such meeting.
This Section shall not be construed to invalidate or in any way affect any
contract or other transaction which would otherwise be valid under the law
applicable thereto.
16. Committees.
The board, by resolution adopted by a majority of the entire board, may from
time to time designate from among its members an executive committee and such
other committees, and alternate members thereof, as they deem desirable, each
constituting of three or more members, with such powers and authority (to the
extent permitted by law) as may be
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provided in such resolution. Each such committee shall remain in existence at
the pleasure of the board. Participation of any one or more members of a
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time, shall constitute a director's presence in person at any such meeting. Any
action authorized in writing by all of the members of a committee and filed with
the minutes of the committee shall be the act of the committee with the same
force and effect as if the same had been passed by unanimous vote at a duly
called meeting of the committee.
ARTICLE IV - OFFICERS
1. Number and Qualifications.
The officers of the Corporation shall consist of a president, one or more vice
presidents, a secretary, a treasurer, and any assistant secretary and/or
treasurer and such other officers, including a chairman of the board, as and if
the board of directors may from time to time deem advisable. Any officer other
than the chairman of the board may be, but is not required to be, a director of
the Corporation. Any two or more offices may be held by the same person, except
the offices of president and secretary.
2. Election.
The officers of the Corporation shall be elected by the board at the regular
annual meeting of the board following the annual meeting of shareholders or if
no annual meeting of shareholders has occurred, at a time and date fixed in
advance by the board.
3. Term of Office.
Each officer shall hold office until the annual meeting of the board next
succeeding his election, and until his successor shall have been elected and
qualified, or until his death, resignation or removal.
4. Resignation.
Any officer may resign at any time by giving written notice thereof to the
board, the president or the secretary of the corporation. Such resignation shall
take effect upon receipt thereof by the board or by such officer, unless
otherwise specified in such written notice. The acceptance of such resignation
shall not be necessary to make it effective.
5. Removal
Any officer, whether elected or appointed by the board, may be removed by the
board, either with or without cause, and a successor elected by the board at any
time.
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6. Vacancies.
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the board.
7. Duties.
Unless otherwise provided by the board, officers of the corporation shall each
have such powers and duties as generally pertain to their respective offices,
such powers and duties as may be set forth in these by-laws, and such powers and
duties as may be specifically provided for by the board. The president shall be
the chief executive officer of the corporation.
8. Sureties and Bonds.
At the request of the board, any officer, employee or agent of the corporation
shall execute for the corporation a bond in such sum, and with such surety as
the board may direct, conditioned upon the faithful performance of his duties to
the corporation, including responsibility for negligence and for the accounting
for all property, funds or securities of the corporation which may come into his
hands.
9. Shares of Other Corporations.
Whenever the Corporation is the holder of shares of any other corporation, any
right or power of the Corporation as such shareholder shall be exercised on
behalf of the Corporation in such manner as the board may authorize.
10. Indemnification.
The Corporation shall indemnify each of its directors, officers, and employees
whether or not then in service as such (and his or her executor, administrator
and heirs), against all damages recovered and reasonable expenses actually and
necessarily incurred by him or her in connection with the defense of any
litigation to which the individual may have been made a party because he or she
is or was a director, officer or employee of the Corporation as provided by the
Corporation's Certificate of Incorporation.
ARTICLE V - SHARES OF STOCK
1. Certificates.
(a) The certificates representing shares in the Corporation shall be in such
form as shall be approved by the board and shall be numbered and registered in
the order issued. They shall bear the holder's name and the number of shares,
and shall be signed by (i) the chairman of the board or the vice chairman of the
board or the president or a vice
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president, and (ii) the secretary or treasurer, or any assistant secretary or
assistant treasurer, and shall bear the corporate seal.
(b) Certificates representing shares shall not be issued until they are fully
paid for.
(c) The board may authorize the issuance of certificates for fractions of a
share which shall entitle the holder to exercise voting rights, receive
dividends and participate in liquidating distributions, in proportion to the
fractional holdings.
2. Lost or Destroyed Certificates.
Upon notification of the loss or destruction of one or more certificates
representing shares of the Corporation by its holder, the Corporation may issue
new certificates in place of any certificates previously issued by it, and
alleged to have been lost or destroyed. Upon production of evidence of loss or
destruction, in such forms as the board in its sole discretion may require, the
board may require the owner of the lost or destroyed certificates to provide the
Corporation with a bond in such sum as the board may direct, and with such
surety as may be satisfactory to the board, to indemnify the Corporation against
any claims, loss, liability or damage it may suffer on account of the issuance
of new certificates. A new certificate may be issued without requiring any such
evidence or bond when, in the judgment of the board, it is proper to do so.
3. Transfers of Shares.
(a) Transfers of shares of the Corporation may be made on the share records of
the Corporation solely by the holder of such records, in person or by a duly
authorized attorney, upon surrender for cancellation of the certificates
representing such shares, with an assignment or power of transfer endorsed
thereon or delivered therewith, duly executed and with such proof of the
authenticity of the signature, and the authority to transfer and the payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
shares as the absolute owner thereof for all purposes and shall not be bound to
recognize any legal, equitable or other claim to, or interest in, such shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
(c) The Corporation shall be entitled to impose such restrictions on the
transfer of shares as may be necessary for the purpose of electing or
maintaining certain statuses under the Internal Revenue Code, securing or
maintaining any other tax advantage to the Corporation and/or to assure
compliance with any applicable corporate or securities law.
4. Record Date.
In lieu of closing the share records of the Corporation, the board may fix, in
advance, a date not less than ten (10) days and not more than sixty (60) days,
as the record date for
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the determination of shareholders entitled to receive notice of, and to vote at,
any meeting of shareholders, or to consent to any proposal without a meeting, or
for the purpose of determining shareholders entitled to receive payment of any
dividends, or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day immediately preceding the day on which
notice is given, or, if no notice is given, the day on which the meeting is
held; the record date for determining shareholders for any other purpose shall
be at the close of business on the day on which the resolution of the directors
relating thereto is adopted. When a determination of shareholders of record
entitled to notice of or to vote at any meeting of shareholders has been made as
provided for herein, such determination shall apply to any adjournment thereof,
unless the directors fix a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to this Certificate of Incorporation and to applicable law, dividends
may be declared and paid out of any funds available therefor, as often, in such
amount, and at such time or times as the board may determine. Before payment of
any dividend, there may be set aside out of the net proceeds of the Corporation
available for dividends, such sum or sums as the board, from time to time, in
its sole discretion, deems proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the board shall think conducive to
the interests of the Corporation, and the board may modify or abolish any such
reserve.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall run from January 1 through December 31,
unless another fiscal year is fixed by the board, subject always to applicable
law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the board.
ARTICLE IX - AMENDMENTS
1. By Shareholders.
All by-laws of the Corporation shall be subject to revision, amendment or
repeal, and new by-laws may be adopted from time to time, by a majority of the
members of the board of directors or a majority vote of the shareholders who are
at such time entitled to vote in the election of directors.
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EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of the 1st day of January, 2000 by
and between INTEGCOM CORP., a Delaware corporation (the "Company") and JAMES E.
HENRY ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to obtain the benefit of the services of
the Employee, and the Employee desires to render such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises and
the mutual covenants herein contained, hereby agree as follows:
1. Termination of Prior Agreements. Upon the execution of this
Agreement, all prior employment agreements between the Employee, and the Company
or any of its affiliates, subsidiaries, and predecessor constituent corporations
are terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter
set forth, the Employee hereby enters into the employment of the Company, or any
of subsidiary or affiliate of the Company, as the Company shall, from time to
time, select, for an employment term commencing on the date of execution of this
Agreement and terminating on December 31, 2004. The period during which the
Employee is employed pursuant to this Agreement is herein after called the "Term
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of Employment".
3. Scope of Employment. During the Term of Employment, the Employee
shall be employed as President of the Company and Chief Executive Officer. In
addition, the Employee shall well and faithfully render and perform, such other
executive and managerial services, as may be assigned to him, from time to time,
by or under the authority of the Board of Directors of the Company or of any
subsidiary or affiliate of the Company. The Employee will devote his full time
and efforts to the business and affairs of the Company, or such subsidiary, or
affiliate as now or hereafter conducted, and shall be at all times subject to
the direction and control of the Board of Directors of the Company or such
subsidiary or affiliate. The Employee shall render such services which are in
accordance with his utmost abilities and shall use his best efforts to promote
the interests of the Company and subsidiaries and affiliates. The Employee will
not engage in any capacity or activity which is, or may be, contrary to the
welfare, interest or benefit of the business now or hereafter conducted by the
Company and its subsidiaries and affiliates.
4. Compensation. As full compensation for all services provided for
herein, including without limiting the generality of the foregoing, all services
to be rendered by the Employee as an officer or director of the Company or of
any subsidiary or affiliate of the Company, the Company will pay, cause to be
paid, to the Employee, and the Employee will accept, a salary, during the Term
of Employment, at an annual rate of One Hundred Thirty Five Thousand Dollars
($135,000) to be paid in regular installments in accordance with the Company's
usual paying practices. Such payments will be subject to such deductions by the
Company as it from time to time requires to make pursuant to law, government
regulations or order or by agreement with, or consent of, the Employee. Such
compensation shall be increased by ten (10%) percent of the Employee's base
salary in each of the third, fourth and fifth years commencing in January 2002
and continuing
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through December, 2004 so that the Employee shall be paid annual compensation of
$135,000 from January 1, 2000 through December 31, 2001, $148,500 from January
1, 2002 through December 31, 2002, $163,350 from January 1, 2003 through
December 31 , 2003 and $179,685 from January 1, 2004 to December 31, 2004. The
Board of Directors, in conjunction with its compensation committee, shall have
the authority to increase such compensation, at its discretion from time to
time, with the award and payment of bonuses and other forms of compensation to
the Employee.
5. Expenses. The Employee shall be entitled to reimbursement by the
Company for reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the Employee,
from time to time, of an itemized account of such expenditures together with
such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance
with the Company's prevailing policy for its operating executives.
7. Benefits. The Employee shall be entitled to participate in all group
life insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which may
hereafter during the Term of Employment be offered by the Company generally to
its operating executives.
8. Payments on Death or Disability. In the event that the Employee shall
die or become disabled during the Term of Employment or any renewal thereof, the
Company shall pay to his heirs, in the case of his death, or to him or his
guardian, in case of his disability, a lump sum payment equal to 18 months of
compensation due to him at that time hereunder or equal monthly installments
covering such 18 months compensation at the discretion of the Employee, his or
her guardian, whatever the case may be.
For purposes of this Agreement, disability of the Employee shall have
occurred if (a) the
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Employee shall become physically or mentally incapable of properly performing
his services to the Company as provided hereunder excluding infrequent and
temporary absences due to ordinary illnesses; (b) such incapacity shall exist or
be reasonably expected to exist for more than 90 days in the aggregate during
any 12 consecutive months covered hereunder or in any renewals hereof, and (c)
either the Employee or the Company shall have given the other 30 days written
notice of his or its intention to terminate the Employee's active employment by
the Company due to such disability.
For purposes of this Agreement, the Employee shall on or immediately
after executing this Agreement provide the Company with a written list of his
heirs in order of preference regarding death payment benefits hereunder. This
list may be altered and changed from time to time by the Employee by giving
written notice of such changes or new list thereof to the Company as provided
herein.
9. Severance. In the event that the Employee's employment with the
Company is terminated thereby without cause during the Term thereof, the
Employee shall be entitled to, as severance hereunder, two year's full
compensation as provided for herein or such full compensation for the remainder
of the Term, whichever period is shorter. No severance compensation will be due
the Employee if he is terminated for cause. Termination for cause shall include:
Employee's failure to perform his duties hereunder, his conviction of felony,
alcoholism, illegal drug abuse, material violations of corporate or securities
laws or similar infractions.
10. Covenant not to Compete. During the Term of Employment and for a
period of one (1) years after the Term of Employment, the Employee shall not
engage, directly or indirectly, within the United States in any business engaged
in the design, development, manufacture, installation, and sale of security
equipment currently manufactured or installed by the Company or under its
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development. For the purpose of this paragraph, the Employee will be deemed,
directly or indirectly, engaged in a business if he participates in such
business as proprietor, partner, joint venturer, stockholder, director, officer,
lender, manager, employee, consultant, advisor or agent or if he otherwise
controls such business. This covenant not to compete after the Term of
Employment shall become null and void if the Employee's employment is terminated
without cause, if the Company fails to complete an initial public offering of
its securities prior to the end of such Term or if it terminates this Agreement
pursuant to Paragraph 15 hereof. The Employee shall not, for purposes of this
paragraph, be deemed a stockholder if he holds less than one (1%) percent of the
outstanding shares of any publicly owned corporation engaged in the same or
similar business to that of the Company or any of its divisions, subsidiaries or
affiliates; provided, however, that the Employee shall not be in a control
position with regard to such corporation. In addition, the Employee shall not at
any time, during or after the termination of this Agreement, engage in any
business which uses as its name, in whole or in part, "IntegCom Corp.", "Henry
Bros." or "Brothers", "Viscom", "HBE" or any other name then used by the Company
or any of its affiliates or subsidiaries.
11. Disclosure. Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at any
time, directly or indirectly, disclose or furnish to any other person firm or
corporation:
(a) the methods of conducting the business of the Company or its
subsidiaries and affiliates;
(b) a description of any of the methods of obtaining business,
installing or manufacturing or advertising security products, or of
obtaining customers thereof; and/or
(c) any confidential information acquired by him during the course of
his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limiting the generality of the foregoing,
the names of any new customers or prospective customers of, or
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any person, firm or corporation, who or which have or shall have traded
or dealt with (whether such customers have been obtained by the Employee
or otherwise) the Company, its predecessors, subsidiaries or affiliates.
12. Inventions. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or prior
to this Agreement, will be the sole and absolute property of the Company for any
and all purposes whatever in perpetuity, whether or not conceived, discovered
and/or developed during regular working hours. The Employee will not have, and
will not claim to have, under this Agreement or otherwise, any right, title or
interest of any kind or nature whatsoever in or to any such products, processes,
discoveries, materials, ideas, creations, inventions and properties.
13. Arbitration. Any controversy arising out of or relating to this
Agreement shall be resolved by arbitration in the City of New York pursuant to
the rules of the American Arbitration Association then in effect. The parties
hereto consent to the jurisdiction of the courts of the State of New Jersey or
the United States District Court for the appropriate District of New Jersey,
whichever is most appropriate, for all purposes in connection with said
arbitration, and further consent that any process or notice of motion may be
served outside the State of New Jersey by personal service or by Registered or
Certified Mail; provided a reasonable time for appearance is allowed.
14. Injunctive Relief. The parties hereto recognize that irreparable
damage will result to the Company and its business and properties if the
Employee fails or refuses to perform his obligations under this Agreement and
that the remedy at law for any such failure or refusal will be inadequate.
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Accordingly, in addition to any other remedies and damages available, including
the provision contained in Paragraph 13 for arbitration, the Company shall be
entitled to injunctive relief, and the Employee may be specifically restrained
from violating the terms and conditions of this Agreement. The institution of
any arbitration proceedings shall not bar injunctive relief pending the final
determination of the arbitration proceedings hereunder.
15. Company Option to Terminate or Modify. In the event that the Company
has not successfully completed an initial public offering of its securities on
or before June 30, 2000, it has the right to modify or terminate this Agreement
without any further liability hereunder; provided, however, that such
modification or termination, if the Employee continues to work on a full-time
basis for the Company in a similar capacity, will not reduce his base salary
below the compensation or rate of compensation being paid immediately prior to
entering into this Agreement. Any other kind of modification hereof requires the
Employee's written consent.
16. Further Instruments. The Employee will execute and deliver all such
other further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm, assign
or convey to the company any products, processes, discoveries, materials, ideas,
creations, inventions or properties referred to in Paragraph 11 hereof,
including the execution of all patent applications.
17. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail or telegram, as follows:
As to the Employee: James E. Henry
c/o IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
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As to the Company: IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
Attn: Irvin Witcosky
or to such other address as either party hereto may designate by notice given in
accordance with this Agreement.
18. Assignment. A party hereto may not assign this Agreement or any
rights or obligations hereunder, without the consent of the other party hereto;
provided, however, that upon the sale or transfer of all or substantially all of
the assets of the Company or upon the merger by the Company into, or the
combination with, another corporation, this Agreement will (subject to the
provisions of Paragraph 2 hereof) inure to the benefits of and be binding upon
the person, firm or corporation purchasing such assets, or the corporation
surviving such merger or consolidation, as the case may be. The provisions of
the Agreement are binding upon the heirs of the Employee and upon the successors
and assigns of the Company hereto.
19. Waiver of Breach. Wavier by either party of a breach of any
provision of this Agreement by the other shall not operate or be constructed as
a waiver of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of
the parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
21. Applicable Law. This agreement shall be constructed in accordance
with the laws of the State of New Jersey.
8
<PAGE>
22. Severability. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and such
provision shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
INTEGCOM CORP.
BY: Irvin Witcosky
-------------------------------------------
Irvin Witcosky, Executive Vice President
James E. Henry
-------------------------------------------
James E. Henry, Employee
9
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of the 1st day of January, 2000 by
and between INTEGCOM CORP., a Delaware corporation (the "Company") and IRVIN
WITCOSKY ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to obtain the benefit of the services of
the Employee, and the Employee desires to render such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises and
the mutual covenants herein contained, hereby agree as follows:
1. Termination of Prior Agreements. Upon the execution of this
Agreement, all prior employment agreements between the Employee, and the Company
or any of its affiliates, subsidiaries, and predecessor constituent corporations
are terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter
set forth, the Employee hereby enters into the employment of the Company, or any
of subsidiary or affiliate of the Company, as the Company shall, from time to
time, select, for an employment term commencing on the date of execution of this
Agreement and terminating on December 31, 2004. The period during which the
Employee is employed pursuant to this Agreement is herein after called the "Term
1
<PAGE>
of Employment".
3. Scope of Employment. During the Term of Employment, the Employee
shall be employed as Executive Vice-President and Secretary of the Company. In
addition, the Employee shall well and faithfully render and perform, such other
executive and managerial services, as may be assigned to him, from time to time,
by or under the authority of the Board of Directors of the Company or of any
subsidiary or affiliate of the Company. The Employee will devote his full time
and efforts to the business and affairs of the Company, or such subsidiary, or
affiliate as now or hereafter conducted, and shall be at all times subject to
the direction and control of the Board of Directors of the Company or such
subsidiary or affiliate. The Employee shall render such services which are in
accordance with his utmost abilities and shall use his best efforts to promote
the interests of the Company and subsidiaries and affiliates. The Employee will
not engage in any capacity or activity which is, or may be, contrary to the
welfare, interest or benefit of the business now or hereafter conducted by the
Company and its subsidiaries and affiliates.
4. Compensation. As full compensation for all services provided for
herein, including without limiting the generality of the foregoing, all services
to be rendered by the Employee as an officer or director of the Company or of
any subsidiary or affiliate of the Company, the Company will pay, cause to be
paid, to the Employee, and the Employee will accept, a salary, during the Term
of Employment, at an annual rate of One Hundred Thirty Five Thousand Dollars
($135,000) to be paid in regular installments in accordance with the Company's
usual paying practices. Such payments will be subject to such deductions by the
Company as it from time to time requires to make pursuant to law, government
regulations or order or by agreement with, or consent of, the Employee. Such
compensation shall be increased by ten (10%) percent of the Employee's base
salary in each of the third, fourth and fifth years commencing in January 2002
and continuing
2
<PAGE>
through December 2004 so that the Employee shall be paid annual compensation of
$135,000 from January 1, 2000 through December 31, 2001, $148,500 from January
1, 2002 through December 31, 2002, $163,350 from January 1, 2003 through
December 31, 2003 and $179,685 from January 1, 2004 to December 31, 2004. The
Board of Directors, in conjunction with its compensation committee, shall have
the authority to increase such compensation, at its discretion from time to
time, with the award and payment of bonuses and other forms of compensation to
the Employee.
5. Expenses. The Employee shall be entitled to reimbursement by the
Company for reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the Employee,
from time to time, of an itemized account of such expenditures together with
such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance
with the Company's prevailing policy for its operating executives.
7. Benefits. The Employee shall be entitled to participate in all group
life insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which may
hereafter during the Term of Employment be offered by the Company generally to
its operating executives.
8. Payments on Death or Disability. In the event that the Employee shall
die or become disabled during the Term of Employment or any renewal thereof, the
Company shall pay to his heirs, in the case of his death, or to him or his
guardian, in case of his disability, a lump sum payment equal to 18 months of
compensation due to him at that time hereunder or equal monthly installments
covering such 18 months compensation at the discretion of the Employee, his or
her guardian, whatever the case may be.
3
<PAGE>
For purposes of this Agreement, disability of the Employee shall have
occurred if (a) the Employee shall become physically or mentally incapable of
properly performing his services to the Company as provided hereunder excluding
infrequent and temporary absences due to ordinary illnesses; (b) such incapacity
shall exist or be reasonably expected to exist for more than 90 days in the
aggregate during any 12 consecutive months covered hereunder or in any renewals
hereof, and (c) either the Employee or the Company shall have given the other 30
days written notice of his or its intention to terminate the Employee's active
employment by the Company due to such disability.
For purposes of this Agreement, the Employee shall on or immediately
after executing this Agreement provide the Company with a written list of his
heirs in order of preference regarding death payment benefits hereunder. This
list may be altered and changed from time to time by the Employee by giving
written notice of such changes or new list thereof to the Company as provided
herein.
9. Severance. In the event that the Employee's employment with the
Company is terminated thereby without cause during the Term thereof, the
Employee shall be entitled to, as severance hereunder, two year's full
compensation as provided for herein or such full compensation for the remainder
of the Term, whichever period is shorter. No severance compensation will be due
the Employee if he is terminated for cause. Termination for cause shall include:
Employee's failure to perform his duties hereunder, his conviction of felony,
alcoholism, illegal drug abuse, material violations of corporate or securities
laws or similar infractions.
10. Covenant not to Compete. During the Term of Employment and for a
period of one (1) years after the Term of Employment, the Employee shall not
engage, directly or indirectly, within the United States in any business engaged
in the design, development, manufacture, installation, and sale of security
equipment currently manufactured or installed by the Company or under its
4
<PAGE>
development. For the purpose of this paragraph, the Employee will be deemed,
directly or indirectly, engaged in a business if he participates in such
business as proprietor, partner, joint venturer, stockholder, director, officer,
lender, manager, employee, consultant, advisor or agent or if he otherwise
controls such business. This covenant not to compete after the Term of
Employment shall become null and void if the Employee's employment is terminated
without cause, if the Company fails to complete an initial public offering of
its securities prior to the end of such Term or if it terminates this Agreement
pursuant to Paragraph 15 hereof. The Employee shall not, for purposes of this
paragraph, be deemed a stockholder if he holds less than one (1%) percent of the
outstanding shares of any publicly owned corporation engaged in the same or
similar business to that of the Company or any of its divisions, subsidiaries or
affiliates; provided, however, that the Employee shall not be in a control
position with regard to such corporation. In addition, the Employee shall not at
any time, during or after the termination of this Agreement, engage in any
business which uses as its name, in whole or in part, "IntegCom Corp.", "Henry
Bros." or "Brothers", "Viscom", "HBE" or any other name then used by the Company
or any of its affiliates or subsidiaries.
11. Disclosure. Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at any
time, directly or indirectly, disclose or furnish to any other person firm or
corporation:
(a) the methods of conducting the business of the Company or its
subsidiaries and affiliates;
(b) a description of any of the methods of obtaining business,
installing or manufacturing or advertising security products, or of
obtaining customers thereof; and/or
(c) any confidential information acquired by him during the course of
his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limiting the generality of the foregoing,
the names of any new customers or prospective customers of, or
5
<PAGE>
any person, firm or corporation, who or which have or shall have traded
or dealt with (whether such customers have been obtained by the Employee
or otherwise) the Company, its predecessors, subsidiaries or affiliates.
12. Inventions. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or prior
to this Agreement, will be the sole and absolute property of the Company for any
and all purposes whatever in perpetuity, whether or not conceived, discovered
and/or developed during regular working hours. The Employee will not have, and
will not claim to have, under this Agreement or otherwise, any right, title or
interest of any kind or nature whatsoever in or to any such products, processes,
discoveries, materials, ideas, creations, inventions and properties.
13. Arbitration. Any controversy arising out of or relating to this
Agreement shall be resolved by arbitration in the City of New York pursuant to
the rules of the American Arbitration Association then in effect. The parties
hereto consent to the jurisdiction of the courts of the State of New Jersey or
the United States District Court for the appropriate District of New Jersey,
whichever is most appropriate, for all purposes in connection with said
arbitration, and further consent that any process or notice of motion may be
served outside the State of New Jersey by personal service or by Registered or
Certified Mail; provided a reasonable time for appearance is allowed.
14. Injunctive Relief. The parties hereto recognize that irreparable
damage will result to the Company and its business and properties if the
Employee fails or refuses to perform his obligations under this Agreement and
that the remedy at law for any such failure or refusal will be inadequate.
6
<PAGE>
Accordingly, in addition to any other remedies and damages available, including
the provision contained in Paragraph 13 for arbitration, the Company shall be
entitled to injunctive relief, and the Employee may be specifically restrained
from violating the terms and conditions of this Agreement. The institution of
any arbitration proceedings shall not bar injunctive relief pending the final
determination of the arbitration proceedings hereunder.
15. Company Option to Terminate or Modify. In the event that the Company
has not successfully completed an initial public offering of its securities on
or before June 30, 2000, it has the right to modify or terminate this Agreement
without any further liability hereunder; provided, however, that such
modification or termination, if the Employee continues to work on a full-time
basis for the Company in a similar capacity, will not reduce his base salary
below the compensation or rate of compensation being paid immediately prior to
entering into this Agreement. Any other kind of modification hereof requires the
Employee's written consent.
16. Further Instruments. The Employee will execute and deliver all such
other further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm, assign
or convey to the company any products, processes, discoveries, materials, ideas,
creations, inventions or properties referred to in Paragraph 11 hereof,
including the execution of all patent applications.
17. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail or telegram, as follows:
As to the Employee: Irvin Witcosky
c/o IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
7
<PAGE>
As to the Company: IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
Attn: James E. Henry
or to such other address as either party hereto may designate by notice given in
accordance with this Agreement.
18. Assignment. A party hereto may not assign this Agreement or any
rights or obligations hereunder, without the consent of the other party hereto;
provided, however, that upon the sale or transfer of all or substantially all of
the assets of the Company or upon the merger by the Company into, or the
combination with, another corporation, this Agreement will (subject to the
provisions of Paragraph 2 hereof) inure to the benefits of and be binding upon
the person, firm or corporation purchasing such assets, or the corporation
surviving such merger or consolidation, as the case may be. The provisions of
the Agreement are binding upon the heirs of the Employee and upon the successors
and assigns of the Company hereto.
19. Waiver of Breach. Wavier by either party of a breach of any
provision of this Agreement by the other shall not operate or be constructed as
a waiver of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of
the parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
21. Applicable Law. This agreement shall be constructed in accordance
with the laws of the State of New Jersey.
8
<PAGE>
22. Severability. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and such
provision shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
INTEGCOM CORP.
