<PAGE>
As filed with the Securities and Exchange Commission on December 17, 1999
Registration No. 333-
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Iteris, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 8748 98-2954623
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1515 S. Manchester Avenue,
Anaheim, CA 92802
(714) 758-0200
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of the Registrant's Principal Executive Offices)
JACK JOHNSON
President and Chief Executive Officer
1515 S. Manchester Avenue
Anaheim, CA 92802
(714) 758-0200
(Name and Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
NICK E. YOCCA, ESQ. LAWRENCE D. LEVIN, ESQ.
K.C. SCHAAF, ESQ. BRIAN M. HOYE, ESQ.
CHRISTOPHER D. IVEY, ESQ. Katten Muchin Zavis
Stradling Yocca Carlson & Rauth, 525 West Monroe Street, Suite 1600
A Professional Corporation Chicago, Illinois 60661
660 Newport Center Drive, Suite 1600 (312) 902-5200
Newport Beach, California 92660
(949) 725-4000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
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, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
================================================================================
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Proposed
Maximum Amount of
Title of Each Class of Securities Aggregate Registration
to be Registered Offering Price Fee
- -----------------------------------------------------------------------------------
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Common Stock, $.001 par value.......................... $50,000,000 $13,200
===================================================================================
</TABLE>
(1) Includes shares of common stock which may be purchased by the Underwriters
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary 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 becomes effective. This +
+preliminary prospectus is not an offer to sell these securities nor a +
+solicitation of an offer to buy these securities in any jurisdiction where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1999
PRELIMINARY PROSPECTUS
Shares
[LOGO OF ITERIS APPEARS HERE]
Common Stock
-----------
This is an initial public offering of shares of common stock of Iteris, Inc. Of
the shares of common stock offered under this prospectus, we are offering
shares and the selling stockholders are offering an additional
shares. We will not receive any of the proceeds from the shares of common stock
sold by selling stockholders.
We anticipate that the initial public offering price will be between $ and
$ per share. We have applied to have our common stock approved for quotation
on the Nasdaq National Market under the symbol "ITER."
See "Risk Factors" beginning on page 6 to read about risks that you should
consider carefully before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
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Per
Share Total
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Public offering price.............................................. $ $
Underwriting discounts and commissions............................. $ $
Proceeds, before expenses, to us................................... $ $
Proceeds to the selling stockholders............................... $ $
</TABLE>
-----------
The underwriters may purchase up to an additional shares of common stock
from us at the initial public offering price, less the underwriting discount,
to cover over-allotments.
The underwriters expect to deliver the shares in New York, New York, on ,
2000.
-----------
Bear, Stearns & Co. Inc.
SG Cowen
Cruttenden Roth Incorporated
The date of this prospectus is , 2000.
<PAGE>
Graphics description for the inside front cover and gatefold.
Inside front cover.
Includes photographs of highways and a transportation management center.
The upper left corner contains a caption with the following text:
"Software based Solutions for Transportation Safety & Efficiency"
The right side of the page contains the following list of products and
services:
"AutoVue Sensor Systems, Vantage Video Detection Systems, Transportation
Management and Traveler Information Systems and Personalized Traveler
Information"
Gatefold.
The heading across the top of the two page gatefold reads:
"Intelligent Transportation Systems"
The gatefold includes photographs of highways in the background along with
the following photographs accompanied with the captions below.
Photograph
- ----------
Transportation Management Center
Caption
- -------
Transportation Management and Traveler Information Systems. We design,
implement and maintain transportation management and traveler information
systems for transportation agencies to improve safety, reduce traffic congestion
and disseminate traveler information.
Photograph
- ----------
Person portrayed as accessing personalized traveler information over a
cellular telephone
Caption
- -------
Personalized Traveler Information. We are developing personalized traveler
information services that will be customized to the travel patterns and
information needs of individual drivers and that are intended to be delivered to
travelers in real-time through personal digital assistants, cellular telephones,
pagers, the mobile Internet and in-vehicle computers. Personalized traveler
information will make your drive better.
Photograph
- ----------
AutoVue Sensor Systems
Caption
- -------
AutoVue Sensor Systems. AutoVue, developed in cooperation with
DaimlerChrysler, detects and warns drivers of unintended lane departures.
Photograph
- ----------
Vantage Video Detection System
Caption
- -------
Vantage Video Detection Systems. Our Vantage vehicle video sensing systems
detect the presence of vehicles at signalized intersections, enabling the
efficient allocation of green signal time.
<PAGE>
You may rely only on the information contained in this prospectus. Neither
we, the selling stockholders, nor any underwriter have authorized anyone to
provide prospective investors with different or additional information. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is correct only as of the date of this
prospectus, regardless of the time of the delivery of this prospectus or any
sale of these securities.
TABLE OF CONTENTS
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Page
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 6
Forward-Looking Statements............................................... 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 30
</TABLE>
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Page
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Arrangements with Odetics.................................................. 42
Management................................................................. 44
Principal and Selling Stockholders......................................... 51
Certain Transactions....................................................... 52
Description of Capital Stock............................................... 53
Shares Eligible for Future Sale............................................ 57
Underwriting............................................................... 59
Legal Matters.............................................................. 61
Experts.................................................................... 61
Where You Can Find Additional Information.................................. 62
Index to Consolidated Financial Statements................................. F-1
</TABLE>
Until , 2000 (25 days after the date of this prospectus), all
dealers that effect transactions in 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>
PROSPECTUS SUMMARY
This summary highlights information found in greater detail elsewhere in
this prospectus. In addition to this summary, we urge you to read the entire
prospectus carefully, including the risks of investing in our common stock
discussed under "Risk Factors," before you decide to buy our common stock.
ITERIS, INC.
Our Company
We design, develop, market and implement software based solutions that
improve the safety and efficiency of vehicle transportation. Using our
proprietary software and industry expertise, we are a leading provider of video
sensor systems and transportation management and traveler information systems
for the intelligent transportation systems, or ITS, industry. The ITS industry
is comprised of companies applying a variety of technologies to enable the safe
and efficient movement of people and goods. Our systems and solutions are
designed to address three critical demands of vehicle transportation: improving
vehicle safety, reducing traffic congestion and increasing the availability of
personalized traveler information.
According to the U.S. Department of Transportation and the National Highway
Transportation Safety Administration, more than six million motor vehicle
accidents occurred in the United States in 1997. Accidents in 1998 resulted in
more than 40,000 fatalities, approximately 39.4% of which were related to
unintended lane departures according to NHTSA. To help prevent accidents caused
by unintended lane departures, we developed AutoVue, a small windshield mounted
sensor that detects and warns drivers of unintended lane departures. AutoVue is
currently being installed in heavy trucks for pre-production testing and
marketed to passenger car and light and medium truck manufacturers.
There were more than 200 million vehicles in operation in the United States
in 1998 according to Automotive News. The U.S. DOT estimated that in 1996
drivers on U.S. highways spent more than two billion hours in traffic
congestion. According to a study conducted for the U.S. DOT, traffic congestion
cost the American public $72 billion in 1997 in lost time and wasted fuel. As
an alternative to expanding a substantially built-out infrastructure of
highways, transportation agencies are turning to ITS to increase the efficiency
of the existing highway infrastructure. As a result, we developed our Vantage
video vehicle sensing systems to detect the presence of vehicles at signalized
intersections, enabling an efficient allocation of green signal time. In
addition, our transportation management and traveler information systems enable
traffic managers to monitor transportation networks in real-time and to
implement corrective actions to relieve traffic congestion.
Each of our AutoVue and Vantage systems incorporate our proprietary software
algorithms designed to maximize the accuracy of outdoor video imaging. We have
entered into strategic relationships with DaimlerChrysler Corporation and its
subsidiary, Freightliner Corporation, to jointly develop software applications
for AutoVue and to install AutoVue in their heavy trucks. We also intend to
sell AutoVue to manufacturers for installation on passenger cars and light and
medium trucks. We believe AutoVue is currently the only commercially-available
unintended lane departure warning system for vehicles and Vantage is a market
leader for video vehicle detection systems in the United States.
In addition to focusing on vehicle safety and traffic congestion, drivers
are increasingly demanding the availability of timely and accurate traffic
information. Traditionally, traffic information has been provided over the
radio and more recently over the Internet. Our transportation management and
traveler information systems enable the dissemination of information on current
traffic conditions through changeable message signs, radio, telephone, cable
television, paging networks and the Internet. We also are developing
personalized traveler information services that will be customized to the
travel patterns and information needs of individual travelers, to be delivered
in real-time through personal digital assistants, or PDAs, cellular telephones,
pagers, the mobile Internet and in-vehicle computers.
1
<PAGE>
We are one of only two companies awarded a contract to develop and maintain
the National ITS Architecture, a federal program designed to create a single
national architecture to enable seamless communication among ITS systems. We
believe our involvement in the National ITS Architecture provides us with
unique vision and insight into emerging market trends and product opportunities
and a significant competitive market advantage. We have the experience to
design and implement transportation management systems that perform the
functions necessary to conform with the National ITS Architecture. Through the
training programs we conduct on the Architecture, we have developed strong
relationships and credibility with national, regional, state and local
transportation agencies responsible for managing funds allocated for
ITS systems.
We have assembled an experienced management team and board of directors
focused on the ITS industry. Our management team and board of directors include
two former U.S. Secretaries of Transportation, a former Deputy Insurance
Commissioner for the State of California, a former General Manager for the
Los Angeles Department of Transportation and a founding board member of ITS
America, a leading industry trade association and federal advisory agency. Our
board also includes a former Technical Director of the ITS program for General
Motors Corporation and a former Chairman of Chrysler Technologies Corporation.
Our Strategy
Our objective is to enhance our position as a leading provider of software
based ITS systems and solutions for the safe and efficient movement of people
and goods. Our strategies to achieve this objective are:
. Combine our proprietary software with our ITS industry expertise to
provide transportation solutions;
. Establish AutoVue as the leading platform for in-vehicle video sensing;
. Provide personalized traveler information to travelers through wireless
communication devices and the mobile Internet;
. Pursue strategic acquisitions and alliances; and
. Broaden our systems and solutions offerings and expand our penetration
of international markets.
Corporate Information; Spin-Off from Odetics
We were formed in 1994 as a division of Odetics, Inc., a publicly-held
company based in Anaheim, California that serves as an incubator for
technology-oriented businesses. We were incorporated as Odetics ITS, Inc. in
September 1998 as a California corporation and will be reincorporated in
Delaware as Iteris, Inc. in January 2000. Odetics currently owns approximately
93% of our outstanding common stock. Immediately prior to this offering,
Odetics will distribute to its stockholders all of the outstanding common stock
of our company owned by Odetics in a tax-free spin-off. The shares distributed
in the spin-off will not be transferable for a period of 180 days following the
date of this prospectus. In preparation for the spin-off, we will enter into
the following agreements with Odetics: separation and distribution agreement,
services agreement, tax allocation agreement and promissory note. Please see
"Arrangements with Odetics."
Any references to "we," "our," "us" or "Iteris" refer to Iteris, Inc. Our
executive offices are located at 1515 S. Manchester Avenue, Anaheim, California
98202. Our telephone number is (714) 758-0200. Our website address is
www.iteris.com. Information contained in our website does not constitute part
of this prospectus.
AutoVue(TM), DATEX Toolkit(TM), EzHCM(TM), Lane Tracker(TM), Iteris(TM),
Odetics ITS(TM), SpecWizard(TM), Vantage(TM), Vantage One(TM), Vantage
Plus(TM), Vantage Edge(TM), Vantage Remote Access System(TM), VRAS(TM),
2
<PAGE>
Vantage Wireless Systems(TM) and Vectura(TM) are our logos and trademarks.
This prospectus also includes the tradenames and trademarks of other companies
whose mention in this prospectus is with due recognition of and without intent
to misappropriate such names or marks.
Except as otherwise noted, all information in this prospectus assumes:
. outstanding options to purchase shares of common stock are not
exercised;
. the underwriters' over-allotment option is not exercised;
. the reincorporation of our company in Delaware; and
. that the spin-off from Odetics is consummated immediately prior to this
offering.
Information in this prospectus does not reflect a stock split anticipated
to be effected prior to this offering.
3
<PAGE>
THE OFFERING
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Common stock offered by us................. shares
Common stock offered by selling
stockholders.............................. shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds............................ We intend to use the net proceeds from this
offering to repay debt to Odetics, expand
sales and marketing activities, acquire or
invest in complementary businesses and for
working capital and other general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol..... ITER
</TABLE>
The number of shares of common stock outstanding after this offering is
based on shares outstanding on November 30, 1999 and excludes:
. 1,400,000 shares of common stock issuable upon exercise of options
outstanding with a weighted average exercise price of $3.60 per share
(378,500 of these options were exercisable as of November 30, 1999 and
the balance are subject to future vesting requirements); and
. 580,000 additional shares of common stock reserved for issuance under
our stock option plan.
If the underwriters exercise their over-allotment option in full, there will
be shares outstanding after this offering.
4
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except share and per share data)
The following table summarizes the financial data for our business during
the periods indicated. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and related notes
included elsewhere in this prospectus.
Also, with respect to information relating to the number of shares used in
per share calculations, please see Note 1 of Notes to Consolidated Financial
Statements for an explanation of the determination of the number of shares used
in computing basic and diluted net loss per share.
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<CAPTION>
Six Months Ended
Years Ended March 31, September 30,
----------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(unaudited)
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Consolidated Statement
of Operations Data:
Total revenue........... $ 200 $ 287 $ 538 $ 5,841 $ 14,580 $ 5,917 $ 11,205
Gross profit (loss)..... 85 (71) 68 471 4,256 1,329 3,615
Loss from operations.... (742) (2,455) (3,826) (5,903) (4,874) (2,443) (2,129)
Net loss................ (848) (2,759) (4,506) (7,247) (7,041) (3,431) (3,536)
Basic and diluted net
loss per share......... (0.14) (0.46) (0.75) (1.21) (1.13) (0.57) (0.55)
Shares used in
computation of net
losses per share, basic
and diluted............ 6,000,000 6,000,000 6,000,000 6,000,000 6,209,500 6,000,000 6,435,700
</TABLE>
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<CAPTION>
September 30, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
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Consolidated Balance Sheet Data:
Working capital (deficit)....................... $ 1,100 $ 1,100
Total assets.................................... 20,492 20,492
Total liabilities............................... 42,989 32,989
Total stockholders' equity (deficit)............ (22,497) (12,497)
</TABLE>
At September 30, 1999, the amount of indebtedness owed to Odetics was $34.7
million. Upon completion of this offering, Odetics will contribute to our
capital approximately $10.0 million in the form of cancellation of
indebtedness, which is reflected in the pro forma column. Also upon completion
of this offering, we will pay Odetics $10.0 million from the proceeds of this
offering and enter into a promissory note payable to Odetics in the principal
amount of $14.7 million, representing the balance of our obligations to
Odetics. This promissory note will be payable in interest only for the first
year and in 16 quarterly installments of principal and interest thereafter. The
actual amount of indebtedness cancelled by Odetics will vary from the amount
reflected in the pro forma column depending on the actual total amount of
indebtedness owed to Odetics at the completion of this offering.
The pro forma as adjusted information also gives effect to the sale of
shares of common stock offered by us at an assumed initial public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses.
5
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock. The
risks described below are not the only ones facing our company. Additional
risks not presently known to us or which we currently consider immaterial may
also adversely affect our company. If any of the following risks actually
occur, our business, financial condition and operating results could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
We have a history of losses, we expect losses in the future and we may not ever
become profitable
We have incurred significant losses in all prior fiscal periods since our
formation. We incurred net losses of $3.5 million in the six months ended
September 30, 1999, $7.0 million in fiscal 1999, $7.2 million in fiscal 1998
and $4.5 million in fiscal 1997. We had an accumulated deficit of $26.5 million
as of September 30, 1999. We also expect to incur losses in fiscal 2000. These
losses may be substantial, and we may not ever become profitable. In addition,
we expect to significantly increase our expenses in the near-term. In
particular, we expect to incur additional expenses to establish and maintain
our own administrative functions, expand research and development and increase
marketing. Therefore, our operating results will be harmed if our revenue does
not keep pace with our expected increase in expenses or is not sufficient for
us to achieve profitability. If we do achieve profitability in any period, we
cannot be certain that we will sustain or increase profitability on a quarterly
or annual basis.
Variations in our quarterly operating results may cause our stock price to
decline
Our quarterly operating results are unpredictable and we expect them to
continue to fluctuate in the future due to a number of factors that are often
outside of our control. If our operating results in future quarters fall below
the expectations of market analysts and investors, the trading price of our
common stock will decline. Factors that may cause our operating results to
fluctuate on a quarterly basis are:
. variations in product roll-outs, purchasing lead times and production
quantities associated with the vehicle transportation industry;
. the size and timing of significant government contracts and customer
orders;
. the long lead times and lengthy sales cycles associated with government
contracts;
. our ability to develop, introduce, market and gain market acceptance of
our products and product enhancements in a timely and cost effective
manner;
. the introduction of new products by competitors;
. our success in securing additional transportation management and
traveler information systems projects;
. product developments by competitors in the ITS industry that may be
superior to our products;
. the availability of components used in the manufacture of our products;
. changes in pricing policies of our suppliers;
. the loss of significant customers;
. delays of orders from vehicle manufacturers due to events beyond our
control;
. the revenue mix between our systems and sensors; and
. general economic and market conditions.
6
<PAGE>
The success of our products depends on the willingness of vehicle manufacturers
to incorporate AutoVue into their vehicles and market AutoVue to end users and
on dealers of traffic management systems to market Vantage to transportation
agencies
We are currently selling AutoVue systems to heavy truck manufacturers for
pre-production testing and marketing AutoVue to light and medium truck and
passenger car manufacturers. The success of AutoVue depends on the willingness
of vehicle manufacturers to incorporate AutoVue into their vehicles. Vehicle
manufacturers may incur delays during testing and may elect to delay product
introductions, or limit the scope of vehicle platforms on which AutoVue will be
offered. These events could have a substantial adverse impact on our results of
operations. In addition, there can be no assurance that we will be able to
establish relationships with vehicle manufacturers for the installation of
AutoVue. Our Vantage video vehicle detection systems are sold primarily through
independent dealers who distribute a broad range of traffic signal control
products. Since we often have no direct contact with the end user of our
products, we depend on the ability of vehicle manufacturers to market and sell
AutoVue as an attractive, safe and effective feature and on dealers of traffic
management systems to sell Vantage as an effective means of monitoring traffic.
If these third parties with whom we develop relationships fail to successfully
market our products, they may not be accepted by consumers and our sales may
decline.
Some vehicle manufacturers may require us to achieve various quality
assurance standards, including QS 9000. These vehicle manufacturers may not
purchase our systems unless we are QS 9000 certified, and there can be no
assurance that we will obtain QS 9000 certification.
Dependence on relationships with DaimlerChrysler and Freightliner
We have entered into strategic relationships with two vehicle manufacturers
to acquire key technologies and design expertise to expedite the development of
our AutoVue systems. AutoVue incorporates technology that we jointly developed
with DaimlerChrysler and integrates proprietary technologies of both companies.
We entered into an agreement with DaimlerChrysler to serve as its exclusive
production source until July 2000 for AutoVue systems installed in Mercedes'
European heavy trucks. We have also entered into an agreement with Freightliner
for the development of an AutoVue system modified for driving and road
conditions in North America. The success of AutoVue is dependent upon the
marketing efforts of DaimlerChrysler and Freightliner. If either of our
relationships with DaimlerChrysler or Freightliner was terminated, our ability
to market AutoVue to the end user and achieve market acceptance would be
negatively impacted.
If the market for AutoVue does not develop or AutoVue is not accepted by
consumers, we will not generate anticipated revenue
The market for in-vehicle lane departure warning systems is not well
developed. Also, our AutoVue system has only recently been made available to
heavy truck manufacturers and has not yet been made widely available to
passenger car and light and medium truck manufacturers. If the market for lane
departure warning systems does not develop, our AutoVue system is not accepted
or competitors develop alternative technology that is more effective than
AutoVue, the revenue we expect to generate from the sale of our AutoVue system
will not be realized.
The success of Vantage depends on our ability to overcome significant barriers
to entry as a result of an installed base of competing products used to achieve
the same purpose
Traffic monitoring has historically been addressed by inductive loops, which
require the installation of wires beneath the roadway surface. These inductive
loops are still the primary technology used to detect vehicles at signalized
intersections. As a result, we must convince transportation authorities that
our Vantage systems are more effective vehicle detection systems. We may have
difficulty selling Vantage systems if transportation authorities do not
consider it to be an effective alternative to inductive loops. If we are unable
to convince a sufficient number of transportation authorities to replace their
current vehicle detection systems with Vantage or install Vantage at new
intersections, our sales may decline.
7
<PAGE>
Revenue from our transportation management and traveler information systems may
fluctuate due to our dependence on government contracts that often involve long
purchase cycles, competitive bidding and fixed price contracts
A significant portion of our revenue has historically been derived from
traffic management contracts with governmental agencies, either as a prime
contractor, subcontractor or supplier. Obtaining government contracts may
involve long purchase cycles, competitive bidding, qualification requirements,
performance bond requirements, delays in funding, budgetary constraints,
extensive specification development and price negotiations and milestone
requirements. Each government agency also maintains its own rules and
regulations with which we must comply and which can vary significantly among
agencies. Governmental agencies also often retain a significant portion of fees
payable upon completion of a project and collection of such fees may be delayed
for several months.
In addition, an increasing number of our government contracts are fixed
price contracts which may prevent us from recovering costs incurred in excess
of our budgeted costs. Fixed price contracts require us to estimate the total
project cost based on preliminary projections of the project's requirements.
The financial viability of any given project depends in large part on our
ability to estimate such costs accurately and complete the project on a timely
basis. In the event our actual costs exceed the fixed contractual cost, we will
not be able to recover the excess costs. If we fail to properly anticipate
costs on fixed priced contracts our profit margins will decrease. Some of our
government contracts are also subject to termination or renegotiation at the
convenience of the government, which could result in a large decline in revenue
in any given quarter.
We currently have a small number of customers and if any of our customers
discontinue use of our systems and solutions, experience business difficulties
or cause us to reduce prices, our revenues may decline
A relatively small number of customers, primarily governmental agencies,
have accounted for a substantial portion of our total revenue, and the identity
of such customers has varied from period to period. Similarly, our AutoVue
systems are being marketed primarily to a small group of vehicle manufacturers.
As a result, we expect that we will continue to be dependent upon a small
number of customers for a significant portion of our total revenue for the
foreseeable future. Revenue from the Federal Highway Administration accounted
for approximately 17%, and revenue from Rockwell Collins, Inc. accounted for
approximately 13%, of our systems revenue for the year ended March 31, 1999. No
other customer accounted for 10% or more of sensors or systems revenue. Our
largest five customers, however, accounted for an aggregate of approximately
55% of our systems revenue for the year ended March 31, 1999 and 43% of our
systems revenue for the six month period ended September 30, 1999. If any of
these significant customers experience business difficulties or choose to no
longer purchase our systems and solutions, it could have a material adverse
effect on our business. In addition, our customers are large established
businesses and governmental agencies that aggressively negotiate prices and
related purchase terms. If any of our customers cause us to reduce our prices,
or negotiate other terms that are unfavorable to us, our revenues may decline.
If the system and service offerings we develop for the personalized traveler
information market are not accepted by consumers, we will not generate
anticipated revenue from these offerings
The market for personalized traveler information is not well developed and
our systems and services under development to address this market are in the
early stages of development. If this market does develop, but our systems are
not well received, or if competitors develop alternative products that are more
effective or render our systems and services obsolete, we will not generate the
amount of revenues we anticipate. In addition, we cannot assure you that we
will be able to develop a cost effective means of compiling useful travel
information from remote sources or that we will be able to develop or obtain an
effective means of delivering such information to consumers.
8
<PAGE>
If we are unable to protect our intellectual property rights, this inability
could weaken our competitive position, reduce our revenue and increase our
costs
Our success depends in large part on our proprietary technology. We rely on
a combination of patent, copyright, trademark and trade secrets,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. We may be required to spend significant resources to
monitor and police our intellectual property rights. We hold five U.S. patents
and various foreign patents for image recognition technologies. We also have
applied for additional patents in the United States, Australia, Canada, Europe
and Japan and may in the future file patents. Our pending patent applications
and any patent application we file in the future may not be allowed or
competitors may successfully challenge the validity or scope of issued and
pending patents.
Even if competitors develop similar technology independently which infringes
our proprietary rights, we may not be able to detect infringement and may lose
our competitive position in the market before we do so. In addition,
competitors may design around our technology or develop substantially
equivalent or superior systems to our systems. Also, the laws of some foreign
countries do not protect proprietary rights to the same extent as do the laws
of the United States.
Litigation may be necessary in the future to enforce our intellectual
property rights, to determine the validity and scope of the proprietary rights
of others, or to defend against claims of infringement or invalidity by others.
An adverse outcome in such litigation or similar proceeding could subject us to
significant liabilities to third parties, require disputed rights to be
licensed from others or require us to cease marketing or using certain
products, any of which could have a material adverse effect on our business. In
addition, the cost of
addressing any intellectual property litigation claim, both in legal fees and
expenses and the diversion of management resources, regardless of whether the
claim is valid, could be significant and could have a material adverse effect
on our business. If we fail to successfully enforce our intellectual property
rights, our competitive position may be harmed.
We depend on two subcontractors to produce our AutoVue systems and single
source suppliers of components for our Vantage systems
We have outsourced the manufacture of our AutoVue systems to two independent
subcontractors. We are dependent on these subcontractors to supply all of our
current needs to support orders from heavy truck manufacturers. Our current
manufacturers of AutoVue do not have the capacity to produce all of the
expected demand for AutoVue. We will be required to engage other third parties
to manufacture expected increases in volume for AutoVue. We also subcontract
the manufacture of certain components of our Vantage systems to independent
single source suppliers. Reliance on a limited number of subcontractors'
involves several risks, including the potential inadequacy of capacity,
interruptions in the subcontractors operations and reduced control over product
quality. Production capacity constraints, interruptions of our subcontractors'
businesses or delays due to quality control will impair our ability to ship
products and will result in decreased revenue until we are able to find a
substitute subcontractor. We may not be able to find a substitute subcontractor
at reasonable prices without incurring significant delays in production.
Our rapid growth may strain our management, operational and financial resources
We are currently experiencing a period of significant expansion and we
anticipate that we must expand further and continue to develop our business
plan to address potential growth in our customer base and market opportunities.
Our expansion has placed, and we expect it to continue to place, a significant
strain on our management, operating systems and financial resources. Also, as
our business plan evolves, we risk distracting management away from current
operations. We cannot assure you that our current and planned facilities,
computer systems, personnel and other resources will be adequate to support our
future operations.
9
<PAGE>
Acquisitions may disrupt our business and require additional financing
If appropriate opportunities present themselves, we intend to acquire
additional businesses, technologies, services or products that we believe will
help us develop and expand our business. The process of integrating an acquired
business, technology, service or product may result in operating difficulties
and expenditures which we cannot anticipate and may absorb significant
management attention that would otherwise be available for further development
of our existing business. Moreover, the anticipated benefits of any acquisition
may not be realized. Any future acquisitions of other businesses, technologies,
services or products might require us to obtain additional equity or debt
financing, which might not be available to us on favorable terms or at all, and
might be dilutive. Additionally, we may not be able to successfully identify,
negotiate or finance future acquisitions or to integrate acquisitions with our
current business.
Our success depends on our ability to attract, retain and motivate management
and other skilled employees
Our success depends to a significant extent upon the continued service of
our executive officers and other key management and technical personnel, and on
our ability to continue to attract, retain and motivate qualified personnel,
such as experienced systems, software and image processing engineers and
transportation engineers. In addition, due to the relatively recent emergence
of the ITS industry, there is a shortage of qualified personnel with
significant ITS experience or a working knowledge of the National ITS
Architecture. The competition for such qualified personnel is intense. The
experience of individual key employees and their relationships with
governmental agencies is a critical factor in securing government contracts.
The loss of the services of one or more of our executive officers or other key
personnel or our inability to recruit replacements for such personnel or to
otherwise attract, retain and motivate qualified personnel could have a
material adverse effect on our business.
We may suffer losses due to claims against our product and systems warranties
We generally warrant the continued operation and performance of our
transportation management and traveler information systems following initial
acceptance, and offer extended warranty contracts under certain circumstances.
These warranties typically include the continued operation and maintenance of
the systems, and in certain circumstances are unlimited in amount. In addition,
we may guarantee the completion of certain projects by a specified date or the
achievement of certain functional specifications. Claims on our warranties or
failures to meet any such schedule or performance requirements could result in
significant additional costs, the amount of which could exceed project profit
margins or even project revenues.
We may incur significant development and production costs prior to recognizing
significant revenue on our AutoVue systems due to long sales and testing cycles
with vehicle manufacturers
The sale to vehicle manufacturers of AutoVue for new vehicles often requires
substantial lead times and will require us to invest heavily in producing
prototypes and conduct extensive testing before any equipment is accepted by
the vehicle manufacturer. We have little control over how long the testing may
take or what quantities will be ordered for product roll-out. Once the
manufacturer decides to include AutoVue in a new model, several years may pass
before vehicles containing AutoVue are manufactured and any revenue is
recognized. As a result, we will be required to invest heavily in establishing
and solidifying relationships with vehicle manufacturers without any
corresponding increase in revenue at that time. These expenditures could
negatively impact our profit margins.
Potential year 2000 problems with our internal systems, our products or the
products with which our products are integrated could adversely affect our
business
Many existing computer systems and applications, and other control devices
were designed to use two digits rather than four digits to define an applicable
year. As a result, such systems and applications may be unable to recognize the
year 2000 and could fail or create erroneous results. These problems are
commonly referred to as the year 2000 problem.
10
<PAGE>
The year 2000 problem could affect the systems, transaction processing
computer applications and devices that we use to operate and monitor all major
aspects of our business, including financial systems (such as general ledger,
accounts payable, and payroll), customer services, infrastructure, master
productions scheduling, materials requirement planning, test equipment,
security systems, networks and telecommunications systems.
We estimate that Odetics has expended approximately $500,000 addressing year
2000 issues for its consolidated group, a portion of which was allocated to us.
Assuming that we have already identified our most significant year 2000 issues,
and that the plans of our third party suppliers will be fulfilled in a timely
manner without cost to us, we do not expect to incur any additional significant
costs to address year 2000 issues. We cannot be sure that these assumptions are
accurate, and actual results could differ materially from those we anticipate.
We have developed contingency plans to address the year 2000 issues that may
pose a significant risk to our on-going operations. These plans include
accelerated replacement of affected equipment and software, temporary use of
back-up equipment and software or the implementation of manual procedures to
compensate for system deficiencies. We cannot be certain that any contingency
plans implemented by us are adequate to meet our needs without materially
impacting our operations, that any such plan will be successful or that our
results of operations would not be materially and adversely affected by the
delays and inefficiencies inherent in conducting operations in an alternative
manner.
Risks Related to Our Industry
Failure to develop technologies to adapt to new technological advancements in
the ITS industry could harm our business
The ITS industry has been subject to fundamental changes recently reflecting
the adoption of the National ITS Architecture and the overburdening of the
existing transportation infrastructure. Our ability to remain competitive will
depend in part on our ability to develop systems and solutions that incorporate
the new standards and advanced traffic management technologies. In addition,
since our AutoVue and Vantage systems are currently based on image recognition
technology, any change in such capabilities or the emergence and acceptance of
any new technologies may require us to incur substantial unanticipated costs to
incorporate technologies. In addition, the introduction of a new, non-intrusive
technology to address vehicle detection could replace video as a leading
alternative to inductive loops. We may not be able to develop or obtain the
technology necessary to address these changes in a timely manner or at all. Our
inability to modify our systems and solutions to reflect changes in technology
on a timely and cost-effective basis, or at all, could have a material adverse
effect on our business.
New product introductions and pricing strategies by our competitors could
adversely affect our ability to sell our systems and solutions and could result
in pressure to price our systems and solutions in a manner that reduces our
margins
Competitive pressures could prevent us from growing, obtaining market share
or require us to reduce prices on our systems and solutions, any of which could
harm our business. Many of our current and potential competitors have longer
operating histories, greater name recognition, access to larger customer bases
and significantly greater financial, technical, manufacturing, distribution and
marketing resources than we do. As a result, they may be able to adapt more
quickly to new or emerging standards of technologies or to devote greater
resources to the promotion and sale of their products than we can. Accordingly,
it is possible that new competitors or alliances among competitors could emerge
and rapidly acquire significant market share, resulting in price reductions,
reduced margins and greater operating losses, any of which could materially and
adversely affect our business.
11
<PAGE>
AutoVue lane departure warning systems
While we believe that AutoVue is the only commercially-available lane
departure warning system currently available, potential competitors, including
Delphi Automotive Systems Corporation domestically, NEC Corporation and Hitachi
Ltd. in Japan and Robert Bosch Gmbh in Europe are currently developing video
sensor technology for the vehicle transportation industry that could be used
for lane departure warning systems.
Vantage vehicle detection systems
In the market for vehicle detection systems, we compete with both
manufacturers of "above ground" video camera detection systems, such as Image
Sensing Systems, Inc., Econolite Control Products, Inc. and the Peek Traffic
Systems division of Thermo Electron Corporation, and other non-intrusive
detection devices including microwave, infrared, ultrasonic and magnetic
detectors, as well as manufacturers and installers of in-pavement inductive
loop products. These competitors may offer products that offer more functions
at less expensive prices.
Traffic management and traveler information systems
The intelligent transportation management and traveler information systems
market is highly fragmented and characterized by rapidly changing technology
and evolving national and regional technical standards. Our competitors vary in
number, scope and breadth of the products and services they offer. Our
competitors in advanced management and traveler information systems include
corporations like Transcore, Lockheed Martin Corporation, PB Farradyne Inc.,
Kimley-Horn and Associates, Inc., TRW, Inc. and National Engineer Technology,
Inc. Our competitors in transportation engineering, planning and design include
major firms like Parsons Brinkerhoff, Inc. and Parsons Transportation Group
Inc., as well as many regional engineering firms.
We could incur significant losses as a result of product liability claims
We face an inherent business risk of exposure to product liability claims in
the event that our systems and solutions malfunction resulting in personal
injury or death. We may be named in these actions even if there is no evidence
our systems and solutions caused the accident. Product liability claims could
result in significant losses as a result of expenses incurred in defending
claims and as a result of damage awards. The sale of systems and solutions for
the vehicle transportation industry entails a high risk of such claims. In
addition, if any of our systems prove to be defective, we may be required to
participate in a recall involving such systems, or due to various industry or
business practices or the need to maintain good customer relationships, may be
placed in a position whereby we may voluntarily initiate a recall or make
payments related to such claims. We currently maintain product liability
insurance. However, there can be no assurance that product liability claims
will be covered by such insurance, that such claims will not exceed insurance
coverage limits or that such insurance will continue to be available on
commercially reasonable terms, if at all. Any product liability claim brought
against us could have a material adverse effect on our reputation and business.
Our ability to expand into international markets is limited by regulatory,
cultural, economic and other differences
We intend to expand our international marketing and sales efforts. If our
international sales increase, we will be subject to additional risks inherent
in international operations. These risks include:
. adapting our products to foreign road conditions and regulations;
. longer buying cycles associated with sales to foreign governments;
. imposition of governmental controls;
. performance bond requirements;
. challenges related to cultural differences, including language barriers;
12
<PAGE>
. exposure to different legal standards, particularly with respect to
government contracting requirements and intellectual property;
. burdens of complying with a variety of foreign laws and trade
restrictions;
. currency exchange fluctuations;
. unexpected changes in regulatory requirements;
. foreign technical standards;
. political, social and economic instability;
. changes in tariffs;
. difficulties in staffing and managing international operations;
. potentially adverse tax consequences; and
. difficulties in finding and managing local dealers.
While substantially all of our international sales to date have been
denominated in U.S. dollars, some foreign countries may experience dramatic
currency devaluation, stock price declines and general market instability,
leading to significant economic problems in the affected region. As a result,
an increase in the value of the U.S. dollar relative to foreign currencies
could make our systems and solutions less competitive in international markets.
These risks may limit our ability to expand into international markets
successfully or require us to modify significantly our current business
practices.
Risks Related to Our Separation from Odetics, Inc.
Our historical financial information may not be representative of our results
as a separate company
We operated as a business unit of Odetics from 1994 to 1998, and thereafter
as a subsidiary of Odetics. Accordingly, we have had no independent operating
history. Our financial results as a division of Odetics may not be
representative of what financial results would have been had we been a
separate, stand-alone company during the periods presented or be indicative of
future results. Differences in financial results may be attributable to:
. expense adjustments and allocations as a result of not being operated as
a single stand-alone business for all periods presented; and
. changes that will occur in our funding and operations as a result of our
separation from Odetics.
After this offering we will operate as an independent company.
We may incur unanticipated expenses and suffer business interruptions if
Odetics does not provide transition support services
We are currently dependent upon Odetics for significant support functions,
including operational, financial, management, administrative, information
systems and manufacturing support, as well as other resources or systems. These
functions are necessary to operate as an independent company and we may not be
able to develop these functions independently. Prior to consummation of the
offering, we will enter into a services agreement with Odetics intended to
facilitate our transition to an independent public company, pursuant to which
Odetics will continue to provide treasury, accounting, tax, internal audit,
legal and human resources services for up to 18 months following the
consummation of this offering. If Odetics does not provide the support we need
pursuant to the services agreement, we may be forced to incur additional
expenses to replace such support services and our business operations could be
interrupted. In addition, loss of access to the senior management of Odetics
could impair our ability to operate as a separate company.
13
<PAGE>
We will incur significant costs in connection with our separation from Odetics
Our obligations to Odetics, which consisted of advances from Odetics to
support our working capital requirements, fund our operating losses and support
acquisition activities, were approximately $34.7 million as of September 30,
1999. Upon completion of this offering Odetics will contribute to our capital
approximately $10.0 million to us in the form of cancellation of indebtedness,
we will pay Odetics $10.0 million from the proceeds of this offering and we
will enter into a promissory note payable to Odetics in the principal amount of
$14.7 million, representing the balance of our existing obligations to Odetics.
We have also entered into a services agreement under which we are obligated to
pay Odetics for services rendered at a rate consistent with amounts charged by
Odetics to us in prior periods. We will also incur expenses to develop our own
treasury, accounting, tax, internal audit, legal and human resources services.
These expenses may be substantial and may adversely impact our results of
operations.
Risks Related to This Offering
The liquidity of our common stock is uncertain since it has not been publicly
traded
There has not been a public market for our common stock. We cannot predict
the extent to which investor interest in our company will lead to the
development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders for investors. The price of our common stock that will prevail
in the market after this offering may be lower than the price you pay. The
initial public offering price for the shares will be determined by negotiations
between us and the representatives of the underwriters and may not be
indicative of prices that will prevail in the trading market.
Since we have broad discretion in how we use the proceeds from this offering,
we may use some of the proceeds in ways with which you disagree
We have not allocated specific amounts of the net proceeds from this
offering for any specific purpose other than repayment of a portion of our debt
to Odetics. Accordingly, our management will have significant discretion in
applying the net proceeds of this offering. The failure of our management to
use such funds effectively could have a material adverse effect on our
business, financial condition and operating results.
Our need for additional financing is uncertain as is our ability to raise
further financing, if required
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least two years
after the date of this prospectus. We may need to raise additional funds,
however, to respond to business contingencies which may include the need to:
. fund more rapid expansion;
. fund additional marketing expenditures;
. enhance our operating infrastructure;
. respond to competitive pressures; or
. acquire complementary businesses or technologies.
We cannot assure you that additional financing will be available on terms
favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, our ability to fund our operations, take
advantage of opportunities, develop systems or solutions or otherwise respond
to competitive pressures could be significantly limited.
14
<PAGE>
Future financing could adversely affect your ownership interest and rights in
comparison with those of other shareholders
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
and these newly issued securities may have rights, preferences or privileges
senior to those of existing stockholders, including you.
Future sales of our common stock could cause our stock price to decline
The market price for our common stock could drop as a result of sales of a
large number of shares of common stock in the market after the offering or the
perception that such sales could occur. These factors also could make it more
difficult for us to raise funds through future offerings of common stock.
There will be shares of common stock outstanding immediately after
this offering. The shares sold in this offering will be freely transferable
without restriction or further registration under the Securities Act. In
connection with the offering all current stockholders and option holders have
agreed that, with certain exceptions, they will not sell any shares of common
stock or enter into similar transactions for 180 days after the date of this
prospectus without the consent of Bear, Stearns & Co. Inc. Similarly, all
shares of our common stock distributed to stockholders of Odetics, Inc. will
not be transferable for 180 days after the date of this prospectus. After the
expiration of the 180 day period, all shares of common stock will be freely
transferable and additional shares of common stock issued upon exercise of
options granted under our stock-based compensation plans will be available for
sale in the public market. Future sales of our common stock could cause our
stock price to decline. See "Shares Eligible For Future Sale."
New investors will suffer immediate and substantial dilution in the tangible
net book value of their shares
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of the common stock. The net tangible
book value of a share of common stock purchased at an assumed initial public
offering price of $ per share will be only $ . You may incur additional
dilution if holders of stock options, whether currently outstanding or granted
after the closing of this offering, exercise their options to purchase common
stock.
Provisions in our charter documents may make an acquisition of us more
difficult
Provisions of our Certificate of Incorporation and Bylaws, as well as
provisions under Delaware law, could make it more difficult for a third party
to acquire us, even if doing so would be beneficial to stockholders. See
"Description of Capital Stock."
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Forward-looking statements generally can be identified by the
use of forward-looking terminology such as "believes," "expects," "may,"
"will," "intends," "plans," "should," "seeks," "pro forma," "anticipates,"
"estimates," "continues," or other variations thereof (including their use in
the negative), or by discussions of strategies, opportunities, plans or
intentions. Such statements include but are not limited to statements under the
captions "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Business." A
number of factors could cause results to differ materially from those
anticipated by such forward-looking statements, including those discussed under
"Risk Factors" and "Business" and elsewhere in this prospectus.
In addition, such forward-looking statements are necessarily dependent upon
assumptions and estimates that may prove to be incorrect. Although we believe
that the assumptions and estimates reflected in such forward-looking statements
are reasonable, we cannot guarantee that our plans, intentions or expectations
will be achieved. The information contained in this prospectus, including the
section discussing risk factors, identifies important factors that could cause
such differences.
The cautionary statements made in this prospectus are intended to be
applicable to all related forward-looking statements wherever they appear in
this prospectus. We assume no obligation to update such forward-looking
statements or to update the reasons why actual results could differ materially
from those anticipated in such forward-looking statements.
16
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares of common
stock offered at an assumed public offering price of $ per share by us
are estimated to be approximately $ , $ if the underwriters'
over-allotment option is exercised in full, after deducting the underwriting
discounts and commissions and the estimated offering expenses payable by us.
We currently intend to use the proceeds of this offering to:
. repay $10.0 million of debt payable to Odetics;
. expand our sales and marketing activities;
. fund acquisitions or investments in businesses, products, services or
technologies complementary to our business; and
. provide working capital and for other general corporate purposes.
Upon consummation of this offering, we will enter into a promissory note
payable to Odetics representing the balance of our obligations to Odetics,
which will be $14.7 million after payment of $10.0 million from the proceeds of
this offering and the cancellation of an estimated $10.0 million of debt that
will be treated as a contribution to our capital. This note will accrue
interest at the lowest rate charged to Odetics from time to time by its
principal lender (10.5% at September 30, 1999) and will be payable in interest
only for the first year and 16 quarterly installments of principal and interest
thereafter. Portions of the proceeds from this offering will be used to make
payments under this promissory note. All obligations payable to Odetics consist
of advances from Odetics for services and support provided to us by Odetics and
for working capital requirements, to fund our operating losses and support
acquisition activities.
We have not yet determined the amount of expenditures for sales and
marketing activities, acquisitions or investments, or for working capital and
other general corporate purposes, and thus cannot estimate the amounts to be
used for each purpose. The amounts and timing of these expenditures will vary
significantly depending on a number of factors, including, but not limited to,
the amount of cash generated by our operations. Accordingly, our management
will retain broad discretion as to the allocation of the net proceeds of this
offering. Also, we currently have no specific agreements or commitments and are
not currently engaged in any negotiations with respect to any significant
acquisitions or investments.
Pending the above uses, we intend to invest the net proceeds of this
offering in interest-bearing investment grade securities, including taxable
securities such as governmental securities, asset-backed securities, corporate
bonds and certificates of deposit and tax exempt securities such as municipal
bonds and notes.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently
anticipate that we will retain earnings, if any, to support operations and to
finance the growth and development of our business and do not anticipate paying
cash dividends in the foreseeable future. Declaration or payment of future
dividends, if any, will be at the discretion of our board of directors after
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs and plans for expansion.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999,
. on an actual basis;
. on a pro forma basis to reflect the cancellation of $10.0 million of
debt. This amount is an estimate of the amount of indebtedness in excess
of $14.7 million that will be payable under a promissory note to Odetics
and the payment of $10.0 million to Odetics that will be paid from the
proceeds of this offering. The actual amount of indebtedness cancelled
by Odetics will vary depending on the actual amount of indebtedness owed
to Odetics at the completion of the offering; and
. on a pro forma as adjusted basis to reflect the sale of shares of
common stock being offered by us at an assumed initial public offering
price of $ per share, and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us
and the repayment of $10.0 million of indebtedness to Odetics.
This information should be read in conjunction with our financial statements
and the notes relating to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
September 30, 1999
----------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------- ----------- --------------
(in thousands, except share data)
<S> <C> <C> <C>
Obligation payable to Odetics........... $ 34,661 $ 24,661 $
Other debt.............................. 32 32
----------- ----------- ----------
Total debt.............................. 34,693 24,693
----------- ----------- ----------
Stockholders' equity (deficit):
Preferred Stock, $.0001 par value;
5,000,000 shares authorized; no
shares issued and outstanding........ -- --
Common Stock, $.0001 par value,
25,000,000 shares authorized;
6,432,100 shares issued and
outstanding, actual; shares
issued and outstanding as
adjusted(1).......................... -- --
Additional paid-in capital............ 4,023 14,023
Accumulated deficit................... (26,520) (26,520)
----------- ----------- ----------
Total stockholders' equity
(deficit).......................... (22,497) (12,497)
----------- ----------- ----------
Total capitalization................ $ 12,196 $ 12,196
=========== =========== ==========
</TABLE>
- --------
(1) Excludes 1,379,000 shares of common stock issuable upon the exercise of
options outstanding with a weighted average exercise price of $3.56 per
share (341,000 of these options were exercisable as of September 30, 1999
and the balance are subject to future vesting requirements).
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<PAGE>
DILUTION
Our net tangible book value as of September 30, 1999, was ($32.0 million) or
($4.98) per share of common stock. Net tangible book value per share is equal
to our total tangible assets less total liabilities, divided by the number of
shares of common stock outstanding on September 30, 1999. Assuming the sale by
us of shares of common stock at an initial public offering price of
$ per share and after deducting the underwriting discount and commissions
and the estimated offering expenses payable by us, our net tangible book value
at September 30, 1999 would have been $ , or $ per share of common
stock. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of $
per share to new investors. The following table illustrates this per share
dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $
Net tangible book value per share as of September 30,
1999...................................................... $(4.98)
Increase in net tangible book value attributable to new
investors.................................................
------
Net tangible book value per share after this offering........ $
---------
Dilution per share to new investors.......................... $
=========
</TABLE>
The following table summarizes the total number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors purchasing shares in
this offering.
<TABLE>
<CAPTION>
Shares Purchased(1) Total Consideration(2)
-------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
------------ ------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 6,432,100 % $ 4,023,000 % $0.63
New investors...........
------------ ------ -------------- -------
Total................... 100% $ 100%
============ ====== ============== =======
</TABLE>
- --------
(1) Excludes 1,379,000 shares of common stock issuable upon exercise of options
outstanding as of September 30, 1999 at a weighted average exercise price
of $3.56 per share (341,000 of these options were exercisable as of
September 30, 1999 and the balance are subject to future vesting
requirements). To the extent options are exercised, there will be further
dilution to new investors.
(2) Does not reflect any deductions for commissions or expenses paid or
incurred in connection with the issuance of such shares of common stock.
On a pro forma basis, giving effect to the anticipated contribution of
capital by Odetics of $10.0 million (estimated) resulting from cancellation of
indebtedness to occur immediately prior to the completion of this offering,
"Net tangible book value per share as of September 30, 1999", "Dilution per
share to new investors", and total consideration paid to us by "Existing
Investors" are ($3.43), $ , and $2.18, respectively.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data set as of March 31, 1998 and 1999 and
for each of the years ended March 31, 1997, 1998 and 1999 has been derived from
our consolidated financial statements audited by Ernst & Young LLP, independent
auditors, included elsewhere in this prospectus. Selected consolidated
financial data as of March 31, 1995, 1996 and 1997 and for each of the years
ended March 31, 1995 and 1996 has been derived from our unaudited consolidated
financial statements not included in this prospectus. The selected consolidated
financial data as of and for the six months ended September 30, 1998 and 1999
has been derived from our unaudited consolidated financial statements for such
period included elsewhere in this prospectus. The unaudited financial
information includes adjustments (consisting only of normal recurring
adjustments) that we consider necessary for a fair presentation of this
information in accordance with generally accepted accounting principles. The
consolidated statement of operations data for the six month period ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the full fiscal year ending March 31, 2000 or any future period. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Six Months Ended
Years Ended March 31 September 30
----------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(unaudited)
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue:
Sensors................ $ 200 $ 287 $ 538 $ 1,607 $ 4,339 $ 1,552 $ 3,506
Systems................ 0 0 0 4,234 10,241 4,365 7,699
--------- --------- --------- --------- --------- --------- ---------
Total revenue........ 200 287 538 5,841 14,580 5,917 11,205
Cost of sales:
Sensors................ 115 358 470 2,555 3,129 1,471 1,829
Systems................ 0 0 0 2,815 7,195 3,117 5,761
--------- --------- --------- --------- --------- --------- ---------
Total cost of sales.. 115 358 470 5,370 10,324 4,588 7,590
Gross profit:
Sensors................ 85 (71) 68 (948) 1,210 81 1,677
Systems................ 0 0 0 1,419 3,046 1,248 1,938
--------- --------- --------- --------- --------- --------- ---------
Total gross profit... 85 (71) 68 471 4,256 1,329 3,615
Operating expenses:
Research and
development........... 652 1,269 2,378 2,037 2,152 939 1,635
Selling, general and
administrative........ 160 1,055 1,411 3,414 5,729 2,387 3,087
Charges allocated by
Odetics............... 15 60 105 458 881 310 670
Other expenses......... 0 0 0 465 368 136 352
--------- --------- --------- --------- --------- --------- ---------
Loss from operations.... (742) (2,455) (3,826) (5,903) (4,874) (2,443) (2,129)
Interest charge
allocated by Odetics... 107 304 680 1,344 2,167 988 1,407
--------- --------- --------- --------- --------- --------- ---------
Loss before income
taxes.................. (849) (2,759) (4,506) (7,247) (7,041) (3,431) (3,536)
Income taxes............ 0 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Net loss................ $ (849) $ (2,759) $ (4,506) $ (7,247) $ (7,041) $ (3,431) $ (3,536)
========= ========= ========= ========= ========= ========= =========
Net loss per share,
basic and diluted...... $ (0.14) $ (0.46) $ (0.75) $ (1.21) $ (1.13) $ (0.57) $ (0.55)
========= ========= ========= ========= ========= ========= =========
Shares used in
computation of net loss
per share, basic and
diluted................ 6,000,000 6,000,000 6,000,000 6,000,000 6,209,500 6,000,000 6,435,700
<CAPTION>
As of March 31, As of September 30,
----------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Working capital
(deficit).............. $ (1,431) $ 481 $ (9,582) $ (3,315) $ (96) $ (2,791) $ 1,100
Total assets............ 0 576 1,675 11,614 17,996 10,680 20,492
Total liabilities....... 1,431 4,766 10,371 27,557 36,711 30,053 42,989
Total stockholders'
equity (deficit)....... (1,431) (4,190) (8,696) (15,943) (18,715) (19,373) (22,497)
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
financial statements and notes included elsewhere in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
in such forward-looking statements. Factors that could cause or contribute to
such differences include those discussed below and in "Risk Factors" and
"Business."
Overview
We design, develop, market and implement software based solutions which
improve the safety and efficiency of vehicle transportation. Our current
customers include federal, state, and other public agencies as well as vehicle
manufacturers from which we have limited revenue. We currently operate in two
business segments: sensors and systems. Our sensors segment has historically
consisted of our Vantage video vehicle detection systems and more recently our
AutoVue lane departure warning system. Our systems segment consists of our
transportation management and traveler information systems. For the fiscal
years ended March 31, 1998 and 1999 and the six months ended September 30, 1998
and 1999, approximately 69% to 74% of our total revenue has been derived from
our systems segment. However, with the recent introduction of AutoVue and with
the continued growth of Vantage, we expect that revenue from our sensors
segment will represent an increasing percentage of total revenue.
We began as a division of Odetics, Inc. in 1994 and incorporated as a
subsidiary of Odetics in September 1998. Odetics currently owns approximately
93% of our outstanding common stock. Immediately prior to this offering,
Odetics will distribute all of its shares of our common stock to its
stockholders in a tax-free spin-off. During the periods presented and through
the period prior to the spin-off, we have been charged by Odetics for expenses
allocable to our business and interest on debt owed to Odetics. Concurrent with
the spin-off, we will enter into a services agreement with Odetics for the
provision of treasury, accounting, tax, audit, legal and human resources
services, which will be charged to us on terms consistent with past practices.