BY: James E. Henry
-------------------------------------
James E. Henry, President
Irvin Witcosky
-------------------------------------
Irvin Witcosky, Employee
9
<PAGE>
EMPLOYMENT AGREEMENT
------
AGREEMENT made and entered into as of the 1st day of January, 2000 by
and between INTEGCOM CORP., a Delaware corporation (the "Company") LOUIS MASSAD
("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to obtain the benefit of the services of
the Employee, and the Employee desires to render such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises and
the mutual covenants herein contained, hereby agree as follows:
1. Termination of Prior Agreements. Upon the execution of this
Agreement, all prior employment agreements between the Employee, and the Company
or any of its affiliates, subsidiaries, and predecessor constituent corporations
are terminated and of no further force and effect.
2. Term of Employment. Subject to the terms and conditions hereinafter
set forth, the Employee hereby enters into the employment of the Company, or any
of subsidiary or affiliate of the Company, as the Company shall, from time to
time, select, for an employment term commencing on the date of execution of this
Agreement and terminating on December 31, 2004. The period during which the
Employee is employed pursuant to this Agreement is herein after called the "Term
1
<PAGE>
of Employment".
3. Scope of Employment. During the Term of Employment, the Employee
shall be employed as Vice-President, Treasurer and Chief Financial Officer of
the Company. In addition, the Employee shall well and faithfully render and
perform, such other executive and managerial services, as may be assigned to
him, from time to time, by or under the authority of the Board of Directors of
the Company or of any subsidiary or affiliate of the Company. The Employee will
devote his full time and efforts to the business and affairs of the Company, or
such subsidiary, or affiliate as now or hereafter conducted, and shall be at all
times subject to the direction and control of the Board of Directors of the
Company or such subsidiary or affiliate. The Employee shall render such services
which are in accordance with his utmost abilities and shall use his best efforts
to promote the interests of the Company and subsidiaries and affiliates. The
Employee will not engage in any capacity or activity which is, or may be,
contrary to the welfare, interest or benefit of the business now or hereafter
conducted by the Company and its subsidiaries and affiliates.
4. Compensation. As full compensation for all services provided for
herein, including without limiting the generality of the foregoing, all services
to be rendered by the Employee as an officer or director of the Company or of
any subsidiary or affiliate of the Company, the Company will pay, cause to be
paid, to the Employee, and the Employee will accept, a salary, during the Term
of Employment, at an annual rate of One Hundred Ten Thousand Dollars ($110,000)
to be paid in regular installments in accordance with the Company's usual paying
practices. Such payments will be subject to such deductions by the Company as it
from time to time requires to make pursuant to law, government regulations or
order or by agreement with, or consent of, the Employee. Such compensation shall
be increased by ten (10%) percent of the Employee's base salary in each of the
third, fourth and fifth years commencing in January 2001 and continuing through
December 2004
2
<PAGE>
so that the Employee shall be paid annual compensation of $110,000 from January
1, 2000 through December 31, 2001, $121,000 from January 1, 2002 through
December 31, 2002, $133,000 from January 1, 2003 through December 31, 2003 and
$146,410 from January 1, 2004 to December 31, 2004. The Board of Directors, in
conjunction with its compensation committee, shall have the authority to
increase such compensation, at its discretion from time to time, with the award
and payment of bonuses and other forms of compensation to the Employee.
5. Expenses. The Employee shall be entitled to a monthly car allowance
of $350 per month at the Company's expense and to reimbursement by the Company
for other reasonable expenses actually incurred by him on its behalf in the
course of his employment by the Company, upon the presentation by the Employee,
from time to time, of an itemized account of such expenditures together with
such vouchers and other receipts as the Company may request.
6. Vacation. The Employee shall be entitled to vacations in accordance
with the Company's prevailing policy for its executives and shall be allowed two
weeks for the calendar year 2000.
7. Benefits. The Employee shall be entitled to participate in all group
life insurance, medical and hospitalization plans, and pension, stock option and
profit sharing plans as are presently being offered by the Company or which may
hereafter during the Term of Employment be offered by the Company generally to
its executives without any trial or preliminary period during which coverage may
ordinarily not be available.
8. Payments on Death or Disability. In the event that the Employee shall
die or become disabled during the Term of Employment or any renewal thereof, the
Company shall pay to his heirs, in the case of his death, or to him or his
guardian, in case of his disability, a lump sum payment equal to 18 months of
compensation due to him at that time hereunder or equal monthly installments
covering such 18 months compensation at the discretion of the Employee, his or
her guardian,
3
<PAGE>
whatever the case may be.
For purposes of this Agreement, disability of the Employee shall have
occurred if (a) the Employee shall become physically or mentally incapable of
properly performing his services to the Company as provided hereunder excluding
infrequent and temporary absences due to ordinary illnesses; (b) such incapacity
shall exist or be reasonably expected to exist for more than 90 days in the
aggregate during any 12 consecutive months covered hereunder or in any renewals
hereof, and (c) either the Employee or the Company shall have given the other 30
days written notice of his or its intention to terminate the Employee's active
employment by the Company due to such disability.
For purposes of this Agreement, the Employee shall on or immediately
after executing this Agreement provide the Company with a written list of his
heirs in order of preference regarding death payment benefits hereunder. This
list may be altered and changed from time to time by the Employee by giving
written notice of such changes or new list thereof to the Company as provided
herein.
9. Severance. In the event that the Employee's employment with the
Company is terminated thereby without cause during the Term thereof, the
Employee shall be entitled to, as severance hereunder, two year's full
compensation as provided for herein or such full compensation for the remainder
of the Term, whichever period is shorter. No severance compensation will be due
the Employee if he is terminated for cause. Termination for cause shall include:
Employee's failure to perform his duties hereunder, his conviction of felony,
alcoholism, illegal drug abuse, material violations of corporate or securities
laws or similar infractions.
10. Covenant not to Compete. During the Term of Employment and for a
period of one (1) years after the Term of Employment, the Employee shall not
engage, directly or indirectly, within the United States in any business engaged
in the design, development, manufacture, installation, and
4
<PAGE>
sale of security equipment currently manufactured or installed by the Company or
under its development. For the purpose of this paragraph, the Employee will be
deemed, directly or indirectly, engaged in a business if he participates in such
business as proprietor, partner, joint venturer, stockholder, director, officer,
lender, manager, employee, consultant, advisor or agent or if he otherwise
controls such business. This covenant not to compete after the Term of
Employment shall become null and void if the Employee's employment is terminated
without cause, if the Company fails to complete an initial public offering of
its securities prior to the end of such Term or if it terminates this Agreement
pursuant to Paragraph 15 hereof. The Employee shall not, for purposes of this
paragraph, be deemed a stockholder if he holds less than one (1%) percent of the
outstanding shares of any publicly owned corporation engaged in the same or
similar business to that of the Company or any of its divisions, subsidiaries or
affiliates; provided, however, that the Employee shall not be in a control
position with regard to such corporation. In addition, the Employee shall not at
any time, during or after the termination of this Agreement, engage in any
business which uses as its name, in whole or in part, "IntegCom Corp.", "Henry
Bros." or "Brothers", "Viscom", "HBE" or any other name then used by the Company
or any of its affiliates or subsidiaries.
11. Disclosure. Except as may be required by law or with the express
permission of the Company's Board of Directors, the Employee will not at any
time, directly or indirectly, disclose or furnish to any other person firm or
corporation:
(a) the methods of conducting the business of the Company or its
subsidiaries and affiliates;
(b) a description of any of the methods of obtaining business,
installing or manufacturing or advertising security products, or of
obtaining customers thereof; and/or
(c) any confidential information acquired by him during the course of
his employment by the Company, its predecessors, subsidiaries or
affiliates, including, without limiting the
5
<PAGE>
generality of the foregoing, the names of any new customers or
prospective customers of, or any person, firm or corporation, who or
which have or shall have traded or dealt with (whether such customers
have been obtained by the Employee or otherwise) the Company, its
predecessors, subsidiaries or affiliates.
12. Inventions. As between the Employee and the Company, all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and properties, whether or not furnished by the Employee, created, developed,
invented or used in connection with the Employee's employment hereunder or prior
to this Agreement, will be the sole and absolute property of the Company for any
and all purposes whatever in perpetuity, whether or not conceived, discovered
and/or developed during regular working hours. The Employee will not have, and
will not claim to have, under this Agreement or otherwise, any right, title or
interest of any kind or nature whatsoever in or to any such products, processes,
discoveries, materials, ideas, creations, inventions and properties.
13. Arbitration. Any controversy arising out of or relating to this
Agreement shall be resolved by arbitration in the City of New York pursuant to
the rules of the American Arbitration Association then in effect. The parties
hereto consent to the jurisdiction of the courts of the State of New Jersey or
the United States District Court for the appropriate District of New Jersey,
whichever is most appropriate, for all purposes in connection with said
arbitration, and further consent that any process or notice of motion may be
served outside the State of New Jersey by personal service or by Registered or
Certified Mail; provided a reasonable time for appearance is allowed.
14. Injunctive Relief. The parties hereto recognize that irreparable
damage will result to the Company and its business and properties if the
Employee fails or refuses to perform his obligations
6
<PAGE>
under this Agreement and that the remedy at law for any such failure or refusal
will be inadequate. Accordingly, in addition to any other remedies and damages
available, including the provision contained in Paragraph 13 for arbitration,
the Company shall be entitled to injunctive relief, and the Employee may be
specifically restrained from violating the terms and conditions of this
Agreement. The institution of any arbitration proceedings shall not bar
injunctive relief pending the final determination of the arbitration proceedings
hereunder.
15. Company Option to Terminate or Modify. In the event that the Company
has not successfully completed an initial public offering of its securities on
or before June 30, 2000, it has the right to modify or terminate this Agreement
without any further liability hereunder; provided, however, that such
modification or termination, if the Employee continues to work on a full-time
basis for the Company in a similar capacity, will not reduce his base salary
below the compensation or rate of compensation being paid immediately prior to
entering into this Agreement. Any other kind of modification hereof requires the
Employee's written consent.
16. Further Instruments. The Employee will execute and deliver all such
other further instruments and documents as may be necessary, in the opinion of
the Company, to carry out the purposes of this Agreement, or to confirm, assign
or convey to the company any products, processes, discoveries, materials, ideas,
creations, inventions or properties referred to in Paragraph 11 hereof,
including the execution of all patent applications.
17. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail or telegram, as follows:
As to the Employee: Louis Massad
c/o IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
7
<PAGE>
As to the Company: IntegCom Corp.
280 Midland Avenue
Saddle Brook, NJ 07662
Attn: James E. Henry
or to such other address as either party hereto may designate by notice given in
accordance with this Agreement.
18. Assignment. A party hereto may not assign this Agreement or any
rights or obligations hereunder, without the consent of the other party hereto;
provided, however, that upon the sale or transfer of all or substantially all of
the assets of the Company or upon the merger by the Company into, or the
combination with, another corporation, this Agreement will (subject to the
provisions of Paragraph 2 hereof) inure to the benefits of and be binding upon
the person, firm or corporation purchasing such assets, or the corporation
surviving such merger or consolidation, as the case may be. The provisions of
the Agreement are binding upon the heirs of the Employee and upon the successors
and assigns of the Company hereto.
19. Waiver of Breach. Wavier by either party of a breach of any
provision of this Agreement by the other shall not operate or be constructed as
a waiver of any subsequent breach by such other party.
20. Entire Agreement. This instrument contains the entire agreement of
the parties as to the subject matter hereof. It may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
21. Applicable Law. This agreement shall be constructed in accordance
with the laws of the State of New Jersey.
8
<PAGE>
22. Severability. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgement, and such
provision shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
INTEGCOM CORP.
BY: Irvin Witcosky
-------------------------------------------
Irvin Witcosky, Executive Vice President
Louis Massad
-------------------------------------------
Louis Massad, Employee
9
<PAGE>
Incentive Stock Option Plan
of
INTEGCOM CORP.
1. PURPOSE
This Incentive Stock Option Plan (the "Plan") is intended as an
incentive for and encouragement of stock ownership by certain officers and
employees of IntegCom Corp. and its subsidiary corporations (collectively the
"Corporation") so that they may acquire or increase their proprietary interest
in the success of the Corporation, and to encourage them to remain in its
employ. It is further intended that Options issued pursuant to this Plan shall
constitute qualified incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The term
"subsidiary corporation" shall be defined in the same manner as such term is
defined in Section 424(f) of the Code and shall include subsidiary corporations
which become such after the adoption of the Plan.
2. ADMINISTRATION
The Plan shall be administered by a committee called the Compensation
Committee (sometimes hereinafter the "Committee") appointed by the Board of
Directors of the Corporation. The Compensation Committee shall consist of two or
more members of the Corporation's Board of Directors. The Board of Directors
may, from time to time, remove members from, or add members to, the Compensation
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Compensation Committee shall select one of its members
as Chairperson, and shall hold meetings at such times and places as it may
determine. Action by a majority of the Committee shall be the valid acts of the
Committee.
The Compensation Committee shall determine which of the eligible
employees of the Corporation (determined under Article 3 hereof) shall be
granted options, when such options shall be granted and the number of shares and
terms with respect to each such option;
The Compensation Committee may prescribe rules and regulations for
administering the Plan, if the Compensation Committee shall determine it
necessary or convenient to do so.
The Compensation Committee shall decide any questions arising as to the
interpretation or application of any provision under the Plan, any rule or
regulation and any Option granted under the Plan. The Compensation Committee's
decisions shall be final and conclusive.
No member of the Compensation Committee or the Board of Directors shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option granted under it.
<PAGE>
3. ELIGIBILITY
The persons eligible to receive Options are such officers and employees
of the Corporation as the Compensation Committee shall select from time to time.
An Optionee may hold more than one Option, but only on the terms and subject to
the restrictions hereafter set forth. No person shall be eligible to receive an
Option for a larger number of shares than is awarded to him by the Compensation
Committee.
4. STOCK
The stock subject to the Options shall be shares of the Corporation's
common stock authorized but unissued or reacquired, par value .01 per share,
hereafter sometimes called Common Stock. The aggregate number of shares which
may be issued under Options shall not exceed 500,000, subject to adjustment as
provided in paragraph (G) of Article 5, below.
In the event that any outstanding Option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subjected to an Option under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Stock Options granted pursuant to the Plan shall be authorized by the
Board of Directors and shall be evidenced by agreements in such form as the
Compensation Committee shall from time to time approve, which agreements shall
comply with and be subject to the following terms and conditions:
(A) Number of Shares Each Option shall state the number of shares to
which it pertains.
(B) Option Price
(1) Each Option shall state the Option price, which shall be not
less than 100% of the fair market value of the shares of Common Stock
of the Corporation on the date of the granting of the Option; provided,
however, that if the Option is granted to an Optionee who, at the time
of the grant owns (as determined in accordance with Section 424(d) of
the Code) stock of the Corporation possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
corporation (or of a parent or a subsidiary corporation, as those terms
are defined in Section 424 of the Code, such ownership to be determined
by application of the applicable attribution rules under the Code) then
the option price shall be not less than 110% of the fair market value
of the shares of Common Stock of the Corporation on the date of the
granting of the Option.
(2) During such time as such stock is not listed upon an
established stock exchange or exchanges or NASDAQ System the fair
market value per share shall be the
2
<PAGE>
mean between dealer "bid" and "ask" prices of the Common Stock in the
over-the-counter market on the day the Option is granted, as reported
by the National Association of Securities Dealers, Inc. If the stock is
listed upon an established stock exchange or exchanges or NASDAQ
System, such fair market value shall be deemed to be the highest
closing price of the Common Stock on such stock exchange or exchanges
or system, the day the Option is granted or if no sale of the
Corporation's Common Stock shall have been made on any stock exchange
or such system on that day, then on the next preceding day on which
there was a sale of such stock. If the stock is neither listed on an
established stock exchange or the NASDAQ System nor traded
over-the-counter, the Committee shall determine such fair market value
under the general principles of valuing the stock of corporations whose
shares are not publicly traded. Subject to the foregoing, the Board of
Directors and the Committee in fixing the Option price shall have full
authority and discretion and shall be fully protected in doing so.
(C) Medium and Time of Payment
The option price shall be payable in United States dollars upon the
exercise of the option, and the exercise of any option and the delivery of the
optioned shares shall be contingent upon receipt by the Corporation of the full
purchase price paid in cash or by check; provided, however, the Compensation
Committee, in its sole discretion, may accept other forms of payment, including,
but not limited to, other stock of the Corporation then owned by the Optionee.
(D) Term and Exercise of Options
(1) Each Option shall specify the dates upon which such Options can
be exercised, and shall designate the maximum number of shares granted
by the Option that can be exercised on such dates. To the extent that
the maximum number of shares permitted to be exercised on such date or
dates are not so exercised, such shares may be so exercised at any
subsequent date not later than ten (10) years after the Option was
granted; provided, however, that no Option granted to an Optionee who,
at the time of the grant, owns stock of the Corporation (as determined
in accordance with Section 424(d) of the Code) possessing more than 10%
of the total voting power of all classes of stock of the Corporation,
shall be exercisable more than five (5) years after such Option was
granted.
(2) Except as otherwise specifically provided herein:
(a) No option granted hereunder shall be exercisable until the
first anniversary of the grant thereof, when it shall become and
remain exercisable for 33 _% of the shares covered thereby. Each
such option shall become and remain exercisable for an additional
33 _% of the shares covered thereby on the second and third
anniversaries of the grant thereof.
(b) An Optionee may exercise a portion of an option from the
date that portion first becomes exercisable until the option
expires or is otherwise terminated; and
3
<PAGE>
(c) In the case of any fractional share resulting from any
calculation under the Plan, the shares available for exercise shall
be determined to the nearest lower number of whole shares
(3) An Optionee's exercise of an option granted under the Plan as
to one or more of the shares shall not be effective until the
Corporation has received from the Optionee (a) written notice of the
optionee's intent to do so in a form satisfactory to the Committee
which specifies the number of shares to be purchased along with (b) the
purchase price.
(4) No Option shall be transferable by the Optionee other than by
will or the applicable laws of descent and distribution. During the
lifetime of the Optionee, the Option shall be exercisable only by him
and shall not be assignable or transferable by him, and no other person
shall acquire any rights therein.
(E) Termination of Employment.
No option may be exercised after the termination of the employment of
the Optionee by the Corporation except as hereinafter provided, specifically
subject, however, to the provisions of paragraph (E) of this Article 5:
(1) Retirement. Options granted under the Plan may be exercised
within three (3) months after the Retirement (as hereinafter defined)
of the Optionee and the options shall be exercisable for all of the
shares covered thereby, notwithstanding the provisions of paragraph
(D)(2) of this Article V. For purposes of the Plan, "Retirement" shall
mean any termination of employment with the Corporation occurring after
the completion of ten (10) years of service with the Corporation and
the attainment of age sixty (60) by the Optionee.
(2) Disability. Options granted under the Plan may be exercised
within three (3) months after the termination of the employment of the
Optionee by reason of the Disability (as hereinafter defined) of the
Optionee and the option shall be exercisable for all of the shares
covered thereby, notwithstanding the provisions of paragraph (D)(2) of
this Article V. For purposes of this Plan, an Optionee shall be deemed
to have incurred a "Disability" if a disinterested duly licensed
medical doctor appointed by the Corporation determines that the
Optionee is totally and permanently prevented, as a result of physical
or mental infirmity, injury, or disease, either occupational or
nonoccupational in cause, from holding the job or position with the
Corporation or engaging in the employment activity, or a comparable job
or employment activity with the Corporation, which the Optionee held or
customarily engaged in prior to the occurrence of the disability
(provided, however, that disability hereunder shall not include any
disability incurred or resulting from the Optionee's having engaged in
a criminal act or enterprise, or any disability consisting of or
resulting from the Optionee's chronic alcoholism, addiction to
narcotics or an intentionally self-inflicted injury).
4
<PAGE>
(3) Death.
(i) If an Optionee shall die while employed by the Corporation
or within three (3) months after termination of employment with the
Corporation by reason of Retirement or Disability, the options
granted under this Plan to such deceased Optionee shall be
exercisable within one (1) year after the date of the Optionee's
death and the options shall be exercisable for all of the shares
covered thereby, notwithstanding the provisions of paragraph (D)(2)
of this Article V.
(ii) If an Optionee shall die within three (3) months after
termination of employment with the Corporation for a reason other
than Retirement or Disability, the options granted under this Plan
to such deceased Optionee shall be exercisable within one (1) year
after the date of the Optionee's death, but the options may not be
exercised for more than the number of Shares, if any, as to which
the options were exercisable by the Optionee immediately prior to
his death.
The legal representative, if any, of the deceased Optionee's estate,
otherwise the appropriate legatees or distributees of the deceased Optionee's
estate, may exercise the option on behalf of such deceased Optionee.
(4) Involuntary Termination of Employment. Options granted under
the Plan may be exercised within thirty (30) days after the Involuntary
Termination of Employment (as hereinafter defined) of the Optionee with
the Corporation and the options shall be exercisable for all of the
shares covered thereby, notwithstanding the provisions of paragraph
(D)(2) of this Article V. For purposes of the Plan, "Involuntary
Termination of Employment" shall mean any termination of an Optionee's
employment with the Corporation by reason of the discharge, firing or
other involuntary termination of employment by action of the
Corporation, other than an involuntary termination for cause as
described in subparagraph (6) of this paragraph (E).
(5) Voluntary Termination of Employment. Options granted under the
Plan shall terminate upon the Voluntary Termination of Employment (as
hereinafter defined) of the Optionee with the Corporation. For purposes
of the Plan "Voluntary Termination of Employment" shall mean any
voluntary termination of employment with the Corporation by reason of
the Optionee's quitting or otherwise voluntarily leaving the
Corporation's employ other than a voluntary termination of employment
by reason of Retirement or a voluntary termination of employment
constituting a termination for cause as described in subparagraph (6)
of this paragraph (E).
(6) Termination for Cause. Anything contained herein to the
contrary notwithstanding, if the termination of an Optionee's
employment with the Corporation is as a result of or caused by:
(a) the Optionee's theft or embezzlement from the Corporation,
(b) the Optionee's violation of a material term or condition of his
employment,
5
<PAGE>
(c) the Optionee's unauthorized disclosure of confidential
information of the Corporation,
(d) the Optionee's conviction for a crime of moral turpitude,
(e) the Optionee's unauthorized compiling or amassing of trade
secrets or other intellectual property owned by the Corporation,
(f) the Optionee's commission of any act in competition with the
Corporation,
(g) The Optionee's violation of any employment rule or practice
adopted by the Corporation prohibiting the illegal use of drugs, within
the sense of 42 USC ss.12111(6), and/or prohibiting the use of alcohol
on any property or in any vehicle owned, leased or otherwise used or
occupied by the Corporation,
(h) The Optionee's violation of any employment rule or practice
adopted by the Corporation that employees shall not be under the
influence of alcohol and/or shall not be engaging in the illegal use of
drugs, within the sense of 42 USC ss.12111(6), on any property or in
any vehicle owned, lease or otherwise used or occupied by the
Corporation,
(i) The Optionee's repeated unauthorized absence from his place of
work, or
(j) the Optionee's engaging in or his commission of any other act
or activity or conduct which in the opinion of the Committee is adverse
to the best interests of the Corporation, then any options, whether or
not exercised, and any and all rights granted to such Optionee under
the Plan shall become null and void effective as of the date of the
occurrence of the event which results in the Optionee ceasing to be an
employee of the Corporation, and any purported exercise of any option
hereunder by or on behalf of said Optionee on or after such date shall
be of no effect.
(F) Redemption
Notwithstanding any provision of the Plan or the terms of any option
issued under the Plan, the Board of Directors retain the right, exercisable at
its sole discretion, to cause the Corporation to redeem any accrued but
unexercised Options of any Optionee whose employment with the Corporation has
been terminated, or if the Optionee is the personal representative or
beneficiary of a deceased former employee of the Corporation, by paying to such
Optionee an amount equal to the difference between the Option price and the then
fair market value of the stock, as determined in accordance with Article 5(B) of
the Plan. The Board of Directors may exercise such right at any time prior to
the issuance of the optioned shares, and regardless of whether the Optionee has
given or the Corporation has received any notice of the Optionee's intent to
exercise any options.
(G) Adjustment of Shares
Subject to any required action by the stockholders, the number of
shares of Common Stock covered by each outstanding Option, and the price for
each such share, shall be proportionally adjusted for any increase or decrease
in the number of issued shares of Common Stock of the Corporation resulting from
a subdivision or consolidation of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Corporation.
6
<PAGE>
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the Option would have
been entitled. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, shall
cause each outstanding Option to terminate; provided, however, that each
Optionee shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the Corporation
is not the surviving Corporation, to exercise his option in whole or in part
without regard to the limitations contained in the Option.
In the event of a change in the common Stock of the Corporation as
presently constituted which is limited to a change of all its authorized shares
into the same number of shares with the stated par value the share resulting
from any such change shall be deemed to be the Common Stock within the meaning
of the Plan.
Except as hereinbefore expressly provided in this paragraph (G) of
Article 5, the Optionee shall have no rights by reason of the subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger or consolidation
or spin-off of assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect the number or price of shares of
Common Stock subject to the Option.
The grant of any Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all
or any part of its business or assets.
(H) Maximum Value of Stock with Respect to Which Options Are
Exercisable for First Time in Any Calendar Year
(1) If the aggregate fair market value of the shares of stock
(determined as of the time of grant of such option(s)) with respect to
which incentive stock options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the
Corporation and its parent and subsidiary corporations, if any) exceeds
$100,000 then only the first $100,000 of such shares so purchased shall
be treated as exercised under this Plan, and any excess over $100,000
so purchased shall be treated as options which are not incentive stock
options; provided, however, that this rule shall be applied by taking
options into account in the order or sequence in which they were
granted.
(2) For purposes of computing the annual limitation, the fair
market value of Common Stock of the Corporation granted under this Plan
shall be aggregated with the fair market value of any other stock of
the Corporation granted to such optionee under this Plan
7
<PAGE>
or any other plan or plans maintained by the Corporation.
(I) Rights as a Stockholder
An Optionee shall have no rights as a stockholder with respect to any
shares covered by his Option until the date of issuance of a stock certificate
to him for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Article 5(G) hereof.
(J) Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations of the
Plan, the Board of Directors may modify, extend or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution therefore (to the extent not theretofore exercised). However, no
modification of an Option shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option theretofore granted under the
plan.
(K) Investment Purposes
Each Option under the Plan shall be granted on the condition that the
purchases of Common Stock thereunder shall be for investment purposes, and not
with a view to resale or distribution, except that in the event the Common Stock
subject to such Option is registered under the Securities Act of 1933, as
amended, or in the event a resale of such stock without such registration would
otherwise be permissible, such condition shall be inoperative if in the opinion
of counsel for the Corporation such condition is not required under the
Securities Act of 1933 or any other applicable law, regulation or rule of any
governmental agency. Each Optionee shall give to the Company an investment
letter, in a form prescribed by the Board of Directors, as a condition precedent
to the issuance of certificates representing shares exercised by such Optionee.
(L) Other Provisions
The Option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the exercise
of the Option, as the Compensation Committee and the Board of Directors of the
Corporation shall deem advisable. Any such Option agreement shall contain such
limitations and restrictions upon the exercise of the Option, and the amount of
such Option, as shall be necessary in order that such Option will be an
"incentive stock Option" as defined in Section 422 of the Code or to conform to
any change in the law.
6. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever
8
<PAGE>
is earlier.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Corporation against
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is
liable for negligence or misconduct in the performance of his duties; provided
that within 60 days after institution of any such action, suit, or proceeding a
Committee member shall in writing offer the Corporation the opportunity at its
own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted by
law, from time to time, with respect to any share at the time not subject to
Options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall change the number of shares subject to the Plan, change the
designation of the class of employees eligible to receive Options, decrease the
price at which Options may be granted, remove the administration of the Plan
from the Compensation Committee, or render any member of the Compensation
Committee eligible to receive an Option under the Plan while serving thereon.
Furthermore, the Plan may not, without the approval of the stockholders, be
amended in any way that will cause Options issued under it to fail to meet the
requirements of incentive stock Options as defined in Section 422 of the Code.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
issued pursuant to Options will be used for general corporate purposes.
10. GRANTING OF OPTIONS.
The granting of any option pursuant to this Plan shall be entirely in
the discretion of the Compensation Committee and nothing herein contained shall
be construed to give any employee any right to participate under this Plan or to
receive any option under it. The granting of an option shall impose no duty upon
the Optionee to exercise such option.
9
<PAGE>
Neither the adoption and maintenance of the Plan nor the granting of an
option pursuant to this Plan shall be deemed to constitute a contract of
employment between the Corporation and any employee or to be a condition of the
employment of any person. Nothing herein contained shall be deemed to (a) give
to any employee the right to be retained in the employ of the Corporation; (b)
interfere with the right of the Corporation to discharge or retire any employee
at any time; (c) give to the Corporation the right to require an employee to
remain in its employ; or (d) interfere with the employee's right to terminate
his employment at any time.
11. INTERPRETATION.
The terms of this Plan are subject to all present and future
regulations and rulings of the Secretary of the Treasury or his delegate
relating to the qualification of Incentive Stock Options under Section 422 of
the Code. If any provision of the Plan conflicts with any such regulation or
ruling, that provision of the Plan shall he void and of no effect. As used in
this Plan, each person of either gender when appropriate, shall be interpreted
as a reference to either gender. He singular shall be construed as including the
plural and the plural the singular as the sense requires.
12. EFFECTIVE DATE: APPROVAL OF STOCKHOLDERS
The Plan shall not take effect until approved by the holders of a
majority of the outstanding shares of Common Stock of the Corporation, which
approval must occur within the period beginning twelve months before and ending
twelve months after the date the Plan is adopted by the Board of Directors.
Adopted this _______ day of
December 1999, by the Board
of Directors and Shareholders
INTEGCOM CORP.
by: ________________________
President
10
<PAGE>
INTEGCOM CORP.
--------------
Incentive Stock Option Agreement
Agreement made this __ day of. ______, 1999 between IntegCom Corp., a
Delaware Corporation (the "Company" or "ITC"), ________________, an employee of
the Company residing at _______________(the "Employee").
NOW THEREFORE in consideration of the premises, it is agreed by and
between the parties hereto as follows:
1. Grant of Option
The Company hereby grants the Employee the right, privilege and Option
to purchase up to _____ of its shares of Common Stock, par value $__ per share,
at an exercise price of $___ per share in the manner and subject to the terms
and conditions provided herein and in the Company's Incentive Stock Option Plan
(the "Plan") dated December 30, 1999. Any conflict between the terms and
conditions of the Plan and those of this Agreement shall be resolved in
accordance with the Plan.
2. Times of Exercise
The Option covered by this Agreement may be exercised by the Employee
at any time from the date hereof until ________ __, ____ in whole or in part or
until its expiration or termination as provided herein or in the Plan, provided
further that:
(A) If Employee, on the date hereof owns stock of the Corporation
possessing more than 10% of the total voting power of all classes of stock of
the Corporation, the Option covered by this Agreement may be exercised by the
Employee from the date hereof until not more than five (5) years after the date
hereof. For purposes of this Section 2, stock ownership and voting power shall
be determined as provided in the Plan.
(B) The option granted vests and may be only exercisable at the rate of
33 1/3% of the shares covered hereby per year at each anniversary date.
3. Method of Exercise
The Option shall be exercised by delivering a written notice of an
intent to exercise to a member of the Compensation Committee at the Company's
principal offices, accompanied by the purchase price, in United States Dollars,
for the number of shares of Common Stock of the Company specified to be
purchased. Unless otherwise authorized in writing on behalf of the Compensation
Committee, the purchase price will be paid by bank check, money order or the
<PAGE>
Employee's personal check. The written notice of intent to exercise shall
indicate the number of shares to be purchased and the total exercise price
applicable thereto. The Company shall, within 30 days of receiving such notice
and the purchase price, whichever is later, deliver a stock certificate(s) in
the appropriate number of shares. The date of delivery of such stock
certificate(s) may be extended by mutual agreement of the Company and the
Employee or due to any law or regulation which may require the Company to take
action with respect to the shares covered by such notice prior to issuance
thereof.
4. Termination of Option
Except as otherwise stated herein or the Plan, the Option, to the
extent that it has not been exercised, shall terminate upon the occurrence of
any of the following events:
(A) Upon the Employee's termination of employment which is a voluntary
termination of employment, other than upon retirement;
(B) Within thirty (30) days after the Employee's termination of
employment which is an involuntary termination of employment;
(C) Within three (3) months after either the Employee's retirement or
his termination by reason of a disability;
(C) Within one year after the Employee's death -- and in such case,
only by his or her executor, administrator or personal representative -- but
only to the extent that such Option was exercisable as of the date of death of
such employee; or
(D) Upon the occurrence of any event described in subparagraphs
(D)(6)(a) through (i) of Article 5.
(E) _________, 200_ (representing the expiration of five years from the
grant of this Option).
For these purposes, the terms "voluntary termination of employment",
"retirement" "involuntary termination of employment" and "retirement" and
"disability" have the same meanings they do in the Plan.
Notwithstanding any other provision of this option, the Board of
Directors has retained the right, exercisable at its sole discretion, to cause
the Corporation to redeem any accrued but unexercised Options of any Optionee
whose employment with the Corporation has been terminated or of an Optionee who
is the personal representative or beneficiary of a deceased former employee of
the Corporation, by paying to such Optionee an amount equal to the difference
between the Option price and the then fair market value of the stock, as
determined in accordance with Article 5(B) of the Plan.
2
<PAGE>
The Compensation Committee will interpret the Plan and events to
determine which, if any, paragraphs of this Section 4 shall apply, and if and
when an event described in subparagraphs (E)(6)(a) through (j) of Article 5 has
occurred.
5. Reclassification. Consolidation or Merger
This Option is subject to certain anti-dilution provisions set forth in
the Plan concerning, among other things, increases or decreases in the number of
shares outstanding, merger, consolidation, changes in common stock as presently
constituted.
6. Rights Prior to Exercise of Option
This Option is non-assignable and non-transferable by the Employee,
except in the event of his or her death as specified in the Plan. During the
Employee's lifetime it is exercisable only by him or her. The Employee shall
have no rights as a stockholder of the Company merely because he or she has been
granted this Option. Such rights only accrue upon exercise of the Option, in
whole or In part, payment of the appropriate exercise price, and issuance and
delivery of the underlying shares as provided in this Agreement.
7. Restrictions on Dispositions
All shares acquired by the Employee shall be deemed restricted
securities as that term is defined under the Securities Act of 1933, as amended
(the " Act"), and may not be sold or transferred unless certain conditions are
met. It is understood that the shares so acquired hereunder are to be purchased
for investment only and not with a view to, or for, sale in connection with any
public offering or distribution. The stock certificates representing such shares
shall contain a legend delineating all the restrictions to which such shares are
subject.
8. Plan and Its Amendment
This Option has been granted pursuant to the Plan which was adopted by
the Company's Board of Directors and its shareholders. The option is subject to
all terms and conditions of the Plan including but not limited to those
concerning amendment and the term of the Plan.
9. Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
assigns. The laws of the State of New Jersey shall govern the interpretation and
enforceability of this Agreement.
3
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
on the day and year first above written.
INTEGCOM CORP.
BY:_____________________
President
AGREED AND ACCEPTED
as of the date first written above
BY:
- ----------------------------
Employee
4
<PAGE>
L E A S E A G R E E M E N T
Between
MIDLAND HOLDING CO., INC.
Landlord,
-and-
HENRY BROS. ELECTRONICS, INC.
Tenant.
-----------------------------------
DATED: July 15, 1990
-----------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<Captions>
Article Topic Page
- ------- ----- ----
<S> <C> <C>
I Description of Premises.................................. 1
II Term of Lease............................................ 1
III Rent..................................................... 2
IV Taxes, Assessments, Utility Charges...................... 2
V Use and Occupancy........................................ 3
VI Alteration, Maintenance and Repair....................... 5
VII Indemnification and Subrogation.......................... 6
VIII Insurance................................................ 6
IX Damage or Destruction.................................... 7
X Eminent Domain -- Condemnation........................... 7
XI Default and Remedies..................................... 8
XII Security................................................. 9
XIII Assignment and Subletting................................ 10
XIV Subordination............................................ 11
XV Bankruptcy............................................... 11
XVI Expiration of Lease...................................... 11
XVII Inspection and Exhibition................................ 12
XVIII Ingress and Egress....................................... 12
XIX Notice................................................... 13
XX Recordation.............................................. 13
XXI Limitation of Landlord's Liability....................... 13
XXII Brokerage Commissions.................................... 13
XXIII Estoppel Certificates.................................... 13
XXIV Governmental Permits..................................... 14
XXV Quiet Enjoyment.......................................... 14
XXVI Force Majeure............................................ 14
XXVII Miscellaneous............................................ 14
XXVIII Rider.................................................... 16
</TABLE>
<PAGE>
L E A S E A G R E E M E N T
THIS LEASE, made and entered into this 15th day of JULY, 1990 by and
between
MIDLAND HOLDING CO., INC. (hereinafter "Landlord"), a New Jersey Corporation
having an address for the purposes hereof at 280 N. Midland Avenue, Saddle
Brook, New Jersey 07662,
and
HENRY BROS. ELECTRONICS, INC. (hereinafter "Tenant"), a New Jersey Corporation
having an address for the purposes hereof at
East 64 Midland Avenue
Paramus, New Jersey 07652
WITNESSETH:
ARTICLE I
DESCRIPTION OF PREMISES
LANDLORD, for and in consideration of the rents to be paid and of the
covenants and agreements hereinafter mentioned, to be kept and performed by
TENANT, does hereby lease, demise and let unto TENANT, and TENANT does hereby
hire and accept from Landlord, the following described premises (sometimes
hereinafter referred to as the "demised premises"), situated in the Township of
Saddle Brook, County of Bergen, State of New Jersey:
Approximately 17,055 square feet in a building
presently existing at 280 N. Midland Avenue,
Saddle Brook, New Jersey, known as "Building M-2"
as shown on the diagram annexed hereto as Exhibit
A, in an area commonly referred to as Zuckerberg's
Industrial Park, and more particularly described
as a portion of Block 1202, Lot 32.01 of the
Township of Saddle Brook Tax Assessment Map, to
include parking for twenty-five (25) vehicles.
ARTICLE II
TERM OF LEASE
2.1 The term of this lease shall be for a period of FIVE (5) years
commencing SEPTEMBER 1, 1990 and expiring
AUGUST 31, 1995
2.2 Provided that TENANT is not in default in the performance of any of the
terms, conditions and covenants of this Lease, TENANT shall have the option to
negotiate a new lease for the demised premises, for an additional five years.
2.3 The option shall be exercised, if at all, by Tenant giving written
notice to Landlord of its election to renegotiate this Lease at least six (6)
months prior to the expiration of said lease.
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ARTICLE III
RENT
3.1 TENANT covenants and agrees to pay to LANDLORD as fixed rental on
the demised premises the sum of SEVENTY-TWO THOUSAND FOUR HUNDRED EIGHTY and
00/100 ($72,480.00) per annum, without demand, set-off or deduction of any
kind.
3.2 The rent shall be paid in advance in equal monthly installments of
SIX THOUSAND FORTY DOLLARS and 00/100********************** ($6,040.00) on
or before the first day of each month, the rent to begin on
OCTOBER 1, 1990
3.3 The rent reserved hereunder shall be paid to LANDLORD without any
claim on the part of TENANT for diminution or abatement. TENANT'S obligation
to pay rent hereunder and to perform the covenants and agreements on its
part to be performed hereunder, shall in no way be affected, impaired or
excused in any respect because the LANDLORD is unable, for any reason
whatsoever, to fulfill any of its obligations hereunder or because TENANT'S
use and occupancy shall be disturbed or prevented from any cause whatsoever,
shall be disturbed or prevented from any cause whatsoever, except the LANDLORD'S
acts, or as otherwise specifically provided in this Lease.
3.4 All rents shall be payable at the office of LANDLORD, MIDLAND HOLDING
CO., INC. 280 N. Midland Avenue, Saddle Brook, New Jersey 07662,
or at such other place as LANDLORD may from time to time designate by notice
in writing.
3.5 Whenever under the terms of the Lease any sum of money is required
to be paid by TENANT in addition to the rental reserved, and said additional
amount so to be paid is not designated as "additional rent," then said amount
shall nevertheless, at the option of LANDLORD, if not paid when due, be deemed
"additional rent" and collectible as such with any installment of rental
thereafter falling due hereunder. Nothing herein contained shall be deemed to
suspend or delay the payment of any sum at the time the same becomes due and
payable hereunder, or limit any other remedy of LANDLORD.
ARTICLE IV
TAXES, ASSESSMENTS, UTILITY CHARGES
4.1 As additional rental, TENANT agrees to reimburse LANDLORD a portion
of real estate taxes as follows: TENANT shall pay a "base tax" of FIVE
THOUSAND ONE HUNDRED TWENTY and 00/100 ($5,120.00) per annum for Building H-2
plus the percentage increase for Block 1202 - Lot 32.03 based on the year 1989.
Notices shall be delivered to TENANT on or before July 1st of each year and
reimbursement shall be made to LANDLORD within ten (10) days of receipt of
such notice. In the event that the Township of Saddle Brook performs a
reevaluation of the municipality, the base tax shall be adjusted accordingly.
Tax reimbursement shall commence on JULY 1, 1991.
4.2 Utilities and services, including but not limited to gas, oil, water,
sewerage and electricity, furnished to the demised premises for the benefit of
TENANT shall be provided and paid for by TENANT, LANDLORD shall not be liable
for any interruption or delay in any utility for any reason.
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<PAGE>
ARTICLE V
USE AND OCCUPANCY
5.1 TENANT has leased the demised premises after a full and complete
examination thereof, and TENANT accepts the same without any representation or
warranty, express or implied, in fact or by law, by LANDLORD and without
recourse to LANDLORD, as to the nature, condition or usability thereof or the
use or uses to which the demised premises or any part thereof may be put.
5.2 TENANT shall use and occupy the premises for the purpose of operating
its business including Corporate offices, sales offices, warehousing, repair and
manufacture of electronic equipment, and related items.
5.3 TENANT shall not use the premises for any other purpose without the
prior written consent of LANDLORD, which shall not be unreasonably withheld.
5.4 Notwithstanding the foregoing, TENANT shall not use or occupy or permit
the demised premises to be used or occupied, nor do or permit anything to be
done in or on the demised premises, in whole or in part, in a manner which would
in any way:
(i) violate any certificate of occupancy affecting the demised
premises;
(ii) make void or voidable any insurance then in force with respect to
the demised premises;
(iii) make it impossible to obtain fire or other insurance required to
be furnished by TENANT hereunder;
(iv) cause structural injury to any part of the demised premises;
(v) constitute a public or private nuisance;
(vi) interfere with the rights of other tenants;
(vii) suffer any waste or damage or injury to any building or
improvement now or hereafter on the demised premises, or the fixtures or
equipment hereof, or permit or suffer any overloading of the floors or roofs
thereon.
(viii) violate any present or future law, regulation, or requirement of
any governmental, public or quasipublic authorities at any time having
jurisdiction of the demised premises. TENANT shall maintain the demised premises
in compliance with all of the foregoing during the term of this Lease.
5.5 (a) TENANT agrees to observe and comply with all present or future
laws, ordinances, rules and regulations of the Federal, State, County, and
Municipal authorities applicable to the business to be conducted by TENANT in
the demised premises.
(b) TENANT shall indemnify, defend and save harmless LANDLORD from all
fines, suits, procedures, claims and actions of any kind arising out of or in
any way connected with TENANT'S non-compliance or violation of any of the
aforementioned.
(c) Should any situation at the demised premises be deemed hazardous or
otherwise unacceptable by any governmental authority, such situation may be
remedied by LANDLORD at TENANT'S sole expense. Any amounts so expended by
LANDLORD shall be owed by TENANT as additional rent.
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(d) LANDLORD'S right to remedy any hazardous situation hereby given
shall in no way be deemed to impose a duty on LANDLORD to inspect the demised
premises for such situations.
5.6 (a) TENANT shall, at TENANT'S own expense, comply with the
Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 et seq. and the
regulations promulgated thereunder (hereinafter "ECRA"). TENANT shall, at
TENANT's own expense, make all submissions to, provide all information to, and
comply with all requirements of, the Bureau of Industrial Site Evaluation
(hereinafter "the Bureau") of the New Jersey Department of Environmental
Protection (hereinafter "DEP"). Should the Bureau or any other division of NJDEP
determine that a cleanup plan be prepared and that a cleanup be undertaken
because of any spills or discharges of hazardous substances or wastes at the
premises which occur during the term of this Lease, then TENANT shall, at
TENANT's own expense, prepare and submit the required plans and financing
assurances, and carry out the approved plans. TENANT'S obligations under this
part shall arise if there is any closing, terminating or transferring of
operations of an industrial establishment at the demised premises pursuant to
ECRA.
(b) At no expense to LANDLORD, TENANT shall promptly provide all
information requested by LANDLORD for preparation of non-applicability
affidavits and shall promptly sign such affidavits when requested by LANDLORD.
(c) TENANT shall indemnify, defend and save harmless LANDLORD from all
fines, suits, procedures, claims and actions of any kind arising out of or in
any way connected with any spills or discharges of hazardous substances or
wastes at the demised premises which occur during the term of this Lease, and
from all fines, suits, procedures, claims and actions of any kind arising out of
TENANT'S failure to provide all information, make all submissions and take all
actions required by the Bureau or any other division of NJDEP.
(d) TENANT'S obligations and liabilities under this section shall
continue so long as LANDLORD remains responsible for any spills or discharges or
hazardous substances or wastes at the demised premises which occur during the
term of this Lease.
(e) TENANT'S failure to abide by the terms of this section shall be
restrainable by injunction.
5.7 (a) TENANT shall promptly provide LANDLORD with all documentation and
correspondence provided to NJDEP pursuant to the Worker and Community Right to
Know Act, N.J.S.A. 34:5A-1 et seq. and the regulations promulgated thereunder.
(b) TENANT shall promptly supply to LANDLORD all reports and notices
made by TENANT pursuant to the Hazardous Substance Discharge--Reports and
Notices Act, N.J.S.A. 13:1K-15 et seq. and the regulations promulgated
thereunder.
(c) TENANT shall promptly supply LANDLORD with any notices,
correspondence and submissions made by TENANT to NJDEP, the United States
Environmental Protection Agency, the United States Occupational Safety and
Health Administration, or any other local, state or federal authority which
requires submission of any information concerning environmental matters or
hazardous wastes or substances.
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<PAGE>
ARTICLE VI
ALTERATION, MAINTENANCE AND REPAIR
6.1 Except as otherwise provided in this Lease, throughout the term of this
Lease LANDLORD shall not be required to furnish any services or facilities or to
make any repairs or alterations in or to the demised premises, TENANT hereby
accepting said premises "as is" and assuming the full and sole responsibility
for the condition, operation, repair, replacement, maintenance and management of
the entire demised premises.
6.2 (a) TENANT agrees to keep the exterior doors and the interior portion
of the demised premises including, but not limited to, the plumbing, heating,
air conditioning, wiring, windows and sprinklers, in as good order and repair
as it is on the date TENANT obtains possession of the premises, reasonable
wear and tear and damage caused by LANDLORD and its agents, and damage by fire,
explosion, storm or other casualty excepted.
(b) TENANT shall keep the demised premises and the area adjacent
thereto, including any landscaped area, in a clean and sanitary condition and
free from litter, debris, trash, and other objectionable matter.
(c) TENANT shall maintain in good repair those exterior improvements,
if any, which TENANT caused to be erected upon the demised premises.
(d) At all times during the term of this Lease, TENANT shall keep and
maintain in good condition and repair and shall keep clean and cleared of snow
and ice all that portion of the parking area designated on Exhibit A annexed
hereto, at the sole cost and expense of TENANT.
6.3 LANDLORD shall, at its expense, maintain and repair, if necessary and
upon reasonable notice by Tenant, the structural supports and exterior of the
demised premises including, but not limited to, the foundation, exterior walls,
roof, cornices, guttering, downspouts, all utility and sewer line connections to
the demised premises, the sidewalks, driveways, loading and parking areas,
except for any repairs caused by the wrongful act of TENANT and its agents.
6.4 (a) Upon obtaining the prior written consent of LANDLORD, TENANT shall
have the right to make, at its sole cost and expense, additions, alterations and
changes in and to the demised premises, provided that TENANT shall not then be
in default in the performance of any of TENANT'S covenants or agreements in this
Lease.
(b) No sign, advertisement or notice shall be affixed to or placed upon
any part of the demised premises by TENANT, except in such manner, and of such
size, design and color as shall conform to government regulations and be
approved in advance in writing by LANDLORD, which approval shall not be
unreasonably withheld.
(c) If a mechanic's lien is filed against the demised premises as a
result of erections, alterations, additions or improvements made by TENANT, then
LANDLORD may, at its sole option, upon thirty (30) days' notice to TENANT
terminate this Lease, and may discharge said lien without inquiring into the
validity thereof, and TENANT shall forthwith reimburse LANDLORD for the total
expenses, including but not limited to attorney's fees, incurred by LANDLORD in
discharging the same.
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ARTICLE VII
INDEMNIFICATION AND SUBROGATION
7.1 LANDLORD shall not be responsible for the loss of or damage to
property, or injury to persons, occurring in or about the demised premises, by
reason of any existing or future condition, defect, matter, or thing on said
premises or the property of which the premises are a part, or for the acts,
ommissions or negligence of other persons or tenants in and about the said
property.
7.2 TENANT agrees to indemnify and save LANDLORD harmless from all claims
and liability for losses of or damage to property, or injuries to persons
occurring in or about the demised premises.
7.3 To the extent TENANT carries hazard insurance on the demised premises
or on the property therein, whether or not required hereby, each such policy of
insurance shall contain a provision waiving subrogation against LANDLORD. TENANT
hereby releases LANDLORD from any liability which LANDLORD may have for damages
by fire or other casualty with respect to which TENANT shall be insured under a
policy of insurance containing such provision waiving subrogation.
ARTICLE VIII
INSURANCE
8.1 (a) LANDLORD will insure, and keep insured during the term of this
Lease, the demised premises against loss or damage by fire and such other
casualties and events as may be procurable now or hereafter under extended
coverage in an amount sufficient to prevent LANDLORD from becoming a co-insurer
under the terms of the applicable policies.
(b) TENANT agrees to pay all premium increases in fire and extended
coverage insurance premiums upon the demised premises if the increase is caused
by any unauthorized use or neglect of TENANT or the nature of TENANT'S business.
(c) TENANT further agrees to insure and keep insured during the term of
this Lease, at its sole cost and expense, policies of insurance insuring all
improvements, additions, fixtures and contents installed or owned by TENANT in
or on the demised premises.
(d) TENANT shall carry fire and extended coverage and vandalism
insurance on TENANT'S contents contained in the demised premises.
8.2 TENANT shall purchase from and keep in force during the term of this
Lease public liability insurance providing coverage in the minimum amounts of
$500,000.00 against liability or injury to or death of any one person,
$1,000,000.00 against liability for personal injury arising out of any one
accident or occurrence, and $500,000.00 for property damage.
8.3 (a) TENANT agrees to deliver to LANDLORD, at least fifteen (15) days
prior to the time any insurance is first required to be carried by TENANT, and
thereafter at least fifteen (15) days prior to when renewal is required, either
a duplicate original or a CERTIFICATE OF INSURANCE and a true and certified copy
of all policies procured by TENANT in compliance with its obligations hereunder,
together with evidence of payment therefor.
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<PAGE>
(b) All of said policies shall name LANDLORD as an "ADDITIONAL INSURED"
party and shall be in form and with insurance companies satisfactory to
LANDLORD.
(c) All such policies shall contain an endorsement stating that such
insurance may not be cancelled or amended except upon not less than thirty (30)
days prior written notice to LANDLORD.
(d) Upon TENANT'S failure to deliver a CERTIFICATE OF INSURANCE or
other proof of insurance as required by this Lease, LANDLORD shall have the
right to obtain any insurance required to protect LANDLORD'S interests, pay the
premiums therefor, and add said premiums to the monthly installment of rent next
due.
ARTICLE IX
DAMAGE OR DESTRUCTION
9.1 LANDLORD agrees that if the demised premises shall, during the term of
this Lease, be damaged by fire, explosion, storm, flood or other casualty, and
the damage is such as in the judgment of TENANT not to unreasonably hinder the
occupancy by TENANT in the normal conduct of its business, then LANDLORD shall,
at no expense to LANDLORD except to the extent of resulting insurance proceeds
collected by LANDLORD, repair the damage as soon as possible and restore the
demised premises to the same physical condition as it was immediately prior to
the damage.
9.2 If the demised premises shall be damaged as aforesaid to the extent
that TENANT cannot use and enjoy the same in the normal conduct of its business,
but repairs may reasonably be made and completed thereon so as to render the
premises suitable for use and occupancy by TENANT within a period of one hundred
twenty (120) days from the date of such damage, and more than twenty (20%)
percent of the term of this Lease remains, then and in that event LANDLORD
shall, at no expense to LANDLORD except to the extent of resulting insurance
proceeds collected by LANDLORD, promptly make the required repairs within said
period and the rent during the time required for the making of the repairs shall
be proportionately abated, taking into account the area of the demised premises
rendered unsuitable for use and occupancy by TENANT. Upon completion of repairs,
the full rents shall be reinstated.
9.3 In the event that the demised premises shall be totally destroyed by
fire, explosion, storm, floor or other casualty, or in the event that the
premises shall be so substantially destroyed that it cannot be repaired or
rendered fit for occupancy by TENANT in its normal course of business within a
period of one hundred twenty (120) days from the date of such damage, then this
Lease, at the option of either LANDLORD or TENANT, may be terminated, and
neither LANDLORD nor TENANT shall after such termination, be liable hereunder.
In the event of such termination, any rents paid by TENANT for occupancy
subsequent to such termination shall be returned by LANDLORD to TENANT.
ARTICLE X
EMINENT DOMAIN -- CONDEMNATION
10.1 If the entire demised premises shall be permanently taken under the
exercise of the power of eminent domain by any competent governmental authority,
or sold under the threat of the exercise of said power (all of which are herein
called condemnation), this Lease shall terminate as of the date the condemning
authority takes title or possession, whichever first occurs.
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10.2 If less than the entire demised premises shall be permanently taken
under the exercise of the power of eminent domain, LANDLORD, at its expense,
shall restore the remaining portion of the demised premises to the extent
necessary to render it a complete architectural unit suitable for the purposes
herein leased, and this Lease shall remain in full force and effect as to the
remaining portion of the premises, except that the rent shall be reduced in the
proportion that the area of the demised premises taken bears to the total area
of the demised premises.