Prior to June 1997, our revenue consisted solely of sales from our Vantage
systems. In June 1997, we acquired certain assets from the transportation
systems business of Rockwell, which expanded our product offerings to include
transportation systems consulting and design services. The acquisition of
assets from Rockwell also provided us with some of the technologies for the
AutoVue system. We further augmented our transportation management and traveler
information systems design and consulting capabilities with the acquisition of
Meyer Mohaddes Associates, Inc. in October 1998, and the acquisition of the
assets of Viggen Corporation in January 1999.
Revenue from the sale of sensors and the related costs of sales are
generally recognized on the date of shipment. Systems revenue on cost plus fee
contracts is recognized as work is performed. Systems revenue from fixed price
contracts is recognized on the percentage of completion method of accounting as
costs are incurred, and includes costs incurred plus a portion of estimated
fees or profits based on the relationship of costs incurred to total estimated
costs. Revenue from maintenance and support services after installation is
recognized when earned.
In our sensors business we design, assemble and test components of Vantage
and subcontract the manufacturing of AutoVue. As a result, cost of sales for
sensors include subassemblies purchased from outside sources, related
manufacturing overhead and direct labor. Our systems business is labor
intensive and often involves a significant amount of custom software
development. As a result, cost of sales for systems consists primarily of
wages, overhead and subcontracting costs. We do not manufacture or procure any
of the hardware components used in the systems that we design and implement.
Our operating expenses are comprised of:
. research and development, which consist primarily of wages,
subcontracting expenses, prototype materials and related overhead costs
to support new systems development for AutoVue and Vantage;
21
<PAGE>
. selling, general and administrative, which consist primarily of wages
and related benefits, advertising and promotional expenses and travel
expenses;
. charges allocated by Odetics, which consist of accounting, auditing,
payroll processing, treasury functions, administration of employee
incentive programs, marketing support, facilities and facilities
management, certain legal services, insurance costs and other
miscellaneous expenses; and
. other expenses, which primarily consists of goodwill amortization and
non-recurring charges.
Our operating expenses have increased significantly in recent periods as a
result of business acquisitions and growth in both our sensors and systems
segments. We expect our operating expenses to continue to increase to support
growth and as we separate from Odetics.
We also pay interest charges on debt we owe to Odetics. Odetics has
historically advanced funds to meet our capital requirements and charged
interest on the resulting intercompany account balance using Odetics' cost of
the related borrowed funds (10.5% at September 30, 1999).
Income tax expenses for each member of the Odetics consolidated group has
been allocated only to companies in the group with separate taxable income. As
of the date of our separation we will not have received any taxable benefit for
our accumulated losses. We expect to derive benefit from taxable losses
incurred in the future and will incur liabilities for future taxable income.
We have incurred net operating losses and negative cash flows since our
inception. To date, our losses and working capital needs have been funded by
Odetics. We expect to continue to incur net losses and negative cash flows as
we seek to grow our business and implement our strategy.
Results of Operations
The following table sets forth certain statements of operations data
expressed as a percentage of total revenue for the periods indicated, except
for cost of sales and gross profit, which are each expressed as a percentage of
the corresponding segment revenue.
<TABLE>
<CAPTION>
Six Months
Years Ended March 31 Ended September 30
----------------------------- ------------------
1997 1998 1999 1998 1999
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
n
Revenue:
Sensors.................. 100.0 % 27.5 % 29.8 % 26.2 % 31.3 %
Systems.................. 0.0 72.5 70.2 73.8 68.7
-------- -------- ------- ------- -------
Total revenue.......... 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Sensors.................. 87.4 159.0 72.1 94.8 52.2
Systems.................. 0.0 66.5 70.3 71.4 74.8
Total costs of sales... 87.4 91.9 70.8 77.5 67.7
Gross profit:
Sensors.................. 12.6 (59.0) 27.9 5.2 47.8
Systems.................. 0.0 33.5 29.7 28.6 25.2
Total gross profit..... 12.6 8.1 29.2 22.5 32.3
Operating expenses:
Research and
development............. 442.0 34.9 14.8 15.9 14.6
Selling, general and
administrative.......... 262.3 58.4 39.3 40.3 27.6
Charges allocated by
Odetics................. 19.5 7.8 6.0 5.2 6.0
Other expenses........... 0.0 8.0 2.5 2.3 3.1
-------- -------- ------- ------- -------
Loss from operations....... (711.2) (101.1) (33.4) (41.3) (19.0)
Interest charges
allocated by Odetics.... 126.4 23.0 14.9 16.7 12.6
-------- -------- ------- ------- -------
Loss before income taxes... (837.6) (124.1) (48.3) (58.0) (31.6)
Income tax expense....... 0.0 0.0 0.0 0.0 0.0
-------- -------- ------- ------- -------
Net loss................... (837.6)% (124.1)% (48.3)% (58.0)% (31.6)%
======== ======== ======= ======= =======
</TABLE>
22
<PAGE>
Six Months Ended September 30, 1999 Compared with Six Months Ended September
30, 1998
Total Revenue. Total revenue increased by 89.4% to $11.2 million for the six
months ended September 30, 1999 from $5.9 million for the six months ended
September 30, 1998.
Sensors revenue increased by 125.9% to $3.5 million for the six months ended
September 30, 1999 from $1.6 million for the six months ended September 30,
1998. Vantage sales comprised approximately 97% of sensors revenues in the six-
months ended September 30, 1999. The increase primarily represented increased
sales as a result of growth in our installed user base.
Systems revenue increased by 76.4% to $7.7 million for the six months ended
September 30, 1999 from $4.4 million for the six months ended September 30,
1998. Included in the 1999 period was $3.8 million from the acquisition of
systems revenue from Meyer Mohaddes and assets of Viggen and included in the
1998 period was $1.3 million of revenue derived from a contract with the City
of Jinan, China. Excluding these items, systems revenue resulted in an increase
of $800,000, due to a general increase in systems activity. Approximately 59%
of our systems revenue was derived from cost plus fee contracts, with the
remainder represented by fixed price contracts.
Gross Profit. Total gross profit increased to $3.6 million, or 32.3% of
total revenue, for the six months ended September 30, 1999 from $1.3 million,
or 22.5% of total revenue, for the six months ended September 30, 1998.
Gross profit from sensors revenue increased to $1.7 million, or 47.8% of
sensors revenue, for the six months ended September 30, 1999 from $81,000 or
5.2% of sensors revenue, for the six months ended September 30, 1998. The
increase in gross profit on sensors revenue reflected increased sales of
Vantage and improved absorption of manufacturing overhead. In addition,
improved gross profit performance reflected the benefits of Vantage cost
reduction efforts.
Gross profit from systems revenue increased to $1.9 million, or 25.2% of
systems revenue, for the six months ended September 30, 1999 from $1.2 million,
or 28.6% of systems revenue, for the six months ended September 30, 1998. The
dollar increase in gross profits of systems revenue reflected the 76.4%
increase in systems revenue in the six months ended September 30, 1999. The
decline in gross profit as a percentage of systems revenue reflected the lower
relative gross profits of contracts acquired as part of the acquisition of
Meyer Mohaddes and the assets of Viggen as well as lower gross profit from
certain fixed priced contracts during the six months ended September 30, 1999.
Research and Development Expenses. Research and development expenses
increased by 74.1% to $1.6 million, or 14.6% of total revenue, for the six
months ended September 30, 1999 from $939,000, or 15.9% of total revenue, for
the six months ended September 30, 1998. Research and development expenses
reflected new product development to support AutoVue and Vantage. These two
development programs consumed approximately equal levels of research and
development expenses in the six months ended September 30, 1998. The increase
in research and development expenses in the six months ended September 30, 1999
primarily reflected increased development activity to support AutoVue as we
continued to enhance performance, add features and functionality and improve
packaging. Research and development expenses for Vantage did not increase
significantly.
Selling, General and Administrative Expenses. Selling, general, and
administrative expenses increased by 29.3% to $3.1 million, or 27.6% of total
revenue, for the six months ended September 30, 1999 from $2.4 million, or
40.3% of total revenue, for the six months ended September 30, 1998. The
acquisition of Meyer Mohaddes and the assets of Viggen constituted
approximately $609,000 of the increase, which was partially offset by a
$500,000 cost reduction as a result of our completion and withdrawal of
activities to support market activity in China. The remaining $600,000 of the
increase primarily reflected the addition of personnel and infrastructure to
support Vantage and AutoVue sales.
23
<PAGE>
Charges Allocated by Odetics. Charges allocated by Odetics increased by
116.1% to $670,000, or 6.0% of total revenue, for the six months ended
September 30, 1999 from $310,000, or 5.2% of total revenue, for the six months
ended September 30, 1998. The increase was attributable to our expanding wage
base, higher square footage occupancy of facilities, and higher revenue
relative to Odetics consolidated group revenue.
Other Expenses. Other expenses increased by 158.8% to $352,000, or 3.1% of
total revenue, for the six months ended September 30, 1999 from $136,000, or
2.3% of total revenue, for the six months ended September 30, 1998. The
increase primarily represented the amortization of goodwill arising from the
acquisition of Meyer Mohaddes in October 1998.
Interest Charges Allocated by Odetics. Interest charges allocated by Odetics
increased by 42.4% to $1.4 million, or 12.6% of total revenue, in the six
months ended September 30, 1999 from $1.0 million, or 16.7% of total revenue,
in the six months ended September 30, 1998. The increase reflected increased
intercompany borrowings necessary to support our working capital requirements
and fund our operating losses.
Year Ended March 31, 1999 Compared with Year Ended March 31, 1998
Total Revenue. Total revenue increased by 149.6% to $14.6 million for the
fiscal year ended March 31, 1999 from $5.8 million for the fiscal year ended
March 31, 1998.
Sensors revenue increased by 170.0% to $4.3 million in fiscal 1999 from $1.6
million in fiscal 1998. The increase in sensors revenue reflects increased unit
sales volume of Vantage across a broad customer base.
Systems revenue increased by 141.9% to $10.2 million in fiscal 1999 from
$4.2 million in fiscal 1998. All of our systems revenue in fiscal 1998
reflected services performed by us on contracts acquired from Rockwell in June
1997. Fiscal 1999 systems revenue includes $1.6 million derived from a contract
with the City of Jinan, China. Approximately 21.2% of our systems revenue in
fiscal 1999 reflected revenue from the acquisitions of Meyer Mohaddes in
October 1998 and the assets of Viggen Corporation in January 1999. 59.0% of the
system revenue in fiscal 1999 was generated under cost plus fee and time and
material contracts, while the remaining revenue was derived from fixed price
contracts.
Gross Profit. Total gross profit increased by 803.6% to $4.3 million, or
29.2% of total revenue, for fiscal 1999 from $471,000, or 8.1% of total
revenue, for fiscal 1998.
Gross profit on sensors revenue totaled $1.2 million, or 27.9% of sensors
revenue in fiscal 1999 as compared to a gross profit (loss) of ($948,000), or
(59%) of sensors revenue, in fiscal 1998. Through fiscal 1998 Vantage had
limited sales volume and we incurred significant costs for direct labor,
manufacturing overhead and other manufacturing costs relative to its limited
sales. During fiscal 1998, gross profit on sensor revenue was also negatively
impacted by $800,000 of costs for upgrades to the installed base of an earlier
generation of Vantage, in addition to charges for inventory obsolescence
related to earlier design versions of Vantage. The improvement in gross profit
on sensors revenue in fiscal 1999 also reflected the benefit of increased sales
volume and manufacturing efficiencies. Also during fiscal 1999, we introduced
certain design changes to lower total cost.
Gross profit on systems revenue increased by 114.7% to $3.0 million, or
29.7% of systems revenue, in fiscal 1999 from $1.4 million, or 33.5% of systems
revenue, in fiscal 1998. The slight decrease in gross profit as a percentage of
systems revenue in fiscal 1999 reflected the contribution of contracts from the
acquisitions of Meyer Mohaddes and the assets of Viggen. These acquired
contracts had associated lower gross profit percentages compared to our other
ongoing systems activities.
Research and Development Expenses. Research and development expense
increased by 5.6% to $2.2 million, or 14.8% of total revenue, in fiscal 1999
from $2.0 million, or 34.9% of total revenue, in fiscal 1998. The increase in
research and development expense reflected the acceleration of development of
AutoVue during fiscal 1999, which was partially offset by a reduction in
development activities supporting Vantage.
24
<PAGE>
Approximately 47% of our research and development expense in fiscal 1999 was
incurred to support AutoVue development efforts. As a percentage of total
revenue, research and development expenses declined sharply in fiscal 1999 as a
result of substantial increases in systems and sensors revenue in fiscal 1999.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased by 67.8% to $5.7 million, or 39.3% of total
revenue, in fiscal 1999 from $3.4 million, or 58.4% of total revenue, in fiscal
1998. Approximately $500,000 of the increase resulted from increased expenses
associated with the acquisition of Meyer Mohaddes and the assets of Viggen.
During fiscal 1999, we also expanded our sales and marketing efforts to support
increases in both systems and sensor revenue. As a percentage of total revenue,
selling, general and administrative expenses declined in fiscal 1999 as a
result of substantial increases in systems and sensors revenue in fiscal 1999.
Charges Allocated by Odetics. Charges allocated by Odetics increased by
92.4% to $881,000, or 6.0% of total revenue, in fiscal 1999 from $458,000, or
7.8% of total revenue, in fiscal 1998. The increase was attributable to our
expanding wage base, higher square footage occupancy of facilities, and higher
revenue relative to Odetics' consolidated group revenue.
Other Expenses. Other expenses decreased by 20.9% to $368,000, or 2.5% of
total revenue, in fiscal 1999 from $465,000, or 8.0% of total revenue, in
fiscal 1998. Other expenses in fiscal 1999 consisted of goodwill amortization
related to the acquisition of certain assets of the transportation systems
business from Rockwell in June 1997. Other expenses in fiscal 1998 included
goodwill amortization related to the acquisition of certain assets of Rockwell
and non-recurring charges of approximately $200,000 related to the wind-down of
our business development activities in China in fiscal 1998.
Interest Charges Allocated by Odetics. Interest charges allocated by Odetics
increased by 61.2% to $2.2 million in fiscal 1999, or 14.9% of total revenue,
from $1.3 million, or 23.0% of total revenue, in fiscal 1998. The increase
reflected increased intercompany borrowings necessary to support our working
capital requirements and fund our operating losses.
Year Ended March 31, 1998 Compared with Year Ended March 31, 1997
Total Revenue. Total revenue increased by 985.7% to $5.8 million for the
fiscal year ended March 31, 1998 from $538,000 for the fiscal year ended March
31, 1997.
Sensors revenue increased by 198.7% to $1.6 million in fiscal 1998 from
$538,000 in fiscal 1997. The increase in sensors revenue primarily reflected
increased unit sales of Vantage.
Systems revenue of $4.2 million in fiscal 1998 reflects services performed
by us on contracts acquired from Rockwell. No systems revenue was recognized in
fiscal 1997. 72% of the systems revenue in fiscal 1998 was generated under cost
plus fee and time and material contracts, while the remaining systems revenue
was derived from fixed price contracts.
Gross Profit. Total gross profit increased by 592.6% to $471,000, or 8.1% of
total revenue, for fiscal 1998 from $68,000, or 12.6% of total revenue, for
fiscal 1997.
Gross profit (loss) on sensors revenue totaled ($948,000), or (59%) of
sensors revenue, in fiscal 1998 as compared to a gross profit of $68,000, or
12.6% of sensors revenue, in fiscal 1997. Prior to fiscal 1998, all of our
gross profit (loss) was derived from sales of Vantage. During fiscal 1998
Vantage had limited sales volume and we incurred significant costs for direct
labor, manufacturing overhead and other manufacturing costs relative to its
limited volume. During fiscal 1998, gross profit on sensors revenue was also
negatively impacted by $800,000 of costs for upgrades to the installed base of
an earlier generation of Vantage, in addition to charges for inventory
obsolescence related to earlier design versions of Vantage systems.
Gross profit on systems revenue was 33.5% of systems revenue in fiscal 1998.
25
<PAGE>
Research and Development Expenses. Research and development expenses
decreased by 14.3% to $2.0 million, or 34.9% of total revenue, in fiscal 1998
from $2.4 million, or 442.0% of total revenue, in fiscal 1997. The decrease
primarily reflected the completion of development of Vantage Plus during fiscal
1998, which was partially offset by new product development activities related
to AutoVue. Approximately 23.0% of our research and development expenses in
fiscal 1998 were incurred to support AutoVue development efforts. As a
percentage of total revenue, research and development expenses declined sharply
in fiscal 1998 as a result of a substantial increase in systems revenue in
fiscal 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 142.0% to $3.4 million, or 58.4% of total
revenue, in fiscal 1998 from $1.4 million, or 262.3% of total revenue, in
fiscal 1997. The increase was due primarily to the acquisition of certain
assets of the transportation systems business of Rockwell in June 1997 in
addition to increased spending to support our marketing and sales proposal
efforts in China.
Charges Allocated by Odetics. Charges allocated by Odetics increased by
336.2% to $458,000, or 7.8% of total revenue, in fiscal 1998 from $105,000, or
19.5% of total revenue, in fiscal 1997. The increase was attributable to our
expanding wage base, higher square footage occupancy of facilities, and higher
revenues relative to Odetics' consolidated group revenues.
Other Expenses. Other expenses for fiscal 1998 represented goodwill
amortization related to the acquisition of certain assets of the transportation
systems business from Rockwell in June 1997 and other non-recurring charges of
approximately $200,000 related to the wind-down of our market development
activities in China.
Interest Charges Allocated by Odetics. Interest charges allocated by Odetics
increased by 97.6% to $1.3 million, or 23.0% of total revenue, in fiscal 1998
from $680,000, or 126.4% of total revenue, in fiscal 1997. The increase
reflected increased intercompany borrowings necessary to support our working
capital requirements, fund our operating losses and support acquisition
activities.
26
<PAGE>
Selected Quarterly Results of Operations
The following tables present selected quarterly financial information for
each of the six quarters through September 30, 1999. This information has been
prepared by us on a basis consistent with our audited financial statements
appearing elsewhere in this prospectus. The information includes all
adjustments (consisting only of normal recurring adjustments) that we consider
necessary for a fair presentation of this information in accordance with
generally accepted accounting principles. Such quarterly results are not
necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
1998 1998 1998 1999 1999 1999
--------- --------- --------- --------- --------- ---------
(unaudited, in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Sensors................ $ 793 $ 759 $ 1,499 $ 1,288 $ 1,487 $ 2,019
Systems................ 2,721 1,644 2,984 2,892 3,610 4,089
--------- --------- --------- --------- --------- ---------
Total revenue........ 3,514 2,403 4,483 4,180 5,097 6,108
Cost of sales:
Sensors................ 659 812 871 787 699 1,130
Systems................ 2,108 1,009 1,974 2,104 2,565 3,196
--------- --------- --------- --------- --------- ---------
Total cost of sales.. 2,767 1,821 2,845 2,891 3,264 4,326
Gross profit:
Sensors................ 134 (53) 628 501 788 889
Systems................ 613 635 1,010 788 1,045 893
--------- --------- --------- --------- --------- ---------
Total gross profit... 747 582 1,638 1,289 1,833 1,782
Operating expenses:
Research and
development........... 453 486 502 711 743 892
Selling, general and
administrative........ 1,244 1,143 1,457 1,885 1,604 1,483
Charges allocated by
Odetics............... 121 189 252 319 303 367
Other expenses......... 100 36 89 143 178 174
--------- --------- --------- --------- --------- ---------
Loss from operations.... (1,171) (1,272) (662) (1,769) (995) (1,134)
Interest charges
allocated by Odetics... 471 517 562 617 679 728
--------- --------- --------- --------- --------- ---------
Loss before income
taxes.................. (1,642) (1,789) (1,224) (2,386) (1,674) (1,862)
Income tax expense...... 0 0 0 0 0 0
--------- --------- --------- --------- --------- ---------
Net loss................ $ (1,642) $ (1,789) $ (1,224) $ (2,386) $ (1,674) $ (1,862)
========= ========= ========= ========= ========= =========
Net loss per share,
basic and diluted...... $ (0.27) $ (0.30) $ (0.19) $ (0.37) $ (0.26) $ (0.29)
========= ========= ========= ========= ========= =========
Shares used in computing
net loss per share,
basic and diluted...... 6,000,000 6,000,000 6,381,000 6,457,000 6,457,000 6,435,000
The following table sets forth certain statements of operations data
expressed as a percentage of total revenue for the periods indicated, except
for cost of sales and gross profit, which are each expressed as a percentage of
the corresponding segment revenue.
Revenue:
Sensors................ 22.6 % 31.6 % 33.4 % 30.8 % 29.2 % 33.1 %
Systems................ 77.4 68.4 66.6 69.2 70.8 66.9
--------- --------- --------- --------- --------- ---------
Total revenue........ 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Sensors................ 83.1 107.0 58.1 61.1 47.0 56.0
Systems................ 77.5 61.4 66.2 72.8 71.1 78.2
Total cost of sales.. 78.7 75.8 63.5 69.2 64.0 70.8
Gross profit:
Sensors................ 16.9 (7.0) 41.9 38.9 53.0 44.0
Systems................ 22.5 38.6 33.8 27.2 28.9 21.8
Total gross profit... 21.3 24.2 36.5 30.8 36.0 29.2
Operating expenses:
Research and
development........... 12.9 20.2 11.2 17.0 14.6 14.6
Selling, general and
administrative........ 35.4 47.6 32.5 45.1 31.5 24.3
Charges allocated by
Odetics............... 3.4 7.9 5.6 7.6 5.9 6.0
Other expenses......... 2.8 1.5 2.0 3.4 3.5 2.8
--------- --------- --------- --------- --------- ---------
Loss from operations.... (33.3) (52.9) (14.8) (42.3) (19.5) (18.6)
Interest charges
allocated by Odetics... 13.4 21.5 12.5 14.8 13.3 11.9
--------- --------- --------- --------- --------- ---------
Loss before income
taxes.................. (46.7) (74.4) (27.3) (57.1) (32.8) (30.5)
Income tax expense...... 0.0 0.0 0.0 0.0 0.0 0.0
--------- --------- --------- --------- --------- ---------
Net loss................ (46.7)% (74.4)% (27.3)% (57.1)% (32.8)% (30.5)%
========= ========= ========= ========= ========= =========
</TABLE>
27
<PAGE>
Quarterly Results of Operations
Total Revenue. Sensors revenue in all quarters presented reflected sales of
Vantage. Systems revenue in the quarter ended June 30, 1998 included $1.4
million of revenue derived from a contract with the City of Jinan, China which
was substantially completed in such quarter. Systems revenue in the quarter
ended December 31, 1998 includes the contributions of revenue from the
acquisition of Meyer Mohaddes.
Gross Profit. Gross profit as a percentage of sensors revenue rose to 53.0%
in the quarter ended June 30, 1999, reflecting the benefit of direct sales of
Vantage to a customer that yielded higher than customary gross profit margins.
Quarterly gross profits on systems revenue are subject to fluctuation as a
result of changes in estimates used in percentage of completion accounting.
Expenses. Our operating expenses have generally increased over each of the
last six quarters ended September 30, 1999 as we have increased investments in
our sales, marketing and administrative infrastructure to support growth.
Research and development expenses have increased to support expansion of
Vantage and to support investments in AutoVue. In the quarter ended March 31,
1999 selling, general, and administrative expenses included a charge of
approximately $353,000 representing deferred financing costs.
Liquidity and Capital Resources
From April 1, 1996 through September 30, 1999, we have incurred cumulative
losses of $22.3 million. Our cumulative negative cash flow from operating
activities, primarily as a result of those losses for such period was $24.8
million. During fiscal 1998, we used $2.2 million in cash to acquire certain
assets of the transportation systems business from Rockwell. To date, we have
relied upon interest bearing advances from Odetics to provide the necessary
cash to support our working capital requirements, fund our operating losses and
support acquisition activities. At September 30, 1999, we owed Odetics
approximately $34.7 million as a result of the net advances made to us since
our inception including accrued interest. Approximately $10.0 million of the
net proceeds received from this offering will be paid by us to Odetics as a
reduction of principal on this obligation. An additional principal amount of
approximately $10.0 million will be cancelled by Odetics and treated as a
contribution to capital. The balance of the obligation then due will be $14.7
million that will be converted to a promissory note, payable in interest only
for the first year and in 16 quarterly installments of principal and interest
thereafter.
We are currently co-borrowers with Odetics under a joint Loan and Security
Agreement with Transamerica Business Credit Corporation and are jointly and
severally liable for all amounts advanced. The maximum amount available under
this credit facility is $17.0 million, of which no borrowings were outstanding
at October 31, 1999. This facility provides for borrowings at a prime rate as
defined in the agreement (8.5% at September 30, 1999) plus 2.00%. The
borrowings under this facility are secured by substantially all of our assets.
Upon consummation of the spin-off we will no longer be a co-borrower under this
facility and the security interests in our assets will be released. Shortly
after this offering, we intend to establish a line of credit. However, we
cannot ensure that we will be successful in obtaining this line of credit on
acceptable terms, if at all.
At September 30, 1999, we had a net capital deficiency of $22.5 million as a
result of accumulated losses since our inception. Upon completion of this
offering, we anticipate that we will have sufficient capital to fund our
operations for a period of at least two years. We may in the future require
additional funds through bank financings, debt or equity offerings or other
sources of capital. Such additional funding may not be available when needed or
on terms acceptable by us, which would have a material adverse effect on our
business, financial condition and results of operations.
28
<PAGE>
Impact of the Year 2000
Many existing computer systems and applications, and other control devices
were designed to use two digits rather than four digits to define an applicable
year. As a result, such systems and applications may be unable to recognize the
year 2000 and could fail or create erroneous results. These problems are
commonly referred to as the year 2000 problem.
We have evaluated each of our products and believe that each is
substantially year 2000 compliant. We have adopted the British Standards
Institute standard for its statements of compliance regarding the year 2000
problem. We believe that it is not possible to determine whether all of our
customers' products into which our products are incorporated will be year 2000
compliant because we have little or no control over the design, production and
testing of our customers' products.
The year 2000 problem could affect the systems, transaction processing
computer applications and devices that we use to operate and monitor all major
aspects of our business, including financial systems (such as general ledger,
accounts payable, and payroll), customer services, infrastructure, master
productions scheduling, materials requirement planning, test equipment,
security systems, networks and telecommunications systems. We believe that we
have identified and corrected substantially all of the major systems, software
applications and related equipment used in connection with our internal
operations that required modification or upgrading in order to minimize the
possibility of a material disruption to our business. Because most of our
software applications are recent versions of vendor supported, commercially
available products, we have not incurred, and do not expect in the future to
incur, significant costs to upgrade these applications.
We estimate that Odetics has expended approximately $500,000 addressing year
2000 issues for its consolidated group, a portion of which was allocated to us.
Assuming we have identified our most significant year 2000 issues and that the
plans of our third party suppliers will be fulfilled in a timely manner without
cost to us, we do not expect to incur any additional significant costs to
address year 2000 issues. We cannot be sure that these assumptions are
accurate, and actual results could differ materially from those we anticipate.
We have developed contingency plans to address the year 2000 issues that may
pose a significant risk to our on-going operations. These plans include
accelerated replacement of affected equipment and software, temporary use of
back-up equipment and software or the implementation of manual procedures to
compensate for system deficiencies. We cannot be certain that any contingency
plans implemented by us are adequate to meet our needs without materially
impacting our operations, that any such plan will be successful or that our
results of operations would not be materially and adversely affected by the
delays and inefficiencies inherent in conducting operations in an alternative
manner.
Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
and commodity market prices and rates. We are exposed to market risk due to
changes in United States interest rates. This exposure is directly related to
our normal operating and funding activities. Historically and as of September
30, 1999, we have not used derivative instruments or engaged in hedging
activities.
The interest payable on our obligation payable to Odetics is variable based
on the prime rate, and, therefore, affected by changes in market interest
rates. We have managed interest rate risk by remitting all cash we received to
Odetics to minimize the amount of such obligation outstanding at any point in
time. Following the completion of this offering, we expect to reduce our
outstanding indebtedness to Odetics to $14.7 million, which will be evidenced
by a note payable over the 20 fiscal quarters following completion of this
offering with interest payable at variable rates. As a result, we expect to
continue to have exposure to interest rate risk.
29
<PAGE>
BUSINESS
Our Company
We design, develop, market and implement software based solutions that
improve the safety and efficiency of vehicle transportation. Using our
proprietary software and ITS industry expertise, we are a leading provider of
video sensor systems and transportation management and traveler information
systems for the ITS industry. The ITS industry is comprised of companies
applying a variety of technologies to enable the safe and efficient movement of
people and goods. We use our outdoor image recognition software expertise to
develop proprietary algorithms for video sensor systems that improve vehicle
safety and the flow of traffic. Our knowledge of the ITS industry enables us to
design and implement transportation solutions that help public agencies reduce
traffic congestion and provide greater access to traveler information. Our ITS
systems and solutions include:
. Sensors. Our proprietary image recognition systems include AutoVue and
Vantage. AutoVue is a small windshield mounted sensor that utilizes
proprietary software to detect and warn drivers of unintended lane
departures. Through new software development we are expanding the
AutoVue platform to incorporate additional safety and convenience
features. Vantage is a video vehicle sensing system that detects the
presence of vehicles at signalized intersections enabling a more
efficient allocation of green signal time.
. Transportation Management and Traveler Information Systems. We design,
develop and implement software based systems that integrate sensors,
video surveillance, computers and advanced communications equipment
enabling public agencies to monitor, control and direct traffic flow,
assist in the quick dispatch of emergency crews and distribute real-time
information about traffic conditions and alternative routes.
Market Overview
According to a study conducted for the U.S. Department of Transportation,
traffic congestion cost the American public more than $72 billion in 1997 in
lost time and wasted fuel in the United States. Over 40,000 people are killed
and 3 million more injured each year in traffic accidents in the United States
according to 1997 National Highway Transportation Safety Administration data.
The total economic cost of motor vehicle crashes in the United States was
$150.5 billion according to the most recent data published by NHTSA in 1994,
and the personal costs due to lost lives and injuries are incalculable. To
address the high economic and personal costs associated with traffic congestion
and accidents, the ITS industry has identified technological solutions which
can cost effectively add capacity to our roads and improve roadway safety.
The U.S. DOT, believes that a combination of ITS and new road construction
will accommodate future traffic growth at a 35% savings as opposed to meeting
the same demand with construction alone. The federal government has stimulated
the implementation of ITS systems by allocating significant federal funding for
research and development of ITS related projects, including approximately $1.28
billion over six years through 2003. Conformance with the National ITS
Architecture standards gives access to additional federal funding for ITS
projects from subsequent legislative appropriations. Additionally, state and
local funding is available for ITS projects.
The U.S. DOT estimates the benefit-to-cost ratio of deploying ITS
infrastructure in the 75 largest metropolitan areas to be approximately eight-
to-one. The U.S. DOT also estimates that ITS applications will eliminate 1.2
million crashes per year, saving thousands of lives and $26 billion in lost
productivity.
We believe the key market drivers for the ITS industry are the demand for
improved vehicle safety, the demand for reduced traffic congestion and the
demand for the availability of personalized traveler information.
Demand for Improved Vehicle Safety
Consumers are concerned with safety on roadways and are increasingly
demanding that the vehicles they buy include effective safety features.
Traditionally, many of the safety features designed for vehicles have
30
<PAGE>
focused on protecting occupants from injury caused by an accident, such as seat
belts and air bags, as opposed to accident prevention. Now, however, we believe
vehicle manufacturers are focusing on safety features that are designed to
prevent accidents. This trend has accelerated the demand for "collision
avoidance" technologies to enhance vehicle safety.
There were more than 12 million passenger cars, trucks and buses produced in
the United States in 1997. We believe that lane departure warning systems may
be deployed in a significant number of these types of vehicles produced in the
future. As vehicle manufacturers and their customers increasingly focus on
vehicle safety, the market for collision avoidance sensor systems is expected
to grow from $45 million in 1997 to $320 million in 2002 according to the
Freedonia Group, a market research company. These statistics do not include
international markets.
Demand for Reduced Traffic Congestion
In 1998, there were more than 200 million vehicles in operation in the
United States according to Automotive News. Better Roads, an ITS trade
publication, estimates that in the past 10 years the amount of travel on
interstate highways has grown by 30% and that the demand for roadway travel is
expected to increase by another 50% over the next 20 years. For drivers this
means more lost time and problems. According to the U.S. DOT, in 1995,
Americans spent more than two billion hours in traffic jams. In addition to
economic costs, traffic congestion leads to frustration among travelers and
adverse effects on the environment due to increased emissions from wasted fuel
burning. The Texas Transportation Institute estimates that over 6 billion
gallons of fuel were wasted in 1997 due to traffic congestion.
Increased traffic congestion is primarily the result of more vehicles on
U.S. highways and the difficulty of expanding or creating new roadways due to a
substantially built-out infrastructure. As a result, governmental
transportation agencies are increasingly using ITS to monitor and regulate
traffic. Transport Technology Publishing, a leading industry market research
firm, projects the market for vehicle detection systems to grow from an average
of approximately $500 million per year in the period from 1994 to 1998 to over
$800 million per year in the period from 1998 to 2003 and that the market for
alternative technologies to in-pavement inductive loops, including video based
systems, is growing at over 26% per year.
Recognizing the potential impact of traffic congestion on our economy and
environment, the federal government has been active in drafting legislation to
decrease traffic congestion and increase the safety and efficiency of U.S.
highways. A primary example is the development of the National ITS
Architecture, which defined a framework for systems integration and identified
a set of standards to be used by transportation agencies when designing their
transportation management systems. Additionally, in 1996 the U.S. DOT launched
Operation Time Saver with the objective of implementing an intelligent
transportation infrastructure in 75 of the largest metropolitan areas within 10
years. Hagler Bailly, a leading market research firm for the ITS industry,
estimates that the market for ITS infrastructure will be in excess of $4
billion in 2000.
Demand for the Availability of Personalized Traveler Information
Traditionally, a limited amount of traffic information has been disseminated
over the radio. This information is typically untimely and impersonal. Because
of increased traffic congestion, drivers are demanding more timely and accurate
traffic information. Drivers want to know traffic conditions on their intended
route to assist them in deciding when to start a trip, what their estimated
arrival time will be, which route to take and whether a change in route is
necessary. This increase in the demand for traffic information is evidenced by
the proliferation of web sites that now offer traffic information.
Our Solution
We believe we are a market leader in the ITS industry in the United States.
We design, develop, market and implement software based solutions to address
the demands of the vehicle transportation industry, including
31
<PAGE>
improving vehicle safety, reducing traffic congestion and increasing the
availability of personalized traffic information. Our proprietary outdoor image
processing software and algorithms are incorporated into our AutoVue and
Vantage video sensor systems. AutoVue is currently the only commercially-
available lane departure warning system and Vantage is a leader in the market
for video vehicle detection systems.
We are also a leading provider of transportation management and traveler
information systems, which incorporate our customized systems integration
software and commercial software that we have developed. We are one of the two
companies selected by the U.S. DOT to develop and maintain the National ITS
Architecture. This has enabled us to develop invaluable experience with the
standards mandated by the federal government and to establish a reputation as
an expert on the National ITS Architecture.
Our ITS systems and solutions address the demands to improve safety and
efficiency of vehicle transportation in the following manner:
<TABLE>
<CAPTION>
Market Demand Our Solution
- -----------------------------------------------------------------------------------------
<C> <S>
Improve Vehicle Safety . AutoVue warns drivers of unintended lane departures and
addresses the largest contributing factor in fatal
motor vehicle accidents in the United States.
. We are expanding the AutoVue platform to include
additional safety features.
- -----------------------------------------------------------------------------------------
Reduce Traffic Congestion . Vantage systems monitor and provide efficient control
of traffic flow at signalized intersections and on
highways.
. Our transportation management and traveler information
systems enable management of transportation networks
with real-time monitoring of traffic conditions and the
ability to implement corrective actions to relieve
traffic congestion.
- -----------------------------------------------------------------------------------------
Increase Access to . Our transportation management and traveler information
Information systems enable the dissemination of information on
current traffic conditions through changeable message
signs, highway advisory radio and telephones, cable
television, commercial radio, paging networks and the
Internet.
. We are developing personalized traveler information
services for delivery over wireless communication
devices and the mobile Internet.
</TABLE>
By combining our proprietary software with our ITS industry expertise, we
believe we are uniquely positioned to deliver a broad array of innovative ITS
systems and solutions.
Our Strategy
Our objective is to enhance our position as a leading provider of software
based ITS systems and solutions to the vehicle transportation industry by
leveraging our ITS expertise and capitalizing on industry trends. The key
elements of our strategy include:
Combine Our Proprietary Software with Our ITS Industry Expertise to Provide
Transportation Solutions. Consumers and transportation authorities are looking
for safer, non-intrusive technological transportation solutions. As a result,
we developed our Vantage system to provide a more efficient means of monitoring
and controlling traffic at signalized intersections and on highways. In
addition, our transportation management and traveler information systems reduce
traffic congestion, improve vehicle safety and disseminate traveler
information. We intend to use our proprietary software and ITS industry
expertise to provide fully-integrated intelligent transportation management and
traveler information systems that enable traffic managers
32
<PAGE>
to efficiently monitor and direct traffic flow, promptly dispatch emergency
vehicles to clear accidents, continuously monitor highway operations and
accurately provide information to travelers about delays or alternative routes.
Establish AutoVue as the Leading Platform for In-vehicle Video Sensing. We
designed AutoVue to accommodate software upgrades that provide sensing
functions in addition to warning drivers of unintended lane departures.
Initially these additional functions will be focused on safety and convenience.
Our proprietary software algorithms and the scalable design of the AutoVue
system enable us to add these functions at low marginal costs. Therefore, the
AutoVue system not only has the capacity to provide improved safety and
additional convenience features, but may also significantly reduce the cost to
vehicle manufacturers who otherwise might purchase multiple sensors from
different suppliers. We also intend to expand our direct sales force and
applications engineering capability to further increase market penetration for
AutoVue systems.
Provide Personalized Traveler Information to Travelers Through Wireless
Communication Devices and the Mobile Internet. We intend to utilize our
knowledge and experience in the areas of transportation management and traveler
information systems, the Internet and wireless communications to provide a new,
higher level of information to travelers. Personalized traveler information
includes information on road and weather conditions, traffic congestion, travel
times and suggested routes provided directly to travelers based on their
personal profiles. We intend to disseminate timely and accurate information
compiled from data collected from a variety of sources, such as video
surveillance, vehicle sensor systems and transportation management systems.
Pursue Strategic Acquisitions and Alliances. Since 1995, we acquired three
ITS firms and have been jointly developing technology for AutoVue with
DaimlerChrysler. These acquisitions and alliances have provided us with new
technologies, customers and experienced technical personnel. We intend to
pursue new strategic acquisitions and alliances with:
. other developers of sensor systems and software technologies that will
complement our existing business by delivering increased functionality
and allow us to market our systems and solutions to new customers;
. other firms that design transportation management and traveler
information systems to expand our presence into areas where we can gain
significant contracts, valuable personnel and exposure to state and
local transportation agencies; and
. wireless communications and Internet service providers who have
interests in the delivery of personalized traveler information.
Broaden Our Systems and Solutions Offerings and Expand Our Penetration of
International Markets. We intend to generate additional revenue by expanding
our systems and solutions to address related applications and market segments
which utilize our proprietary software technologies, increasing our geographic
coverage and leveraging our sales and distribution channels. For example, we
intend to market wireless Vantage systems that enhance our ability to address
retrofit applications. Similarly, we are targeting new applications and
geographic expansion opportunities for the software and system designs we
incorporate in our transportation management and traveler information systems.
We also intend to increase our sales and marketing efforts internationally,
particularly in Europe and Asia, where trends such as increased demand for
vehicle safety and increased traffic congestion are similar to those in the
United States.
Our Products and Services
Sensor Systems
Our sensor systems combine our proprietary software and algorithms with
advanced outdoor video image processing to deliver roadway image recognition
and vehicle detection systems that contribute to increase vehicle safety and
reduce traffic congestion.
AutoVue. We have developed what we believe to be currently the only
commercially-available unintended lane departure warning system for heavy
trucks and are marketing AutoVue for installation also in passenger cars
33
<PAGE>
and light and medium trucks. AutoVue is a windshield mounted device that is
approximately the size of a deck of cards which serves as a platform for an
image processing camera and on-board computer system. AutoVue utilizes software
based upon our proprietary algorithms to predict effectively driving behavior
and driver reactions in order to differentiate between intended and unintended
lane departures. For example, the use of a directional signal or sudden lane
changes will not elicit a warning. We integrated these software applications
with our video image processing technologies to create an image sensing
platform that recognizes the difference between the roadway and lane markings
and accurately monitors a vehicle's placement within the lane markings. As a
vehicle travels down a roadway, the AutoVue system tracks both solid and dashed
lane markings. The AutoVue computer processor combines this data with the
vehicle's speed to calculate the proper lane positioning of the vehicle. When a
vehicle traveling at 35 miles per hour or more begins to drift towards an
unintended lane departure, AutoVue sends a distinctive rumble strip sound
through the vehicle's audio system, alerting the driver to make a correction.
AutoVue works effectively both day and night and in most weather conditions
where the lane markings are visible. AutoVue incorporates technology that we
and DaimlerChrysler Corporation have been jointly developing for over four
years.
The illustration below demonstrates the perspective of AutoVue while
tracking lane markings:
[LOGO APPEARS HERE]
Through new software development we are expanding the AutoVue platform to
incorporate additional safety and convenience features. Our proprietary
algorithms and the scalable design of AutoVue enable us to add these additional
features at low marginal costs. AutoVue not only allows vehicle manufacturers
to respond to increasing safety demands, but also provides the opportunity to
reduce costs, increase functionality and consolidate their supplier base.
We expect to ship AutoVue for installation in selected models of Mercedes'
European heavy trucks in the first half of calendar year 2000. We have also
developed an AutoVue system modified for driving and road conditions in North
America and also expect to begin shipments to Freightliner in the first half of
calendar year 2000. In addition, we have delivered AutoVue system prototypes to
other leading vehicle manufacturers for evaluation and test. Our software
engineers are currently developing upgrades to the AutoVue system that will
work with existing AutoVue image sensing technology to deliver additional
safety and convenience features.
Vantage. Our Vantage system is a market leader for video vehicle detection.
Vantage incorporates proprietary image processing technologies to provide
reliable and easy to implement vehicle detection at
34
<PAGE>
signalized intersections and on highways. Vantage cameras, mounted on the arm
of street lights or traffic signals at intersections, send video images to a
Vantage processor located in a roadside cabinet. The processor analyzes the
image to detect vehicle presence enabling the traffic controller to allocate
effectively green signal time. The Vantage video processor includes built-in
programming capability, eliminating the need for a separate computer. This
makes our system very easy to use by traffic system maintenance technicians.
The illustration below demonstrates a two approach camera placement of a
Vantage system:
[LOGO APPEARS HERE]
We believe that Vantage provides a more reliable, flexible and easy to use
and maintain solution than in-pavement inductive loops. In addition to vehicle
detection, Vantage offers functions including remote programming of detection
zones and remote real-time monitoring. Vantage can also provide an attractive
cost of ownership in comparison to inductive loops, which are vulnerable to
failure due to road construction, weather conditions and ground movement.
Maintenance and repair costs for these inductive loops are significant.
Additionally, because inductive loops are buried beneath the roadway surface,
entire lanes of traffic must be diverted when inductive loops are installed,
replaced or serviced and they are ineffective when traffic is diverted during
road repairs and resurfacing projects. Vantage systems are currently used in
over 150 cities in the United States and nine cities in Canada and Asia.
Vantage has been adopted as a method of vehicle detection in cities such as
Santa Barbara, California; Las Vegas, Nevada; St. Louis, Missouri; Omaha,
Nebraska; and Philadelphia, Pennsylvania and by such transportation agencies as
the Colorado Department of Transportation, the Nevada Department of
Transportation, the Texas Department of Transportation, the Virginia Department
of Transportation and the Ministry of Transportation in Ontario, Canada.
We currently offer the following Vantage systems, each of which addresses a
distinct market segment:
. Vantage Plus consists of an advanced processor that can be deployed with
one to six video cameras mounted at an intersection for vehicle
detection on up to six different roadway approaches. Each of these
cameras can accurately provide up to 24 detection zones in a single
roadway approach. Vantage Plus is often deployed at new or fully
refurbished intersections.
. Vantage One incorporates the vehicle detection technology of Vantage
Plus into a modular, single camera system for affordable video detection
on a flexible, per camera basis. Vantage One provides video detection
for a single intersection approach, enabling our customers to retrofit
cost effectively in-pavement inductive loops one approach to an
intersection at a time.
35
<PAGE>
. Vantage Edge incorporates the same vehicle detection algorithms found in
Vantage Plus and Vantage One into a processor designed to plug easily
into standard Type 170 cabinets, a widely used type of traffic control
cabinet in the United States.
. Vantage Remote Access System (VRAS) is a software application that may
be installed on any personal computer equipped with a modem. Traffic
agencies typically use VRAS to perform system diagnostics and
reconfigure detection zones for each Vantage camera from a remote
location. The VRAS allows traffic control personnel to view images to
visually verify traffic conditions and emergency situations.
. Vantage Wireless Systems incorporate the full functionality of the
Vantage family of systems in a wireless architecture, obviating the need
to run coaxial cables from the camera to the traffic control cabinets.
Transportation Management and Traveler Information Systems
We design, implement and maintain transportation management and traveler
information systems for local, state and federal agencies to improve vehicle
safety, reduce traffic congestion and disseminate information. We also design
customized software applications to link independent transportation management
and traveler information systems. These systems allow transportation agencies
to manage their transportation networks in a real-time and coordinated fashion
by using a variety of detection, communication, and information technologies.
They also provide traffic information necessary to enable drivers to avoid
traffic congestion. As one of only two companies awarded a contract to develop
and maintain the National ITS Architecture, we have the experience to design,
implement and maintain transportation management and traveler information
systems that conform with the National ITS Architecture. We believe this
experience provides us with unique insight into emerging market trends and
product opportunities and a significant competitive market advantage.
Transportation management and traveler information systems are the basic
building blocks of successful intelligent transportation systems.
The illustration below demonstrates some of the typical elements of a fully
integrated transportation management and traveler information system which
enables traffic control officials to monitor continuously highway operations,
efficiently manage traffic flow, promptly dispatch emergency assistance and
provide information to travelers about delays or alternative routes:
[LOGO APPEARS HERE]
36
<PAGE>
Systems Design and Implementation. A transportation management system
typically consists of a transportation management center that houses computers,
software and video surveillance monitors used to process and display traffic
data gathered from roadway sensors, video surveillance cameras, and other
sources. This data is delivered to the transportation management center through
communication pathways, including fiber optic lines and wireless technologies.
Transportation management center staff analyze the data using software
applications that convert the raw data into useful information. This
information may be disseminated through changeable message signs, highway
advisory radios and telephones, cable television, commercial radio, paging
networks and the Internet for a variety of commercial and government uses.
These uses include traffic management, freight and fleet management, toll
administration, emergency services, commercial vehicle operations, traveler
information services and transit management. We believe there will be demand
for this information by consumers through PDAs, cellular telephones, pagers,
in-vehicle computers and the mobile Internet.
We often serve as the primary contractor throughout the development of the
customer's entire transportation management and traveler information system.
For example, we worked with the Michigan Department of Transportation to deploy
and maintain one of the nation's largest integrated traffic management and
traveler information systems located in the metropolitan Detroit area. Our
software enabled the integration of more than 1,200 vehicle detectors, 43
changeable message signs, 12 highway advisory radios, 145 closed-circuit
television surveillance cameras and 10 ramp metering stations. Our innovative
design, incorporating an existing fiber optic ring with wireless communication
technologies to collect information from roadway detection devices and
disseminate traffic advisories to drivers, resulted in an affordable and
effective freeway management system that serves as a model for other
transportation departments.
Maintenance. In addition to designing and implementing transportation
management and traveler information systems, our staff of engineers and
technicians maintains and upgrades existing systems on a contract basis. We
believe that our significant experience in the design and implementation of ITS
projects uniquely positions us to maintain and upgrade existing systems on
behalf of transportation agencies on a cost effective basis. Our maintenance
teams utilize specialized software to diagnose malfunctioning equipment and
provide automated documentation and reporting when problems are detected. Our
staff of engineers and technicians are available 24 hours a day to perform
preventive maintenance, remedial maintenance and emergency maintenance on
damaged systems.
Commercial Software. We design customized software applications that link
independent transportation management centers to enable a comprehensive
monitoring of regional traffic conditions and to provide communications among
transportation agencies. We have also developed and license several
commercially-available proprietary software applications to facilitate systems
design and integration. Our DATEX Toolkit software assists in the
implementation of a communications protocol to enable the sharing of traffic
data among transportation management centers using the Datex-Asn standard,
while our SpecWizard software assists transportation engineers in designing ITS
systems that comply with National ITS Architecture based standards. In
addition, our VECTURA Internet data publishing software utilizes "push"
technology which moves information from a central database to web and custom
application servers to accommodate user requests for information. VECTURA
enables the availability of information without degrading the performance or
compromising the security of a central database. Our EzHCM software assists
transportation engineers in performing complex highway capacity calculations.
Technology and Intellectual Property
We have developed expertise in several important technology areas, including
software to enhance the applications of outdoor image processing cameras,
communication linkage software for the integration of management systems, and
low cost image processing hardware design and assembly techniques. Our advanced
expertise of algorithms and outdoor imaging technologies form the foundation
upon which AutoVue and Vantage systems are built. The software applications
installed in our sensors incorporate image processing algorithms for outdoor
image recognition based upon complex mathematical calculations in order to
operate in
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diverse lighting and inclement weather conditions and to mitigate the effects
of camera motion. We have developed these image processing algorithms
internally for Vantage and jointly with DaimlerChrysler over a period of four
years for AutoVue. We also employ our design expertise to develop electronic
components for AutoVue to mitigate the effects of severe automotive operating
environments.
We have developed expertise in system integration techniques, data
communication protocols, and emerging ITS architecture standards as a result of
designing and implementing transportation management and traveler information
systems. We use state-of-the-art database and distributed computing
architectures, including CORBA and Enterprise JavaBean, to facilitate the
distribution of information over the Internet for our transportation management
and traveler information systems customers.
We currently have five U.S. patents and various other foreign patents for
image recognition technologies that we use in our ITS business. We intend to
aggressively pursue patent protection for our proprietary technologies
incorporated in our AutoVue and Vantage systems. We also rely on a combination
of copyright, trademark, and trade secret laws, confidentiality procedures and
contractual provisions to protect our intellectual property.
Key Relationships with Vehicle Manufacturers
We intend to use our relationships to build upon brand awareness and
worldwide distribution channels of major vehicle manufacturers and to further
penetrate our target markets. We have entered into the following key
relationships:
DaimlerChrysler
AutoVue incorporates technology that we jointly developed with the
DaimlerChrysler Corporation and integrates proprietary technologies of both
companies. As part of our development agreement, DaimlerChrysler granted us a
license to use their driver heuristics algorithms for the software applications
incorporated in AutoVue. While our right to use this license is perpetual, we
have agreed to pay DaimlerChrysler a 3% royalty of net sales of all lane
departure warning applications of AutoVue systems sold to non-DaimlerChrysler
vehicle manufacturers through July 1, 2002.
We recently completed successful testing of AutoVue in Mercedes' European
heavy trucks, and entered into an agreement with DaimlerChrysler to serve as
DaimlerChrysler's exclusive production source until July 2000 for AutoVue
systems installed in Mercedes' European heavy trucks.
Freightliner
In January 1999, we entered into an agreement with Freightliner for the
development of an AutoVue system modified for driving and road conditions in
North America. We have shipped several prototypes to Freightliner and they have
started commercial testing of the systems in their Class 3-8 trucks. As part of
our Freightliner agreement, we granted Freightliner an exclusive three year
right, following the commercial availability of AutoVue in North America, to
purchase AutoVue from us for resale to manufacturers of Class 3-8 trucks
destined for use in North America.
Sales and Marketing
Sensor Systems
Our marketing strategy for AutoVue is to establish it as the leading
platform for in-vehicle video sensing for trucks and passenger cars. We believe
the AutoVue system not only has the capacity to provide improved safety and
additional convenience features, but may also significantly reduce the cost to
vehicle manufacturers who otherwise might purchase multiple sensors from
different suppliers. AutoVue is sold directly by us to vehicle manufacturers.
We have a direct sales force of three product managers. We intend to expand our
sales
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force in the future to include engineers and product managers who will be
responsible for sales and customer service to specific vehicle manufacturers.
Since our target customer base is well known, we do not engage in large scale
marketing campaigns.
Our marketing strategy for Vantage is to focus customers on the competitive
advantages of Vantage, which we believe to be price, performance and ease of
use. Vantage systems are primarily marketed and sold through independent
dealers. To enhance our market presence, we exhibit at a variety of national
and regional trade shows and encourage our dealers to conduct technical
seminars on our products. We currently have 25 dealers in the United States,
two in Canada and three in Asia. In addition, we intend to increase our
existing sales force of five regional and district sales managers.
Our independent dealers are primarily responsible for sales, installation
and support of Vantage systems. Our dealers maintain an inventory of
demonstration traffic products including the Vantage vehicle detection systems
and sell directly to government agencies and installation contractors. Our
dealers often have long-term arrangements with the government agencies in
their territory for the supply of various products for the construction and
renovation of traffic intersections. We hold technical training classes for
our dealers and maintain a full time staff of customer support technicians to
provide technical assistance when needed.