10.3 Notwithstanding the foregoing, in the event more than thirty (30%)
percent of the demised premises is permanently taken, TENANT shall have the
option to terminate this Lease on thirty (30) days prior written notice to
LANDLORD, and rent shall be apportioned and paid by TENANT as of the date of
termination.
10.4 In the event of any taking, whether total or partial, permanent or
temporary, TENANT shall have no claim in or to any award of damages for such
taking. TENANT hereby expressly assigns any and all of its right, title, and
interest in and to such award or any part thereof, to LANDLORD.
10.5 TENANT may prosecute a separate action or proceeding for the value of
its improvements, fixtures, relocation expenses, loss of good will or any other
value lost as a result of such taking, provided same in no way reduces
LANDLORD'S award, or impairs or impedes LANDLORD'S proceeding regarding its
award.
ARTICLE XI
DEFAULT AND REMEDIES
11.1 (a) If TENANT shall fail to pay any rent when due or within ten (10)
days thereafter, or if TENANT shall continue to default in the performance of
any other covenant, agreement, term, provision or condition herein contained for
thirty (30) days after receipt of written notice from LANDLORD specifically
describing such failure on TENANT'S part, or if TENANT shall abandon, vacate or
surrender the premises, then the LANDLORD may, at its option, cause the
forfeiture and termination of this Lease.
(b) Possession of the demised premises and all permanent improvement
and additions shall be delivered to LANDLORD within ten (10) days after TENANT
receives notice from LANDLORD that it has exercised said option to terminate,
LANDLORD shall promptly take all reasonable steps to secure a new tenant, and
make a diligent effort to obtain a good rental, and should said rental be less
than the rent reserved hereunder, TENANT shall pay LANDLORD, monthly in advance
on the first day of each month, the difference between the rent so realized and
the rental reserved hereunder for the balance of the term of this Lease, or the
entire monthly rental reserved hereunder during the period LANDLORD has not been
able to secure a new tenant, whichever is greater, together with all other
damages, costs, expenses and reasonable attorney's fees incurred by LANDLORD as
a result of TENANT'S default.
(c) Should TENANT fail to pay any rent when due or within ten (10)
days thereafter, then and in such event interest on the amount of said rent at
the rate of fifteen (15%) percent per annum to the date of payment shall be
deemed additional rent due by TENANT under this Lease and shall be promptly paid
by TENANT to LANDLORD.
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(d) Should TENANT fail to make any repair or replacement provided
herein or shall TENANT fail to pay any taxes or make any other payment required
to be made under this Lease, then and in such event LANDLORD may, but shall not
be required to, make any such repair or replacement at the expense of TENANT, or
make any other payments required to be made by TENANT hereunder, and any amount
so paid or expended by LANDLORD, together with interest on such sums and
expenses from the date of payment by LANDLORD until payment in full at the rate
of fifteen (15%) percent per annum to the date of payment, shall be deemed
additional rent due by TENANT under this Lease and shall be promptly paid by
TENANT to LANDLORD.
11.2 (a) LANDLORD may restrain any breach or threatened breach of any
covenant, agreement, term, provision or condition herein contained, but the
mention herein of any particular remedy shall not preclude LANDLORD from any
other remedy it might have, either in law or in equity.
(b) The failure of LANDLORD to insist upon the strict performance of
any one of the terms of this Lease or to exercise any right, remedy or election
herein contained or permitted by law shall not constitute or be construed as a
waiver or relinquishment for the future of such term, right, remedy or election,
but the same shall continue and remain in full force and effect.
(c) Any right or remedy that LANDLORD may have at law, in equity or
otherwise upon breach by TENANT of any covenant contained in this Lease, shall
be distinct, separate and cumulative rights or remedies and no one of them
whether exercised by LANDLORD or not, shall be deemed to be in exclusion of any
other.
(d) No term of this Lease shall be deemed to have been waived by
LANDLORD unless such waiver is in writing, signed by LANDLORD or LANDLORD'S
agent duly authorized in writing. Receipt or acceptance of rent or additional
rent by LANDLORD shall not be deemed to be a waiver of any default under this
Lease, or of any right which LANDLORD may be entitled to exercise under this
Lease.
11.3 In the event that LANDLORD shall fail to preform any of the covenants
of this Lease, TENANT shall serve written notice on LANDLORD specifically
describing such failure on LANDLORD'S part. LANDLORD shall have thirty (30) days
from receipt of such notice within which to cure any such failure so described.
If at the expiration of such thirty (30) days such failure on LANDLORD'S part
shall not be cured, it shall, at the option of the TENANT, cause the forfeiture
and termination of this Lease without further notice, and TENANT shall have no
further liability hereunder, and LANDLORD shall return to TENANT any rents paid
for occupancy subsequent to such termination.
ARTICLE XII
SECURITY
12.1 Simultaneously herewith, TENANT has deposited with LANDLORD **SEE
RIDER**, the equivalent of three (3) months rental, as security for the faithful
performance and observance by TENANT of the terms, provisions and conditions of
this Lease. It is agreed that in the event TENANT defaults in this respect to
any of the terms, provisions and conditions of this Lease, including without
limitation the payment of fixed or additional rent, LANDLORD may use, apply or
retain all or any portion of the security so deposited, to the extent so
required for the payment of any fixed and/or additional rent and all other sums
as to which TENANT is in default, and for all sums which LANDLORD has expended
or may be required to expend by reason of TENANT'S
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default in respect to any of the terms, covenants and conditions of this Lease,
including without limitation all damages and deficiencies arising from the
reletting of the demised premises, whether such damages or deficiencies arose
before, during or after summary proceedings or other reentry by LANDLORD or
otherwise.
12.2 In the event that TENANT shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the aforesaid
security shall be returned to TENANT, without interest, upon the expiration of
the term of this Lease, and after delivery of the entire possession of the
demised premises to LANDLORD pursuant to the terms of this Lease.
12.3 In the event of a sale, assignment or transfer of LANDLORD'S interest
in the demised premises, LANDLORD shall have the right to deliver the security
to the transferee of the premises, and LANDLORD shall thereupon be released by
TENANT from all liability for the return of such security. TENANT agrees in such
event to look solely to the new Landlord for the return of said security.
12.4 TENANT further covenants that it will not assign or encumber the
monies deposited herein as security, and that neither LANDLORD nor its
successors or assigns shall be bound by any such actual or attempted assignment
or encumbrance.
ARTICLE XIII
ASSIGNMENT AND SUBLETTING
13.1 TENANT shall not assign, mortgage, pledge, encumber, or in any manner
transfer this Lease, or any part hereof, or sublease all or any part of the
demised premises, without the prior written consent of LANDLORD, which consent
shall not be unreasonably withheld.
13.2 In the event that this Lease or any part hereof is transferred, or all
or any part of the demised premises is subleased, without the prior written
consent of LANDLORD, TENANT shall be in default of this Lease and said Lease
may, at the option of LANDLORD, be terminated.
13.3 Should the demised premises be subleased with LANDLORD'S consent,
LANDLORD shall collect as additional rent from TENANT eighty (80%) percent of
any excess in the total rental charged by TENANT over the fixed rental reserved
under this Lease.
13.4 (a) As a condition precedent to TENANT'S sublease of the demised
premises or assignment of this Lease, TENANT shall, at TENANT'S own expense,
comply with ECRA.
(b) TENANT shall promptly furnish to LANDLORD true and complete copies
of all documents, submissions and correspondence provided by TENANT to the
Bureau and all documents, reports, directives and correspondence provided by the
Bureau to TENANT. TENANT shall also promptly furnish to LANDLORD true and
complete copies of all sampling and test results obtained from tests taken at
and around the demised premises.
(c) As a condition precedent to TENANT'S sublease of the demised
premises or assignment of this Lease, TENANT shall have received from the Bureau
either (i) a non-qualified approval of TENANT'S negative declaration or (ii) a
non-applicability letter, for which TENANT shall promptly apply pursuant to
ECRA.
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13.5 In the event of any voluntary or involuntary bankruptcy, arrangement,
plan of reorganization, assignment for the benefit of creditors or other
insolvency or related proceeding filed, instituted or conducted by, against or
otherwise on behalf of TENANT, the leasehold created hereby shall not be
assigned nor the demised premises sublet, nor shall either this leasehold or the
premises be otherwise conveyed or transferred, in whole or in part, to any party
without the prior written consent of LANDLORD, which consent shall not be
unreasonably withheld.
ARTICLE XIV
SUBORDINATION
14.1 LANDLORD shall have the right, at any time or from time to time during
the continuance of the lease, as security for any indebtedness with respect to
the demised premises, to mortgage or refinance a mortgage on said premises or
any part thereof.
14.2 This lease is subject and is hereby subordinated to all present and
future mortgages, deeds of trust and other encumbrances affecting the demises
premises or the property of which said premises is a part. This provision shall
be self-operative and no further instrument shall be required to subordinate
this Lease to any such mortgage or mortgages; however, TENANT will execute and
deliver such further instrument or instruments as may be desired by any
mortgagee or proposed mortgagee evidencing said subordination. TENANT hereby
irrevocably appoints LANDLORD the attorney-in-fact of TENANT to execute and
deliver any such instrument or instruments for TENANT.
14.3 LANDLORD shall use its best efforts to obtain from all future
mortgagees a non-disturbance agreement in favor of TENANT for so long as TENANT
is not in default under this Lease, and provided TENANT agrees to attorn to the
said mortgagee in the event it comes into possession of the demised premises.
ARTICLE XV
BANKRUPTCY
If at any time during the term of this Lease TENANT shall make any
assignment for the benefit of creditors, or be decreed insolvent or bankrupt
according to law, or if a receiver shall be appointed for TENANT, then LANDLORD
may, at its option, terminate this Lease, exercise of such option shall be
evidenced by notice to that effect served upon the assignee, receiver, trustee
or other person in charge of the liquidation of the property of TENANT or
TENANT'S estate, but such termination shall not release or discharge any payment
of rent payable hereunder and then accrued, or any liability then accrued by
reason of any agreement of covenant herein contained on the part of TENANT.
ARTICLE XVI
EXPIRATION OF LEASE
16.1 upon the expiration of the term of this Lease or on the sooner
termination thereof, TENANT shall peaceably and quietly leave, surrender and
yield up unto LANDLORD all the demised premises free of occupants.
-11-
<PAGE>
16.2 TENANT may remove from the demised premises any decorations,
furniture, shelving, fixtures and equipment which TENANT shall, at its own
expense, have installed in the premises. Any damage caused to the demised
premises by such removal shall be repaired at TENANT'S expense.
16.3 Any removable property of TENANT which shall remain in or upon the
demised premises after the termination or expiration of this Lease and the
removal of TENANT from the premises may, at the option of LANDLORD, be deemed to
have been abandoned, and either may be retained by LANDLORD as its property, or
may be disposed of in such manner as LANDLORD may see fit, at the sole expense
of TENANT.
16.4 At the termination or expiration of this Lease, all erections,
alterations, additions and improvements, whether temporary or permanent in
character, which may be made upon the demised premises by any person, except
furniture, movable trade fixtures or movable machinery or equipment of TENANT,
shall, at LANDLORD'S option, either (i) become the property of LANDLORD, and
shall remain upon and be surrendered with the demised premises as a part thereof
without compensation to TENANT or to anyone else, or (ii) be removed by TENANT
at its sole cost and expense.
16.5 Notwithstanding anything to the contrary provided in this Lease, at
the expiration or earlier termination of the term hereof, TENANT shall deliver
the demised premises to LANDLORD in a clean and orderly condition, substantially
as it exists on the date hereof, ordinary wear and tear excepted.
16.6 TENANT agrees that during the six months prior to the expiration of
the term of this Lease, LANDLORD may place on the demised premises any usual or
ordinary "For Lease" or "For Sale" signs.
ARTICLE XVII
INSPECTION AND EXHIBITION
LANDLORD and its agents and invitees shall have the right at any reasonable
time to enter upon the demised premises for the purposes of inspection, posting
notices, showing to a prospective purchaser or tenant, or making any
alterations or repairs which LANDLORD shall deem necessary for the protection,
improvement or preservation of the premises or for any other lawful purposes.
ARTICLE XVIII
INGRESS AND EGRESS
LANDLORD hereby grants the right of ingress and egress to Midland Avenue, a
public road, to TENANT, its employees and all persons doing business with
TENANT. TENANT agrees that LANDLORD may post and enforce reasonable speed limits
and driving controls on any private road leading to said public road.
-12-
<PAGE>
ARTICLE XIX
NOTICE
Any notice herein required or permitted to be given must be in writing and
shall be deemed to have been given properly on the date of mailing by United
States registered or certified mail, postage prepaid, return receipt requested
and properly addressed to the addresses of the parties heretofore set forth or
to such addresses as a party shall specify to the other in like manner.
ARTICLE XX
RECORDATION
Neither this lease nor any short form or memorandum hereof shall be
recorded by TENANT. Such recordation shall be a default under this Lease, and
TENANT hereby irrevocably appoints LANDLORD its attorney in fact for the limited
purpose of causing the removal from the record of any such recordation.
ARTICLE XXI
LIMITATION OF LANDLORD'S LIABILITY
If LANDLORD or any successor in interest or assignee shall be an
individual, joint venture, tenancy in common, firm or partnership, general or
limited, or a trust, it is specifically understood and agreed that there shall
be no personal liability upon such individual or the members of the joint
venture, tenancy in common, firm or partnership, or the trustee(s) under such
trust or the beneficiaries thereunder, or upon such joint venture, tenancy in
common, firm, partnership or trust, in respect to any of the covenants or
conditions of this Lease. TENANT shall look solely to LANDLORD'S equity in the
demised premises for the satisfaction of the remedies of TENANT in the event of
a breach by LANDLORD'S equity in the demised premises for the satisfaction of
the remedies of TENANT in the event of a breach by LANDLORD of any of the terms,
covenants and conditions of the Lease to be performed by LANDLORD.
ARTICLE XXII
BROKERAGE COMMISSIONS
Each party warrants and represents to the other that no brokerage
commission is due to any person, firm or entity with respect to this Lease, and
each party agrees to indemnify and hold the other party harmless with respect to
any judgment, damages, legal fees, court costs and any and all liabilities of
any nature whatsoever arising from a breach of said representation.
ARTICLE XXIII
ESTOPPEL CERTIFICATES
Within ten (10) days of the request of either party, the other party shall
deliver a certificate to it, certifying to the best of its knowledge that (i)
this Lease has not been modified in any respect, or specifying the manner in
which it has been supplemented, amended or modified; (ii) this Lease is in
full force and effect, or if it is alleged that this Lease is not in full force
and effect, specifying the reasons therefor; (iii) there exists no default under
this Lease and no event or condition which with the giving of notice or lapse of
time, or both, would become a default under this Lease; and (iv) there are no
defenses or claims of any nature whatsoever by or on behalf of TENANT against
LANDLORD with respect to this lease.
-13-
<PAGE>
ARTICLE XXIV
GOVERNMENT PERMITS
TENANT shall at its own cost and expense, where necessary, immediately
apply and diligently seek to obtain any governmental permits or certificates
required for occupancy of for any other transaction or occurrence.
ARTICLE XXV
QUIET ENJOYMENT
LANDLORD covenants that it is lawfully seized of the demised premises and
of the parking area, driveways and footways and has good right and lawful
authority to enter into this Lease for the full term aforesaid, that LANDLORD
will put the TENANT in actual possession of the demised premises at the
beginning of the term hereof, and that TENANT, on paying the rent and performing
the other covenants herein agreed by it to be performed, shall and may peaceably
and quietly have, hold and enjoy the demised premises and use the appurtenances
thereto as hereinabove referred to for the said term.
ARTICLE XXVI
FORCE MAJEURE
26.1 The period of time during which LANDLORD is prevented from performing
any act required to be performed under this Lease by reason of fire,
catastrophe, labor difficulties, strikes, lock-outs, civil commotion, acts of
Nature or of the public enemy, governmental prohibitions or preemptions,
embargoes, inability to obtain materials or labor by reason of governmental
regulations or prohibitions, or other events beyond the reasonable control of
LANDLORD, as the case may be, shall be added to the time for performance of such
act, and neither party shall be liable to the other or in default under this
Lease as a result thereof.
26.2 The aforementioned provision shall not apply to or in any manner
extend or defer the time for any obligation to make payment of monies required
to either party hereunder.
ARTICLE XXVII
MISCELLANEOUS
27.1 This instrument and all of the rights and liabilities herein given to,
or imposed upon, the respective parties hereto shall extend to and be binding
upon the heirs, personal representatives, assigns and successors in interest of
the parties hereto.
27.2 The interpretation and validity of this Lease shall be governed by the
laws of New Jersey.
27.3 The provisions of this Lease are severable and if any provision,
clause, sentence, section or part thereof is held illegal, invalid,
unconstitutional or inapplicable to any person or circumstances, such
illegality, invalidity, unconstitutionality or inapplicability shall not affect
or impair any of the remaining provisions, sentences, clauses, sections or parts
of the Lease or their application to LANDLORD, TENANT or other persons or
circumstances.
-14-
<PAGE>
27.4 This Lease embodies the final and entire agreement and understanding
between the parties, supersedes all prior negotiations, agreements and
understandings, and neither LANDLORD nor TENANT nor their agents shall be bound
by any terms, conditions, statements, warranties or representations, oral or
written, not herein contained.
27.5 Any provision of this Lease may be modified, waived or discharged only
by an instrument in writing signed by the party against which enforcement of
such modification, waiver or discharge is sought.
27.6 The foregoing rights and remedies are not intended to be exclusive but
as additional to all rights and remedies LANDLORD would otherwise have by law.
27.7 The plural shall be substituted for the singular number in any place
herein in which the context may require such substitution.
27.8 The term "LANDLORD," as used in this Lease, means only the owner for
the time being of the demised premises, and in the event of a sale, assignment
or transfer by such owner of its interest in all or part of said premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of LANDLORD thereafter accruing with respect to the portion of the
premises so transferred; but such covenants and obligation shall be binding upon
each new owner for the time being of the demised premises or any part thereof.
27.9 The captions and headings herein are used for convenience of reference
only and shall not affect the interpretation of this lease.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
instrument the day and year first above written.
ATTEST: Landlord
Anthony A. D'Agostino By Nathan Zuckerberg
- ------------------------- ---------------------
Anthony A. D'Agostino Nathan Zuckerberg
Secretary President
Tenant
Irvin Witcosky, V.P./Sec. By James E. Henry, President
- ------------------------- -------------------------
Irvin Witcosky James E. Henry
Secretary President
-15-
<PAGE>
ARTICLE XXVIII
RIDER
28.1 Landlord shall repair or replace any heating or air conditioning units
in the demised premises that are not working, and guarantees each system for one
season.
28.2 Article XII, SECURITY, Paragraph 12.1 is amended as follows:
(a) $6,040.00 to be deposited with the Landlord upon the signing of
this agreement.
(b) $6,040.00 to be deposited with the Landlord on MARCH 1, 1991
(c) $6,040.00 to be deposited with the Landlord on SEPTEMBER 1, 1991.
The total security deposit with the Landlord shall be $18,120.00
All other terms and conditions of the original paragraph shall remain in
full force and effect except where herein modified.
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<PAGE>
EXHIBIT "A"
[MAP]
<PAGE>
LEASE EXTENSION AGREEMENT
THIS LEASE EXTENSION AGREEMENT is made this 20 day of March, 1998, by
and between MIDLAND HOLDING CO., INC., a New Jersey corporation, having an
office at 280 North Midland Avenue, Saddle Brook, New Jersey 07663 ("Landlord")
and HENRY BROS. ELECTRONICS, INC., a New Jersey corporation, having an office
at 280 North Midland Avenue, Saddle Brook, New Jersey 07663 ("Tenant").
W I T N E S S E T H:
WHEREAS, by Lease dated July 15, 1990 (the "Lease"), Landlord leased to
Tenant certain premises known as Building "M-2" at 280 North Midland
Avenue, Saddle Brook, New Jersey; and
,
WHEREAS, by Lease Modification and Extension Agreements dated February
11, 1992, January 8, 1997, and November 18, 1997, the term of the Lease
was extended to June 30, 1998; and
WHEREAS, Tenant desires to extend the term of the Lease for an
additional three (3) years commencing July 1, 1998:
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. TERM. The term of the Lease shall be extended for three (3) years
from July 1, 1998 ending at midnight on June 30, 2001 (the "Extended Term"),
unless sooner terminated pursuant to the Lease.
2. RENT. Tenant covenants and agrees to pay to Landlord as fixed rental
throughout the Extended Term the sum of Two Hundred Sixty-one Thousand, Six
Hundred Dollars ($261,600.00) as follows:
July 1, 1998 through June 30, 1999: $7,000.00/month
July 1, 1999 through June 30, 2001: $7,400.00/month
The rent shall be paid in advance and without demand, set-off or
deduction of any kind throughout the Extended Term on or before the first day
of each month beginning on July 1, 1998.
3. SECURITY DEPOSIT. Upon the execution of this Lease Extension
Agreement, Tenant shall deposit with Landlord an additional one Thousand, Two
Hundred Dollars ($1,200.00) so that the total amount deposited with
Landlord shall be Twenty-two Thousand, Two Hundred Dollars ($22,200.00), the
equivalent of three (3) months' rent during the last two years of the Extended
Term. All sums
L. initial:
T. initial: [signature illegible]
<PAGE>
so deposited shall serve as security for the full and faithful Performance by
Tenant of all the terms, covenants and conditions of the Lease upon Tenant's
part to be performed.
4. OPTION TO NEGOTIATE NEW LEASE. Notwithstanding anything to the
contrary in Paragraphs 2.2 and 2.3 of the Lease, Tenant shall have the option to
negotiate a new lease for the demised premises provided that Tenant exercises
its option by giving written notice to Landlord by no later than December 31,
2000.
5. ISRA COMPLIANCE. Tenant acknowledges and agrees that references in
the Lease to the Environmental Cleanup Responsibility Act ("ECRA") shall be
replaced by the Industrial Site Remediation Act ("ISRA").
6. SIC NUMBER. Tenant represents and warrants to Landlord that its
business operations are assigned the Standard Industrial Classification number
"3665" in the most recent edition (1987) of the Standard Industrial
Classification Manual published by the Executive Office of the President, Office
of Management and Budget, Washington, D.C. This representation and warranty
shall expressly survive the expiration or termination of the Lease.
7. OTHER TERMS AND CONDITIONS. Except as modified by this Lease
Extension Agreement, all the terms, provisions and conditions of the Lease shall
remain in full force and effect and shall govern the rights and obligations of
the parties. Wherever the provisions of this Lease Extension Agreement and the
Lease conflict, the provisions of this Lease Extension Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have caused this Lease Extension
Agreement to be signed and sealed as of the day and year first above written.
ATTEST: MIDLAND HOLDING CO., INC.
Landlord
By:
- ---------------------------------- -------------------------
JUDITH D'AGOSTINO, ANTHONY A. D'AGOSTINO,
Secretary President
ATTEST: HENRY BROS. ELECTRONICS, INC.
Tenant
Irvin Witcosky By: James E. Henry
- ---------------------------------- --------------------------
IRVIN WITCOSKY, JAMES E. HENRY,
Secretary President
-2-
<PAGE>
LEASE EXTENSION AGREEMENT
THIS LEASE EXTENSION AGREEMENT is made this 20 day of March, 1998, by
and between MIDLAND HOLDING CO., INC., a New Jersey corporation, having an
office at 280 North Midland Avenue, Saddle Brook, New Jersey 07663 ("Landlord")
and HENRY BROS. ELECTRONICS, INC., a New Jersey corporation, having an office at
280 North Midland Avenue, Saddle Brook, New Jersey 07663 ("Tenant").
W I T N E S S E T H:
WHEREAS, by Lease dated July 15, 1990 (the "Lease"), Landlord leased to
Tenant certain premises known as Building "M-2" at 280 North Midland
Avenue, Saddle Brook, New Jersey; and
WHEREAS, by Lease Modification and Extension Agreements dated February
11, 1992, January 8, 1997, and November 18, 1997, the term of the
Lease was extended to June 30, 1998; and
WHEREAS, Tenant desires to extend the term of the Lease for an
additional three (3) years commencing July 1, 1998:
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. TERM. The term of the Lease shall be extended for three (3) years
from July 1, 1998 ending at midnight on June 30, 2001 (the "Extended Term"),
unless sooner terminated pursuant to the Lease.
2. RENT. Tenant covenants and agrees to pay to Landlord as fixed rental
throughout the Extended Term the sum of Two Hundred Sixty-one Thousand, Six
Hundred Dollars ($261,600.00) as follows:
July 1, 1998 through June 30, 1999: $7,000.00/month
July 1, 1999 through June 30, 2001: $7,400.00/month
The rent shall be paid in advance and without demand, set-off or
deduction of any kind throughout the Extended Term on or before the first day
of each month beginning on July 1, 1998.
3. SECURITY DEPOSIT. Upon the execution of this Lease Extension
Agreement, Tenant shall deposit with Landlord an additional One Thousand, Two
Hundred Dollars ($1,200.00) so that the total amount deposited with Landlord
shall be Twenty-two Thousand, Two Hundred Dollars ($22,200.00), the equivalent
of three (3) months' rent during the last two years of the Extended Term. All
sums
L. initial: [signature illegible]
T. initial: [signature illegible]
<PAGE>
so deposited shall serve as security for the full and faithful performance by
Tenant of all the terms, covenants and conditions of the Lease upon Tenant's
part to be performed.
4. OPTION TO NEGOTIATE NEW LEASE. Notwithstanding anything to the
contrary in Paragraphs 2.2 and 2.3 of the Lease, Tenant shall have the option to
negotiate a new lease for the demised premises provided that Tenant exercises
its option by giving written notice to Landlord by no later than December 31,
2000.
5. ISRA COMPLIANCE. Tenant acknowledges and agrees that references in
the Lease to the Environmental Cleanup Responsibility Act ("ECRA") shall be
replaced by the Industrial Site Remediation Act ("ISRA").
6. SIC NUMBER. Tenant represents and warrants to Landlord that its
business operations are assigned the Standard Industrial Classification number
"3665" in the most recent edition (1987) of the Standard Industrial
Classification Manual published by the Executive Office of the President, Office
of Management and Budget, Washington, D.C. This representation and warranty
shall expressly survive the expiration or termination of the Lease.
7. OTHER TERMS AND CONDITIONS. Except as modified by this Lease
Extension Agreement, all the terms, provisions and conditions of the Lease shall
remain in full force and effect and shall govern the rights and obligations of
the parties. Wherever the provisions of this Lease Extension Agreement and the
Lease conflict, the provisions of this Lease Extension Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have caused this Lease Extension
Agreement to be signed and sealed as of the day and year first above written.
ATTEST: MIDLAND HOLDING CO., INC.
Landlord
Judith D'Agostino By: Anthony A. D'Agostino
- -------------------------------- ---------------------------
JUDITH D'AGOSTINO, ANTHONY A. D'AGOSTINO,
Secretary President
ATTEST: HENRY BROS. ELECTRONICS, INC.