Transportation Management and Traveler Information Systems
We market and sell our transportation management and traveler information
systems and services directly to government agencies pursuant to negotiated
contracts which involve competitive bidding and specific qualification
requirements. To enhance our presence in this market we actively participate
in various professional organizations, such as ITS America and the Institute
of Transportation Engineers, conduct presentations on issues involving
transportation management and ITS and attend trade shows. We also advertise in
professional trade magazines and participate in ITS conferences, workshops and
symposiums. We currently have eight offices throughout the United States and
plan to open three to five additional offices over the next 24 months.
We are one of only two companies awarded a contract to develop and maintain
the National ITS Architecture. We believe our involvement in the National ITS
Architecture provides us with unique vision and insight into emerging market
trends and product opportunities and a significant competitive market
advantage. Through the training programs we conduct on the National ITS
Architecture, we have developed strong relationships and credibility with
national, regional, state and local transportation agencies responsible for
managing funds allocated for intelligent transportation systems.
We are currently expanding our marketing efforts to enter the rural ITS
market, where we have already been awarded several contracts. In addition, we
are broadening the application of our transportation management and traveler
information systems and services to apply to transit priority projects and
personalized traveler information.
Our traffic engineering and transportation planning services staff works
closely with over 100 local, regional, and state agencies. Their efforts help
identify and define projects where ITS technologies could be an effective
solution and help us establish relationships with those agencies who desire
our system design, software development, and system integration services.
Competition
Sensor Systems
The market for vehicle sensor systems is intensely competitive. Vehicle
manufacturers comprise our target market for the AutoVue system. These
companies generally purchase products from first time suppliers only to lower
costs or access technology that is not otherwise available from their existing
suppliers. While we believe that AutoVue is the only commercially-available
lane departure warning system, potential competitors, including Delphi
Automotive Systems Corporation domestically, NEC Corporation and Hitachi Ltd.
in Japan and
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Robert Bosch Gmbh in Europe are currently developing video sensor technology
for the vehicle industry that could be used for lane departure warning systems.
In the market for our Vantage vehicle detection systems, we compete with
both manufacturers of "above ground" video camera detection systems, such as
Econolite Control Products, Inc., Image Sensing Systems, Inc. and the Peek
Traffic Systems division of Thermo Electron Corporation, and other non-
intrusive detection devices including microwave, infrared, ultrasonic and
magnetic detectors, as well as manufacturers and installers of in-pavement
inductive loop products. We believe that we are a market leader in many key
competitive categories including price, ease of use, and detection accuracy in
a broad range of intersection architecture geometries and varying weather and
lighting conditions. However, we must continue to develop and expand upon
existing Vantage technologies, as more end user agencies are requiring
additional video detection functions.
Transportation Management and Traveler Information Systems
The transportation management and traveler information systems market is
highly fragmented and characterized by rapidly changing technology and evolving
national and regional quality and safety standards. Our competitors vary in
number, scope and breadth of the products and services they offer. Our
competitors in advanced transportation management and traveler information
systems include corporations like TRW, Inc., Transcore, Lockheed Martin
Corporation, PB Farradyne Inc., Kimley-Horn and Associates, Inc. and National
Engineering Technology, Inc. Our competitors in transportation engineering,
planning and design include major firms like Parsons Brinkerhoff, Inc. and
Parsons Transportation Group Inc., as well as many regional engineering firms.
We believe that the principal competitive factors for securing contracts are
the experience of key individuals and their relationships with government
agencies, project management experience, name recognition and the ability to
develop software and to integrate systems. We expect the competition in the
transportation management and traveler information systems market to increase
as additional competitors gain experience and expertise.
Many of our current and prospective competitors have longer operating
histories, greater name recognition, access to larger customer bases and
significantly greater financial, technical, manufacturing, distribution and
marketing resources than we do. As a result, they may be able to adapt more
quickly to new or emerging standards or technologies or to devote greater
resources to the promotion and sale of their products than we do. Accordingly,
it is possible that new competitors or alliances among competitors could emerge
and rapidly acquire a significant market share. Our failure to provide services
and develop and market products that compete successfully with those of other
suppliers and consultants in the market would have a material adverse effect on
our business, financial condition and results of operations.
Production
We design, assemble and test the components of our Vantage systems. Our
facility consists of approximately 5,000 square feet of space located in
Anaheim, California. Production equipment consists of assembly lines and test
apparatus for final assembly and testing of the manufactured product.
Production volume is based upon quarterly forecasts that we readjust on a
monthly basis to control inventory. We subcontract the manufacture of AutoVue
systems to two manufacturers. We expect these manufacturers to produce unit
volume sufficient to support sales to heavy truck manufacturers. We intend to
engage additional manufacturers with expertise in high volume production to
produce higher volumes for light and medium trucks and passenger cars. We do
not produce any of the hardware used in the transportation management and
traveler information systems that we design and implement. Our production
facility is ISO 9001 certified.
Associates
We refer to our employees as associates. As of November 30, 1999, we had 149
associates, including 97 in engineering, 17 in sales and marketing, nine in
production and 26 in other business and administrative services. Our associates
are not subject to any collective bargaining agreements, and we generally have
good relations with them.
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Facilities
As of November 30, 1999, we leased eight facilities, all located within the
United States. Our principal executive and corporate offices are located in
Anaheim, California. We also have offices for our support staff and development
teams in Madison Heights, Michigan, Sterling, Virginia, Long Beach, California,
Las Vegas, Nevada, Los Angeles, California, San Bruno, California and Boise,
Idaho. We believe that our facilities are adequate for our current operations
and that additional leased space can be obtained if needed.
Legal Proceedings
There are no legal proceedings pending to which we are a party and our
management is unaware of any contemplated legal actions against us.
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ARRANGEMENTS WITH ODETICS
Odetics currently owns 93% of our outstanding common stock. Immediately
prior to this offering, Odetics will distribute all of its shares of our common
stock to its stockholders in a tax-free spin-off. Odetics has been responsible
for providing us with financial, management, administrative and other
resources. Odetics also maintains substantial control over our operations and
provides us with significant management functions and services, including
treasury, accounting, tax, internal audit, legal, human resources, marketing
and other support services. As a result of these services we incurred charges
allocated by Odetics of $670,000 for the six month period ended September 30,
1999, $881,000 in fiscal 1999, $458,000 in fiscal 1998 and $105,000 in fiscal
1997. The costs of these services have been directly charged and/or allocated
using methods that we believe are reasonable. However, these charges are not
necessarily indicative of the costs we would have incurred to obtain these
services from an independent entity.
For the purpose of governing certain of the relationships between us and
Odetics relating to the spin-off, to provide for an orderly transition and for
other matters, we will enter into the agreements described below with Odetics.
The following summaries of the material terms of these agreements are qualified
by reference to the complete agreements that have been filed as exhibits to the
registration statement of which this prospectus is a part.
These agreements were negotiated in the context of a parent-subsidiary
relationship and therefore are not the result of negotiations between
independent parties. It is our intention that these agreements should
accommodate the parties' interests in a manner that is fair to both parties,
while continuing certain mutually beneficial joint arrangements. The parties
intend that these agreements provide fair market value to them on terms no less
favorable to either party as would otherwise be available from unaffiliated
parties.
Separation and Distribution Agreement
We will enter into a Separation and Distribution Agreement with Odetics that
will provide for the principle corporate transactions required to effect the
separation of our business from those of Odetics, the spin-off and certain
other matters governing the relationship between us and Odetics after the spin-
off.
To separate our business from other businesses of Odetics, Odetics will
transfer to us those assets used in our business that are currently held by
Odetics without representation or warranty on an "as is" basis. We will assume
all liabilities associated with our business, including those arising from the
operation of our business both before and after the spin-off. Part of the
assets transferred to us by Odetics will be all intellectual property,
including patents and pending patent applications, related to our business. We
will license back to Odetics, on a nonexclusive, royalty free basis, a portion
of such intellectual property (exclusive of the patents).
We will release Odetics from all other obligations and liabilities owed to
us existing on the date of the spin-off, other than liabilities and obligations
arising under the Separation and Distribution Agreement and the other
agreements entered into in connection with the spin-off. Likewise, each of
Odetics and Iteris will indemnify the other for liabilities arising from a
breach of these agreements or the failure to pay or discharge the liabilities
assumed by such party under the Separation and Distribution Agreement.
The Separation and Distribution Agreement also provides that each party will
take all reasonable steps necessary and appropriate to cause all conditions to
the distribution to be satisfied and to effect the distribution. The directors
of Odetics will set the record date for the distribution and the date on which
shares will be distributed. Odetics has agreed to consummate the distribution
as promptly as practicable after the satisfaction or waiver by its board of
directors, in its sole discretion, of the following conditions:
. effectiveness of the registration statement of which this prospectus is
a part;
. any material governmental approvals and consents necessary to consummate
the distribution shall have been obtained and be in full force and
effect;
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. no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the distribution shall be in effect, and
no other event outside the control of Odetics shall have occurred or
failed to occur that prevents the consummation of the distribution; and
. no other events or developments shall have occurred that, in the
judgment of the Board of Directors of Odetics, would result in the
distribution having a material adverse effect on Odetics or on its
stockholders.
The Separation and Distribution Agreement also provides that all shares of
common stock of our company distributed to Odetics stockholders shall be marked
with a legend restricting the transferability of the shares for a period of 180
days following the date of this prospectus.
The Separation and Distribution Agreement requires that we complete a public
offering of our common stock immediately following the spin-off. It also
requires that we use proceeds of the offering to repay $10.0 million of debt
payable to Odetics and for the other purposes described under the heading "Use
of Proceeds" in this prospectus.
We are currently an additional named insured under various Odetics insurance
policies. Under the Separation and Distribution Agreement, we will be entitled
to the benefit of pre-spin-off historical coverage under Odetic's property,
liability and certain other insurance policies to the extent coverage is
applicable or potentially available and where limits of liability have not been
exhausted, either on a per occurrence or aggregate basis. The terms and
conditions of these policies, including limits of liability, will not be
amended as a consequence of the spin-off. Going forward, we will be responsible
for maintaining separate policies of insurance, which we have already obtained
prior to this offering.
Services Agreement
We will enter into a Services Agreement with Odetics upon consummation of
the spin-off, pursuant to which Odetics will continue to provide limited
services to us, including treasury, accounting, tax, internal audit, legal and
human resources functions. The cost of services under the Service Agreement is
expected to be consistent with costs allocated to us by Odetics during prior
periods. The actual expenditures will depend on numerous factors, some of which
are beyond our control.
Tax Allocation Agreement
We will enter into a Tax Allocation Agreement with Odetics upon the
consummation of the spin-off, pursuant to which tax liability for any given
taxable period prior to the spin-off will be apportioned among the members of
the Odetics consolidated group that generated taxable income for that period.
The tax liability will be allocated according to each member's share of taxable
income of the consolidated group. No tax liability will be allocated to us if
we generate a taxable loss during such period and we will not receive any
benefit from the use of any such loss by other members of the Odetics
consolidated group. We will be responsible for all of our tax liabilities after
the spin-off.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Joel Slutzky............ 60 Chairman of the Board
Jack Johnson............ 52 Chief Executive Officer, President and Director
Victor Rumana........... 49 Chief Financial Officer
Stephen E. Rowe......... 64 Sr. Vice President and Director of Transportation Systems
Donald W. Sinnar........ 56 Sr. Vice President of Marketing and Products
Abbas Mohaddes.......... 42 Vice President and Deputy Director of Transportation Systems
Andrew H. Card, Jr...... 52 Director
Gary Hernandez.......... 41 Director
Gregory A. Miner........ 45 Director
Samuel K. Skinner....... 61 Director
William M. Spreitzer.... 70 Director
Paul E. Wright.......... 68 Director
</TABLE>
Joel Slutzky has served as our Chairman of the Board since inception and has
served as Chairman of the Board and Chief Executive Officer of Odetics since he
co-founded Odetics in 1969. From August 1993 until January 1994, Mr. Slutzky
served as the Chief Financial Officer of Odetics, and as President of Odetics
from 1969 to 1975. Prior to founding Odetics, Mr. Slutzky was an engineering
manager at Leach Corporation, now part of the Lockheed Electronics Division of
Lockheed Corporation. Mr. Slutzky holds a B.S. in both Electrical Engineering
and Mechanical Engineering and an M.S. in Mechanical Engineering from the
University of Illinois.
Jack Johnson has served as our President since May 1998, our Chief Executive
Officer since January 1999 and a director since our inception. From October
1996 through May 1998, Mr. Johnson served as our Vice President and General
Manager. Mr. Johnson is a Vice President of Odetics and has also served in
various capacities at Odetics including the General Manager of the Odetics
Customer Service Division from 1990 to 1996, the Vice President and General
Manager of Odetics' Omutec division from 1986 to 1990, the Director of
Contracts for the Space Division from 1980 to 1986, the Controller of
Infodetics, a former subsidiary of Odetics, from 1975 to 1980 and the
Controller of Odetics from 1974 to 1975. Prior to joining Odetics, Mr. Johnson
served as a certified public accountant with Peat Marwick and Mitchell. Mr.
Johnson holds a B.S. in Accounting from Northern Illinois University.
Victor Rumana has served as our Chief Financial Officer since December 1999.
From February 1997 until joining us, Mr. Rumana served as a Vice President,
Telecommunication Products Division, at Ball Aerospace & Technologies, Inc.
From April 1995 to November 1996, Mr. Rumana served as Vice President, Finance
and Administration, at Efratom Time & Frequencing, Inc., a subsidiary of Datum,
Inc. Mr. Rumana holds a B.S. in Accounting from the University of Colorado and
an M.B.A. from the University of California, Irvine.
Stephen E. (Ed) Rowe joined us in June 1997 as Director of Transportation
Systems, and has served as Senior Vice President since January 1999. From 1958
to 1993, Mr. Rowe was employed by the Los Angeles Department of Transportation
in various capacities, most recently as its General Manager from 1987 to 1993.
At the Los Angeles Department of Transportation, Mr. Rowe directed the planning
and implementation of the Automated Traffic Surveillance and Control System as
well as the City's 1984 Olympic Games Transportation Program. Mr. Rowe was also
largely responsible for Los Angeles' participation in the Los Angeles Smart
Corridor Project, which was one of the early field-operational tests of ITS
concepts. From 1993 to 1997, Mr. Rowe provided ITS consultation services for
federal, state and municipal government agencies, in addition to private
corporations such as Rockwell International. Such consulting projects included
the National ITS Architecture Development Program. Mr. Rowe is a current and
founding member of ITS America, a member of the California Alliance for
Advanced Transportation Systems, and past Chairman of the ITS Council of the
Institute of Transportation Engineers. Mr. Rowe is also a recipient of the
prestigious ITE Matson award for
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contributions to the science and technology of transportation engineering. Mr.
Rowe holds a Bachelor degree in Engineering from the University of Southern
California and a Masters in Engineering from the University of California, Los
Angeles.
Donald W. Sinnar has served as our Senior Vice President, Marketing and
Products since January 1998, and prior to that served as the Corporate Director
of Business Communications of Odetics since February 1997, and as the General
Manager of Odetics Telecom from 1995 to 1997. From 1993 until 1995, Mr. Sinnar
served as the Vice President, Marketing and Sales of Efratom Time and Frequency
Products, which was subsequently acquired by Datum, Inc. Mr. Sinnar also served
as the Vice President, Sales and Marketing of First Pacific Networks, Inc. from
1991 to 1993, Fiberstars, Inc. from 1989 to 1990 and American Telecorp., Inc.
from 1987 to 1989. Mr. Sinnar holds a B.S. in Accounting and Finance from
Benjamin Franklin University.
Abbas Mohaddes has served as our Vice President, Transportation Systems,
since October 1998. Prior to joining us, since January 1991, Mr. Mohaddes
served as Chief Executive Officer of our wholly owned subsidiary Meyer,
Mohaddes Associates, Inc., a consulting firm specializing in ITS and traffic
engineering. Mr. Mohaddes is a founding member of ITS America. Mr. Mohaddes is
also Chairman of the Committee on innovative procurement methods for traffic
control and a member of the traffic flow committee of the Transportation
Research Board. Mr. Mohaddes holds a B.S. in Civil Engineering and an M.S. in
Transportation Engineering from the University of Nebraska.
Andrew H. Card, Jr. has been a Director since January 1999. Since June 1999,
Mr. Card has served as Vice President, Government Relations, for General
Motors. From September 1993 to January 1999, Mr. Card served as President and
Chief Executive Officer of the American Automobile Manufacturers Association.
Mr. Card was U.S. Secretary of Transportation from February 1992 to January
1993 and White House Deputy Chief of Staff from January 1989 to February 1992.
Mr. Card has also been a Distinguished Fellow of the U.S. Chamber of Commerce
since January 1999. Mr. Card holds a B.S. in Engineering from the University of
South Carolina and an M.S. in Government from Harvard University.
Gary Hernandez has been a Director since January 1999. Mr. Hernandez has
been a partner in the law firm of Sonnenschein, Nath and Rosenthal since
December 1997. From December 1995 to December 1997, Mr. Hernandez was a partner
in the law firm of Long & Levit. Mr. Hernandez served as the Deputy Insurance
Commissioner of California from April 1991 to November 1995. Mr. Hernandez
received his B.A. from the University of California, Berkeley and his J.D. from
the University of California, Davis.
Gregory A. Miner has been a director since April 1998 and served as our
Chief Financial Officer and Secretary from our incorporation in September 1998
to December 1999. Mr. Miner is the Vice President, Finance and Chief Financial
Officer of Odetics and has served in those capacities since January 1994. In
April 1998, Mr. Miner also assumed the duties of Chief Operating Officer of
Odetics. Prior to joining Odetics, Mr. Miner served as Vice President, Chief
Financial Officer and a member of the Board of Directors of Laser Precision
Corporation, a manufacturer of telecommunications test equipment, from January
1984 until December 1993. Mr. Miner holds a B.A. degree from California
Polytechnic State University, San Luis Obispo, and is a certified public
accountant.
Samuel K. Skinner has been a Director since April 1999. From December 1991
to September 1992, Mr. Skinner served as Chief of Staff to President George
Bush from February 1989 to December 1991 served as U.S. Secretary of
Transportation. Mr. Skinner served as President of Unicom and Commonwealth
Edison from February 1993 to April 1998. Mr. Skinner is currently co-chairman
of the law firm of Hopkins & Sutter. Mr. Skinner holds a B.A. in Accounting
from the University of Illinois and his J.D. from DePaul University.
William M. Spreitzer has been a Director since January 1999. From March 1991
to January 1998, Mr. Spreitzer was Technical Director of the ITS program for
General Motors. From 1966 to 1989, Mr. Spreitzer served as head of General
Motors Transportation Research Department. Mr. Spreitzer was also a founding
member of ITS America. Mr. Spreitzer holds a B.S. and an Honorary Professional
Degree in Aeronautical Engineering from the University of Detroit.
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Paul E. Wright has been a Director since January 1999. Since 1996, Mr.
Wright has served as President of Wright Associates, Inc. From 1988 to 1996,
Mr. Wright served as Chairman of Chrysler Technologies Corporation. Mr. Wright
is also a member of the board of directors of Odetics. Mr. Wright holds a B.S.
in Engineering from California Polytechnic State University, San Luis Obispo
and an M.S. in Engineering from the University of Pennsylvania.
In accordance with our certificate of incorporation, the terms of office of
the members of our board of directors are divided into three classes. Mr. Miner
and Mr. Skinner serve as Class I directors (whose term expires in 2001), Mr.
Hernandez, Mr. Slutzky and Mr. Wright serve as Class II directors (whose term
expires in 2002), and Mr. Johnson, Mr. Card and Mr. Spreitzer serve as Class
III directors (whose term expires in 2003). At each annual meeting of our
stockholders, the successors to directors whose terms then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following elections. If we add additional directors, they will
be distributed among the three classes so that, as nearly as possible, each
class will consist of one-third of the total number of directors. The
classification of our board of directors may have the effect of delaying or
preventing changes in control of our management.
Other Key Employees
Our other key employees are as follows:
James C. Barbaresso has served as our Midwest Regional Vice President,
Transportation Systems since June, 1997. Prior to joining us from April 1996 to
June 1997, Mr. Barbaresso served as Regional Manager, Midwest Region, for
Rockwell Transportation Systems. From February 1988 to April 1996, Mr.
Barbaresso served as Director, Planning and Development, for Oakland County,
Michigan. Mr. Barbaresso holds a B.S. in Sociology and an M.S. in
Transportation Planning from the University of Iowa.
Richard D. Crawshaw has served as our Vice President, Engineering, since
January 1999, and prior to that served as our Director of Engineering since
January 1998, and as Product Manager from November 1995 to December 1997. Mr.
Crawshaw worked as a Senior Software Engineer at Hewlett Packard. Mr. Crawshaw
holds a B.S. in Physics from Oregon State University and an M.S. in Physics
from the University of Oregon.
Clifford D. Heise has served as our Eastern Regional Vice President,
Transportation Systems, since January 1999. Mr. Heise served as our Regional
Manager, Eastern Region, from July 1997 to December 1999. From July 1996 to
June 1997, Mr. Heise served as Regional Manager, Eastern Region, and from
January 1994 to June 1996 was a Systems Engineer for Rockwell International
Corporation. Mr. Heise holds a B.S. in Mathematics from Oklahoma State
University.
Richard P. Hooper, Ph.D. has served as our Chief Scientist since June 1997
and Vice President since January 1999. Prior to joining us, Dr. Hooper served
as Chief Technologist at Rockwell International Corporation since April 1994.
Dr. Hooper holds a B.A. in Mathematics-Computer Science, and an M.S. and Ph.D.
in Computer Science from the University of California, Los Angeles.
Gregory McKhann has served as our Vice President of Strategic Business
Development since December 1999 and our Director of Strategic Business
Development from October 1999 to December 1999. From July 1997 to October 1999,
Mr. McKhann served as our Marketing Director. Prior to joining us from 1990 to
1997 Mr. McKhann served as a Marketing Manager at Rockwell International. Mr.
McKhann holds a B.S. degree in Computer Science from Duke University and an
M.B.A. from the University of California, Irvine.
Francis Memole has served as our Vice President of Vehicle Sensors since
December 1998. From June 1997 to December 1998, Mr. Memole served as our
Marketing Director. Prior to joining us, from January 1994 to June 1997, Mr.
Memole was a Vehicle Products Manager at Rockwell International. Mr. Memole
holds a B.S.E.E. from the University of South Florida and an M.B.A. from
Claremont Graduate School.
Michael P. Meyer serves as Vice President of Meyer, Mohaddes Associates,
Inc. From January 1991 until our acquisition of Meyer, Mohaddes, Mr. Meyer
served as both President and Secretary of Meyer, Mohaddes. Mr. Meyer holds a
B.S. and an M.S. in Civil Engineering from the University of California,
Berkeley.
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Arya Rohani has served as our Western Regional Vice President,
Transportation Systems, since 1997. Prior to joining us, from 1991 until 1997,
Mr. Rohani served as Manager of Transportation for the city of Irvine,
California. Mr. Rohani holds a B.S. in Engineering from the University of
Florida.
Board Committees
Our board of directors currently has two committees, a compensation
committee and an audit committee. The compensation committee consists of Mr.
Hernandez, Mr. Slutzky and Mr. Spreitzer. The compensation committee reviews
and recommends the salaries and bonuses of our officers and certain key
employees, establishes compensation and incentive plans, authorizes and
approves the granting of stock options and restricted stock in accordance with
our stock option and incentive plans and determines other fringe benefits.
The audit committee consists of Mr. Card, Mr. Spreitzer and Mr. Wright. The
audit committee recommends engagement of our independent public accountants and
is primarily responsible for approving the services performed by our
independent accountants and for reviewing and evaluating our accounting
principles and our system of internal controls.
Director Compensation
Directors who are not employed by us receive cash compensation of $12,000
per year for service on our board of directors, in addition to $1,500 for each
board meeting attended in person and $250 for each telephonic board meeting.
Directors are also reimbursed for out of pocket expenses incurred in connection
with service on our board of directors. In addition, each non-employee director
received an option to purchase 10,000 shares of our common stock upon
appointment as a director and are eligible to receive periodic stock option
grants under our 1998 Stock Incentive Plan. Upon completion of this offering,
Mr. Slutzky and Mr. Miner shall receive cash compensation equal to amounts
received by other non-employee directors and will be eligible to receive
periodic stock option grants under our 1998 Stock Incentive Plan.
Compensation Committee Interlocks and Insider Participation
Mr. Slutzky and Mr. Miner, each directors, are stockholders, executive
officers and directors of Odetics. Mr. Wright, a director is also a director of
Odetics. No other relationship exists between our Board of Directors or
Compensation Committee and the Board of Directors of any other company.
Executive Compensation
The following table summarizes all compensation earned by or paid to our
Chief Executive Officer and the other executive officers whose total salary and
bonus exceeded $100,000 for services rendered in all capacities to us during
the year ended March 31, 1999. We refer to these officers as our named
executive officers in other parts of this prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual ------------
Compensation(1) Securities
--------------- Underlying All Other
Name and Principal Position(2) Salary(3) Bonus Options (#) Compensation(4)
- ------------------------------ --------- ----- ------------ ---------------
<S> <C> <C> <C> <C>
Jack Johnson ..................... $152,115 -- -- $3,920
Chief Executive Officer and
President
Gregory A. Miner(5)............... 156,751 -- -- 4,613
Chief Financial Officer and
Secretary
Stephen E. Rowe................... 136,794 -- -- 2,726
Senior Vice President and
Director of Transportation
Systems
Donald W. Sinnar ................. 157,198 -- -- 4,430
Senior Vice President, Marketing
and Products
</TABLE>
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<PAGE>
- --------
(1) Other than salary and bonus described herein, we did not pay any named
executive officer, any fringe benefits, perquisites or other compensation
in excess of 10% of such executive officer's salary and bonus during fiscal
1999.
(2) Mr. Mohaddes, our Vice President and Deputy Director of Transportation
Systems, joined us in October 1998. His annual salary is $127,200.
(3) Represents amounts paid by Odetics and its subsidiaries on an aggregated
basis. Odetics charged us for the salaries of Mr. Johnson, Mr. Rowe and Mr.
Sinnar and a portion of the salary for Mr. Miner.
(4) Represents Odetics matching contribution under the Odetics Section 401(k)
Plan.
(5) Mr. Miner resigned as the Chief Financial Officer and Secretary in
December 1999. Mr. Rumana joined us as Chief Financial Officer in December
1999. Mr. Rumana's annual salary is $135,000.
Option Grants
There were no stock options granted to our named executive officers during
the fiscal year ended March 31, 1999.
Option exercises and fiscal year-end values
Our named executive officers did not exercise any stock options during the
fiscal year ended March 31, 1999. The following table sets forth the number and
value of the named executive officers' unexercised options at March 31, 1999,
based upon an exercise price of $2.00 per share. The value of unexercised in-
the-money options at March 31, 1999 represents an amount equal to the
difference between the assumed initial public offering price of $ per
share and the option exercise price, multiplied by the number of unexercised
in-the-money options.
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-money Options
Options at March 31, 1999 at March 31, 1999
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack Johnson................ 30,000 90,000
Gregory A. Miner............ -- -- -- --
Stephen W. Rowe............. 25,000 75,000
Donald W. Sinnar............ 12,500 37,500
</TABLE>
Employment Agreements
Mr. Mohaddes is employed as our Vice President and Deputy Director of
Systems under a four-year employment agreement. The employment agreement
provides for the payment to him of a base salary of $120,000 per year. Mr.
Mohaddes may participate in all employee benefit plans or programs generally
available to our employees, and we will pay or reimburse him for all reasonable
and necessary out-of-pocket expenses he incurs in the performance of his
duties. If Mr. Mohaddes is terminated without cause or he voluntarily
terminates for good reason, he is entitled to severance pay in an amount equal
to the lesser of twelve months salary or the amount of salary remaining under
the term of his employment agreement.
1998 Stock Incentive Plan
Our 1998 Stock Incentive Plan was adopted by our board of directors on April
13, 1998 and was approved by our stockholders on April 14, 1998. Our 1998 Stock
Incentive Plan provides for awards or sales of shares, incentive stock options
and nonstatutory stock options. We have authorized a total of 1,500,000 shares
of common stock for issuance under our 1998 Stock Incentive Plan.
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<PAGE>
Our 1998 Stock Incentive Plan consists of:
. the Discretionary Option Grant program under which eligible individuals
in our employ or service (including officers, non-employee board members
and consultants and independent advisors) may be granted options to
purchase shares of common stock at an exercise price not less than 85%
of their fair market value on the grant date;
. the Stock Issuance Program under which such individuals may be issued
shares of common stock directly, through the purchase of such shares at
a price not less than 85% of their fair market value at the time of
issuance or as a bonus tied to the performance of services; and
. the Automatic Option Grant Program under which option grants will
automatically be made at periodic intervals to eligible non-employee
members of our board of directors to purchase shares of common stock at
an exercise price per share equal to 100% of their fair market value on
the option grant date.
The Discretionary Option Grant and Stock Issuance Programs will be
administered by our board of directors prior to the effectiveness of our
registration statement under Section 12(g) of the 1934 Act and will be
administered by the compensation committee after that time. The compensation
committee or the plan administration will have complete discretion to
administer the 1998 Stock Option Plan. The Automatic Option Grant Program will
be self-executing in accordance with the terms of that program, and neither the
compensation committee nor the board of directors will exercise any
administrative discretion with respect to option grants under that program.
In the event that we are acquired by merger or a sale of substantially all
of our assets, each outstanding option under the Discretionary Option Grant
Program which is not to be assumed by the successor corporation will
automatically accelerate in full, and all unvested shares under the
Discretionary Option Grant and Stock Issuance Programs will immediately vest,
except to the extent our repurchase rights with respect to those shares are
assigned to the successor corporation. The plan administration will have
complete discretion to grant one or more options under the Discretionary Option
Grant Program which will become exercisable on an accelerated basis for all or
part of the option shares if we are acquired, whether or not those options are
assumed, or if an optionee is terminated within a designated period following
an acquisition in which those options are assumed. The vesting of outstanding
shares under the Stock Issuance Program may be accelerated upon similar terms
and conditions.
We have authorized stock appreciation rights under the Discretionary Option
Grant Program which provide the optionholders with the election to surrender
their outstanding options for an appreciation distribution from us equal to the
excess of the fair market value of the vested shares of common stock subject to
the surrendered option over the aggregate exercise price payable for such
shares. Such appreciation distribution may be made in cash or in shares of
common stock.
The plan administrator will have the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return for
the grant of new options for the same or different number of option shares with
an exercise price per share based upon the fair market value of the common
stock on the new grant date.
Under the Automatic Option Grant Program, each individual who first becomes
a non-employee member of our board of directors at any time thereafter receives
a 10,000 share option grant on the date such individual joins the board of
directors, provided such individual has not been employed by us or any parent
or subsidiary corporation. On the date of each annual stockholders meeting,
beginning with the annual meeting held in the calendar year immediately
following the effective date of this offering, each non-employee member of our
board of directors who is to continue to serve as non-employee board member
will automatically be granted an option to purchase 5,000 shares of common
stock, provided such individual has served on our board of
49
<PAGE>
directors for at least six months. The shares subject to each automatic grant
will immediately vest in full upon certain changes in control or ownership of
us or upon the optionee's death or disability while a member of our board of
directors.
The board of directors may amend or modify the 1998 Stock Incentive Plan at
any time, subject to any required shareholder approval. The 1998 Stock
Incentive Plan will terminate on the earliest of April 13, 2008, the date on
which all shares available for issuance under the 1998 Stock Incentive Plan
have been issued as fully-vested shares or the termination of all outstanding
options in connection with certain changes in control or ownership of us.
Option Issued Outside of the 1998 Stock Incentive Plan
Prior to the adoption of our 1998 Stock Incentive Plan, we issued
nonqualified options to purchase 480,000 shares of our common stock to selected
employees, including executive officers. The purchase price under these
nonqualified option agreements is equal to the fair market value of our shares
of common stock at the time of grant.
Employee Stock Purchase Plan
In December 1999, our board of directors adopted our Employee Stock Purchase
Plan, to be effective upon completion of this offering. A total of 750,000
shares of common stock have been reserved for issuance under our Employee Stock
Purchase Plan. Our Employee Stock Purchase Plan, which is intended to qualify
under Section 423 of the Internal Revenue Code of 1986, as amended, will be
administered by the board of directors or by a committee appointed by the
board. Employees are eligible to participate if they are customarily employed
for at least 20 hours per week and for more than five months in any calendar
year. Employees who own more than 5% of our outstanding stock may not
participate. Our Employee Stock Purchase Plan permits eligible employees to
purchase common stock through payroll deductions which may not exceed the
lesser of 15% of any employee's compensation, or $25,000.
Our Employee Stock Purchase Plan will be implemented by six month offering
periods with purchases occurring at six month intervals commencing on the date
of this prospectus.
The purchase price of the common stock under our Employee Stock Purchase
plan will be equal to 85% of the fair market value per share of common stock on
either the start date of the offering period or on the purchase date, whichever
is less. Employees may end their participation in an offering period at any
time during that period, and participation ends automatically on termination of
employment with us. In the event of a proposed dissolution or liquidation of
our company, the offering periods terminate immediately prior to the
consummation of the proposed action, unless otherwise provided by our board of
directors. If there is a proposed sale of all or substantially all of our
assets or the merger of our company with or into another company, then the
offering period in progress will be shortened and a new exercise date will be
set that is before the sale or merger. Our Employee Stock Purchase Plan will
terminate in 2009, unless sooner terminated by the board of directors.
Section 401(k) Plan
We intend to adopt a 401(k) Plan covering our full-time employees following
the offering. Our 401(k) Plan is intended to qualify under Section 401(k) of
the Internal Revenue Code of 1986, as amended, so that contributions to the
401(k) Plan by employees or by us, and the investment earnings thereon, are not
taxable to employees until withdrawn from the 401(k) Plan, and so that we can
deduct any contributions that we make, at the time they are made. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation by up
to the statutorily prescribed annual limit and to have the amount of such
reduction contributed to the 401(k) Plan. The 401(k) Plan permits us, but does
not require us to make, additional matching contributions to the 401(k) Plan on
behalf of all participants in the 401(k) Plan.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth specified information with respect to the
beneficial ownership of our common stock as of November 30, 1999:
. each person, or group of affiliated persons, who is known by us to
beneficially own 5% or more of the common stock;
. each of our selling stockholders;
. each of our directors;
. each of our named executive officers; and
. all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power
with respect to shares. Unless otherwise indicated, the persons named in the
table have sole voting and sole investment control with respect to all shares
beneficially owned. The number and percentage of shares beneficially owned are
based on 6,432,100 shares of common stock outstanding as of November 30, 1999.
The number and percentage of shares beneficially owned also assumes that:
. shares of common stock subject to options that are currently exercisable
or exercisable within 60 days of November 30, 1999 are deemed to be
outstanding and beneficially owned;
. the spin-off from Odetics has been consummated; and
. executive officers, directors and selling stockholders who hold options
to purchase Odetics common stock have fully exercised their options.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
Prior to the Shares Beneficially Owned
Offering Number of After the Offering
Name and Address of -------------------- Shares -----------------------------
Beneficial Owners Number Percentage Being Offered Number Percentage
------------------- --------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Jack Johnson(1)......... 95,144 1.5 --
Stephen E. Rowe(2)...... 56,052 * --
Donald W. Sinnar(3)..... 31,262 * --
Andrew Card(4).......... 3,333 * --
Gary Hernandez(4)....... 3,333 * --
Gregory A. Miner(5)..... 80,342 1.2 --
Samuel K. Skinner....... 0 * --
Joel Slutzky(6)......... 590,795 9.2 --
William M.
Spreitzer(4)........... 3,333 * --
Paul E. Wright(7)....... 36,279 * --
Abbas Mohaddes(8)....... 216,538 3.4
Michael P. Meyer(9)..... 234,756 3.6
Gary Hamrick(10)........ 21,616 *
Viggen Davidian(11)..... 12,558 *
All executive officers
and directors as a
group (11 persons)..... 1,116,411 17.0 --
</TABLE>
- --------
*Less than 1%
(1) Includes options to purchase 60,000 shares of common stock exercisable
within 60 days of November 30, 1999 and 35,144 shares distributed in the
spin-off.
(2) Includes options to purchase 50,000 shares of common stock exercisable
within 60 days of November 30, 1999 and 6,052 shares distributed in the
spin-off.
51
<PAGE>
(3) Includes options to purchase 25,000 shares of common stock exercisable
within 60 days of November 30, 1999 and 6,262 shares distributed in the
spin-off.
(4) Consists of options to purchase 3,333 shares of common stock exercisable
within 60 days of November 30, 1999.
(5) Includes 80,342 shares distributed in the spin-off.
(6) Consists of 590,795 shares distributed in the spin-off.
(7) Includes options to purchase 3,333 shares of common stock exercisable
within 60 days of November 30, 1999 and 32,946 shares distributed in the
spin-off.
(8) Includes 16,492 shares distributed in the spin-off.
(9) Includes 20,794 shares distributed in the spin-off.
(10) Includes 611 shares distributed in the spin-off.
(11) Includes 1,554 shares distributed in the spin-off.
CERTAIN TRANSACTIONS
Odetics has provided us with significant management functions and services,
including treasury, accounting, tax, internal audit, legal, human resources,
sales and marketing and other support services. As a result of these services,
we incurred charges allocated by Odetics of $105,000 in fiscal 1997, $458,000
in fiscal 1998 and $881,000 in fiscal 1999 and $670,000 for the six months
ended September 30, 1999. We directly charged and/or allocated the costs of
these services using methods that we believe are reasonable, but these charges
are not necessarily indicative of the costs we would have incurred to obtain
these services from an independent agency. We will enter into the following
agreements with Odetics in connection with the spin-off: separation and
distribution agreement, services agreement, tax allocation agreement and
promissory note. See "Arrangements with Odetics."
We have agreed to take all reasonable steps necessary and appropriate to
satisfy the conditions to and effect the spin-off of our shares by Odetics. As
a result of the spin-off and assuming all Odetics stock options held by the
following persons are exercised, Mr. Johnson will receive 35,144 shares, Mr.
Miner will receive 80,342 shares, Mr. Mohaddes will receive 16,492 shares, Mr.
Rowe will receive 6,052 shares, Mr. Sinnar will receive 6,262 shares, Mr.
Slutzky will receive 590,795 shares and Mr. Wright will receive 32,946 shares
of our common stock.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 40,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value.
The following is a summary of certain provisions of our common stock,
preferred stock, certificate of incorporation and bylaws.
Common Stock
As of November 30, 1999, there were 6,432,100 shares of common stock
outstanding, held by five stockholders of record. All outstanding shares of our
common stock are, and the common stock to be issued in this offering will be,
fully paid and nonassessable.
The following summarizes the rights of holders of our common stock:
. each holder of shares of common stock is entitled to one vote per share
on all matters to be voted on by stockholders generally, including the
election of directors;
.there are no cumulative voting rights;
. the holders of our common stock are entitled to dividends and other
distributions as may be declared from time to time by the board of
directors out of funds legally available for that purpose, if any;
. upon our liquidation, dissolution or winding up, the holders of shares
of common stock will be entitled to share ratably in the distribution of
all of our assets remaining available for distribution after
satisfaction of all our liabilities and the payment of the liquidation
preference of any outstanding preferred stock;
. the holders of common stock have no preemptive or other subscription
rights to purchase shares of our stock, nor are they entitled to the
benefits of any redemption or sinking fund provisions; and
. shares of our common stock that will be distributed by Odetics in the
spin-off will not be publicly transferable for a period of 180 days
following the date of this prospectus.
Preferred Stock
Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Our certificate of incorporation authorizes our board of
directors to create and issue one or more series of preferred stock and
determine the rights and preferences of each series within the limits set forth
in our certificate of incorporation and applicable law. Among other rights, the
board of directors may determine, without further vote or action by our
stockholders:
. the number of shares constituting the series and the distinctive
designation of the series;
. the dividend rate on the shares of the series, whether dividends will be
cumulative, and if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of the series;
. whether the series will have voting rights in addition to the voting
rights provided by law and, if so, the terms of the voting rights;
. whether the series will have conversion privileges and, if so, the terms
and conditions of conversion;
. whether or not the shares of the series will be redeemable or
exchangeable, and, if so, the dates, terms and conditions of redemption
or exchange, as the case may be;
. whether the series will have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
the sinking fund; and
. the rights of the shares of the series in the event of our voluntary or
involuntary liquidation, dissolution or winding up and the relative
rights or priority, if any, of payment of shares of the series.
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<PAGE>
Unless otherwise provided by our board of directors, the shares of all
series of preferred stock will rank on a parity with respect to the payment of
dividends and to the distribution of assets upon liquidation. Although we have
no present plans to issue any shares of preferred stock, any future issuance of
shares of preferred stock, or the issuance of rights to purchase preferred
shares, may have the effect of delaying, deferring or preventing a change of
control in our company or an unsolicited acquisition proposal. The issuance of
preferred stock also 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 the common stock.
Registration Rights
The holders of 432,100 shares of our common stock, which are referred to as
the "investors," have the right to cause us to register their shares under the
Securities Act of 1933 anytime we file a registration statement to register any
of our securities for our own account. Such registration opportunities are
unlimited but the number of shares that can be registered may be eliminated
entirely or cut back in certain situations by the underwriters of such
offering.
Anti-Takeover Effects of Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to certain exceptions, 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 interested stockholder attained such status with the approval of the board
of directors or the business combination is approved in a prescribed manner. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, fifteen percent
or more of a corporation's voting stock. This statute could prohibit or delay
the accomplishment of mergers or other takeover or change in control attempts
relating to our company and, accordingly, may discourage attempts to acquire
us.
In addition, some provisions of our certificate of incorporation and bylaws
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. These provisions include:
. Board of Directors. Our board of directors is divided into three classes
of directors serving staggered terms. Our certificate of incorporation
authorizes our board of directors to fill vacant directorships or
increase the size of the board of directors. Accordingly, even if a
stockholder succeeds in a proxy contest, he would likely only be able to
elect a minority of our board of directors at any one annual meeting.
. Stockholder Action; Special Meeting of Stockholders. Our certificate of
incorporation provides that stockholders may not take action by written
consent, but only at a duly called annual or special meeting of
stockholders. Our certificate of incorporation further provides that
special meetings of our stockholders may be called only by the Chairman
of the Board of directors, by a committee of the board of directors or a
majority of the board of directors, and in no event may the stockholders
call a special meeting. Thus, without approval by the board of directors
or Chairman, stockholders may take no action between annual meetings.
. Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of
stockholders, must provide timely notice of this intention in writing.
To be timely, a stockholder's notice must be delivered to or mailed and
received at our principal executive offices not less than 120 days prior
to the first
54
<PAGE>
anniversary of the date of our notice of annual meeting provided with
respect to the previous year's annual meeting of stockholders. However,
if no annual meeting of stockholders was held in the previous year or
the date of the annual meeting of stockholders has been changed to be
more than 30 calendar days from the time contemplated at the time of the
previous year's proxy statement, then a proposal shall be received no
later than the close of business on the tenth day following the date on
which notice of the date of the meeting was mailed or a public
announcement was made, whichever first occurs. The bylaws also include a
similar requirement for making nominations at special meetings and
specify requirements as to the form and content of a stockholder's
notice. These provisions may preclude stockholders from bringing matters
before an annual meeting of stockholders or from making nominations for
directors at an annual or special meeting of stockholders.
. Authorized but Unissued Shares. The authorized but unissued shares of
our common stock and preferred stock are available for future issuance
without stockholder approval, subject to certain limitations imposed by
the Nasdaq National Market. These additional shares may be utilized for
a variety of corporate purposes, including future public offerings to
raise additional capital, corporate acquisitions and employee benefit
plans. The existence of authorized but unissued and unreserved common
stock and preferred stock could render more difficult or discourage an
attempt to obtain control of our company by means of a proxy contest,
tender offer, merger or otherwise.
Delaware law provides generally that the affirmative vote of a majority of
the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. We
have provisions in our certificate of incorporation and bylaws which require a
vote of 66 2/3% of the holders of the outstanding common stock to amend,
revise or repeal anti-takeover provisions.
Limitations of Liability and Indemnification Matters
Our certificate of incorporation provides that, except to the extent
permitted by Delaware law, our directors shall not be personally liable to us
or our stockholders for monetary damages for any breach of fiduciary duty as a
director. Under Delaware law, the directors have a fiduciary duty to us that
is not eliminated by this provision of our certificate and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or that involve
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision also does not affect the director's responsibilities under
any other laws, such as the federal securities laws.
Section 145 of the Delaware corporate law empowers a corporation to
indemnify its directors and officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
. for any breach of the director's duty of loyalty to the corporation or
its stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. arising under Section 174 of the Delaware corporate law; or
. for any transaction from which the director derived an improper personal
benefit.
Delaware law provides further that the indemnification permitted by that
law shall not be deemed exclusive of any other rights to which the directors
and officers may be entitled under a corporation's bylaws, any agreement, a
vote of stockholders or otherwise. Our certificate of incorporation eliminates
the personal
55
<PAGE>
liability of directors to the fullest extent permitted by Section 102(b)(7) of
the Delaware corporate law and provides that we may fully 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) by reason of the fact that such person is or
was our director or officer or is or was serving at our request as an employee,
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in the bylaws. We believe that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. Our bylaws also permit us to secure insurance on behalf
of any officer, director, employee or other agent for any liability arising out
of his or her actions, regardless of whether Delaware law would permit
indemnification.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be EquiServe, LP.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common stock.
No predictions can be made regarding the effect, if any, that sales of shares
or the availability of shares for sale will have on the market price prevailing
from time to time. As described below, only a limited number of shares will be
available for sale shortly after this offering due to certain contractual and
legal restrictions on resale. Sales of substantial amounts of our common stock
in the public market after the restrictions lapse could adversely affect the
prevailing market price.
Upon completion of this offering, we will have shares of common
stock outstanding based on 6,432,100 shares outstanding at November 30, 1999.
The shares of common stock being sold in this offering will be freely tradable,
other than by our "affiliates" as such term is defined in the Securities Act,
without restriction or registration under the Securities Act. The remaining
shares includes shares issued and sold by us in private
transactions and 6,000,000 shares to be distributed by Odetics to its
stockholders in the spin-off. The shares sold in private transactions are
restricted shares and are eligible for public sale if registered under the
Securities Act or sold in accordance with Rule 144 under the Securities Act.
The shares distributed in the spin-off are freely tradable (other than by
persons deemed to be our affiliates) 180 days after the date of this
prospectus.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person not deemed to be our affiliate, or a
person holding restricted shares who beneficially owns shares that were not
acquired from us or our affiliates within the previous year, would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of:
. 1% of the then outstanding shares of common stock, or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission.
Sales under Rule 144 are subject to requirements relating to manner of sale,
notice and availability of current public information about us. However, if a
person (or persons whose shares are aggregated) is not deemed to have been our
affiliate at any time during the 90 days immediately preceding the sale, he or
she may sell his or her restricted shares under Rule 144(k) without regard to
the limitations described above if at least two years have elapsed since the
later of the date the shares were acquired from us or from our affiliates. The
foregoing is a summary of Rule 144 and is not intended to be a complete
description of it.
In connection with this offering, all current stockholders and optionholders
will be subject to lock-up agreements with the underwriters under which the
holders of the shares and options to purchase shares have agreed they will not
sell any common stock owned by them, other than the shares being sold by the
selling stockholders identified in this prospectus, without the prior written
consent of Bear, Stearns & Co. Inc. for a period of 180 days from the date of
this prospectus.
The following table indicates approximately when the shares of our common
stock that are not being sold in the offering, but which will be outstanding
after the offering is completed, will be eligible for sale into the public
market.
Eligibility for Resale into Public Market of Restricted Shares
<TABLE>
<CAPTION>
Time Number of Shares
---- ----------------
<S> <C>
Effective Date.............................................
180 days after Effective Date..............................
</TABLE>
57
<PAGE>
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers,
consultants or advisers prior to the closing of this offering, pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to stock options granted by
us before this offering, along with the shares acquired upon exercise of these
options. Securities issued in reliance on Rule 701 are deemed to be restricted
shares and, beginning 90 days after the date of this prospectus, unless subject
to the contractual restrictions described above, may be sold by persons other
than affiliates subject only to the manner of sale provisions of Rule 144 and
by affiliates under Rule 144 without compliance with its one-year minimum
holding period requirements.
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of common stock reserved for issuance under our 1998
Stock Incentive Plan and Employee Stock Purchase Plan, thus permitting the
resale by non-affiliates of shares issued under the plans in the public market
without restriction under the Securities Act. Such registration statement will
become effective immediately upon filing which is expected shortly after the
closing of this offering. As of the closing of this offering, options to
purchase 1,400,000 shares of common stock will be outstanding, all of which are
subject to lock-up agreements described above.
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the underwriters, the selling stockholders and us, each of the
underwriters named below, through their representatives Bear, Stearns & Co.
Inc., SG Cowen Securities Corporation and Cruttenden Roth Incorporated, has
severally agreed to purchase from us and the selling stockholders the aggregate
number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Bear, Stearns & Co. Inc............................................
SG Cowen Securities Corporation....................................
Cruttenden Roth Incorporated.......................................
---------
Total............................................................
=========
</TABLE>
The obligations of the underwriters under the underwriting agreement are
several and not joint. This means that each underwriter is obligated to
purchase from us only the number of shares of common stock set forth opposite
its name in the table above. Except in limited circumstances set forth in the
underwriting agreement, an underwriter has no obligation in relation to the
shares of common stock which any other underwriter has agreed to purchase.
The underwriting agreement provides that the obligations of the several
underwriters are subject to approval of various legal matters by their counsel
and to various other conditions including delivery of legal opinions by our
counsel, the delivery of a letter by our independent auditors and the accuracy
of the representations and warranties made by us in the underwriting agreement.
Under the underwriting agreement, the underwriters are obliged to purchase and
pay for all of the above shares of common stock if any are purchased.
Public Offering Price
The underwriters propose to offer the shares of common stock directly to the
public at the offering price set forth on the cover page of this prospectus and
at that price less a concession not in excess of $ per share of common
stock to other dealers who are members of the National Association of
Securities Dealers, Inc. The underwriters may allow, and those dealers may
reallow, concessions not in excess of $ per share of common stock to other
dealers. After the offering, the offering price, concessions and other selling
terms may be changed by the underwriters. Our common stock is offered subject
to receipt and acceptance by the underwriters and subject to other conditions,
including the right to reject orders in whole or in part. The underwriters have
informed us that the underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.
The following table summarizes the per share and total public offering price
of the shares of common stock in the offering, the underwriting compensation to
be paid by us and the selling stockholders to the underwriters by us and the
proceeds of the offering, before expenses, to us. The information presented
assumes either no exercise or full exercise by the underwriters of their over-
allotment option.
<TABLE>
<CAPTION>
Total
-----------------------------
Without With
Per Share Over-Allotment Over-Allotment
----------- -------------- --------------
<S> <C> <C> <C>
Public offering price............... $ $ $
Underwriting discounts and
commissions payable by us.......... $ $ $
Proceeds, before expenses, to us.... $ $ $
</TABLE>
The underwriting discount and commission per share is equal to the public
offering price per share of common stock less the amount paid by the
underwriters to us per share of common stock. The underwriting commissions and
fees are expected to represent % of the public offering price per share of
common stock.
59
<PAGE>
The following table indicates the expenses payable by us in the offering.
All amounts are estimates other than the Securities and Exchange Commission
registration fee, the NASD fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities Exchange Commission registration fee..................... $13,200
National Association of Securities Dealers, Inc. fee................ 5,500
Nasdaq listing fee..................................................
Accounting fees and expenses........................................
Legal fees and expenses.............................................
Printing and engraving..............................................
Transfer agent fees and expenses....................................
Miscellaneous expenses..............................................
-------
Total............................................................. $
=======
</TABLE>
Over-Allotment Option to Purchase Additional Shares
We have granted a 30-day over-allotment option to the underwriters to
purchase an amount, up to an aggregate of 15% of the aggregate number of shares
appearing above, of additional shares of our common stock exercisable at the
offering price less the underwriting discounts and commissions, each as set
forth on the cover page of this prospectus. If the underwriters exercise this
option in whole or in part then each of the underwriters will become obligated,
subject to various conditions, to purchase approximately the same percentage of
such additional shares as is approximately the percentage of shares of common
stock that it is obligated to purchase of the total number of shares under the
underwriting agreement as shown in the table set for the above.
Indemnification and Contribution
The underwriting agreement provides that we and the selling stockholders
must indemnify the underwriters against liabilities arising out of any alleged
misstatements of fact or omissions in this prospectus and the registration
statement, including liabilities under the Securities Act, and contribute to
payments that the underwriters may be required to make in respect of those
liabilities.
Nasdaq National Market Quotation
Prior to the offering, there has been no public market for our common stock.
Consequently, the initial offering price for the common stock will be
determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in those negotiations, the
primary factors will be our results of operations in recent periods, estimates
of our prospects and the industry in which we compete, an assessment of our
management, the general state of the securities markets at the time of the
offering and the prices of similar securities of generally comparable
companies. We have applied to have our common stock approved for quotation on
the Nasdaq National Market under the symbol "ITER." We cannot assure you,
however, that an active or orderly trading market will develop for the common
stock or that our common stock will trade in the public market subsequent to
the offering at or above the initial offering price.
Stabilization, Syndicate Short Position and Penalty Bids
In order to facilitate the offering, persons participating in the offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after the offering. Specifically, the
underwriters may over-allot or otherwise create a short position in the common
stock for their own account by selling more shares of common stock than we and
the selling stockholders have actually sold to them. The underwriters may elect
to cover any short position by purchasing shares of stock in the open market or
by exercising the over-allotment option granted to the underwriters. In
addition, the underwriters may stabilize or maintain the price of the common
stock by bidding for or purchasing shares of common stock in the open market
and may impose penalty bids, under which selling concessions allowed to
syndicate members or other
60
<PAGE>
broker-dealers participating in the offering are reclaimed if shares of common
stock previously distributed in the offering are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the common stock to the extent that it discourages resales
of the common stock. No representation is made as to the magnitude or effect of
any of these activities.