Tenant
Irvin Witcosky By: James E. Henry
- ---------------------------------- --------------------------
IRVIN WITCOSKY, JAMES E. HENRY,
Secretary President
-2-
<PAGE>
DFW CORPORATE PARK LEASE
1. BASIC LEASE TERMS
a. DATE OF LEASE EXECUTION:
b. TENANT: Henry Bros. Electronics. Inc., a New Jersey Corporation
Trade Name:
Address (Leased Premises): 2100 HWY. 360 SUITE 2101
GRAND PRARIE, TEXAS 75050
c. LANDLORD: EAGLE-DFW CORPORATE PARK, L.P. dba DFW CORPORATE PARK
BY: EAGLE-DFW, INC., IT'S GENERAL PARTNER
Address (For Notices): 2100 HWY. 360 SUITE 101 GRAND PRARIE, TEXAS 75050
with a copy to Eagle Equity Management, Inc., 5420 Freeway, Suite 540,
Dallas, Texas 75240 or to such other place as Landlord may from time to
time designate by notice to tenant.
d. TENANT'S ONLY PERMITTED USE OF PREMISES: Sales/administrative office for
electronics company.
e. PREMISES AREA: 3500 Rentable Square Feet
f. PROJECT AREA: 211,385 Square Feet
Unless otherwise indicated herein any statement of square footage,
rentable or otherwise set forth in this Lease or which may have been used
in calculating rental or any other amount due under the lease, is an
approximation which Landlord and Tenant agree is reasonable, and the
rental or any other calculation based upon square footage is not subject
to revision whether or not the actual square footage is more or less.
g. PREMISES PERCENT OF PROJECT:.0166
h. TERM OF LEASE: Commencement: February 1st, 1998
EXPIRATION: January 31st, 2001
Number of Months 36 Mo's
i. BASE MONTHLY RENT: $2,625,00
j. RENT ADJUSTMENT (Initial One):
LANDLORD
- --------
TENANT
LANDLORD
- --------
TENANT
k. EXPENSE BASE:
Expense Stop
or
Base Year 1998
1. PREPAID RENT: $ n/a
m: TOTAL SECURITY DEPOSIT: $2625.00, including a $ -0- non-refundable
cleaning fee.
n. BROKERS(S): N/A
o. GUARANTORS:
p. ADDITIONAL SECTIONS
Additional sections of this lease numbered 33 through 34 are attached
hereto and made a part hereof.
ADDITIONAL EXHIBITS
Additional exhibits lettered A through E are attached hereto and made a
part hereof.
1
<PAGE>
2. PREMISES: Landlord leases to Tenant the premises described in Section 1 and
in Exhibit A (the "Premises") located in this project described on Exhibit B
(the "Project"). Landlord reserves the right to modify Tenant's percentage
of the Project as set forth in Section 1 if the Project size is increased
through the development of additional property. By entry on the Premises,
Tenant acknowledges that it has examined the Premises and accepts the
Premises in their present condition, subject to any additional work Landlord
has agreed to do.
3. TERM. The term of this Lease is for the period set forth in Section 1
commencing on the date in Section 1. If Landlord, for any reason, cannot
deliver possession of the Premises to Tenant upon commencement of the term,
this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting from such delay. In that event,
however, there shall be a rent abatement covering the period between the
commencement of the term and the time when Landlord delivers possession to
Tenant, and all other terms and conditions of this Lease shall remain in
full force and effect, provided, however, that if Landlord cannot deliver
possession of the Premises to Tenant, this Lease shall be void. If a delay
in possession is caused by Tenant's failure to perform any obligation in
accordance with this Lease, the term shall commence as set forth in Section
1 and there shall be no reduction. of rent between the commencement of the
term and the time Tenant takes possession.
4. RENT.
a. Base Rent. Tenant shall pay Landlord monthly base rent in the initial
amount in Section 1 which shall be payable monthly in advance on the
first day of each and every calendar month ("Base Monthly Rent")
provided, however, the first month's rent is due and payable upon
execution of this Lease If the term of this Lease contains any rental
abatement period, Tenant hereby agrees that if Tenant breaches the Lease
and/or abandons the Premises before the end of the Lease term, or if
Tenant's right to possession is terminated by Landlord because of
Tenant's breach of the Lease, Landlord shall at its option, (1) void the
real abatement period and (2) recover from Tenant in addition to any
damages due Landlord under the terms and conditions of the Lease, rent
prorated for the duration of the rental abatement period at a rental rate
equivalent to two (2) times the Base Monthly Rent.
For purposes of Section 467 of the Internal Revenue Code the parties to
this Lease hereby agree to allocate the stated rents, provided herein, to
the periods which correspond to the actual rent payments as Provided
under the terms and conditions of this agreement.
b. Rent Adjustment
c. Expenses. The purpose of this Section 4.c is to ensure that Tenant bears
a share of all Expenses related to the use, maintenance, ownership,
repair or replacement, and insurance of the Project. Accordantly,
beginning on the date Tenant takes possession of the Premises, Tenant
shall pay to Landlord that portion of Tenants share of Expenses related
to the Project which is in excess of the Annual Expense Base shown in
Section 1.
1) Expenses Defined. The term "Expenses" shall mean all costs and
expenses of the ownership operation, maintenance, repair or
replacement, and insurance of the Project, including without
limitation, the following costs:
(a) All supplies, materials, labor, equipment, and utilities used in
or related to the operation and maintenance of the Project;
(b) All maintenance, management, janitorial, legal, accounting,
insurance, and service agreement costs related to the Project;
(c) All maintenance, replacement and repair costs relating to the
areas within or around the Project, including, without limitation,
air conditioning systems, sidewalks, landscaping, service areas,
driveways, parking areas (including resurfacing and restripping
parking areas), walkways, building exteriors including painting)
signs and directories, repairing and replacing roofs, walls, etc.
These costs may be included either based on actual expenditures or
the use of an accounting reserve based on past cost experience for
the Project.
2
<PAGE>
(d) Amortization along with reasonable financing charges) of capital
improvements made to the Project which may be required by any
government authority or which will improve the operating
efficiency of the Project (provided, however, that the amount of
such amortization for improvements not mandated by government
authority shall not exceed in any year the amount of costs
reasonably determined by Landlord in its sole discretion to have
been saved by the expenditure either through the reduction or
minimization of increases which would have otherwise occurred).
(e) Real Property Taxes including all taxes assessments (general and
special) and other impositions or charges which may be taxed,
charged, levied assessed or imposed upon all or any portion
of or in relation to the Project or any portion thereof, any
leasehold estate in the Premises or measured by rent from the
Premises, including any increase caused by the transfer, sale or
encumbrance of the Project or any portion thereof. "Real Property
Taxes" shall also include any form of assessment, levy, penalty,
charge or tax (other than estate, inheritance, net income or
franchise taxes, imposed by any authority having a direct or
indirect power to tax or charge including without limitation any
city, county, state, federal or any improvement or other
district, whether such tax is (1) determined by the area of the
Project or the rent or other sums payable under this Lease, (2)
upon or with respect to any legal or equitable interest of
Landlord in the Project or any part thereof; (3) upon this
transaction or any document to which Tenant is a party creating a
transfer, in any interest in the Protect, (4) in lieu of or as a
direct substitute in whole or in part of or in addition to any
real property taxes on the Project; (5) based on any parking
spaces or parking facilities provided in the Project or (6) in
consideration for services such as police protection, fire
protection, street, sidewalk and roadway maintenance, refuse
removal or other services that may be provided by any governmental
or quasi-governmental agency from time to time which were formerly
provided without charge or with less charge to property owners or
occupants.
2. Annual Estimate of Expenses. When Tenant takes possession of the Premises,
Landlord shall estimate Tenant's portion of Expenses for the remainder of
the calendar year based on the Tenant's portion of the Protect Area set
forth in Section 1. At the commencement of each calendar year thereafter,
Landlord shall estimate Tenant's portion of Expenses for the coming year
based on the Tenant's portion of the Project Area set forth in Section 1.
3. Monthly Payment of Expenses. If Tenant's portion of said estimate of
Expenses shows an increase for the remainder of the calendar year over the
Annual Expense Base, as set forth in Section 1, Tenant shall pay to
Landlord, as additional rent, such estimated increase in monthly
installments of one-twelfth (1/12) beginning on the date Tenant takes
possession of the Premises. If Tenant's portion of said estimate of Expenses
shows an increase for subsequent calendar years over the Annual Expense
Base, as set forth in, Section 1 ,Tenant shall pay to Landlord, as
additional rent such estimated increase to monthly installments of
one-twelfth (1/12) beginning on January 1 of the forthcoming calendar year,
and one-twelfth (1/12) on the first day of each succeeding calendar month.
As soon as practical following each calendar year. Landlord shall prepare an
accounting of actual Expenses incurred during the prior calendar year and
such accounting shall reflect Tenant's share of Expenses. If the additional
rent paid by Tenant under this Section 4.c.3 during the preceding calendar
year was less than the actual amount of Tenant's share of Expenses, Landlord
shall so notify Tenant and Tenant shall pay such amount to Landlord within
30 days of receipt of such notice. Such amount shall be deemed to have
accrued during the prior calendar year and shall be due and payable from
Tenant even though the term of this Lease has, expired or this Lease has
been terminated prior to Tenants receipt of this notice. Tenant shall have
thirty (30) days from receipt of such notice to contest the amount due,
failure to so notify Landlord shall represent final determination of
Tenant's share of expenses. If Tenant's payments were greater than the
actual amount then such overpayment shall be credited by Landlord to all
present rent due under this Section 4.c.3.
4. Rent Without Offset and Landlord Charge. All rent shall be paid. Tenant to
Landlord monthly in advance on the first day of every calendar month, at the
address shown in Section 1 or such other place as Landlord may designate in
writing from time to time. All rent shall be paid without prior "demand or
notice and without any deduction or offset whatsoever. All rent shall be
paid in lawful currency of the United States of America. All rent due for
any partial month shall be prorated at the rate of 1/30th of the total
monthly rent per day. Tenant acknowledges that late payment by Tenant to
Landlord of any rent or other sums due under this Lease will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impractible to ascertain. Such costs
include, without limitation, processing and accounting charges and late
charges that may be imposed on Landlord by the terms of any encumbrance or
note secured by the Premises. Therefore, if any rent or other sum due from
Tenant is not received when due, Tenant shall pay to Landlord an additional
sum equal to 10% of such overdue payment. Landlord and Tenant hereby agree
that such late charge represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of any such late payment and that
the late charge is in addition to any and all remedies available to the
Landlord and that the assessment and/or collection of the late charge
shall not be deemed a waiver of any other default. Additionally, all such
delinquent rent or other sums, plus this late charge, shall bear interest
at the then maximum lawful rate permitted to be charged by Landlord. Any
payments of any kind returned for insufficient funds will subject to an
additional handling charge of $25.00, and thereafter, Landlord may require
Tenant to pay all future payments of rent or other sums due by money order,
or cashier's check
5. PREPAID RENT: Upon the execution, of this Lease, Tenant shall pay to
Landlord the prepaid rent set forth in Section 1, and if Tenant is not in
default of any provisions of this Lease such prepaid rent shall be applied
toward the rent due for the last month of the term. Landlord's obligations
with respect to the prepaid rent are those of a debtor and not of a trustee,
and Landlord can commingle the prepaid rent with Landlord's general funds.
Landlord shall not be required to pay Tenant interest on the prepaid rent.
Landlord shall be entitled to immediately endorse and cash Tenant's prepaid
rent; however, such endorsement and cashing shall not constitute Landlord's
acceptance of this lease. In the event Landlord does not accept this Lease,
Landlord shall return said prepaid rent.
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6. DEPOSIT. Upon execution this Lease, Tenant shall deposit the security
deposit set forth in Section 1 with Landlord, in part as security for the
performance by Tenant of the provisions of this Lease, and in part as a
cleaning fee. If Tenant is in default, Landlord can use the security deposit
or any portion of it to cure the default or to compensate Landlord for any
damages sustained by Landlord resulting from Tenant's default. Upon demand,
Tenant shall immediately pay to Landlord a sum equal to the portion of the
security deposit expended or applied by Landlord to maintain the security
deposit in the amount initially, deposited with Landlord. In no event will
Tenant have the right to apply any part of the security deposit to any rent
or other sums due under this Lease. If Tenant is not in default at the
expiration or termination of this Lease Landlord shall return the entire
security deposit to Tenant, except for 10% of first month's rent or $125
whichever is greater, which Landlord shall retain as a non-refundable
cleaning fee. Landlord's obligations with respect to the deposit are those
of a debtor and not of a trustee, and Landlord can commingle the security
deposit with Landlord's general funds. Landlord shall not be required to pay
Tenant interest on the deposit. Landlord shall be entitled to immediately
endorse and cash Tenant's prepaid deposit; however, such endorsement and
cashing shall not constitute Landlord's acceptance of this Lease. In the
event Landlord does not accept this Lease, Landlord shall return said
prepaid deposit
7. USE OF PREMISES AND PROJECT FACILITIES. Tenant shall use the Premises solely
for the purposes set forth in Section 1 and for no other purpose without
obtaining the prior written consent of landlord. Tenant acknowledges, that
neither Landlord nor any agent of Landlord has made any representation or
warranty with respect to the Premises or with respect to the suitability of
the Premises or the Project for the conduct of Tenant's business, nor has
Landlord agreed to undertake any modification alteration or improvement to
the Premises or the Project, except as provided in writing in this Lease.
Tenant acknowledges that Landlord may from time to time, at its sole
discretion, make such modifications, alterations, deletions or improvements
to the Project as Landlord may deem necessary or desirable, without
compensation or notice to Tenant. Tenant shall, promptly comply with all
laws, ordinances, orders and regulations affecting the Premises and the
Project, including without limitation, any rules and regulations that may be
attached to this Lease and to any reasonable modifications to these rules
and regulations as Landlord may adopt from time to time. Tenant shall not do
or permit anything to be done in or about the Premises or bring or keep
anything in the Premises that will in any way increase the premiums paid by
Landlord for its insurance, related to the Project or which will in any way
increase the premiums for fire or casualty insurance carried by other
tenants in the Project. Tenant will not perform any act or carry on any
practices that may injure the Premises or the Project or that may be a
nuisance or menace to other tenants in the Project; or that shall in anyway
interfere with the quiet enjoyment of such other tenants. Tenant shall not
use the Premises for sleeping, washing clothes, cooking or the preparation,
preparation, manufacture or mixing of anything that might emit any,
objectionable odor, noises, vibrations or lights onto such other tenants. If
sound insulation is required to muffle noise produced by Tenant on the
Premises, Tenant at its own cost shall provide all necessary insulation.
Tenant shall not do anything on the premises which will overload any
existing parking or service to the Premises. Pets and/or animals of any type
shall not be kept on the Premises with the exception of seeing-eye dogs.
Only trash generated in the normal course of the business of Lessee's
Permitted Use, and only such trash actually generated by work on site in the
Leased Premises, may be disposed of in trash containers at the designated
locations. Only the materials permitted by law to be disposed of, in the
containers may be so disposed of, and under no circumstances may hazardous
waste materials be disposed of in project trash containers. No trash or
scrap materials may be brought into the Premises, Project or Property at
any time for disposal, storage, or any other purpose. No "trade" trash,
including but not limited to, industrial scrap carpet scrap or wallboard may
be disposed of in the containers. No storing of trash or scrap is permitted
in or about the Premises, Project or Property. In the event Lessee generates
more trash by work on site in the Leased Premises in the normal course of
Tenant's permitted use than can be handled with the current pickup, Tenant
shall be assessed the costs, and Tenant shall be exclusively responsible
immediately to pay for upon demand, any additional service.
8. SIGNAGE. All signing shall comply with rules and regulations set forth by
landlord as may be modified from time to time. Current rules and regulations
relating to signs are described on Exhibit C. Tenant shall place no window
covering (e.g., shades, blinds, curtains, drapes, screens, or tinting
materials), stickers, signs, lettering, banners or advertising or display
material on or near exterior windows or doors if such materials are visible
form the exterior of the Premises, without Landlord's prior written consent.
Similarly, Tenant may not install any alarm boxes, for protection tape or
other security equipment on the Premises without Landlord's prior written
consent. Any material violating this provision may be destroyed by Landlord
without compensation to Tenant.
9. PERSONAL PROPERTY TAXES. Tenant shall pay before delinquency all taxes,
assessments, license fees and public charges levied, assessed or imposed
upon its business operations as well as upon all trade fixtures, leasehold
improvements, merchandise and other personal property in or about the
Premises.
10. PARKING. Landlord grants to Tenant and Tenant's customers, suppliers,
employees and invitees a non-exclusive license to use the designated parking
areas in the Project for the use of motor vehicles during the term of this
Lease. Landlord reserves the right at any time to grant similar
non-exclusive use to other tenants, to promulgate rules and regulations
relating to the use of such parking areas, including reasonable restrictions
on parking by tenants and employees, to designate specific spaces for the
use of any tenant to make changes in the parking layout from time to time,
and to establish reasonable time limits on parking. Overnight parking is
prohibited and any vehicle violating this or any other vehicle regulation
adopted by Landlord is subject to removal at the owner's expense.
11. UTILITIES. (Strike and initial clause which not apply).
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b. Industrial Space. Tenant shall pay for all heat, light, power,
electricity, telephone or other service metered, chargeable or provided
to the Premises. Landlord reserves the right to install separate meters
for any such utility and to charge Tenant for the cost of such
installation.
LANDLORD
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TENANT
12. MAINTENANCE. Landlord shall maintain, in good condition, the structural
parts of the Premises, which shall include only the foundations, bearing and
exterior walls (excluding glass), subflooring and roof (excluding
skylights), the unexposed electrical, plumbing and sewerage systems,
including without limitation those portions of the systems lying outside the
Premises, exterior doors (excluding glass), window frames, gutters and
downspouts on the Building and the heating, ventilating and air conditioning
system servicing the Premises; provided, however, the cost of all such
maintenance shall be considered "Expenses" for purposes of Section 4.c.
Except as provided above, Tenant shall maintain and repair the Premises in
good condition, including without limitation maintaining and repairing all
walls, floors, ceilings, interior doors, exterior and interior windows and
fixtures as well as damage caused by Tenant, its agents, employees or
invitees. Upon expiration or termination of this Lease, Tenant shall
surrender the Premises to Landlord in the same condition as existed at the
commencement of the term, except for reasonable wear and tear or damage
caused by fire or other casualty for which Landlord has received all funds
necessary for restoration of the Premises from insurance proceeds.
13. ALTERATIONS. Tenant shall not make any alterations to the Premises, or to
the Project, including any changes to the existing landscaping without
Landlord's prior written consent. If Landlord gives its consent to such
alterations Landlord may post notices in accordance with the laws of the
state in which the premises are located. Any alterations made shall remain
on and be surrendered with the Premises upon expiration or termination of
this Lease, except that Landlord may, within 30 days before or 30 days after
expiration of the term, elect to require Tenant to remove any alterations
which Tenant may have made to the premises. If Landlord so elects, at its
own cost Tenant shall restore the Premises to the condition designated by
Landlord in its election, before the last day of the term or within 30 days
after notice of its election is given, whichever is later.
Should Landlord consent in writing to Tenant's alteration of the Premises,
Tenant shall contract with a contractor approved by Landlord for the
construction of such alterations, shall secure ail appropriate governmental
approvals and permits, and shall complete such alterations with due
diligence in compliance, with plans and specifications approved by Landlord.
All such construction shall be performed in a manner which will not
interfere with the quiet enjoyment of other tenants of the Project. Tenant
shall pay all costs for such construction and shall keep the Premises and
the Project free and clear of all mechanics' Dens which may result from
construction by Tenant. If Landlord gives its consent, no such alterations
will proceed without Landlord's prior written approval of Tenant's
contractor, which shall be conditioned on proof of insurance by Tenant's
contractor for public liability and automobile liability and property
damage insurance with limits not less than $1,000,000/$250,000/$500,000
respectively endorsed to show Landlord as an additional insured and for
worker's compensation as required and detailed and specifications for
such work.
Tenant will keep the Premises and Property free from any liens arising out
of any work performed, materials furnished or obligations incurred by
Tenant, its agents or contractors. Tenant agrees that should any lien be
posted on the property due to work performed, materials furnished or
obligations incurred by it, that it will immediately notify and proceed to
remove such lien. Tenant further acknowledges that it will remain liable to
Landlord and indemnify it for any costs or damages to Landlord or the
property as a result of such liens. Landlord has the right to post and keep
posted in the Premises and/or Property, any notices that may be provided by
law or which landlord may deem to be proper for the protection of Landlord,
the Premises and/or Property from such liens.
14. RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant agrees
that Landlord shall not be liable to Tenant for any damage to Tenant or
Tenant's property from any cause, and Tenant waives all claims against
Landlord for damage to persons or property arising for an reason, except for
damage resulting directly from Landlord's breach of its express obligations
under this Lease which Landlord as not cured within a reasonable time after
receipt of written notice of such breach from Tenant. Tenant shall indemnify
and hold Landlord harmless from all damage's arising out of any damage to
any person or property occurring in, on or about the Premises or Tenant's
use of the Premises or Tenants breach of any term of this Lease.
15. INSURANCE. Tenant, at its cost, shall maintain public liability and property
damage insurance and products liability insurance with a single combined
liability limit of $1,000,000 insuring against all liability of Tenant and
its authorized representatives arising out of or in connection with Tenant's
use or occupancy of the Premises. Public liability insurance, products
liability insurance and Property damage insurance shall insure performance
by Tenant of the indemnity provisions of Section 14. Landlord shall be named
as additional insured and the policy shall contain cross-liability
endorsements. On all its personal property, at its cost, Tenant shall
maintain a policy of standard fire and extended coverage insurance with
vandalism and malicious mischief endorsements and all risk" coverage on all
Tenant's improvements, and alterations in or about the Premises to the
extent of at least 90% of their full replacement value. The proceeds from
any such policy shall be used by Tenant for the replacement of personal
property and the restoration of Tenant's improvements or alterations: This
policy will contain an express waiver, in favor of Landlord, of any right of
subrogation by the insurer. All insurance required to be provided, by Tenant
under this Lease shall release Landlord from any claims for damage to any
person or the Premises and the Project, and to Tenant's fixtures, personal
property improvements and alterations in or on the Promises or the Project,
caused by or resulting from risks insured against under any insurance policy
carried by Tenant and in force at the time, of such damage All insurance
required to be provided by Tenant under this Lease; (a) shall be
issued by Insurance companies authorized to do business in the state in
which the premises are located with a financial rating of at least an
'A'. XII status as rated in the most recent edition of Best's Insurance
Reports; (b) shall be, issued as a primary policy, and (c) shall contain an
endorsement requiring at least 30 days prior written notice of cancellation
to Landlord and Landlord's lender, before cancellation or change in
coverage, scope or amount of any policy. Tenant shall deliver a certificate
or copy of such policy together with evidence of payment of all current
premiums to Landlord within 30 days of execution of this Lease.
Tenant's failure to provide evidence, of such coverage to Landlord
may, in Landlord's sole discretion, constitute a default under this Lease.
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16. DESTRUCTION. If during the term, the Premises or Project are more than 10%
destroyed from any cause, or rendered inaccessible or unusable from any
cause, Landlord may, in its sole discretion, terminate this Lease by
delivery of notice to Tenant within 30 days of such event without
compensation to Tenant. If in Landlord's estimation, the Premises cannot be
restored within 90 days following such destruction, the Landlord shall
immediately notify Tenant and Tenant may terminate this Lease by delivery of
notice to Landlord within 30 days of receipt of Landlord's notice. If
Landlord does not terminate this lease and if in Landlord's estimation the
Premises can be restored within 90 days, then Landlord shall commence to
restore the Premises in compliance with then existing laws and shall
complete such restoration with due diligence. In such event, this Lease
shall remain in full force and effect, but there shall be an abatement
of rent between the date of destruction and the date of completion of
restoration, based on the extent to which destruction interferes with
Tenant's use of the Premises.
17. CONDEMNATION.
a. Obligations to be Governed by Lease. If during the term of the Lease
there is an takin of all or pus pant to the Premises or the Project, the
rights and obligations of the parties shall be determined pursuant to
this Lease.
b. Total or Partial Taking. If the Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking. If any
portion of the Premises is taken by condemnation, this Lease shall
remain in effect, except that Tenant can elect to terminate this Lease
if the remaining portion of the Premises is rendered unsuitable for
Tenant's continued use of the Premises. If Tenant elects to terminate
this Lease, Tenant must exercise its right to terminate by giving notice
to Landlord within 30 days after the nature and extent of the taking
have been finally determined. If Tenant elects to terminate this Lease,
Tenant shall also notify Landlord of the date of termination, which
shall not be earlier than 30 days nor later than 90 days after Tenant
has notified Landlord of its election to terminate; except that this
Lease shall terminate on the date of taking if the date of taking falls
on a date before the date of termination as designated by Tenant. If
any portion of the Premises is taken by condemnation and this Lease
remains in full force and effect, on the date of taking the rent shall
be reduced by an amount in the same ratio as the total number of square
feet in the Premises taken bears to the total number of square feet in
the Premises immediately before the date of taking. Tenant will not
because of such taking assert any claim against the Landlord or the
taking authority for any compensation because of such taking and
Landlord will be entitled to receive the entire amount of any
compensation or award without deduction for any estate of interest of
Tenant, unless Landlord would not be entitled to such award and such
award or part thereof does not diminish Landlord's award.
18. ASSIGNMENT OR SUBLEASE. Tenant shall not assign or encumber its interest in
this Lease or the Premises or sublease all or any part of the Premises or
allow any other person or entity (except Tenants authorized representatives,
employees, invitees, or guests) to occupy or use all or any part of the
Premises without first obtaining Landlord's consent which Landlord may
withhold in its sole discretion. Any assignment encumbrance or sublease
without Landlord's written consent shall be voidable and at Landlord's
election, shall constitute a default. It Tenant is a partnership, a
withdrawal or change, voluntary, involuntary or by operation of law of any
partner; or the dissolution of the partnership, shall be deemed a voluntary
assignment. If Tenant consists of more than one person, a purported
assignment, voluntary or involuntary, or by operation of law from one person
to the other shall be deemed a voluntary assignment. If Tenant is a
corporation, any dissolution, merger; consolidation or other reorganization
of Tenant, or sale or other transfer of a controlling percetage of the
capital stock of Tenant, or the sale of at least 25% of the value of the
assets of Tenant shall be deemed a voluntary assignment. The phrase
"controlling percentage" means ownership of and right to vote stock
possessing at least 25% of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding and entitled to vote for election
of directors. This Section 18 shall not apply to corporations the stock of
which is traded through an exchange or over the counter. All rent received
by Tenant from its subtenants in excess of the rent payable by Tenant to
Landlord under this Lease shall be paid to Landlord, or any sums to be paid
by an assignee to Tenant in consideration of the assignment of this Lease
shall be paid to Landlord. If Tenant requests Landlord to consent to a
proposed assignment or subletting, Tenant shall pay to Landlord whether
or not consent is ultimately given, $100 or Landlord's reasonable attorneys'
fees incurred in connection with such request whichever is greater.
No interest of Tenant in this Lease shall be assignable by involuntary
assignment through operation of law (including without limitation the
transfer of this Lease by testacy or intestacy). Each of the following acts
shall be considered an involuntary assignment: (a) If Tenant is or becomes
bankrupt or insolvent, makes an assignment for the benefit of creditors, or
institutes proceedings under the Bankruptcy Act in which Tenant is the
bankrupt; or if Tenant is a partnership or consists of more than one person
or entity, if any partner of the partnership or other person or entity is or
becomes bankrupt or insolvent, or makes an assignment for the benefit of
creditors; or (b) If a writ of attachment or execution is levied on this
Lease; or (c) If in any proceeding or action to which Tenant is a party, a
receiver is appointed with authority to take possession of the Premises. An
involuntary assignment shall constitute a default by Tenant and Landlord
shall have the right to elect to terminate this Lease, in which case this
Lease shall not be treated as an asset of Tenant.