Reserved Share Program
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to % of the shares of common stock being offered by
this prospectus for employees and other persons or entities with when we have a
business relationship, and to their associates and related persons. The number
of shares available for sale to the general public in the offering will be
reduced to the extent those persons purchase these reserved shares. Purchases
of reserved shares are to be made through an account at Bear, Stearns & Co.
Inc. in accordance with Bear, Stearns & Co. Inc.'s procedures for opening an
account and transacting in securities. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares offered in this offering.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for Iteris by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California. Certain legal matters in
connection with this offering will be passed upon for the representatives of
the underwriters by Katten Muchin Zavis, Chicago, Illinois.
EXPERTS
The consolidated financial statements and schedule of Iteris, Inc. as of
March 31, 1998 and 1999, and for each of the three years in the period ended
March 31, 1999, and the financial statements of Meyer, Mohaddes Associates,
Inc. for the year ended December 31, 1997, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance on such reports given on the authority of said firm as
experts in accounting and auditing.
61
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 with respect
to the common stock offered hereby. This prospectus, which constitutes a part
of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are
part of the registration statement. For further information with respect to us
and our common stock, reference is made to the registration statement and the
exhibits and schedules thereto. You may read and copy any document we file at
the SEC's public reference room in Washington, DC. Please call the SEC at 1-
800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from the SEC's website at
http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy statements and other information
with the SEC. Such periodic reports, proxy statements and other information
will be available for inspection and copying at the SEC's public reference
rooms, our website and the website of the SEC referred to above. Information on
our website does not constitute a part of this prospectus.
62
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ITERIS, INC.
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Net Capital Deficiency.......................... F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
MEYER, MOHADDES ASSOCIATES, INC.
Report of Independent Auditors............................................. F-18
Balance Sheet.............................................................. F-19
Statement of Income........................................................ F-20
Statement of Shareholders' Equity.......................................... F-21
Statement of Cash Flows.................................................... F-22
Notes to Financial Statements.............................................. F-23
ITERIS, INC.
Unaudited Pro Forma Statement of Operations................................ F-26
Notes to Unaudited Pro Forma Statement of Operations....................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Iteris, Inc.
We have audited the accompanying consolidated balance sheets of Iteris, Inc.
(the Company), a subsidiary of Odetics, Inc. (Parent), as of March 31, 1999 and
1998, and the related consolidated statements of operations, net capital
deficiency, and cash flows for each of the three years in the period ended
March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Iteris, Inc. at March 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1999, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Orange County, California
December 3, 1999, except
for Note 7 as to which the
date is
The foregoing report is in the form that will be signed upon the
reincorporation of the Company in Delaware and the transfer of net assets of
the ITS division of Odetics, Inc. to Iteris, Inc. that is expected to occur
prior to the effectiveness of the Company's initial registration statement on
Form S-1 as described in Note 7 to the consolidated financial statements.
/s/ Ernst & Young LLP
Orange County, California
December 17, 1999
F-2
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31
------------------ September 30,
1998 1999 1999
-------- -------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................ $ 66 $ 1 $ 1
Trade accounts receivable, net of allowance
for doubtful accounts of $0 at
March 1998, $252 at March 1999 and $252 at
September 1999............................. 800 4,471 6,645
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 5).. 790 1,159 963
Inventories:
Finished goods............................. 66 139 139
Work in process............................ 1,140 139 235
Materials and supplies..................... 912 585 1,208
Prepaid expenses and other.................. 284 149 233
-------- -------- --------
Total current assets...................... 4,058 6,643 9,424
Equipment, furniture and fixtures:
Equipment................................... 1,551 1,915 2,222
Furniture and fixtures...................... 195 224 231
Building and improvements................... -- 23 23
Allowances for depreciation................. (325) (697) (948)
-------- -------- --------
1,421 1,465 1,528
Goodwill, net of accumulated amortization of
$266 at March 1998,
$706 at March 1999 and $1,055 at September
1999........................................ 5,713 9,888 9,540
Other assets................................. 422 -- --
-------- -------- --------
Total assets................................. $ 11,614 $ 17,996 $ 20,492
======== ======== ========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Trade accounts payable...................... $ 1,006 $ 1,213 $ 3,562
Accrued payroll and related................. 226 588 777
Accrued expenses............................ 517 686 205
Contract reserve (Note 3)................... 4,541 3,892 3,569
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note
5)......................................... 1,083 333 183
Current portion of long-term debt........... -- 27 28
-------- -------- --------
Total current liabilities.................... 7,373 6,739 8,324
Long-term debt:
Payable to Parent (Note 2).................. 20,184 29,950 34,661
Long-term debt, less current portion........ -- 22 4
-------- -------- --------
Total long-term debt......................... 20,184 29,972 34,665
Commitments and contingencies (Note 10)
Net capital deficiency
Preferred stock $.0001 par value:
Authorized shares 5,000,000
Issued and outstanding shares none......... -- -- --
Common stock, $.0001 par value:
Authorized shares 25,000,000 issued and
outstanding shares 6,000,000 at March 31,
1998, 6,457,000 at March 31, 1999 and
6,432,100 at September 30, 1999........... -- -- --
Additional paid in capital.................. -- 4,269 4,023
Accumulated deficit......................... (15,943) (22,984) (26,520)
-------- -------- --------
Net capital deficiency....................... (15,943) (18,715) (22,497)
-------- -------- --------
Total liabilities and net capital
deficiency.................................. $ 11,614 $ 17,996 $ 20,492
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except shares and per share information)
<TABLE>
<CAPTION>
Six months ended
Years ended March 31 September 30
------------------------------- --------------------
1997 1998 1999 1998 1999
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Sensors............... $ 538 $ 1,607 $ 4,339 $ 1,552 $ 3,506
Systems............... -- 4,234 10,241 4,365 7,699
--------- --------- --------- --------- ---------
Total revenue....... 538 5,841 14,580 5,917 11,205
Costs of sales:
Sensors............... 470 2,555 3,129 1,471 1,829
Systems............... -- 2,815 7,195 3,117 5,761
--------- --------- --------- --------- ---------
Total cost of
sales.............. 470 5,370 10,324 4,588 7,590
--------- --------- --------- --------- ---------
Gross profit........ 68 471 4,256 1,329 3,615
Operating expenses:
Research and
development.......... 2,378 2,037 2,152 939 1,635
Selling, general and
administrative....... 1,411 3,414 5,729 2,387 3,087
Charges allocated by
Parent (Note 2)...... 105 458 881 310 670
Other expense......... -- 465 368 136 352
--------- --------- --------- --------- ---------
Total operating
expenses........... 3,894 6,374 9,130 3,772 5,744
--------- --------- --------- --------- ---------
Loss from
operations......... (3,826) (5,903) (4,874) (2,443) (2,129)
Interest charge
allocated by Parent.... 680 1,344 2,167 988 1,407
--------- --------- --------- --------- ---------
Loss before income
taxes.................. (4,506) (7,247) (7,041) (3,431) (3,536)
Income taxes (Note 6)... -- -- -- -- --
--------- --------- --------- --------- ---------
Net loss............ $ (4,506) $ (7,247) $ (7,041) $ (3,431) $ (3,536)
--------- --------- --------- --------- ---------
Net loss per share of
common stock--basic and
diluted................ $ (.75) $ (1.21) $ (1.13) $ (.57) $ (.55)
========= ========= ========= ========= =========
Shares used in
computation of net loss
per share.............. 6,000,000 6,000,000 6,209,500 6,000,000 6,435,700
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
CONSOLIDATED STATEMENTS OF NET CAPITAL DEFICIENCY
(In thousands)
<TABLE>
<CAPTION>
Common stock Additional
-------------- paid-in Accumulated
Shares Amount capital deficit Total
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1996...... 6,000 $ -- $ -- $ (4,190) $ (4,190)
Net loss..................... -- -- -- (4,506) (4,506)
------ ---- ------ -------- --------
Balance at March 31, 1997...... 6,000 -- -- (8,696) (8,696)
Net loss..................... -- -- -- (7,247) (7,247)
------ ---- ------ -------- --------
Balance at March 31, 1998...... 6,000 -- -- (15,943) (15,943)
Acquisition of MMA (Note 4).. 457 -- 4,269 -- 4,269
Net loss..................... -- -- -- (7,041) (7,041)
------ ---- ------ -------- --------
Balance at March 31, 1999...... 6,457 -- 4,269 (22,984) (18,715)
Purchase price adjustment
(unaudited) (Note 4)........ (25) -- (249) -- (249)
Issuance of stock options
(unaudited)................. -- -- 3 -- 3
Net loss (unaudited)......... -- -- -- (3,536) (3,536)
------ ---- ------ -------- --------
Balance at September 30, 1999
(unaudited)................... 6,432 $ -- $4,023 $(26,520) $(22,497)
====== ==== ====== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended
Years ended March 31 September 30
------------------------- ------------------
1997 1998 1999 1998 1999
------- ------- ------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss....................... $(4,506) $(7,247) $(7,041) $ (3,431) $ (3,536)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization................ 64 514 812 371 600
Stock option expense......... -- -- -- -- 3
Changes in operating assets
and liabilities (Note 13)... (811) (379) (2,114) (172) (1,197)
------- ------- ------- -------- --------
Net cash used in operating
activities................. (5,253) (7,112) (8,343) (3,232) (4,130)
Investing activities:
Purchases of equipment,
furniture and fixtures........ (233) (576) (239) (159) (314)
Purchase of net assets of
acquired business............. -- (2,183) -- -- --
------- ------- ------- -------- --------
Net cash used in investing
activities................. (233) (2,759) (239) (159) (314)
Financing activities:
Net cash received from Parent.. 5,488 9,930 8,517 3,326 4,461
Payments on long-term debt..... -- -- -- -- (17)
------- ------- ------- -------- --------
Net cash provided by
financing activities....... 5,488 9,930 8,517 3,326 4,444
------- ------- ------- -------- --------
Increase (decrease) in cash..... 2 59 (65) (65) --
Cash at beginning of year....... 5 7 66 66 1
------- ------- ------- -------- --------
Cash at end of year............. $ 7 $ 66 $ 1 $ 1 $ 1
======= ======= ======= ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(1) Summary of Significant Accounting Policies
The Company
Iteris, Inc. (the Company), a 93% owned subsidiary of Odetics, Inc.
(Parent), designs, develops, markets and implements software based solutions
that improve the safety and efficiency of vehicle transportation. The Company
incorporates its software into sensor systems that it sells to vehicle
manufacturers in North America and Europe and to governmental agencies,
principally in the United States. It also develops transportation management
and traveler information systems for the intelligent transportation systems, or
ITS, industry; these systems are sold to local, state and national
transportation agencies in the United States.
Basis of Presentation
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary, Meyer, Mohaddes Associates, Inc., a California
corporation ("MMA"). All intercompany transactions and balances have been
eliminated in consolidation.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant estimates made in preparing the consolidated financial statements
include the allowance for doubtful accounts, inventory reserves, costs to
complete long-term contracts and income tax valuation allowances.
Revenue Recognition
Revenue from the sale of sensors and the related cost of sales are
recognized on the date of shipment, or if required, upon acceptance by the
customer.
Systems revenue is derived primarily from long-term contracts with
governmental agencies. Contract revenue and earnings on cost reimbursable
contracts are recognized as work is performed. Systems revenue and earnings on
fixed-price contracts are recognized on the percentage-of-completion method of
accounting as costs are incurred (cost-to-cost basis). Contract revenues
include costs incurred plus a portion of estimated fees or profits based on the
relationship of costs incurred to total estimated costs. Any anticipated losses
on contracts are charged to earnings when identified. Certain contracts contain
incentive and/or penalty provisions which provide for increased or decreased
revenues based upon performance in relation to established targets. Incentive
fees are recorded when earned and penalty provisions are recorded when
incurred, as long as the amounts can reasonably be determined.
Revenues from follow-on service and support, for which the Company typically
charges separately, are recognized when earned.
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
within management's expectations and within amounts provided through the
allowance for doubtful accounts. At March 31, 1998 and 1999 accounts receivable
from governmental agencies and prime government contractors were approximately
$586,000 and $2,996,000, respectively.
F-7
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Values of Financial Instruments
The fair value of amounts payable to Parent approximates its carrying value
because interest charges thereon are based on the prevailing market rates of
interest charged to the Parent under related borrowings.
Inventory Valuation
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
Equipment, Furniture and Fixtures
Equipment, furniture and fixtures are recorded at cost and are depreciated
principally by the declining balance method over their estimated useful lives
(four to eight years).
Long-Lived Assets
Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If required, the recoverability test is performed at the lowest
level practicable based on undiscounted net cash flows.
Goodwill
Goodwill, representing the excess of the purchase price over the fair value
of the net assets of acquired entities, is being amortized using the straight-
line method over the estimated useful life of 15 years.
Warranty
The Company provides a one year warranty on all products and records a
related provision for estimated warranty costs at the date of sale. The
estimated warranty liability was $698,000 and $95,000 at March 31, 1998 and
1999, respectively.
Income Taxes
The Company is included in the consolidated federal income tax return of
its Parent. The Company and the Parent have entered into a tax sharing
arrangement whereby U.S. and state income taxes are computed in accordance
with consolidated return Section 1552(a)(1) of the Internal Revenue Code, as
if they were separate legal entities. Under this allocation, the consolidated
tax liability (including alternative minimum tax) for a given tax year is
allocated only to companies in the group which have separate taxable income
for that year. The tax liability is allocated pro rata based on each Company's
relative separate taxable income. Companies with losses are not allocated any
of the tax liability and are not given any benefit for their losses.
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax basis of assets and liabilities based
on enacted tax laws and rates applicable to the period in which differences
are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred tax assets to amounts which are more likely
than not to be realized. The provision for income taxes consists of the taxes
payable or refundable for the period plus or minus the change during the
period in deferred income tax assets and liabilities.
F-8
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
Accounting for Stock-Based Compensation, requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, if the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share is computed using the weighted
average number of shares of common stock outstanding during the year and
excludes the anti-dilutive effects of options.
The following table sets forth the computation of loss per share:
<TABLE>
<CAPTION>
Six months ended
Years ended March 31 September 30
------------------------------- --------------------
1997 1998 1999 1998 1999
--------- --------- --------- --------- ---------
(Unaudited)
(In thousands, except share and per share
information)
<S> <C> <C> <C> <C> <C>
Numerator: Net loss..... $ (4,506) $ (7,247) $ (7,041) $ (3,431) $ (3,536)
========= ========= ========= ========= =========
Denominator: Weighted-
average shares
outstanding............ 6,000,000 6,000,000 6,209,500 6,000,000 6,435,700
========= ========= ========= ========= =========
Basic and diluted loss
per share.............. $ (.75) $ (1.21) $ (1.13) $ (.57) $ (.55)
========= ========= ========= ========= =========
</TABLE>
Research and Development Expenditures
Research and development expenditures are charged to expense in the period
incurred.
Advertising Expenses
The Company expenses advertising costs as incurred. Advertising expenses
totaled $16,000, $79,000 and $261,000 in the years ended March 31, 1997, 1998
and 1999, respectively.
Interim Financial Information
The financial statements for the six months ended September 30, 1998 and
1999 are unaudited, but include all adjustments (consisting of only normal
recurring adjustments) which the Company considers necessary for a fair
statement of the financial position and the operating results and cash flows
for the interim periods. Results for the interim periods are not necessarily
indicative of results to be expected for the entire year.
(2) Transactions with Parent
The Company and its Parent have entered into an agreement whereby the
Company is charged for certain corporate general and administrative functions
performed by the Parent. These charges are included in the caption "Charges
allocated by Parent" in the accompanying statements of operations and consist
of significant management functions and services, including treasury,
accounting, tax, internal audit, legal, human resources, sales and marketing
and other support services. Charges are allocated to the Company based on
actual amounts incurred on behalf of the Company or agreed upon amounts or
percentages that management of the Company believes are reasonable.
F-9
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Parent also manages domestic cash flows. Pursuant to this cash
management program the Company transfers any accumulated cash surplus to the
Parent's accounts and the Parent funds cash disbursements, as needed, to
maintain minimum account balances. The Company and its Parent have entered into
an agreement whereby the Parent charges the Company interest based on the
Company's net payable to the Parent balance calculated using the Parent's cost
of related borrowed funds (10.5% at March 31, 1999). The amounts due under the
payable are not due until after March 31, 2000, except in the case of an
initial public offering of the Company's common stock, which may accelerate the
repayment of certain amounts payable to the Parent.
The net payable to Parent represents the net of the following transactions:
cash advances to and from the Parent in connection with cash management policy;
the value of equity securities issued by the Parent in connection with the
Company's acquisitions; proceeds from sales to affiliates; payments for
purchases from affiliates; and corporate charges for general corporate overhead
and interest.
(3) Assumption of Contracts
On June 20, 1997, the Company assumed certain contracts and acquired certain
assets from Rockwell Collins, Inc. (Rockwell). Revenues and costs related to
contracts assumed from Rockwell are included in the accompanying statement of
operations since the date of assumption. The total payment to Rockwell
associated with the assumption of contracts was approximately $2.2 million in
cash. Additionally, a total of $1.3 million of assets were acquired, $5.0
million of liabilities were assumed, and Rockwell agreed to reimburse the
Company for losses incurred on certain phases of a major contract with the
Michigan Department of Transportation (MDOT). Liabilities assumed include a
$3.8 million provision for anticipated losses on other phases of the MDOT
contract, which the Company expects to incur over the next five years.
(4) Business Combinations
On October 16, 1998 the Company acquired MMA. Pursuant to the terms of the
merger agreement, the Company purchased all of the issued and outstanding
shares of common stock of MMA for $4.6 million by issuing 432,100 shares of the
Company's common stock (after giving effect to the purchase price adjustment
required by the merger agreement) and 55,245 shares of the Parent's Class A
common stock valued at $250,000. The value of the shares issued by the Parent
is repayable to the Parent and is included in "Payable to Parent" in the
accompanying balance sheet. A total of $2.0 million of assets were acquired and
$1.2 million of liabilities were assumed. The acquisition was accounted for as
a purchase and, accordingly, the excess of cost over the fair value of net
assets of $3.8 million has been recorded as goodwill and is being amortized
over its expected benefit period of 15 years.
In April 1999, the Parent issued an additional 25,740 shares of the Parent's
Class A common stock valued at $250,000 to the MMA shareholders upon resolution
of a contingency specified in the merger agreement. Additional shares from the
Parent with a value of $1 million may be issued at various dates through April
2001 in the event an initial public offering of the Company's common stock is
not consummated by those dates. In addition, if the Company does not complete
its initial public offering by October 2001, then the holders of the Company's
common stock issued in this transaction will have the right to require the
Parent to repurchase the Company's common stock for a purchase price of $10 per
share. Any amounts paid by the Parent either in the form of its class A Common
Stock, or cash, under the merger agreement is repayable by the Company and will
be included in Payable to Parent.
At any time prior to the Company's initial public offering, the Parent has
the right to require these shareholders to sell all of their shares of the
Company's common stock at a purchase price of $10 per share.
F-10
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Parent has the option to pay the purchase price for these shares in cash or
in Odetics' Class A common stock valued as of five business days prior to the
date of the event triggering the payment.
On November 11, 1998 the Company acquired certain assets and assumed certain
liabilities of Viggen Corporation, a Virginia corporation, pursuant to the
terms of an Agreement of Purchase and Sale of Assets for an aggregate purchase
price of $275,000 evidenced by the issuance of 27,603 shares of the Parent's
Class A common stock. The value of the shares issued is repayable by the
Company and is included in the "Payable to Parent" in the accompanying balance
sheet. The acquisition has been accounted for as a purchase and the purchase
price, including direct costs of the acquisition, has been allocated to the
fair value of the net assets acquired with the excess, approximating $746,000,
allocated to goodwill. The recorded goodwill is being amortized over its
expected benefit period of 15 years.
The following unaudited pro forma financial information presents the
consolidated results of operations as if the MMA acquisition had occurred at
the beginning of the year presented, and does not purport to be indicative of
the results that would have occurred had the acquisition occurred at such date
or of results which may occur in the future.
<TABLE>
<CAPTION>
Years ended March 31
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Net revenue....................................... $ 10,067 $ 16,282
Net loss.......................................... (6,814) (7,449)
Net loss per share of common stock--basic and
diluted.......................................... $ (1.14) $ (1.16)
</TABLE>
Pro forma information for the Viggen acquisition is not material.
(5) Costs and Estimated Earnings on Uncompleted Contracts
Costs incurred, estimated earnings and billings on uncompleted long-term
contracts are as follows:
<TABLE>
<CAPTION>
March 31
---------------
1998 1999
------- ------
(In thousands)
<S> <C> <C>
Costs incurred on uncompleted contracts.................... $ 3,214 $6,410
Estimated earnings......................................... 1,021 2,051
------- ------
4,235 8,461
Less billings to date...................................... 4,528 7,635
------- ------
$ (293) $ 826
======= ======
Included in accompanying balance sheets:
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... $ 790 $1,159
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... (1,083) (333)
------- ------
$ (293) $ 826
======= ======
</TABLE>
Costs and estimated earnings in excess of billings at March 31, 1998 and
1999 include $388,000 and $182,000, respectively, that were not billable as
certain milestone objectives specified in the contracts had not been attained.
Substantially all costs and estimated earnings in excess of billings at March
31, 1999 are expected to be billed and collected during the year ending March
31, 2000.
F-11
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Income Taxes
As a result of its tax sharing agreement with the Parent (Note 1), the
Company has received no tax benefit from its losses because it has not paid or
accrued federal or state income taxes. The Company's taxable losses through
March 31, 1998 and 1999 have been assumed by the Parent under the tax sharing
arrangement and as a result are not available to the Company to provide any tax
benefit in future periods.
The components of the Company's deferred taxes are as follows:
<TABLE>
<CAPTION>
March 31
----------------
1998 1999
------- -------
(In thousands)
<S> <C> <C>
Deferred tax assets
Goodwill amortization.................................... $ 89 $ 161
Vacation pay/sick pay accrual............................ 87 188
Inventory reserve........................................ 93 28
Warranty reserve......................................... 206 38
Other.................................................... 4 69
------- -------
Total deferred tax assets.............................. 479 484
------- -------
Deferred tax liability
Cash to accrual adjustment............................... -- (484)
------- -------
Total deferred tax liability........................... -- (484)
------- -------
Valuation allowance...................................... (479) --
------- -------
Net deferred tax asset (liability)......................... $ -- $ --
======= =======
</TABLE>
The decrease in the valuation allowance from March 31, 1998 to March 31,
1999 of $479,000 is due to the increase in the deferred tax liability related
to the cash to accrual adjustment for the MMA acquisition.
The Company's effective tax rate differs from the U.S. statutory tax rate of
35% because of the establishment of the valuation allowance.
(7) Equity
In May 1998, the Company effected a recapitalization in which 25,000,000
shares of common stock were authorized with a par value of $.0001 per share.
All share and per share information in the accompanying financial statements
has been restated to reflect the recapitalization.
In January 2000, the Company reincorporated as a Delaware corporation and
changed its name to Iteris, Inc. Formerly the Company was known as Odetics ITS,
Inc. Also in December 1999, the Parent transferred the net assets and
liabilities of its ITS division to the Company in a transaction accounted for
as a transfer between entities under common control. Accordingly, such net
assets and operations are reflected in the Company's consolidated financial
statements for all periods presented at the historical amounts reported by the
Parent in its consolidated financial statements.
(8) Associates Incentive Programs
Under the terms of the Parent's Profit Sharing Plan, the Company contributes
to a trust fund such amounts as are determined annually by the Company's Board
of Directors. No contributions were made in the years
F-12
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ended March 31, 1998 or 1999. The Company's associates participate in the
Parent's 401(k) Plan. Under the 401(k) Plan, eligible associates voluntarily
contribute to the plan up to 15% of their salary through payroll deductions.
The Company matches 50% of contributions up to a stated limit. Under the
provisions of the 401(k) Plan, associates have four investment choices, one of
which is the purchase of Odetics' Class A common stock at market price. Company
matching contributions were approximately $40,000, $114,000 and $120,000 in the
years ended March 31, 1997, 1998 and 1999, respectively.
The Company's employees with more than six months of eligible service
participate in the Parent's noncontributory Associate Stock Ownership Plan
(ASOP). The ASOP provides that Company contributions, which are determined
annually by the Board of Directors, may be in the form of cash or shares of the
Parent's stock. The Company contributions to the ASOP were approximately
$25,000, $51,000 and $69,000 in the years ended March 31, 1997, 1998 and 1999,
respectively.
Certain executives of the Company participate in the Parent's Executive
Deferral Plan under which a portion of their annual compensation may be
deferred. Compensation charged to operations and deferred under the plan
totaled $12,000, $12,000 and $12,000 for the years ended March 31, 1997, 1998
and 1999, respectively.
(9) Stock Options
In September 1997, the Company granted options to purchase up to 480,000
shares of common stock to certain members of senior management at an exercise
price of $2.00 per share. The options granted vested ratably at 25% on each of
the first four anniversaries of the grant date.
Subsequently, the Company's Board of Directors and its Parent adopted and
approved the 1998 Stock Incentive Plan (the "Plan"), authorized 1,500,000
shares of the Company's common stock for issuance under the Plan, and granted
thereunder options to purchase 899,500 shares of common stock at exercise
prices of $3.00 to $5.00 per share, the fair value of the underlying common
stock as of the date of grant as determined by the Board of Directors. Under
terms of the Plan, eligible key employees, directors and consultants can
receive options to purchase shares of the Company's common stock at prices not
less than 100% for incentive stock options and not less than 85% for
nonqualified stock options of the fair value on the date of grant as determined
by the Board of Directors. Options expire ten years after date of grant or 90
days after termination of employment. The options granted vested ratably at 25%
on each of the first four anniversaries of the grant date.
F-13
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of all Company stock option activity is as follows:
<TABLE>
<CAPTION>
Six months ended
Year ended March 31 September 30
-------------------------------------------------- ----------------
1997 1998 1999 1999
---------------- ---------------- ---------------- ----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Options Price Options Price Options Price Options Price
------- -------- ------- -------- ------- -------- ------- --------
(In thousands, except per share data) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period -- $ -- -- $ -- 480 $2.00 1,278 $3.10
Granted............... -- -- 480 2.00 798 4.22 101 4.83
Exercised............. -- -- -- -- -- -- -- --
Canceled.............. -- -- -- -- -- -- -- --
------- ------ --- ----- ----- ----- ----- -----
Options outstanding at
end of period.......... -- $ -- 480 $2.00 1,278 $3.10 1,379 $3.56
======= ====== === ===== ===== ===== ===== =====
Exercisable at end of
period................. -- -- 120 341
======= === ===== =====
Available for grant at
end of period.......... -- -- 702 601
======= === ===== =====
</TABLE>
During the six month period ended September 30, 1999, the Company issued
34,500 options to employees for which the exercise price of the option was less
than the fair value of the Company's common stock at the date of grant. As a
result, the Company will incur compensation charges of $115,000 which will be
charged to operations over the four year vesting period of the options. In the
six months ended September 30, 1999 the Company recorded $3,000 of expense
related to such options.