19. DEFAULT. The occurrence of any of the following shall constitute a default
by Tenant. (a) A failure to pay rent or other charge when due and such
default continues for a period of 5 (five) days after such default occurs;
(b) Abandonment and vacation of the Premises (failure to occupy and operate
the Premises for ten consecutive days shall be deemed an abandonment and
vacation); or (c) Failure to perform any other provision of this Lease and
such default continues for 15 (fifteen) days after such default occurs.
20. LANDLORD'S REMEDIES. Landlord shall have the following remedies if Tenant is
in default. (These remedies are not exclusive; the are cumulative and in
addition to any remedies now or later allowed by law): Landlord may
terminate Tenant's right to possession of the Premises at any time. Tenant
hereby grants Landlord full and free right, whether by changing or picking
of locks if necessary, to enter and repossess the Premises, with or without
process of law. Tenant releases Landlord of any liability for any damage
resulting therefrom and waives any right to claim damage for such re-entry.
Tenant also agrees that Landlord has not waived or relinquished any other
right given to it hereunder or by operation of law. No act by Landlord other
than giving notice to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises, or the appointment of a receiver
on Landlord's initiative to protect Landlord's interest under this Lease
shall not constitute a termination of Tenant's right to possession. Upon
termination of Tenant's right to possession, Landlord has the right to
recover from Tenant: (1) The worth of the unpaid rent that had been earned
at the time of termination of Tenant's right to possession; (2) The worth of
the amount of the unpaid rent that would have been earned after the date of
termination of Tenant's right to possession; (3) Any other amount, including
court, attorney
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and collection costs, necessary to compensate Landlord for all detriment
proximately caused by Tenants default. "The Worth," as used for Item 20(1)
in this Paragraph 20 is to be computed by allowing interest at the maximum
rate an individual is permitted to charge by law or 12%, whichever is
greater. "The worth at the time of the award" as used for Item 20(2) in this
Paragraph 20 is to be computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of termination
of Tenant's right of possession.
21. ENTRY ON PREMISES. Landlord and its authorized representatives shall have
the right to enter the Premises at all reasonable times for any of the
following purposes: (a) To determine whether the Premises are in good
condition and whether Tenant is complying with its obligations under this
Lease; (b) To do any necessary maintenance and to make any restoration to
the Premises or the Project that Landlord has the right or obligation to
perform, (c) To post "for sale" signs at any time during the term, to post
"for rent" or "for lease" signs during the last 90 days of the term, or
during any period while Tenant is in default; (d) To show the Premises to
prospective brokers, agents, buyers, tenants or persons interested in
leasing or purchasing the Premises, at any time during the term; or (e) To
repair, maintain or improve the Project and to erect scaffolding and
protective barricades around and about the Premises but not so as to prevent
entry to the Premises and to do any other act or thing necessary for the
safety or preservation of the Premises or the Project. Landlord shall not be
liable in any manner for any inconvenience, disturbance, loss of business,
nuisance or other damage arising out of Landlord's entry onto the Premises
as provided in this Section 21. Tenant shall not be entitled to an abatement
or reduction of rent if Landlord exercises any rights reserved in this
Section 21. Landlord shall conduct his activities on the Premises as
provided herein in a manner that will cause the least inconvenience,
annoyance or disturbance to Tenant. For each of these purposes, Landlord
shall at all times have and retain a key with which to unlock all the doors
in, upon and about the Premises, excluding Tenant's vaults and safes. Tenant
shall not alter any lock or install a new or additional lock or bolt on any
door of the Premises without prior written consent of Landlord. If Landlord
gives its consent, Tenant shall furnish Landlord with a key for any such
lock.
22. SUBORDINATION. Once Tenant has received written notice identifying the name
and address of any lender (a "Lender") holding a mortgage or deed of trust
(a "Mortgage") on the property of which these premises form a part (the
"Property"), Tenant agrees to notify such Lender by certified mail, return
receipt requested, with postage prepaid, of any default on the part of
Landlord under this Lease, and Tenant further agrees that, notwithstanding
any provisions of this Lease, no cancellation of termination of this Lease
and no abatement or reduction of the rent payable hereunder shall be
effective unless the Lender has received notice of the same and have failed
within thirty (30) days after the time when it shall have become entitled
under the Mortgage to remedy the same, to commence to cure such default
and thereafter diligently prosecute such cure to completion, provided that
such period may be extended, if the Lender needs to obtain possession of the
Property to cure such default, to allow the Lender to obtain possession of
the Property provided the Lender commences judicial or non-judicial
proceedings to obtain possession within such period and thereafter
diligently prosecutes such efforts and cure to completion. It is understood
that the Lender shall have the right, but not the obligation, to cure any
default on the part of Landlord.
Tenant agrees that if a Lender shall succeed to the interest of Landlord
under this Lease neither the Lender nor its successors or assigns shall be:
liable for any prior act or omission of Landlord; subject to any claims,
offsets, credits or defenses which Tenant might have against any prior
landlord (including Landlord); or bound by, any assignment (except as
otherwise expressly permitted hereunder); surrender, release, waiver,
amendment or modification of the Lease made without such Lender's prior
written consent; or obligated to make any payment to Tenant or liable for
refund of all or any part of any security deposit or other prepaid charge,
to Tenant held by Landlord for any purpose unless the Lender shall have come
into exclusive possession of such deposit or charge. In addition, if a
Lender shall succeed to the interest of Landlord under this Lease, the
Lender shall have no obligation, nor incur any liability, beyond its then
equity interest, if any, in the Property.
In the event that a Lender (or any person or entity to whom the Mortgage may
subsequently be assigned) notifies Tenant of a default under the Mortgage
and demands that Tenant pay its rent and all other sums due under this Lease
to the Lender, Tenant shall honor such demand without inquiry and pay its
rent and all other sums due under this Lease directly to the Lender or as
otherwise required pursuant to such notice and shall not thereby incur any
obligation or liability to Landlord.
Tenant agrees and acknowledges that this Lease is subordinate to the lien of
any Mortgage, and in the event a Lender succeeds to the interest of Landlord
under this Lease, then, at the Lender's election (A) Tenant shall be bound
to the Lender under all of the terms, covenants and conditions of this Lease
for the remaining balance of the term hereof, with the same force and effect
as if the Lender were the lessor hereunder, and Tenant does hereby agree
to attorn to the Lender as its lessor without requiring the execution of any
further instruments immediately upon the Lender succeeding to the interest
of Landlord under this Lease; provided, however, that Tenant agrees to
execute and deliver to the Lender any instrument reasonably requested by it
to evidence such attonment; and (B) subject to the observance and
performance by Tenant of all the terms, covenants and conditions of this
Lease on the part of Tenant to be observed and performed, the Lender shall
recognize the leasehold estate of Tenant under all of the terms and
conditions of this Lease for the remaining balance of the term with the same
force and effect as if the Lender were the lessor under the Lease.
Tenant agrees at antime and from time to time, as requested by Landlord or
any Lender, upon not less than ten (10) days' prior notice, to execute and
deliver without cost or expense to the Landlord or such Lender an estoppel
certificate 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), certifying the dates
to which all fixed or base rent and any additional rent have been paid, and
stating whether or not, to the knowledge of this Lease, and, if so,
specifying each such default of which Tenant may have knowledge, it being
intended that any such statement delivered pursuant thereto may be relied
upon my any other person with whom Landlord or such Lender may be dealing.
23. NOTICE. Any notice, demand, request, consent, approval or communication
desired by either party or required to be given, shall be in writing and
served either personally or sent by prepaid certified first class mail,
addressed as set forth in Section 1. Either party may change its address by
notification to the other party. Notice shall be deemed to be communicated
48 hours from the time of mailing, or from the time of service as provided
in this Section 23.
7
<PAGE>
24: WAIVER. No delay or omission in the exercise of any right or remedy by
Landlord shall impair such right or remedy or be construed as a waiver. No
act or conduct of Landlord, including without limitation, acceptance of the
keys to the Premises, shall constitute an acceptance of the surrender of the
Premises by Tenant before the expiration of the term. Only written notice
from Landlord to Tenant shall constitute acceptance of the surrender of the
Premises and accomplish termination of the Lease. Landlords consent to or
approval of any act by Tenant requiring Landlord's consent or approval shall
not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent act by Tenant. Any waiver by Landlord of any
default must be in writing and shall not be a waiver of any other default
concerning the same or any other provision of the Lease.
25. SURRENDER OF PREMISES; HOLDING OVER. Upon expiration of the term, Tenant
shall surrender to Landlord the Premises and all Tenant improvements and
alterations in good condition, except for ordinary wear and tear and
alterations Tenant has the right or is obligated to remove under the
provisions of Section 13 herein. Tenant shall remove all personal property
including, without limitation, all wallpaper; paneling and other decorative
improvements or fixtures and shall perform all restoration made necessary by
the removal of any alterations or Tenant's personal property before the
expiration of the term, including for example, restoring all wall surfaces
to their condition prior to the commencement of this Lease. Landlord can
elect to retain or dispose of in any manner Tenant's personal property not
removed from the Premises by Tenant prior to the expiration of the term.
Tenant waives all claims against Landlord for any damage to Tenant resulting
from Landlord's retention or disposition of Tenants personal property.
Tenant shall be liable to Landlord for Landlord's costs for storage, removal
or disposal of Tenant's personal property.
If Tenant, with Landlord's consent, remains in possession of the Premises
after expiration or termination of the term, or after the date in any notice
given by Landlord to Tenant terminating this Lease, such possession by
Tenant shall be deemed to be a month-to-month tenancy terminable on written
30-day notice at any time, by either party. All provisions of this Lease,
except those pertaining to term and rent, shall apply to the month-to-month
tenancy. Tenant shall pay monthly rent in an amount equal to 125% of
Rent for the last full calendar month during the regular term plus 100%
of said last month's estimate of Tenant's share of Expenses pursuant to
Section 4.c3.
26. LANDLORD'S LIEN/STORAGE. As security for payment of rent, damages and all
other payments required to be made by this Lease, Tenant hereby grants to
Landlord a lien upon all property of Tenant now or subsequently located upon
the leased Premises. If Tenant abandons or vacates any substantial portion
of the Lease Premises or is in default in the payment of any rent or
additional rent, damages or other payments required to be made by this Lease
or is in default of any other provision of this Lease, Landlord may enter
upon the leased premises, whether by changing or picking locks, and take
possession pursuant to this Lease of all or any part of the personal
property, and may sell all or any part of the personal property at a public
or private sale, in one or successive sales to the highest bidder all of
Tenant's title and interest in the personal property sold to him.
Any and all property which may be removed from the Premises by Landlord
pursuant to the authority of this Lease or of law, to which Tenant is or may
be entitled, may be handled, removed and stored, as the case may be, by or
at the direction of Landlord at the risk, cost and expanse of Tenant, and
Landlord shall in no event be responsible for the value, preservations or
safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such
property so long as the same shall be in Landlord's possession or under
Landlord's control. Any such property of Tenant not retaken by Tenant from
storage within 30 days after removal from the Premises shall, at Landlord's
option, be deemed conveyed by Tenant to Landlord under this Lease as by a
bill of sale without further payment or credit by Landlord to Tenant.
27. RULES AND REGULATIONS. Tenant will faithfully observe and comply with the
Rules and Regulations printed on or attached to this Lease and Landlord
reserves the right to modify and amend them as it deems necessary. Landlord
will not be responsible to Tenant for the nonperformance by any other lessee
or occupant of he Project of any of said Rules and Regulations.
Violation of any such Rules and Regulations shall be deemed a material
breach of this Lease by Tenant.
28. PROJECT PLAN. In the event Landlord requires the Premises for use in
conjunction with another suite or for other reasons connected with the
Project planning program, Landlord, upon notifying Tenant in writing, shall
have the right to move Tenant to space in the Project of which the Premises
forms a part, at Landlord's sole cost and expense (excluding private
telephone systems which Tenant must bear the cost of moving and installing),
and the terms and conditions of the original Lease will remain in full force
and effect excepting that the Premises will now be in a new location.
However, if the new space does not meet with Tenant's approval, Tenant will
have the right to cancel this Lease upon giving Landlord thirty (30) days'
notice within ten (10) days of receipt of Landlord's notification. Should
Tenant elect to cancel the Lease as provided in this paragraph, the
effective expiration date will equal the projected move-in date of the suite
Landlord wishes Tenant to move to as indicated in Landlord's written
notification to Tenant.
29. FORCE MAJEURE. Landlord will have no liability to Tenant, nor will Tenant
have any right to terminate this Lease or abate Monthly Rent or Additional
Rent or assert a claim of partial or total actual or constructive eviction,
because of Landlord's failure to perform any of its obligations in the Lease
if the failure is due in part or in full to reasons beyond Landlords
reasonable control, including without limitation, strikes, or other labor
difficulties, inability to obtain necessary governmental permits and
approvals, war, riot, mandatory or prohibitive injunction issued in
connection with the civil insurrection, accidents, acts of God, and
governmental preemption in connection with a national emergency
(collectively referred to as "Force Majeure"). If Landlord, fails to perform
its obligations because of any reasons beyond Landlord's reasonable control
(including those enumerated above), the period for Tenants performance will
be extended day for day for the duration of the cause of Landlord's failure,
except for Tenants obligation to pay Rent as required under the Lease.
30. SECURITY MEASURES. Tenant hereby acknowledges that the rental payable to
Landlord hereunder does not include the cost of guard service or other
security measures, and that Landlord shall have no obligation whatsoever to
provide same. Tenant assumes all responsibility for the protection of the
Premises, Project and Property and all real and all personal property that
it, its agents, and/or its invitees may use, from the acts of third parties.
8
<PAGE>
31. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money
is asserted shall have the right to make payment "under protest" and such
payment, shall not be regarded as a voluntary payment and shall survive
the right on the part of said party to initiate suit or other action for
recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any part thereof,
said party shall be entitled to recover such sum or so much thereof as it
was not legally required to pay under the provisions of this Lease.
32. LIMITATION OF LIABILITY. In consideration of the benefits accruing
hereunder, Tenant agrees that, in the event of any actual or alleged
failure, breach or default of this Lease by Landlord, if Landlord is a
partnership:
a. The sole and exclusive remedy shall be against the partnership and its
partnership assets;
b. No partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction of the
partnership);
c. No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
d. No partner of Landlord shall be required to answer or otherwise plead
to any service or process;
e. No judgment may be taken against any partner of Landlord;
f. Any judgment taken against any partner of Landlord may be vacated and
set aside at any time without hearing;
g. No writ of execution will ever be levied against the assets of any
partner of Landlord;
h. These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
Tenant agrees that each of the foregoing provisions shall be applicable
to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.
33. MISCELLANEOUS PROVISIONS.
a. Time of Essence. Time is of the essence of each provision of this
Lease.
b. Successor. This Lease shall be binding on and inure to the benefit of
the parties and their successors, except as provided in Section 18
herein.
c. Landlord's Consent. Any consent required by Landlord under this Lease
must be granted in writing and may be withheld by Landlord in its sole
and absolute discretion.
d. Commissions. Each party represents that it has not had dealings with
any real estate broker, finder or other person with respect to this
Lease in any manner, except for the broker identified in Section 1, who
shall be compensated by Landlord.
e. Other Charges. If Landlord becomes a party to any litigation concerning
this Lease, the Premises or the Project, by reason of any act or
omission of Tenant or Tenant's authorized representatives, Tenant shall
be liable to Landlord for reasonable attorneys' fees and court costs
incurred by Landlord in the litigation whether or not such litigation
leads to actual court action. Should the court render a decision which
is thereafter appealed by any part thereto, Tenant shall be liable to
Landlord for reasonable attorneys' fees and court costs incurred by
Landlord in connection with such appeal.
If either party commences any litigation against the other party or
files an appeal of a decision arising out of or in connection with this
Lease, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees and costs of suit. If Landlord employs
a collection agency to recover delinquent charges, Tenant agrees to pay
all collection agency and attorneys' fees charged to Landlord in
addition to rent late charges, interest and other sums payable under
this Lease. Tenant shall pay a charge of $75 to Landlord for
preparation of a demand for delinquent rent.
f. Authority. If either party hereto is a corporation, trust, or general
or limited partnership, each individual executing this lease on behalf
of such entity represents and warrants that he or she is duly
authorized to execute and deliver this Lease on its behalf. If Tenant
is a corporation, trust or partnership, Tenant shall, within thirty
(30) days after request by Landlord, deliver to Landlord evidence
satisfactory to Landlord of such authority.
g. Offer. Any preparation of this document by Landlord or Landlord's agent
and submission of same to Tenant shall not be deemed to be a proposal,
offer or contract to lease to Tenant. This document cannot be
unilaterally accepted by Tenant and thereby made binding upon
Landlord. This document is not binding on any party and has no force
or effect until executed by all parties hereto.
h. Landlord's Successors. In the event of a sale or conveyance by Landlord
of the Project, the same shall operate to release Landlord from any
liability under this Lease, and in such event Landlord's successor in
interest shall be solely responsible for all obligations of Landlord
under this lease.
i. Interpretation. This Lease shall be construed and interpreted in
accordance with the laws of the state in which the premises are
located. This Lease constitutes the entire agreement between the
parties with respect to the Premises and the Project, except for such
guarantees or modifications as may be executed in writing by the
parties from time to time. When required by the context of this
Lease, the singular shall include the plural, and the masculine shall
include the feminine and/or neuter. "Party" shall mean Landlord or
Tenant. If more than one person or entity constitutes Landlord or
Tenant, the obligations imposed upon that party shall be joint and
several. The enforceability, invalidity or illegality of any
provision shall not render the other provisions unenforceable,
invalid or illegal.
9
<PAGE>
Landlord: EAGLE-DFW CORPORATE PARK, Tenant: HENRY BROS. ELECTRONICS,
L.P. dba: DFW Corporate Park, INC., A NEW JERSEY
Eagle-DFW, Inc., it's General CORPORATION
Partner
By:---------------------------------- By:----------------------------
Michael A. Hershman Jim Henry
Title: President Title: President
Date: -------------------------------- Date:-------------------------
<PAGE>
[FLOOR PLAN]
EXHIBIT "A1"
2100 Hwy. 360
Suite 2101
Grand Prairie, Tx. 75050
APPROX. 3500 S.F.
<PAGE>
EXHIBIT "B"
DFW CORPORATE PARK
2100 N. HWY 360
GRAND PRAIRIE, TEXAS 75050
The description of Tract I, a 16.181 acre tract of land out of the unplatted
G.S.C. Development Corporation Properties in the City of Grand Prairie, Tarrant
County, Texas, being situated in the J. Brown Survey, Abstract No. 110 and the
J. Goodwin Survey, Abstract No. 589, and being more particularly described as
follows:
COMMENCING at the north line of Carrier Parkway (100 foot R.O.W.) and the west
line of Lead Tract No. 1 (50 foot R.O.W.);
THENCE West along the north line of said Carrier Parkway for a distance of
500.00 feel to a 1/2 inch iron rod, being the POINT OF BEGINNING; said point
also being the southwest corner of an 11.40 acre tract of land as recorded in
Volume 6277, Page 364, Deed Records of Tarrant County, Texas.
THENCE continuing West along the north line of said Carrier Parkway for a
distance of 707.95 feet to a 1 inch iron rod for corner;
THENCE North 39 degrees, 14 feet 00 minutes West for a distance of 126.46 feet
to a 3/4 inch iron rod for corner, sat point being the cast line of State
Highway 360 (R.O.W. varies);
THENCE North 10 degrees, 57 feet 00 minutes East along the cast line of said
State Highway 360 for a distance of 747.96 feet to a 3/4 inch iron rod;
THENCE North 12 degrees, 23 feet 00 minutes East a distance of 95.45 feet to a
3/4 inch iron rod;
THENCE North 13 degrees, 50 feel 33 minutes East continuing along the cast line
of said State Highway 360 for a distance of 76.71 feet to a 1/2 inch iron rod
for corner;
THENCE East for a distance of 607.03 feet to a 1/2 inch iron rod for corner;
said point also being the northwest corner of said 11.48 acre tract; '
THENCE South along the west line of said 11.48 acre tract for a distance of
1000.00 feet to the POINT OF BEGINNING.
CONTAINING 704,860.47 square feet of 16.181 acres of land.
[MAP]
<PAGE>
EXHIBIT "C"
SIGN CRITERIA
1. Sign Criteria
This criteria establishes the uniform policies for all Tenant sign
identification within Corporate Park. This criteria has been established
for. the purpose of maintaining the overall appearance of the Park.
Conformance will be strictly enforced. Any sign installed that does not
conform to the criteria will be brought into conformity at the expense of
the Tenant.
A. General Requirements
1. A drawing of the size and shape of the approved signage is
shown below. Lettering and installation shall be paid for
by the Tenant.
2. Landlord shall approve all copy and/or logo design prior to the
installation of the sign.
3. Landlord shall direct the placement of all Tenant signs and the
method of attachment to the building.
4. Tenant shall be responsible for the fulfillment of all
requirements for this criteria.
B. General Specifications
1. The sign's dimensions shall be 18" high by 60" long.
2. Tenant shall be allowed one sign of the nature described
in B-1 for each full module leased.
3. All sign lettering shall be no larger than 3 1/2" and will be
white in color. (No other color shall be allowed without
Landlord's consent.) Use of the Tenant's individual company
logo or insignia on any sign visible to public view shall be
at the sole discretion of the Landlord and authorization must
be obtained in writing.
4. No electrical or audible signs will be allowed.
5. Upon removal of any sign, any damage to the building will be
repaired by Tenant.
6. Except as provided herein, no advertising placards, banners,
pennants, names, insignias, trademarks, or other descriptive
material shall be affixed or maintained upon any automated
machine, glass panes of the building, landscaped areas,
streets, or parking areas.
[ART]
TENANT SIGN EXAMPLE
'TOTAL SIGN WIDTH
IMAGE AREA MAXIMUM LETTER HEIGHT
*Signage to remain after Tenant moveout.
Lessee shall pay the sum of $75.00 in total payment for sign
identification.
<PAGE>
EXHIBIT "D"
DFW CORPORATE PARK
RULES AND REGULATIONS
1) SIGNS/WINDOWS: All Tenant identification signs shall be provided at the
expense of Tenant. No sign, placard, picture, advertisement, name or
notice shall be attached to any part of the outside of any building and
if so placed, Landlord shall have the right to remove any such sign,
placard, picture, advertisement, name or notice at Tenant's expense.
Tenant shall not place nor allow anything to be placed near the glass of
any window, door, partition or wall which may appear unsightly from
outside the leased premises, nor conflict with the above. Landlord will
provide a standard drape, blind or window covering that shall not be
altered or removed by Tenant. Tenant is responsible to keep windows
washed, inside and/or out. No awning or shade shall be affixed or
installed over or in the windows or the exterior of the premises.
2) COMMON AREA/ROOF: The sidewalks, entrances and exits, hall passages and
stairways, if any, shall not be obstructed or used by Tenant for any
purpose other than for ingress and egress. The hall passages, exits,
entrances, stairways and roofs are not for the use of the general public
and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence in the judgement of the
Landlord shall be prejudicial to the safety, character, reputation and
interests of the premises and tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom
Tenant normally deals in the ordinary course of Tenant's business unless
such persons are engaged in illegal activities. Neither Tenant nor
employees or invitees of Tenant shall go upon the roof of any building.
3) ADVERTISING: Tenant shall not use the name of the building in connection
with or in promoting or advertising the business of Tenant except as to
Tenant's address. Landlord shall have the right to prohibit the use of
the name of the projects or other publicity by Tenant which in
Landlord's opinion tends to impair the reputation of the project or its
desirability for the other Tenants. Tenants will refrain from or
discontinue such publicity upon notification by Landlord.
4) LOCKS: No additional locks or bolts shall be placed upon any of the
doors or windows by Tenant, nor shall any changes be made in existing
locks or the mechanisms thereof. Tenant must upon the termination of
Tenant's tenancy, return to Landlord all keys either furnished to or
otherwise procured by Tenant. In the event of the loss of any keys so
furnished, Tenant shall pay to Landlord the cost thereof.
5) SOLICITATIONS: Tenant shall not disturb, solicit or canvass any occupant
of the project and shall cooperate to prevent the same.
6) USE OF PREMISES: The leased premises shall not be used for lodging,
sleeping or cooking or for any immoral or illegal purpose or for any
purpose that will damage the premises or the reputation thereof or for
any purpose other than that specified in the lease covering the
premises.
7) PARKING: The parking areas within the office park complex shall be used
solely for the parking of passenger vehicles during normal office hours.
The parking of trucks, trailers, recreational vehicles and campers is
specifically prohibited. No vehicle of any type shall be stored in the
parking areas at any time. In the event that a vehicle is disabled, it
shall be removed within 48 hours. There shall be no "For Sale" or other
advertising signs on or about any parked vehicle. All vehicles shall be
parked in the designated parking areas in conformation with all signs
and other markings. No parking is permitted on public streets adjacent
to the complex.
8) NUISANCES: Tenant shall not use, keep or permit to be used or kept, any
foul or noxious gas or substance in the premises, or permit or suffer,
the premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the building by reason
of noise, odors and/or vibrations, or interfere in any way with other
Tenants or those having business therein nor shall any animals or birds
be brought in or kept in or about the premises of the project. Tenant
shall maintain the leased premises free from mice, bugs, and ants
attracted by food, water or storage materials. Landlord is responsible
for maintaining the outside area.
9) DANGEROUS ARTICLES: Tenant shall not use or keep on the premises of the
complex any kerosene, gasoline or inflammable or combustible fluid or
material, or any article deemed extra hazardous on account of fire or
other dangerous properties or use any other method of heating or air
conditioning other than supplied by Landlord.
10) IMPROPER CONDUCT: Landlord reserves the right to exclude or expel from
the complex any person who in the judgement of the Landlord, is
intoxicated or under the influence of liquor or drugs or who shall in
any manner do any act in violation of the Rules & Regulations of the
said project.
11) WIRING: No electric wires, or any other electrical apparatus, or
additional electrical outlets, shall be installed except with written
request to and written approval from Landlord. Any installation of
above wiring shall be removed by Landlord at Tenant's expense. Landlord
reserves the right to enter upon the leased premises for the purpose of
installing additional electrical wiring and other utilities for the
benefit of the Tenant or adjoining tenant. Landlord will direct
electricians as to where and how telephones and telegraph wires are to
be introduced. The location of telephones, call boxes and other
equipment affixed to the premises shall be subject to the approval of
Lessor.
<PAGE>
12) AUCTION: No auction, public or private, will be permitted.
13) EXTERIOR: Tenant shall not place any improvements or moveable objects
including antennae, outside furniture, etc. in the parking areas,
landscaped area or other areas outside of the leased premises, or on the
roof of any building.
14) SECURITY PRECAUTIONS: All entrance doors in the complex shall be closed
and securely locked when the premises are not in use and all doors
opening to public corridors shall be kept closed except for normal
ingress and egress. Tenant must observe strict care and caution that all
water faucets or any other apparatus is shut off before Tenant or
Tenant's employees leave the premises and that all electricity, gas,
etc. shall likewise be carefully shut off so as to prevent waste or
damage.
15) RESTROOM FACILITIES: The washrooms and restrooms and appurtenances
thereto shall not be used for any other use than those for which they
were constructed. No sweeping, rubbish, rags or other foreign substances
shall be thrown or placed therein. No person shall waste water by
interfering or tampering with the faucets. Any damage resulting in soiled
washrooms or restrooms or appurtenances shall be paid for by the Tenant
who, or whose agents, guests, or employees, shall cause such damage.
16) DAMAGE: Walls, floors and ceilings shall not be defaced in any way and
no one shall be permitted to mark, nail screw or drill into surfaces,
paint or in any way mar the building surface. Pictures, certificates,
licenses and similar items normally used in Tenant's premises may be
carefully attached to the walls by Tenant in a manner to be prescribed
by Landlord. Upon removal of such items by Tenant, any damage to the
walls or other surfaces shall be repaired by Tenant.
17) FURNITURE, SAFES/MOVING: Furniture, freight, equipment, safes or other
bulky articles shall be moved into or out of the complex only in the
manner and at such times as Landlord may direct. Tenant shall not
overload the floor of the premises or in any way deface the premises or
any part thereof. Landlord shall in all cases have the right to
determined or limit the weight, size and position of all safes and other
heavy equipment. Landlord will not be responsible for loss or damage to
any safe or other property of Lessee from any cause. All damage done to
the building or complex by moving or maintaining any such safe or other
property shall be repaired at the expense of Tenant.
18) JANITORIAL SERVICE: Tenant shall not cause any unnecessary labor by
reason of Tenant's carelessness or indifference in the preservation of
good order and cleanliness. Landlord shall not be responsible to Tenant
for any loss of property on the premises, however occurring or for any
damage done to the effect of Tenant by the janitor of any other employee
or any other person.
19) REQUIREMENTS OF LESSEE: Employees of Landlord shall not perform any work
or do anything outside of their regular duties unless under special
instruction from Landlord. Tenant shall give Landlord prompt notice of
any defects in the water, sewage, gas pipes, electrical lights and
fixtures, heating apparatus, or any other service equipment.
20) RULES AND REGULATIONS: Rules may be, modified, amended or supplemented
at any time by Landlord upon written notice to Tenant.
<PAGE>
EXHIBIT "E"
A. AGREEMENT
A.1 Lessor and Lessee agree to the construction of improvements in the Premises
according to the terms and conditions of the Lease, Exhibit "B", and this
EXHIBIT "E".
A.2 Lessor will provide Lessee with final detailed plans and specifications of
all proposed improvements on or before
N/A
- ----------------------------------------------------------------.
A.3 Lessee will return to Lessor a copy of said final detailed plans and
specifications EXHIBIT "E" approved by Lessee on or before
N/A
- -----------------------------------------------------------------.
A.4 Any changes required by Lessee to final plans and specifications previously
approved by both Lessor and Lessee, shall be approved by Lessor at its sole
discretion.
A.5 Lessor will complete all final proposed improvements to the best of its
ability on or before February 28th, 1998
---------------------------------------.
B. LESSEE PAID IMPROVEMENTS
B.1 Lessee at its sole cost and expense will pay for the following
improvements:
N/A
C. LESSOR PAID IMPROVEMENTS
C.1 Lessor at its sole cost and expense will pay for the following improvements
to the premises:
1) Shampoo carpet
2) Touch up paint in office portions of suite
END OF IMPROVEMENTS
<PAGE>
MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
================================================================================
SALES AGREEMENT
---------------
BETWEEN:
MAVIX Ltd., P.O.Box 217, Yoqneam Hi-Tech Park, Yoqneam Illit 20692 ISRAEL
("Seller")
AND
- -------------------------------------------------------------------------------
("Buyer").
Whereas Seller is the producer/supplier of the Products and applied software as
described in Appendix A ("Products"); and Buyer wishes to purchase such Products
from Seller for integration into surveillance projects as provided herein;
Therefore, the parties have agreed as follows:
1. Preamble and Scope of the Agreement
1.1 The preamble and any appendices hereto form integral and inseparable
parts of this Agreement.
1.2 Buyer will order from Seller the Products for integration in Buyer's
systems, and Seller will sell to Buyer the Products on a non-exclusive
basis, under the terms of this agreement.
1.3 Buyer will not market Products in the same form as shipped by Seller,
but only as part of systems installed by Buyer. Buyer is responsible
for the preparation of the cabling and networking infrastructure and
for the configuration, integration; installation, user training,
warranty and maintenance of the complete systems, including the
communications and surveillance equipment.
1.4 Buyer may market the Products, in any form or combination, only in
___________________ ("Territory"). Buyer agrees not to market Products
outside the Territory, except with Seller's prior written approval.
1.5 Buyer is committed to purchase from the Seller in the amount of US
$__________________ of MAVIX products, during the period of this
agreement. This agreement will be extended based on an agreed annual
Sales volume.
<PAGE>
MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
================================================================================
1.6 During the period of this Agreement, Buyer agrees not to produce and/or
order from third parties items, which perform similar functions to
those of the Products, nor to offer any substitute to the Product; and
Buyer shall order all its needs for such items only from Seller.
1.7 There are no partnership or agency relations between Seller and Buyer.
Buyer shall be exclusively responsible towards its customers and any
other person (including Government authorities and regulatory agencies)
in all matters relating to the re-sale and/or use of the Products and
Buyer's systems.
1.8 Buyer is not authorized to, and may not, make any presentations on
behalf of Seller, nor bind it in any way to any obligation.
1.9 Buyer shall indemnify and save Seller harmless from all liabilities,
claims, demands, suits or actions which may be asserted by third
parties against Seller, where those are within Buyer's responsibilities
as defined in this Agreement.
2. PRE-SALE PROMOTION
2.1 Buyer undertakes to use its best efforts in order to maximize sales of
Products in the Territory. Buyer will advertise, promote and present
the Products in the Territory and participate in trade shows, so as to
maximize sales of Products in the Territory.
2.2 Seller will submit to Buyer in due time, upon Buyer's request,
competitive proposals for the Products to be incorporated in Buyer's
offers to its customers, provided that Buyer delivers the full
customer requirements to Seller.
2.3 As a rule, Buyer will be the sole interface with the customer. Buyer
will carry out all pre-sale activities, tenders and proposals
preparation and delivery, at the highest level, in order to increase
the sale of Products in the Territory.
For the above purposes, Seller will provide Buyer with free of charge
technical training for the Products at Seller's premises in Israel.
Buyer will bear all travel, lodging and other expenses for its trainees.
Buyer may request additional training. Subject to the availability of
qualified personnel and prior coordination, Seller will make a
reasonable effort to comply with such requests, at a daily rate of US
$750 (Seven hundred fifty US dollars) per each technical instructor in
addition, Buyer will pay per diem and travel and other expenses.
2.4 Seller will assist Buyer's pre-sale activities with reasonable
consultancy for questions regarding planning, organization and
advertising the Products.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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Buyer may request attendance of Seller's personnel at presentations,
trade shows or demonstrations in the Territory. Subject to availability
of qualified personnel and prior coordination; Seller will make a
reasonable effort to comply with such requests at a daily rate of 750 US
dollars (seven hundred and fifty US dollars); in addition Buyer will pay
per diem and travel and other expenses according to Seller's applicable
rates.
2.5 Seller agrees to provide to Buyer marketing aids, data sheets and other
marketing information relating to Products. These materials, as they
become available, will be sold to Buyer at the current price, except
that 25 copies of existing and new material will be provided free of
charge.
3. PRE-INSTALLATION AND INSTALLATION PROVISIONS
3.1 Buyer confirms that its employees have already received from Seller full
training as to the integration, installation, operation and maintenance
of the Products.
3.2 Buyer will be responsible that prior to installation of the Products,
the communication network is already installed and tested and. found to
operate well peer to peer for any mode and under any traffic load.
3.3 Together. with each purchase order, Buyer will provide a list and
description of the devices, which are to be connected to the Products.
If any such device requires protocol handshake with the Products, then
the specifications for implementation of the protocol, on both sides,
must be discussed and agreed in advance.
Subject to agreement upon the development plan, price and schedule,
Seller will implement the required modifications. Seller will not
charge the Buyer for modifications, which are part of its general
development plan.
3.4 Buyer confirms that Buyer has a PLAT platform suitable for the MAVIEW
software requirements, ready for installation (the MAVIEW is one of the
Products).
3.5 The Products are to be installed in room temperature environments. RFI
distortions are to be resolved and tested by Buyer before any
installation of the Products.
3.6 Buyer is responsible for the installation and smooth operation of the
cabling and network infrastructure, the communication equipment and the
surveillance equipment, which are the basis for installation of the
Products.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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Buyer will also provide know-how, and will support the network operation
during and after the installation.
3.7 Buyer may request attendance of Seller's personnel at the installation
in the Territory. Subject to availability of qualified personnel and
prior coordination, Seller will make a reasonable effort to comply with
such requests, at a daily rate of US $750 (Seven hundred fifty dollars);
in addition, Buyer will pay per diem and travel and other expenses.
4. SALE AND DELIVERY
4.1 Buyer hereby orders from Seller components for a demo system NM
MX2100C/C/E, MX2100C/M/E, MAVIEW and the peripherals according to
the MAVIX Demo System offer.
Seller will deliver the above components within 30 days of receipt of
L/C for a price of US $12,675.00, payable upon shipment.
Buyer will install the complete demo system and use it for presentation,
demonstration and sales promotion.
4.2 Annual forecasts for required quantities of Products will be provided by
Buyer at the beginning of each year, and will be updated quarterly.
Binding purchase orders will be issued for each quarter at least 30 days
before the beginning of that quarter.
Normal delivery time is 90 days after acceptance of order.
Seller will not be liable for delays in deliveries when such delays are
the result of causes beyond Seller's reasonable control.
4.3 In addition to the demo system described in 3.1 above, this agreement
forms a binding purchase order for Products amounting to an initial sum
of US $__________________ which shall be delivered within 12 weeks,
according to the list in Appendix B.
4.4 All orders shall be subject to written acceptance of Seller, but Seller
will not withhold its acceptance unreasonably.
4.5 Deliveries will be made FOB, port of exit from Israel.
All risks of loss or damage related to the Products shall pass to Buyer
upon delito the FOB point.
However, without derogating from the above, Seller retains title to the
Products until full payment of all related invoices and charges.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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4.6 Seller reserves the right at any time to change or modify its Products
and/or specifications, after a 90 day notice to Buyer.
5. PRICES AND PAYMENTS
5.1 Prices of Products will be as per the attached price list - Appendix A.
5.2 Prices are FOB/FCA (Incoterms90) port of exit from Israel.
Any and all charges, expenses; costs, taxes, customs, duties, levies or
tariffs, however designated, beyond the FOB point shall be the
responsibility of Buyer, and are in addition to the agreed prices.
5.3 Payment terms are as defined in Appendix A.
5.4 Each purchase order must be accompanied by an "Irrevocable Confirmed
Letter of Credit", on a major bank as agreed to by Seller.
5.5 Without prejudice to any other right of Seller, late payments shall bear
interest at the rate of 0.75% per week.
5.6 After the first year, Seller may change the prices with a 30 day notice.
5.7 If special projects require special customization of the Products, then
the parties will agree in advance and in writing upon the
specifications, time schedule and price for such customization.
6. WARRANTY AND SUPPORT
6.1 Seller hereby warrants that hardware Products sold hereunder shall be
free of defects in workmanship and materials for a period which will be
the shorter of: 9 months from date of installation at the end-user site
or 12 months from the date of FOB delivery.
The warranty liability is limited to the expeditious replacement or
repair (at Seller's option) of Products during the warranty period at
Seller's facility as indicated by Seller, in accordance with the
warranties specifically and expressly set forth herein. Buyer shall bear
shipping costs for shipment of defective Products to Seller, and Seller
shall bear shipping costs of returning good Products to Buyer.
6.2 Seller shall have no obligation hereunder to make repairs or cause
replacements required as a result of any of the following: normal wear
and tear, accidents or catastrophes or damages occurring after delivery,
force majeure occurrences, fault or negligence of the Buyer or any user,
improper or unauthorized assembly or packaging or use or maintenance of
the Products, use of the
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
================================================================================
Products in a manner for which they were not designed, alteration or
modification of the Products, connection of the Products to devices not
authorized by Seller.
6.3 Shipping and repair/replacement charges for Products returned to Seller
and found not to be under warranty as specified above, will be paid in
full by Buyer.
6.4 Buyer undertakes to purchase and maintain a stock of spare parts and
complete Product units as recommended by Seller.
On-site repairs will be performed by Buyer by replacing defective
parts or complete units with spare parts or units from Buyer's stock.
The defective parts or units will be sent for repair or replacement
to Seller's maintenance center.
Replacement and repair prices will be according to Seller's Price List
valid at the time of repair/replacement.
6.5 SOFTWARE WARRANTY: within the warranty period and subject to the
provisions hereinabove contained, Seller will make a reasonable effort
to correct or cause others to correct errors or non-conformance of the
software which is part of the Products to its approved specifications.
Seller does not warrant the results of such correction nor that the
software will meet Buyer's or end-users' requirements.
The end-users must make and keep backup copies of all application
software operable with the Products. Seller will not be responsible for
any loss of or damage to application software.
6.6 Due to the nature of this Agreement, all assembly, installation,
integration, warranty, maintenance, service and other obligations
towards buyers and users of the Products are the exclusive
responsibility of Buyer; all without prejudice to Seller's obligations
towards Buyer as per paragraphs 6.1- 6.5 above.
6.7 Buyer hereby agrees that the warranty liabilities of Seller are and
shall be limited to the express foregoing terms.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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7. PATENT INFRINGEMENT
7.1 If Buyer notifies Seller promptly in writing of any claim alleging
infringement of patent or other third party's right by the Products or
their use, and gives Seller sole control over the conduct of the defense
against such claims, and assists Seller in such defense, then Seller
shall defend such claims at its expense and shall bear the damages which
may be awarded to third parties against Buyer.
7.2 If a final injunction is obtained in such action as specified in 7.1.
above against the use of the Products or if in Seller's opinion the
Products are likely to become the subject of a claim of infringement,
Seller will, at its option and expense, do one of the following:
(a) procure for Buyer and its clients the right to continue using the
Products,
or
(b) replace or modify the Products so as to make them non-infiringing,
or
(c) grant Buyer a credit for the infringing Products as depreciated
(20(degree)% a year) and accept their return.
7.3 Seller shall not have any liability to Buyer or to any third party if
the alleged infringement is based upon use of the Products in
combination with items or devices not produced by Seller or upon
Seller's compliance with Buyer's designs or special requirements.
Buyer shall defend and hold Seller harmless against any expense,
judgement or loss for alleged infringement of any patents, copyrights,
trade secrets or trademarks which result from the foregoing.
7.4 In no event shall Seller's total liability to Buyer as a result of
infringements exceed the explicit foregoing provisions.
8. LIMITATION OF LIABILITIES
8.1 THE EXPRESS WARRANTIES AND OBLIGATIONS SET FORTH ABOVE ARE AND SHALL BE
IN LIEU OF ALL OTHER WARRANTIES AND OBLIGATIONS OF SELLER, EXPRESS OR
IMPLIED, AND EXCEPT TO THE EXTENT HEREIN PROVIDED, SELLER DOES NOT MAKE
AND SHALL NOT BE DEEMED TO MAKE ANY WARRANTY WHATSOEVER TO BUYER, TO
ANY DEALER, TO ANY END USER OR TO OTHER PERSON OR PARTY, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR
ANY PARTICULAR USE OR PURPOSE.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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8.2 EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER SHALL NOT BE LIABLE FOR ANY
LOSS OF USE, SALES OR PROFIT OR FOR ANY INDIRECT, CONSEQUENTIAL OR
INCIDENTAL DAMAGES CAUSED BY OR SUFFERED AS A RESULT OF THE SALE OR USE
OF THE PRODUCTS.
8.3 The foregoing limitations shall not apply in case of physical injuries
or damage to tangible property of third parties attributable to defects
in the production of Products, provided that the injuries or damages
were sustained in the course of regular and reasonable use.
9. TECHNOLOGY AND CONFIDENTIAL
9.1 It is expressly agreed and understood that the Products and all applied
knowhow and software represent and embody highly confidential know-how,
technology and trade-secrets (all of which, whether patented or not,
will heretofore be referred to as "Technology").
The Technology and all related rights are, and shall always remain, the
exclusive property of Seller.
9.2 Except as expressly specified in this agreement, Buyer agrees not to
use, nor allow or assist others to use, in any way whatsoever, any part
of the Technology for any purpose whatsoever.
9.3 Buyer shall preserve as confidential all Technology and related
technical documentation and information.
9.4 Where a product is a software product ( such as, but not limited to,
the MAVIEW-API or MAVIEW) or where a Product includes software, such
software remains the property of Seller's and/or its licensers. Buyer
and its clients shall only have a non-exclusive and non-transferable
license to use such software for operation of Products supplied by
Seller.
9.5 As concerning a software package ("PACKAGE") such as MAVIEW-API (which
is a building tool for Buyer's systems), it is provided to Buyer under
the following conditions, which are hereby accepted by Buyer
(a) The use of the PACKAGE is allowed only to Buyer itself, for the
purpose of integrating hardware Products purchased from Seller
into B's systems and for adjusting such integrated systems to
the special needs of the end-users.
Buyer will pay to Seller a royalty at the sum specifies in
Appendix A here to for each and every workstation or terminal
that runs and uses MAVIEW-API and is a part of a system as
specified above.
(b) Buyer undertakes not to permit, nor enable, the PACKAGE to be
used by any person or in any manner other than expressly
specified in paragraph (a) above, or as authorized by Seller.
Buyer shall not make copies of the PACKAGE, shall keep it
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
================================================================================
take all necessary precautions to prevent its disclosure to, or
use by, any third party.
Buyer may not modify any part of the PACKAGE without the prior
written authorization of Seller
(c) Seller agree to notify Buyer of updates or new versions of the
PACKAGE and the terms of their supply. Upon request of Buyer and
the applicable payment, Seller will supply the foregoing at the
offered terms, and the provisions of this agreement shall then
apply to such updates and new versions.
(d) The right of Buyer to use the PACKAGE as provided above may be
terminated by Seller in case of breach of this agreement by
Buyer, and failure to remedy the breach within 14 days of notice
to that effect. Upon such termination, Buyer will discontinue
all activity related in any way to the PACKAGE and will return
to Seller all copies of it and all related documentation.
(e) Should Buyer provide the PACKAGE to another system integrator,
Buyer will be responsible to ensure that such integrator
undertakes in writing (towards Seller and Buyer) to comply with
the provisions of this chapter 9, including the payment of
royalties as per sub-section (a) above, and Buyer will be
responsible to transfer such payment to Seller.
9.6 Promptly upon termination or expiration of this Agreement, Buyer will
discontinue the use of any Seller's proprietary or confidential
Technology and information in its possession and return it to Seller
together with all copies thereof made by Buyer.
9.7 Neither party may use the name, logo, trademarks or trade names of the
other party, or derivatives thereof, in advertisements, letterheads or
otherwise, except with the prior written approval of the other party.
9.8 Upon expiration or termination of this Agreement, each party agrees.
simultaneously therewith to discontinue all uses of the other party's
name, logo, trademarks and trade names.
9.9 The provisions of sections 9.1 through 9.8 shall survive termination or
expiration of this Agreement.
<PAGE>
MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
================================================================================
10. PERIOD OF THE AGREEMENT
10.1 This Agreement is valid for one year. If the purchase of Products during
the term of this agreement is less than the Buyer's commitment
(paragraph 1.5), then the Seller is entitled to terminate the agreement.
If purchases of Products by Buyer in this period meet the sales targets
as defined in paragraph 1.5, then the Agreement will renew for a second
year with a mutually agreed annual Sales volume.
10.2 Each party may immediately terminate this Agreement in the event the
other party commits a breach which is not cured within thirty (30) days
after notice to that effect. .
10.3 Should either party go into receivership, be admitted to the benefits of
any court procedure for the settlement of debts or be declared bankrupt,
or if substantial change occurs in the nature, ownership or control of
either party's business, whether voluntary or by operation of law, then
the other party may terminate this Agreement forthwith by written
notice.
10.4 Any expiration or termination will not relieve Buyer of its obligations
to pay any sum due hereunder, or to take delivery and pay for orders
placed by it prior to the effective date of the termination or
expiration, and the provisions of this Agreement shall remain applicable
to such orders.
All sums still due to Seller will be paid upon the termination or
expiration of the Agreement.
10.5 Acceptance of any order from Buyer or any sale made to Buyer by Seller
after notice of termination or after termination or expiration of this
Agreement shall not be construed as a renewal or extension hereof nor as
a waiver of such notice of termination, but in the absence of new
agreement covering such orders or sales, each such order and sale shall
be governed by terms and conditions identical with the terms and
conditions of this Agreement.
10.6 In the event of expiration or termination of this Agreement,
irrespective of cause, Seller shall not be liable to Buyer for any
damages, expenses, unsold stock, return of investment or creation of
goodwill, or for any loss on account of prospective profits or
anticipated sales.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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11. MISCELLANEOUS
11.1 This agreement forms the complete and exclusive agreement between the
parties as to its subject matter and cancels any prior verbal or written
agreement related thereto.
Any amendment, waiver or cancellation of any part of this Agreement will
be valid only if done in writing and signed by the parties.
Terms and conditions contained in any document issued by one party shall
not apply, unless expressly agreed to in writing by the other party.
11.2 All correspondence, negotiations and proceedings related to this
Agreement will be in the English language only.
11.3 A party to this Agreement will not be liable for any delay or default in
the performance of this Agreement when such delay or default is the
result of causes which are reasonably beyond its control or which
occurred without its fault or negligence.
11.4 The failure or delay of either party to require the performance of any
term of this Agreement, or the waiver by either party of any breach of
this Agreement, shall not prevent a subsequent enforcement of such
terms, nor be deemed a waiver of any subsequent or prolonged breach.
11.5 Any notice sent by one party to the other by registered mail to the
addresses heading the agreement, or to addresses provided by one party
to the other from time to time - will be deemed to have been delivered
10 business days after the day of mailing. Fax messages will be deemed
to have been delivered one business day after transmission.
11.6 Except for assignment to affiliates, neither party shall have the right
to assign or transfer any of its rights or obligations under this
Agreement to any third per.
11.7 Any provisions of this agreement prohibited by law shall be ineffective
to the extent of such prohibition, without invalidating the remaining
provisions hereof.
In such case of an ineffective provision, the parties agree to replace
the ineffective provision with a new provision having the same (or as
close as possible) economic effect.
11.8 Each party to this agreement expressly agrees that: any claim brought by
it with relation to this agreement, may only be entered in the courts of
the State of the defending party, and such courts will have exclusive
jurisdiction over such claims. Judgements of the foregoing courts will
be enforceable in any country.
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MAVIX LTD /INTEGRATOR SALES AGREEMENT 28 JUL-99
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11.9 If any action at law, inequity or by way of arbitration is necessary to
enforce or interpret the provisions of this agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements, in addition to any other relief to which that
party may be entitled.
AND IN WITNESS, THE PARTIES HAVE SIGNED AND EXECUTED THIS
AGREEMENT,
ON THIS DAY OF , 1998.
------- ------------
Seller, by Buyer, by:
AVNER MOR, PRESIDENT
- ------------------------------- ---------------------------
MAVIX Ltd. Name(s) and Title(s)
- ------------------------------- ---------------------------
Signature Signature(s)
APPENDICES:
A - Price List.
B - List for Initial Order.
<PAGE>
LENEL Systems International, Inc.
LENEL'r' ONGUARD'r'
Authorized Reseller Agreement
LENEL MAILING ADDRESS:
1050 Pittsford-Victor Road
Fairport, New York 14534 FOR LENEL USE ONLY:
Telephone 716-248-9720 FAX 716-248-9185 Customer # ________
Reseller Name: Henry Bros Electronics
Contact Name: Ted Gjini
Address: 280 Midland Ave., Saddle Brook, NJ 07663
Telephone 201/794-6500 FAX 201/794-8341
e-mail Address Jim Henry, Irv Witcosky, Emil Marone, Gerard Romolo,
Eileen Vazque
(Please specify the name and address of any other individual who should receive
notices and mailings from Lenel)
Contact Name Dave Jones
Street Address 2100 Hwy 360, Suite 2101
City, State, Zip Grand Prairie, TX 75050
Telephone 214/988-8887 FAX 214/988-9047
e-mail Address ____________________________________________________________
RESELLER AUTHORIZATION:
Signature /s/ Irv Witcosky Print Name Irv Witcosky Title V.P. Date 4/26/99
________________ ____________ _____ _______
LENEL AUTHORIZATION:
Signature /s/ Elena Prokupets
___________________
President & CEO Date 6/1/99
_______________ ______
This Agreement covers a term beginning on the date this agreement is signed by
all parties (the "Effective Date") and ending March 31, 2001 (the "Term").
Neither party is obligated to renew this Agreement at the end of the term nor to
extend the Agreement beyond the initial term.
This Agreement, including the attached exhibits, which are hereby incorporated
into this Agreement, sets forth the terms and conditions for the distribution of
LENEL PRODUCTS and services in a territory through RESELLER.
<PAGE>
2
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1.0 APPOINTMENT
1.1 Under this RESELLER Agreement (the "Agreement") Lenel Systems International,
Inc. ("LENEL(degree)") appoints the RESELLER identified above ("RESELLER") as a
LENEL OnGuard Authorized RESELLER for the term of this Agreement. The Agreement
is effective only when signed by an authorized representative of LENEL and
RESELLER.
1.2 While this Agreement is in force, RESELLER shall be entitled to style and
represent itself as a LENEL OnGuard Authorized RESELLER for PRODUCTS in the
TERRITORY. RESELLER shall not grant this style to any third party or AFFILIATED
COMPANY.
1.3 LENEL hereby appoints RESELLER to be a nonexclusive RESELLER of the
PRODUCTS within the TERRITORY. It is understood that other RESELLERS may sell
and deliver PRODUCTS to customers within the TERRITORY, and LENEL will not be
obligated to account to RESELLER for such sales.
Furthermore, LENEL may sell to DIRECT ACCOUNTS. DIRECT ACCOUNTS shall mean
those customers and prospective customers of LENEL that are identified in
Exhibit A, which may be served directly by LENEL. Notwithstanding, it is not
LENEL's intention to sell products to end users on a direct basis. LENEL will
notify RESELLER of any changes to Exhibit A on a timely basis.
1.4 RESELLER may sell PRODUCTS only within the TERRITORY. TERRITORY shall mean
the locations where RESELLER regularly conducts its business, inclusive of
Metro New York and Metro Dallas, Texas but limited to the United States.
1.5 RESELLER is acting in the role of an independent contractor under this
Agreement. Neither party may bind the other party to any legal obligations in
connection with this Agreement or RESELLER's agreements with its customers.
1.6 This Agreement may not be assigned by RESELLER without the prior written
consent of LENEL. which consent will not be unreasonably withheld. and any
attempted assignment will be void.
2.0 RESALE OBLIGATIONS
RESELLER may purchase PRODUCTS for resale to end user customers, and to prime
contractors to end user customers.
3.0 PRODUCTS
3.1 LENEL appoints RESELLER as a RESELLER for the PRODUCTS (the "PRODUCTS") as
described in Exhibit B.
3.2 LENEL may discontinue the manufacture or availability of any PRODUCTS, or
add PRODUCTS, or make a change to any PRODUCTS relating to performance,
serviceability, recommended uses and application, or otherwise, at any time.
LENEL will use reasonable efforts to provide RESELLER with advance notification
of such changes.
4.0 LENEL OBLIGATIONS
4.1 LENEL will sell RESELLER the PRODUCTS in accordance with the terms and
conditions stated in this Agreement.
4.2 LENEL will maintain a staff to market and support the PRODUCTS to the
RESELLER.
4.3 LENEL will assist RESELLER, at RESELLER's discretion, in the development of
RESELLER's own programs to promote the PRODUCTS.
4.4 LENEL will promote the PRODUCTS through marketing campaigns targeted to
potential end users of the PRODUCTS.
4.5 LENEL will offer (at reasonable costs) technical training programs
regarding the PRODUCTS to RESELLER, to enable RESELLER to perform to the
satisfaction of its customers in both sales and service of the PRODUCTS.
4.6 LENEL will provide RESELLER with original catalogs, schedules,
supplements, trade bulletins and other literature relating to the PRODUCTS.
5.0 RESELLER OBLIGATIONS
<PAGE>
3
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5.1 RESELLER will maintain a qualified staff to promote, sell, and support the
PRODUCTS during the term of this Agreement.
5.2 RESELLER will provide warranty service for the PRODUCTS to RESELLER's
customers. RESELLER will make no false or misleading representations concerning
the PRODUCTS, and make no representations or warranties on behalf of LENEL,
except for those representations or warranties that are made by LENEL for the
PRODUCTS.
5.3 RESELLER will sell all the PRODUCTS in LENEL's original packages without
removing, defacing, concealing, or altering marks or numbers prior to sale,
unless otherwise agreed in writing by LENEL and RESELLER.
5.4 RESELLER must purchase from LENEL, a minimum of $500.000 of any combination
of the PRODUCTS contained in Exhibit B. If RESELLER fails to meet this
requirement, LENEL may terminate this Agreement.
5.5 Within thirty days (30) following the Agreement Effective Date, RESELLER
agrees to order from LENEL a software package for demonstrating the PRODUCTS;
enroll at least one qualified staff member for training at LENEL's factory.
RESELLER will monitor and maintain at least one staff member at each location of
RESELLER, who is trained by LENEL at the factory,
6.0 RECORDS AND REPORTING
RESELLER will provide LENEL, upon request, with information concerning the sale
of PRODUCTS to enable LENEL to (i) comply with any federal, state, or law
relating to the sale, servicing, or use of the PRODUCTS, (ii) verify RESELLERS
compliance with any marketing or promotional program that LENEL may make
available and under which RESELLER elects to participate, and (iii) determine
RESELLER's performance of its obligations under this agreement.
7.0 WARRANTY
All PRODUCTS are sold only with the warranty that is either, expressly stated
on, or packaged with, or accompanying the PRODUCT, or stated on the Reseller
Price Book. or LENEL's PRODUCT information materials.
LENEL DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
NOTE: Unless otherwise provided in the applicable PRODUCT warranty, PRODUCTS
purchased under this Agreement are eligible for warranty service only within the
United States.
8.0 TRADEMARKS
8.1 Subject to the conditions in this Agreement, LENEL grants to RESELLER for
the term of this Agreement, a non-exclusive right and license (limited to the
TERRITORY) to use the design trademark shown in the attached Exhibit C
(hereinafter "Trademark") to identify RESELLER in the distribution of PRODUCTS
in the TERRITORY to its customers. RESELLER may not transfer or assign this
license or grant sub-licenses or any other right to use the Trademark to any
other party.
8.2 RESELLER acknowledges that LENEL is the owner of the Trademark and all trade
dress and trademarks incorporated in or associated with the Trademark. If
RESELLER acquires by operation of law or otherwise any rights in the Trademark
or any such trade dress or trademarks, it will at LENEL's request, assign such
rights to LENEL or its related company at no cost to LENEL along with any
goodwill associated with such rights. The obligations of RESELLER under this
paragraph shall survive expiration or termination of this Agreement.
8.3 Upon expiration or termination of this Agreement, RESELLER will discontinue
forthwith the use of the Trademark, and the rights of the RESELLER to use the
Trademark will cease. RESELLER will promptly deliver to LENEL, or destroy, all
material bearing the Trademark which is in the RESELLER's possession or control.
RESELLER further agrees to notify LENEL of any infringement or misuse, to which
<PAGE>
4
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RESELLER becomes aware, of the Trademark or such other LENEL trademark or trade
dress and to cooperate with LENEL as LENEL shall reasonably require in any
action taken by LENEL with respect to such infringement of misuse.
8.4 RESELLER agrees not to contest, or to use or attempt to register any
trademark or trade dress confusingly similar to, the Trademark or any such other
LENEL trademark or trade dress.
9.0 ORDERS
9.1 All orders for the PRODUCTS, which must be placed in the form of a purchase
order by RESELLER to LENEL, shall be subject to acceptance by LENEL.
9.2 The Terms and conditions applicable to each specific order placed by
RESELLER to LENEL shall be as stated in Exhibit D. In the absence of provisions
in the documentation, the terms and conditions will be as set forth in Exhibit D
hereto. The prices charged to RESELLER will be the prices prevailing in LENEL's
published Reseller Price Book at the time of the order's acceptance by LENEL.
10.0 CONFIDENTIAL, INFORMATION
10.1 All information not already available to the public, which RESELLER has
acquired prior to the Effective Date and may acquire during the term hereof,
related to LENEL's inventions, designs, methods, improvements, trade secrets,
price lists, schedules, quotations, customer information including the identity
of LENEL's customers, or other confidential business and technical information
(hereinafter "Confidential Information"), shall not directly or indirectly be
disclosed by RESELLER to any person without prior written permission of LENEL,
and shall not be used by RESELLER except in fulfilling its obligations under
this Agreement. This obligation will survive this Agreement.
10.2 RESELLER further agrees that upon termination or failure to renew or extend
this Agreement all Confidential Information, together with all files,
correspondence. documents, sales and other data, and material related to LENEL's
business, shall be returned to LENEL.
10.3 RESELLER agrees that the Non-Disclosure Agreement attached in Exhibit E, is
made a part of this Agreement.
11.0 TERM AND TERMINATION
11.1 Either party may terminate this Agreement without cause upon 90 days' prior
written notice to the other party. This Agreement remains in effect from the
Effective Date to the end of the Term, and may be extended for one (1)
additional year by the written mutual agreement of the parties.
11.2 Either party may immediately terminate this Agreement if the other party
fails to remedy a material breach of its obligations within 30 days after
receipt of a written notice from the other party specifying the nature of the
breach.
11.3 Either party may terminate this Agreement immediately if the other party
ceases to conduct its operations in the normal course of business, or files for
or becomes the subject of a bankruptcy petition, or is placed in receivership.
11.4 LENEL may terminate this Agreement immediately if RESELLER attempts to
assign this Agreement without LENEL's prior written consent.
12.0 EFFECT OF TERMINATION OR EXPIRATION
12.1 If this Agreement is terminated, not renewed, or extended due to a material
breach by RESELLER, LENEL may, at its option, cancel any or all unfilled orders
and LENEL reserves the right to purchase from RESELLER, and RESELLER shall sell
to LENEL or its nominee, any or all salable PRODUCTS not sold or used by
RESELLER at the net price paid by RESELLER or the current net RESELLER price;
whichever LENEL elects: provided however that RESELLER shall remain liable to
LENEL or its nominee for any defects in such PRODUCT caused by poor handling or
storage.
12.2 If this Agreement expires and is not renewed, or if this Agreement is
terminated for a
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reason other than a material breach by RESELLER, RESELLER may continue for 120
days to sell its remaining inventory of PRODUCTS subject to the terms of this
Agreement.
12.3 Upon termination of this Agreement, RESELLER shall discontinue immediately
all advertising or reference to the PRODUCTS and shall forthwith pay all
invoices for the PRODUCTS the title of which has passed to RESELLER, regardless
of any terms which previously may have been granted with respect thereto.
13.0 NO LIABILITY FOR TERMINATION
To the full extent allowed by any applicable law, RESELLER agrees that it will
have no rights to damages or indemnification of any nature due to any
expiration, rightful termination, or non-renewal of this Agreement by LENEL.
14.0 TAXES
RESELLER shall be exclusively responsible for the payment of income or other
taxes, fees or governmental dues of any kind, arising out of this Agreement or
resulting from the performance of this Agreement. RESELLER shall keep LENEL
harmless and indemnified against any taxes or other levies resulting from this
Agreement.
15.0 NOTICES
All notices required or permitted hereunder shall be in writing and shall be
deemed duly given when personally delivered, or sent by registered or certified
mail, or overnight carrier to the address set forth above.
16.0 FORCE MAJEURE
In the event of an inability or failure by LENEL to manufacture, supply or ship
any of the PRODUCTS herein by reason of any fire, explosion, war, riot, strike,
walk-out, labor controversy, flood, shortage of water, power, labor,
transportation facilities or necessary materials or supplies, default or failure
of carriers, breakdown in or the loss of production from plant or equipment, act
of God or public enemy, any law act or order of any court, board, government or
other authority of competent jurisdiction, or any other direct cause (whether or
not of the same character as the foregoing) beyond the reasonable control of
LENEL, then LENEL shall not be liable to the RESELLER during the period and to
the extent of such inability or failure. Deliveries omitted in whole or in part
while such inability remains in effect shall be canceled.
17.0 AMENDMENTS
No addition to, deletion from or modification of any of the provisions of this
Agreement shall be binding upon the parties unless made in writing and signed by
a duly authorized representative of each party.
18.0 WAIVER
Failure by either party to enforce any term or condition of this Agreement will
not be deemed a waiver of future enforcement of that or any other term or
condition.
19.0 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. Disputes under this Agreement shall be resolved by civil
litigation or alternate dispute resolution in Monroe County, New York.
20.0 ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of the parties with regard
to the sale of PRODUCTS, and supersedes all prior discussions, representations,
agreements and understandings.
21.0 NON-HIRE/NON COMPETE
21.1 During the terms of this agreement and for one year after termination of
this agreement, RESELLER agrees not to solicit employees from LENEL.
21.2 During the TERM of this AGREEMENT, RESELLER agrees that it shall not
undertake the development or outsource the development of software that competes
with PRODUCTS.
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LIST OF ATTACHMENTS:
Exhibit A - Direct Accounts, Exhibit B - Products, Exhibit C - Trademarks,
Exhibit D - Terms and Conditions, Exhibit E - Non-Disclosure Agreement, Exhibit
F - Lenel OnGuard License Agreement
EXHIBIT A - DIRECT ACCOUNTS
Existing LENEL Customers
University of Rochester
Microsoft Corporation
EXHIBIT B - PRODUCTS
The following LENEL products are assigned for sale in RESELLER's TERRITORY:
Lenel OnGuard'r' ID Multimedia Identification Management System for Windows NT
and 95.
Lenel OnGuard'r' Multimedia Access Control & Alarm Monitoring System for
Windows NT and 95.
Lenel OnGuard'r' Plus Integrated Multimedia Security Management System for
Windows NT and 95.
All related Lenel OnGuard'r' Software Modules.
EXHIBIT C - TRADEMARKS
The following trademarks and registered trademarks are available for use by
RESELLER in accordance with the terms set forth in Section 8.0. (This sample is
not intended for reproduction purposes; camera-ready art is available through
LENEL)
LENEL'r'
Lenel OnGuard'r'
Lenel BadgeDesigner'TM'
Lenel OnGuard Plus
Lenel Image Viewer'TM'
Lenel VisitorBadge'TM'
Lenel PhotaGallery'TM'
The Single Solution for Multimedia Productivity
The Single Solution for Security Productivity
OnGuard Enterprise'TM'
OnGuard FormsDesigner'TM'
OnGuard CentralMonitor'TM'
OnGuard AssetsManager'TM'
OnGuard MobileBadge'TM'
[LOGO]
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EXHIBIT D - PURCHASE ORDERING - TERMS, CONDITIONS, AND PROCEDURES
1.0 QUOTATIONS AND PRO FORMA INVOICES:
1.1 All quotations and pro forma invoices issued by LENEL are subject to these
Terms and Conditions of Sale.
1.2 Unless otherwise stated in writing thereon, the quotation expires 60 days
from date of quotation and may be withdrawn at any time within that period,
prior to approval of order, upon written notification to RESELLER.
1.3 Specifications, pricing, and availability are subject to change at any time.
LENEL will use reasonable efforts to provide RESELLER with advance notification
of such changes.
2.0 APPROVAL OF ORDERS
2.1 All purchase orders must detail specific quantities, prices, and part
numbers for the PRODUCTS. All purchase orders must be firm and submitted in a
hard copy form either by mail or facsimile. Phone orders will not be accepted.
LENEL will review each purchase order prior, and if accepted an acknowledgment
will be faxed to the RESELLER.
2.2 The commitment to fulfill orders is subject to approval by LENEL's credit
department.
2.3 ORDER CANCELLATION. RESELLER has the right to cancel an accepted purchase
order (for standard products only) when a written request for cancellation is
received by LENEL from RESELLER, and the order is canceled thirty (30) or more
calendar days in advance of previously requested and accepted shipment date set
forth on purchase order. If the order is canceled when there is less than thirty
(30) calendar days from the written request to the shipment date, RESELLER
agrees to pay LENEL a 20% handling fee.
3.0 PRICES
3.1 Prices in any price list of LENEL PRODUCTS, do not include sales, use or
other taxes, which shall be added to LENEL's invoices if applicable. Any changes
in the price of PRODUCTS shall apply as follows: (i) price increases shall
apply to all orders received 60 days after effective date of the new prices; and
(ii) price decreases shall apply to all orders received on or after the
effective date of the new prices.
3.2 LENEL may change prices at any time. LENEL will use reasonable efforts to
provide RESELLER with advance notification of such changes.
3.3 All prices are stated and payable in US dollars.
3.4 RESELLER is free to determine its own resale price for all PRODUCTS; and
suggested list price that may be published by LENEL for any PRODUCT is for
reference only and is not binding on RESELLER.
3.5 NET PURCHASE PRICE for PRODUCTS shall mean the price charged by LENEL in the
sale of PRODUCTS minus any discounts, PRODUCTS returned for credit,
transportation costs, and any direct governmental charge or tax.
4.0 BILLING AND PAYMENT TERMS
4.1 RESELLER must have credit terms approved by LENEL credit department.
4.2 If credit terms are not extended, then all orders must be prepaid via wire
transfer or shipped to RESELLER cash on delivery.
4.3 Invoices will be issued by LENEL on date of shipment and payment must be
made by RESELLER within 30 days of date of invoice.
4.4 If RESELLER fails to pay invoice within 30 days, LENEL will impose a late
payment charge equal to the lessor of (1) 2% per month or (2) the maximum rate
allowed by law.
4.5 All performance by LENEL under this Agreement or any other order may be
suspended should RESELLER be delinquent in making
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payment for PRODUCTS, services, or other items.
4.6 Should RESELLER become delinquent in making payments for PRODUCT, LENEL
reserves the right to place RESELLER on cash on delivery and/or wire transfer
terms.
5.0 DELIVERY
5.1 LENEL shall deliver all PRODUCTS purchased hereunder F.O.B. shipping point.
5.2 Special shipping instructions must be specified at the time of order
placement. If no instructions are given, LENEL will ship the products via UPS
ground transportation. International shipments will ship UPS Expedited. Risk of
loss passes to the RESELLER at the time of delivery to the carrier.
5.3 LENEL will attempt to schedule shipments as closely as possible in
accordance with RESELLER's request. However, LENEL will not accept
responsibility for any damages or charges to the RESELLER for late delivery.
6.0 RIGHT TO DISTRIBUTE SOFTWARE
6.1 LENEL hereby grants to RESELLER the nonexclusive right to distribute the
software included in the PRODUCTS to its customers in accordance with the terms
and conditions of LENEL's Standard Software License Agreement (Exhibit F).
RESELLER shall not have the right to copy, reproduce, or modify any software or
hardware for any purpose.
6.2 TRANSFER OF TITLE
The title of ownership of materials, products, and software licenses does not
transfer from LENEL to the purchaser until LENEL has been paid in full for all
material and labor and any LENEL or applicable software license agreements have
been signed by the RESELLER and the end-user and returned to LENEL.
6.3 SOFTWARE OWNERSHIP
LENEL system software and firmware remain the property of LENEL. RESELLERS
purchase systems with the understanding that they have purchased a "License to
use" the software programs.
Each software license sold is for use on a single CPU unless otherwise stated in
the license agreement. RESELLER must purchase additional licenses when using or
installing the LENEL software on more than the originally contracted number of
CPUs. RESELLERS/End-users are strictly prohibited from attempting to alter
LENEL software programs. Any attempt to alter said programs will immediately
void any remaining applicable warranty or maintenance contract and break the
terms and conditions of the software License Agreement.
7.0 RETURN OF GOODS
7.1 Reseller must obtain a Return Material Authorization (RMA) from LENEL prior
to returning PRODUCTS or components. RESELLERS must make a request for an RMA
within 30 days of shipment. LENEL is not obliged to accept returns of product
after 30 days from shipment. One RMA number is required for each returned
shipment.
7.2 Following receipt of the RMA number, the RESELLER shall ship the product
(prepaid) to LENEL within 15 days. If LENEL has not received the product within
15 days of the RMA issue date, the RMA becomes void and receipt of the product
will be refused by LENEL. RESELLER shall return PRODUCTS to LENEL in original
packaging.
7.3 Return PRODUCTS shall be shipped Freight Pre-Paid F.O.B. Destination. and
shall include the RMA Number, a description of item(s) being returned, and
reason for the return.
7.4 All special orders or custom products, including non-standard software
features are not subject to return.
7.5 A restocking charge of 25% of the purchase price will be charged for items
returned in unused condition with the original packaging intact. LENEL will not
accept the return of used equipment.
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EXHIBIT E - NON-DISCLOSURE AGREEMENT
This Non-Disclosure Agreement (the "Agreement") is made between LENEL Systems
International, Inc. a Delaware Corporation ("LS"), and RESELLER (herein this
exhibit as "COMPANY"), and entered into the Effective Date under the RESELLER
Agreement.
In consideration of the mutual promises and convenants contained in this
Agreement, LS disclosure of confidential information to COMPANY, and any
payments made or to be made by LS or COMPANY, the parties hereto agree as
follows:
1. Confidential Information and Materials
(a) "Confidential Information" means nonpublic information that LS designates as
being confidential or which, under the circumstances surrounding disclosure,
ought to be treated as confidential. "Confidential Information" includes,
without limitation, information relating to released or unreleased LS software
or hardware products, the marketing or promotion of any LS product, LS' business
policies or practices, and information received from others that LS is obligated
to treat as confidential. Confidential information disclosed to COMPANY by a LS
Subsidiary and/or agents is covered by this agreement.
(b) Confidential Information shall not include that information defined as
Confidential Information above that COMPANY can conclusively establish: (i) is
or subsequently becomes publicly available without COMPANY's breach of any
obligation owed LS; (ii) became known to COMPANY prior to LS' disclosure of such
information to COMPANY, (iii) became known to COMPANY from a source other than
LS other than by the breach of an obligation of confidentiality owed to LS; (iv)
is disclosed by LS to a third party without restrictions on its disclosure; or
(v) is independently developed by COMPANY.
(c) "Confidential Materials" shall mean all tangible materials containing
Confidential Information, including without limitation written or printed
documents and computer disks or tapes, whether machine or user readable.
2. Restrictions
(a) COMPANY shall not disclose any Confidential Information to third parties for
five (5) years following the date of its disclosure by LS to COMPANY, except to
COMPANY's consultants as provided below. However, COMPANY may disclose
Confidential Information in accordance with judicial or other governmental
order, provided COMPANY shall give LS reasonable notice prior to such disclosure
and shall comply with any applicable protective order or equivalent.
(b) COMPANY shall take reasonable security precautions, at least as great as the
precautions it takes to protect its own confidential information, to keep
confidential the Confidential Information. COMPANY may disclose Confidential
Information or Materials only to COMPANY's employees or consultants on a
need-to-know basis. COMPANY shall execute appropriate written agreements with
its employees and consultants sufficient to enable it to comply with all the
provisions of this Agreement.
(c) Confidential Information and Materials may be disclosed, reproduced,
summarized, or distributed only in pursuance of COMPANY's business relationship
with LS, and only as otherwise provided hereunder. COMPANY agrees to segregate
all such Confidential Materials from the confidential materials of others in
order to prevent commingling.
(d) COMPANY may not reverse engineer, decompile, or disassemble any software
disclosed to COMPANY.
3. Rights and Responsibilities
(a) COMPANY shall notify LS immediately upon discovery of any unauthorized use
or disclosure of Confidential Information or Materials, or any other breach of
this Agreement by COMPANY, and will
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cooperate with LS in every reasonable way to help LS regain possession of the
Confidential Information or Materials and prevent its further unauthorized use.
(b) COMPANY shall return all originals, copies, reproductions and summaries of
Confidential Information or Materials at LS's request or, at LS' option, certify
destruction of the same,
(c) COMPANY acknowledges that monetary damages may not be a sufficient remedy
for unauthorized disclosure of Confidential Information and that LS shall be
entitled. without waiving any other rights or materials, to such injunctive or
equitable relief as may be deemed proper by a court of competent jurisdiction.
(d) LS may visit COMPANY's premises, with reasonable prior notice and during
normal business hours, to review COMPANY's compliance with the terms of
Agreement.
4. Miscellaneous
(a) All Confidential Information and Materials are and shall remain the property
of LS. By disclosing information to COMPANY, LS does not grant any express or
implied right to COMPANY to or under LS patents, copyrights, trademarks, or
trade secret information.
(b) If LS provides pre-release software as Confidential Information or Materials
under this Agreement, such pre-release software is provided "as is" without
warranty of any kind. COMPANY agrees that neither LS nor its suppliers shall be
liable for any damages whatsoever relating to COMPANY's use of such pre-release
software.
(c) Any software and documentation provided under this Agreement is provided to
COMPANY with RESTRICTED RIGHTS. Use, duplication or disclosure by the Government
is subject to restrictions as set forth in subparagraph h(c)(1)(ii) of The
Rights in Technical Data and Computer Software clause at DFARS 252.227-7013 OR
SUBPARAGRAPHS (c)(1) and (2) of the Commercial Computer Software--Restricted
Rights at 48 CFR 52.227-19, as applicable. Manufacturer is LENEL Systems
International Inc., 290 Woodcliff Office Park, Fairport, NY 14450-4212.
(d) COMPANY agrees that it does not intend nor will it directly or indirectly,
export or transmit (i) any Confidential Information or Materials or (ii) any
product (or any part thereof), process, or service that is the direct product of
the Confidential Information or Materials to the People's Republic of China,
Afghanistan, or any group Q, S, W, Y, or Z country specified in Supplement No. 1
of Section 770 of the Export Administration Regulations or to any other country
to which such export or transmission is restricted by regulation or stature,
without the prior written consent of the Office of Export Administration of the
U.S. Department of Commerce or such other governmental entity as may have
Jurisdiction over such export or transmission.
(e) This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and merges all prior discussions between
them as Confidential Information. It shall not be modified except by a written
Agreement dated subsequent to the date of this Agreement and signed by both
parties. None of the provisions of this Agreement shall be deemed to have been
waived by any act or acquiescence on the part of LS, its agents, or employees,
but only by an instrument in writing signed by an authorized officer of LS.
No waiver of any provision of this Agreement shall constitute a waiver of any
other provision(s) or of the same provision on another occasion.
(f) If either LS or COMPANY employs attorneys to enforce any rights arising out
of or relating to this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees. This Agreement shall be construed and
controlled by the laws of the State of New York, and COMPANY further consents
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to jurisdiction by the state and federal courts sitting in the State of New
York. Process may be served on either party by U.S. mail, postage prepaid,
certified or registered, return receipt requested, or by such other method as is
authorized by the New York Long Arm Statute.
(g) Subject to the limitations set forth in this Agreement, this Agreement will
inure to the benefit of and be binding upon the parties, their successors and
assigns.
(h) If any provision of this agreement shall be held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, the remaining provisions
shall remain in full force and effect.
(i) All obligations created by the Agreement shall survive change or termination
of the parties business relationship.
5. Suggestions and Feedback
LS may from time to time request suggestions, feedback, or other information
from COMPANY on Confidential Information or on released or unreleased LS
software or hardware. Any suggestions, feedback or other disclosure made by
COMPANY are and shall be entirely voluntary on COMPANY's part and shall not
create any obligation on the part of LS or a confidential relationship between
COMPANY and LS. Instead, LS shall be free to disclose and use COMPANY's
suggestions, feedback, or other information as LS sees fit, entirely without
obligation of any kind to COMPANY.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as per the
signature authorization under the RESELLER Agreement.
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EXHIBIT F- LENEL ONGUARD LICENSE AGREEMENT
You should carefully read the following license agreement before signing
RESELLER Agreement. By signing the agreement, you indicate your acceptance of
the terms of this legal agreement.
Copyright/Proprietary Protection
This Software (the computer application program contained in the diskette
envelope) and the Documentation (all of the printed material included with this
Software) are owned by Lenel Systems International, Inc. (Lenel) and are
protected by the United States and international copyright laws and
international treaty provisions. You must treat this software like any other
copyrighted material, with the exceptions outlined in the following License
Grant. Any violation of this agreement will automatically terminate your right
to use this Software, and you must immediately return it to Lenel.
License Grant
Lenel grants you a nonexclusive license to copy this Software onto the hard disk
of a single (dedicated) computer, and to make one copy for archival purposes.
You may not make copies of the Software for any purpose other than what is
stated above. You may not copy the Documentation for any reason. You may not
reverse-engineer, disassemble, decompile or attempt to discover the source code
of the Software. You may not sublicense, rent or lease any portion of the
Software. You may transfer your rights under this agreement on a permanent basis
to another person or entity provided that you transfer this License Agreement,
all original and updated Software and Documentation, and that you not retain any
copies of the Software. You must notify Lenel in writing of your transfer, and
the recipient must also agree to the terms of this License Agreement. If you
want to share the Software on a network, please contact Lenel to request a
Network License Agreement.
No Liability for Consequential Damages
In no event shall Lenel or its suppliers or resellers be liable for any damages
whatsoever (including, without limitation, damages for loss of profits, business
interruption, loss of information or other pecuniary loss) arising out of the
use of or inability to use this Lenel product, even if Lenel has been advised of
the possibility of such damages. Because some states do not allow the exclusion
or limitation of liability for consequential or inconsequential damages, the
above limitation may not apply to you. This agreement constitutes the entire
agreement between you and Lenel and supersedes any prior agreement concerning
the contents of the diskette envelope. Lenel is not bound by any provision of
any purchase order or any other type of correspondence (written or verbal). This
agreement is governed by the laws of the State of New York.
US Government Restricted Rights
This Software is provided with restricted rights. Use, duplication or disclosure
by the government is subject to restrictions set forth in subparagraph
(c)(1)(ii) of The Rights in Technical Data and Computer Software clause at DFARS
252-227-7013 or subparagraphs (c)(1) and (2) of the Commercial Computer
Software--Restricted Rights at 48CFR 52.227-19, as applicable.
Contractor/manufacturer is Lenel Systems International, Inc., 290 Woodcliff
Office Park, Fairport, NY 14450-4212.
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
INTEGCOM CORP.
We consent to the inclusion in this Registration Statement on Form SB-2
(File No. 33- ) of our report dated December 23, 1999 on our audit of
the financial statements of InTegCom Corp. We also consent to the reference to
our firm under the headings "Experts" and "Selected Financial Data" in the
prospectus.
DEMETRIUS & COMPANY, LLC
Wayne, New Jersey
January 11, 2000