Pro Forma Disclosures of the Effect of Stock-Based Compensation Plans
Pro forma information regarding results of operations and net loss per share
is required by Statement No. 123 for stock-based awards to employees as if the
Company had accounted for such awards using a valuation method permitted under
Statement No. 123.
Stock-based awards to employees under the Plan during the years ended March
31, 1999 and 1998, and for the six months ended September 30, 1999 and 1998,
were valued using the minimum value method, assuming no expected dividends and
the following weighted-averages:
<TABLE>
<CAPTION>
Six months
Years ended ended
March 31 September 30
------------ ------------
1998 1999 1999
----- ----- ------------
<S> <C> <C> <C>
Weighted Average:
Remaining contractual life--years.................. 9.50 8.87 8.62
Expected life--years............................... 5.50 4.87 4.62
Risk-free interest rate............................ 5.88% 5.45% 5.23%
Fair value of options granted...................... $0.59 $0.74 $0.89
</TABLE>
Should the Company complete an initial public offering of its common stock,
stock-based awards granted thereafter will be valued using the Black-Scholes
option pricing model. In addition to the factors used to estimate the fair
value of stock options issued using the minimum value method, the Black-Scholes
model
F-14
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
considers the expected volatility of the Company's stock price, determined in
accordance with Statement No. 123, in arriving at an estimated fair value. The
minimum value method does not consider stock price volatility.
For purposes of pro forma disclosures, the estimated minimum value of the
Company's stock-based awards to employees is amortized over the options'
vesting period. The results of applying Statement No. 123 to the Company's
stock-based awards to employees would approximate the following (in thousands,
except per share data):
<TABLE>
<CAPTION>
Six months ended
Years ended March 31 September 30
------------------------- ----------------
1997 1998 1999 1999
------- ------- ------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
Pro forma:
Net loss................ $(4,506) $(7,257) $(7,103) $(3,577)
Basic and diluted loss
per share.............. $ (.75) $ (1.21) $ (1.14) $ (.56)
</TABLE>
(10) Commitments and Contingencies
The Company and the Parent are co-borrowers and cross-guarantors under a
loan agreement with the Parent's banks. Virtually all of the Company's assets
have been pledged as collateral under the agreement. The maximum credit
facility is $17.0 million of which $11.0 million and $16.7 million (unaudited)
was outstanding at March 31, 1999 and September 30, 1999, respectively. The
loan agreement expires December 31, 2000.
The Company has lease commitments for facilities in various locations
throughout the United States. The annual commitment under these noncancelable
operating leases at March 31, 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2000............................................................ $354,000
2001............................................................ 307,000
2002............................................................ 194,000
2003............................................................ 17,000
2004............................................................ --
--------
$872,000
========
</TABLE>
Rent expense under operating leases totaled $42,000, $319,000, and $424,000,
respectively for the years ended March 31, 1997, 1998 and 1999.
(11) Significant Customer Information
Sales to major customers in the years ended March 31, 1997, 1998 and 1999,
and the related accounts receivable balances at March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Sales
------------------------------ Receivable Balance at
Customer 1997 1998 1999 March 31, 1999
- -------- -------- ---------- ---------- ---------------------
<S> <C> <C> <C> <C>
A......................... $ -- $1,946,000 $1,903,000 $ --
B......................... -- -- 1,579,000 --
C......................... -- 995,000 -- --
D......................... -- 656,000 2,497,000 404,000
E......................... 294,000 -- -- --
F......................... 111,000 -- -- --
</TABLE>
No other customer represented more than 10% of the Company's annual sales.
F-15
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(12) Business Segment and Geographic Information
Effective April 1, 1998, the Company adopted the FASB Statement Financial
No. 131, Disclosure about Segments of an Enterprise and Related Information
(Statement 131). Statement No. 131 establishes standards for the way that
public business enterprises report information about operating segments both
for annual and interim financial periods. Operating segments are components of
an enterprise about which separate financial information is available that is
regularly evaluated by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Statement 131 also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. The adoption of Statement 131 did not affect
results of operations or financial position, but did affect the following
disclosure of sement information.
The Company operates in two reportable segments: sensors and systems. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies except that certain expenses,
such as interest, amortization of certain intangibles and certain corporate
expenses are not allocated to the segments. In addition, the Company's net
assets are not allocated to the segments.
The reportable segments are each managed separately because they manufacture
and distribute distinct products or services.
Selected financial information for the Company's reportable segments for the
years ended March 31, 1997, 1998 and 1999 follows:
<TABLE>
<CAPTION>
(In thousands) Sensors Systems Total
- -------------- ------- ------- -------
<S> <C> <C> <C>
Year ended March 31, 1997
Revenue from external customers....................... $ 538 $ -- $ 538
Depreciation and amortization......................... 64 -- 64
Segment income (loss)................................. (3,721) -- (3,721)
Year ended March 31, 1998
Revenue from external customers....................... $ 1,607 $ 4,234 $ 5,841
Depreciation and amortization......................... 103 411 514
Segment income (loss)................................. (5,750) 305 (5,445)
Year ended March 31, 1999
Revenue from external customers....................... $ 4,339 $10,241 $14,580
Depreciation and amortization......................... 173 639 812
Segment income (loss)................................. (4,514) 521 (3,993)
Six months ended September 30, 1998 (unaudited)
Revenue from external customers....................... $ 2,902 $ 3,015 $ 5,917
Depreciation and amortization......................... 73 298 371
Segment income (loss)................................. (2,513) 380 (2,133)
Six months ended September 30, 1999 (unaudited)
Revenue from external customers....................... $ 3,506 $ 7,699 $11,205
Depreciation and amortization......................... 129 471 600
Segment income (loss)................................. (1,657) 198 (1,459)
</TABLE>
F-16
<PAGE>
ITERIS, INC.
(a subsidiary of Odetics, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following reconciles segment income to consolidated income before income
taxes:
<TABLE>
<CAPTION>
Six months ended
Year ended March 31 September 30
------------------------- ----------------
(In thousands) 1997 1998 1999 1998 1999
- -------------- ------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Total profit or loss for
reportable segments............. $(3,721) $(5,445) $(3,993) $(2,133) $(1,459)
Unallocated amounts:
Corporate and other expenses... (105) (458) (881) (310) (670)
Interest expense............... (680) (1,344) (2,167) (988) (1,407)
------- ------- ------- ------- -------
Income before income taxes....... $(4,506) $(7,247) $(7,041) $(3,431) $(3,536)
======= ======= ======= ======= =======
</TABLE>
Segment assets are not presented because the Company does not segregate its
assets by segment.
Selected financial information for the Company's operations by geographic
segment is as follows:
<TABLE>
<CAPTION>
Six months ended
Years ended March 31 September 30
----------------------- ----------------
(In thousands) 1997 1998 1999 1998 1999
- -------------- ----- ------- ------- ------ --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Geographic Area Revenue
United States.................... $ 538 $ 5,841 $13,002 $4,567 $11,205
Asia Pacific Rim................. -- -- 1,578 1,350 --
----- ------- ------- ------ -------
Total net revenue................ $ 538 $ 5,841 $14,580 $5,917 $11,205
Geographic Area Long-Lived Assets
United States.................... $ 264 $ 7,134 $11,353 $6,758 $11,068
Asia Pacific Rim................. 622 422 -- -- --
----- ------- ------- ------ -------
Total long-lived assets.......... $ 886 $ 7,556 $11,353 $6,758 $11,068
===== ======= ======= ====== =======
(13) Supplemental Cash Flow Information
<CAPTION>
Six months ended
Years ended March 31 September 30
----------------------- ----------------
(In thousands) 1997 1998 1999 1998 1999
- -------------- ----- ------- ------- ------ --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net cash used in changes in
operating assets and
liabilities:
Increase in accounts
receivable.................... $ (26) $ (499) $(1,242) $ (498) $(2,174)
(Increase) decrease in net
costs and estimated earnings
in excess of billings......... 62 293 (653) (610) 46
(Increase) decrease in
inventories................... (248) (1,290) 1,255 1,050 (719)
(Increase) decrease in prepaid
expenses and other assets..... (716) (56) 570 551 (84)
Increase (decrease) in accounts
payable and accrued expenses.. 117 1,173 (2,044) (665) 1,734
----- ------- ------- ------ -------
Net cash used in changes in
operating assets and
liabilities..................... $(811) $ (379) $(2,114) $ (172) $(1,197)
===== ======= ======= ====== =======
Non-cash transaction during the
year:...........................
Purchase of MMA for stock and
payable to Parent............. $ -- $ -- $ 4,638 $ -- $ 250
===== ======= ======= ====== =======
Purchase of Viggen for payable
to Parent..................... $ -- $ -- $ 275 $ -- $ --
===== ======= ======= ====== =======
MMA purchase price adjustment.. $ -- $ -- $ -- $ -- $ 249
===== ======= ======= ====== =======
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Meyer, Mohaddes Associates, Inc.:
We have audited the accompanying balance sheet of Meyer, Mohaddes
Associates, Inc. (the Company), as of December 31, 1997 and statement of
income, shareholders' equity, and cash flows for the year ended December 31,
1997. 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 audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Meyer, Mohaddes Associates,
Inc. at December 31, 1997, and the results of its operations and cash flows for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Orange County, California
July 2, 1998
F-18
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.............................................................. $ --
Trade accounts receivable, net of allowance for
doubtful accounts of $22,000..................................... 960,000
Costs and estimated earnings in excess of billings
on uncompleted contracts (Note 2)................................ 580,000
----------
Total current assets............................................ 1,540,000
Equipment, furniture and fixtures:
Equipment......................................................... 154,000
Furniture and fixtures............................................ 28,000
Allowances for depreciation....................................... (147,000)
----------
35,000
Other assets........................................................ 28,000
----------
Total assets........................................................ $1,603,000
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit.................................................... $ 100,000
Trade accounts payable............................................ 301,000
Income taxes payable.............................................. --
Deferred tax liabilities.......................................... 470,000
Accrued payroll and related....................................... 82,000
Accrued expenses.................................................. 24,000
----------
Total current liabilities....................................... 977,000
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock, no par value:
Authorized shares 100,000
Issued and outstanding shares 2,160 at December 31, 1997........ 22,000
Retained earnings................................................. 604,000
----------
Total shareholder's equity.......................................... 626,000
----------
Total liabilities and shareholders' equity.......................... $1,603,000
==========
</TABLE>
See accompanying notes.
F-19
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
STATEMENT OF INCOME
Year ended December 31, 1997
<TABLE>
<S> <C>
Contract revenue.................................................... $3,625,000
Cost of contract revenue............................................ 1,910,000
----------
Gross profit........................................................ 1,715,000
Selling, general and administrative expenses........................ 1,457,000
----------
Income from operations.............................................. 258,000
Interest expense.................................................... (10,000)
Other income........................................................ 19,000
----------
Income before income taxes.......................................... 267,000
Income taxes........................................................ 119,000
----------
Net income.......................................................... $ 148,000
==========
</TABLE>
See accompanying notes.
F-20
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
Year ended December 31, 1997
<TABLE>
<CAPTION>
Common stock
-------------- Retained
Shares Amount earnings Total
------ ------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.................. 2,160 $22,000 $456,000 $478,000
Net income.................................. -- -- 148,000 148,000
----- ------- -------- --------
Balance at December 31, 1997.................. 2,160 $22,000 $604,000 $626,000
===== ======= ======== ========
</TABLE>
See accompanying notes.
F-21
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1997
<TABLE>
<S> <C>
Operating activities:
Net income......................................................... $ 148,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 25,000
Provision for losses on accounts receivable...................... 22,000
Provision for deferred income taxes.............................. 118,000
Changes in operating assets and liabilities (Note 8)............. (280,000)
---------
Net cash provided by operating activities.......................... 33,000
Investing activities:
Purchases of equipment, furniture and fixtures..................... (2)
Financing activities:
Net payments on line of credit and note payable.................... (110,000)
---------
Decrease in cash................................................... (79,000)
Cash at beginning of year.......................................... 79,000
---------
Cash at end of year................................................ $ --
=========
</TABLE>
See accompanying notes.
F-22
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(1) Summary of Significant Accounting Policies
The Company
Meyer, Mohaddes Associates, Inc. (the Company), a California corporation,
provides transportation engineering and planning services to the public and
private sectors. The Company's customers consist mainly of state and local
government and related agencies, mainly in California.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant estimates made in preparing the financial statements include the
allowance for doubtful accounts, and costs to complete long-term contracts.
Revenue Recognition
Contract revenues are recognized based on hours incurred at contractually
agreed upon billing rates. Any anticipated losses on contracts are charged to
earnings when identified. Certain contracts contain incentive and/or penalty
provisions which provide for increased or decreased revenues based upon
performance in relation to established targets. Incentive fees are recorded
when earned and penalty provisions are recorded when incurred, as long as the
amounts can reasonably be determined.
Equipment, Furniture and Fixtures
Equipment, furniture and fixtures are recorded at cost and are depreciated
principally by the declining balance method over their estimated useful lives
(four to eight years).
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
within management's expectations and within amounts provided through the
allowances for doubtful accounts. At December 31, 1997, accounts receivable
from governmental agencies and prime government contractors were approximately
$764,000.
Recent Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for the reporting and display of
comprehensive income and its components in financial statements. Comprehensive
income generally represents all changes in shareholders' equity except those
resulting from investments by distributions to shareholders. Statement No. 130
is effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented.
Also in June 1997, the FASB issued Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, which requires publicly-held
companies to report financial and descriptive information about its operating
segments in financial statements issued to shareholders for interim and annual
periods. The statement also requires additional disclosures with respect to
products and services, geographical areas of operations, and major customers.
Statement No. 131 is effective for fiscal years beginning after December 15,
1997 and requires restatement of earlier periods presented.
F-23
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(2) Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings in excess of billings at December 31, 1997
include $127,000, that were not billable as certain milestone objectives
specified in the contracts had not been attained. Substantially all costs and
estimated earnings in excess of billings at December 31, 1997 are expected to
be billed and collected during the year ending December 31, 1998.
(3) Line of Credit
On April 3, 1997, the Company entered into a line of credit agreement with a
bank collateralized by substantially all of the Company's assets. Under the
terms of the agreement, the Company is required to comply with certain
financial covenants. The Company may borrow up to $300,000 with interest at the
bank's reference rate plus two percent (10.5% as of December 31, 1997). At
December 31, 1997, $100,000 was outstanding. The agreement expired on March 1,
1998. The Company has subsequently extended this line of credit agreement to
terminate on March 1, 1999.
In addition, the Company entered into a loan agreement with a bank
collateralized by substantially all of the Company's assets. Under the terms of
the agreement, the Company is required to comply with certain financial
covenants. The Company may borrow up to $100,000 with interest at the bank's
reference rate plus three percent (11.5% as of December 31, 1997). No
borrowings were outstanding under this agreement at December 31, 1997.
(4) Income Taxes
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under the liability method, deferred taxes are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates.
The components of the provision (benefit) for income taxes are as follows
for the year ended December 31, 1997:
<TABLE>
<S> <C>
Current:
Federal........................................................... $ --
State............................................................. 1,000
--------
1,000
Deferred:
Federal........................................................... 92,000
State............................................................. 26,000
--------
118,000
--------
Provision for income taxes......................................... $119,000
========
</TABLE>
The reconciliation of the income tax provision to taxes computed at the U.S.
federal statutory rate of 35% is as follows at December 31, 1997:
<TABLE>
<S> <C>
Income tax at statutory rates..................................... $ 93,000
State income taxes, net of federal tax benefit.................... 17,000
Other............................................................. 9,000
--------
$119,000
========
</TABLE>
F-24
<PAGE>
MEYER, MOHADDES ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company's deferred tax liabilities consists of an accrual to cash
conversion of $470,000.
The Company has federal and California net operating loss carryforwards of
approximately $7,000 and $2,000 respectively which begin to expire in 2011 and
2001, respectively.
(5) Employee Incentive Programs
The Company sponsors a 401(k) Plan in which all employees are eligible to
participate. Under the 401(k) Plan, eligible employees voluntarily contribute
to the plan up to 5% of their salary through payroll deductions. The Company
matches 45% of contributions up to a stated limit. Under the provisions of the
401(k) Plan, employees have six investment choices. Company matching
contributions were approximately $35,000 in the year ended December 31, 1997.
Employees also participate in the Company's bonus program. The Company paid
approximately $134,000 in the year ended December 31, 1997.
(6) Commitments and Contingencies
The Company has entered into an operating leases for certain equipment and
facilities with varying terms and escalation clauses. Future minimum payments
under noncancelable operating losses with initial terms of one year or more are
as follows: $184,000 in 1998; $76,000 in 1999 and $48,000 in 2001.
Rent expense for the year ended December 31, 1997 aggregated $164,000.
(7) Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Year ended
December 31,
1997
------------
<S> <C>
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable................... $ 35,000
Increase in net costs and estimated earnings in excess of
billings.................................................... (297,000)
(Increase) decrease in prepaid expenses and other assets..... 8,000
Increase (decrease) in accounts payable and accrued
expenses.................................................... (26,000)
---------
Net cash used by changes in operating assets and liabilities.. $(280,000)
=========
Cash paid during the year:
Interest..................................................... $ 10,000
Income taxes paid............................................ 1,000
</TABLE>
F-25
<PAGE>
ITERIS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Year ended March 31, 1999
On October 16, 1998, the Company acquired Meyer, Mohaddes Associates, Inc.,
a California corporation ("MMA"). Pursuant to the terms of the merger
agreement, the Company purchased all of the issued and outstanding shares of
common stock of MMA for $4.6 million by issuing 432,100 shares of the Company's
common stock (after giving effect to the purchase price adjustment required by
the merger agreement) and 55,245 shares of the Parent's Class A common stock
valued at $250,000. The value of the shares issued by the Parent is repayable
to the Parent. The acquisition was accounted for as a purchase and,
accordingly, the excess of cost over the fair value of net assets of $3.8
million has been recorded as goodwill and is being amortized over its expected
benefit period of 15 years. The following unaudited pro forma statement of
operations presents the combined results of the Company and of MMA as if the
acquisition had occurred as of April 1, 1998.
<TABLE>
<CAPTION>
Iteris MMA
Year ended April 1, 1998 to Pro Forma
March 31, 1999 October 16, 1998 Adjustments Pro Forma
-------------- ---------------- ----------- ---------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Revenue:
Sensor................ $ 4,339 $ $ $ 4,339
Systems............... 10,241 1,702 11,943
--------- ------- ---------
Total revenue....... 14,580 1,702 16,282
Costs of sales:
Sensors............... 3,129 3,129
Systems............... 7,195 857 8,052
--------- ------- ---------
Total costs of
sales.............. 10,324 857 11,181
--------- ------- ---------
Gross profit............ 4,256 845 5,101
Operating expenses:
Research and
development.......... 2,152 2,152
Selling, general and
administrative....... 5,729 1,099 6,828
Charges allocated by
Parent (Note 2)...... 881 881
Other expenses........ 368 140 (a) 508
--------- ------- ------ ---------
Total operating
expenses............... 9,130 1,099 140 10,369
--------- ------- ------ ---------
Loss from operations.... (4,874) (254) (140) (5,268)
Interest charge
allocated by Parent.... 2,167 14 (b) 2,181
--------- ------- ------ ---------
Loss before income
taxes.................. (7,041) (254) (154) (7,449)
Income taxes (Note 6)... -- (113) 113 (c) --
--------- ------- ------ ---------
Net loss................ $ (7,041) $ (141) $ (267) $ (7,449)
========= ======= ====== =========
Net loss per share of
common stock--basic and
diluted................ $ (1.13) $ (1.16)
========= =========
Shares used in
computation of net loss
per share.............. 6,209,500 22,600 (d) 6,432,100
========= ====== =========
</TABLE>
F-26
<PAGE>
ITERIS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(a) Pro forma amortization expense for period from April 1, 1999 to October 16,
1999 of $3.8 million of goodwill arising from acquisition based on expected
benefit period of 15 years.
(b) Pro forma interest expense for period from April 1, 1999 to October 16,
1999 on $250,000 of MMA purchase price paid by Parent. This amount is
included in "Payable to Parent" in the Company's consolidated balance sheet
at March 31, 1999. Interest expense is calculated at 10.5%, the Parent's
cost of related borrowed funds.
(c) Elimination of tax benefit recognized by MMA.
(d) Inclusion of 432,100 shares of the Company's common stock, which were
issued in the acquisition of MMA, in the weighted average number of shares
outstanding for the entire year used in calculating net income (loss) per
share.
(e) In April 1999, the Parent issued an additional 25,740 shares of the
Parent's Class A common stock valued at $250,000 to the MMA shareholders
upon resolution of a contingency specified in the merger agreement.
Additional shares from the Parent with a value of $1 million may be issued
at various dates through April 2001 in the event an initial public offering
of the Company's common stock is not consummated by those dates. In
addition, if the Company does not complete its initial public offering by
October 2001, then the holders of the Company's common stock issued in this
transaction will have the right to require the Parent to repurchase the
Company's common stock for a purchase price of $10 per share. Any amounts
paid by the Parent either in the form of its class A Common Stock, or cash,
under the merger agreement is repayable by the Company and will be included
in Payable to Parent.
F-27
<PAGE>
Contains the Iteris logo and the following slogan:
"We Make Your Drive BETTER"
<PAGE>
[LOGO OF ITERIS(TM) APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of the common stock being registered hereunder. All of the amounts shown
are estimates except for the SEC registration fee, the Nasdaq National Market
application fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $13,200
NASD filing fee.................................................. 5,500
Nasdaq National Market application fee........................... *
Printing expenses................................................ *
Legal fees and expenses (other than Blue Sky).................... *
Accounting fees and expenses..................................... *
Blue sky fees and expenses....................................... *
Miscellaneous.................................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
--------
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers
(a) As permitted by Delaware law, our certificate of incorporation
eliminates the liability of directors to us or our stockholders for monetary
damages for breach of fiduciary duty as directors, except to the extent
otherwise required by Delaware law.
(b) Our certificate of incorporation provides that we will indemnify each
person who was or is made a party to any proceeding by reason of the fact that
such person is or was a director or officer of the company against all expense,
liability and loss reasonably incurred or suffered by such person in connection
therewith to the fullest extent authorized by Delaware law. Our bylaws provide
for a similar indemnity to our directors and officers to the fullest extent
authorized by Delaware law.
(c) Our certificate of incorporation also gives us the ability to enter into
indemnification agreements with each of our directors and officers. We have
entered into indemnification agreements with certain of our directors and
officers, which provide for the indemnification of our directors or officers
against any and all expenses, judgments, fines, penalties and amounts paid in
settlement, to the fullest extent permitted by law.
Item 15. Recent Sale of Unregistered Securities
The following is a summary of transactions by us from November 30, 1996
through the date hereof involving sales of our securities that were not
registered under the Securities Act:
On October 16, 1998, we issued 457,000 shares of our common stock in
connection with our acquisition of Meyer, Mohaddes Associates, Inc. In April
1999, 24,900 of these shares were cancelled due to a purchase price adjustment.
Since September 30, 1997, we have granted options to purchase an aggregate
of 1,400,000 shares of common stock to employees and directors.
We did not employ any underwriters, brokers or finders in connection with
this transaction.
The sales of the securities listed above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder; or, with respect
II-1
<PAGE>
to issuances to employees, Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering
transaction pursuant to compensatory benefit plans and contracts relating to
compensation. The recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the instruments representing such securities issued in
such transactions. All recipients had adequate access, through their
relationships with us, to information about us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization, dated October 16, 1998, by and
among the Registrant, Odetics, Inc., MMA Acquisition Corp., and Meyer,
Mohaddes Associates, Inc. and its shareholders.
3.1 Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen common stock certificate.
4.2 Registration Rights Agreement between the Registrant and Abbas
Mohaddes, Michael Meyer, Viggen Davidian and Gary Hamrick, dated
October 16, 1998.
5.1* Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation.
10.1 1998 Stock Incentive Plan.
10.2 Form of 1998 Stock Option Agreement.
10.3 Form of Indemnification Agreement.
10.4 Form of Employee Stock Purchase Plan
10.5* Form of Separation and Distribution Agreement between Registrant and
Odetics.
10.6* Form of Tax Allocation Agreement between Registrant and Odetics.
10.7* Form of Services Agreement between Registrant and Odetics.
10.8* Form of Promissory Note between Registrant and Odetics.
10.9 Employment Agreement between Abbas Mohaddes, Meyer, Mohaddes
Associates, Inc., and Registrant, dated October 16, 1998.
10.10* Cooperative Development Agreement between the Registrant and Daimler-
Benz Aktlengesellschaft, dated July 22, 1998.
10.11+ Agreement between Freightliner Corporation and the Registrant, dated
January 1, 1999.
10.12 Federal Highway Administration Agreement between the U.S. Department of
Transportation and Registrant, dated September 30, 1996.
10.13 Contract for Maintenance Services between the Michigan Department of
Transportation and the Registrant, dated June 17, 1999.
10.14+ Firm Fixed Price Agreement for Odetics Services for MDOT ATMS/ATIS
Operational Deployment, Final Acceptance and Initial Two-Year Warranty,
between Rockwell Collins, Inc. and Registrant dated November 6, 1998.
10.15 Contract for ITS On-Call Technical Services Consultant Contract Number
699-WB between the Virginia Department of Transit and the Registrant,
dated December 15, 1998.
21.1 List of Subsidiaries
23.1* Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation
(included in exhibit 5.1).
23.2 Consent of Independent Auditors.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
24.1 Power of Attorney (included on the signature page to this Registration
Statement -- see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Portions of this exhibit are omitted and were filed separately with the
Securities and Exchange Commission pursuant to the Company's application
requesting confidential treatment under Rule 406 of the Securities Act of
1933.
(b) Financial Statement Schedules
Report of Independent Auditors on Financial Statement Schedule
Schedule II--Valuation And Qualifying Accounts
Other schedules are omitted because they are not applicable or because the
information is included in the financial statements or the related notes.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the 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 whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes 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 underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Anaheim, State of
California, on the 17th day of December 1999.
ITERIS, INC.
/s/ Jack Johnson
By: _________________________________
Jack Johnson
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Iteris, Inc., do hereby
constitute and appoint Jack Johnson and Victor Rumana or either of them, our
true and lawful attorneys-in-fact and agents, each with full power to sign for
us or any of us in our names and in any and all capacities, any and all
amendments (including post-effective amendments) to this registration
statement, or any related registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to file the same, with all exhibits thereto and other documents required in
connection therewith, and each of them with full power to do any and all acts
and things in our names and in any and all capacities, which such attorneys-in-
fact and agents, or either of them, may deem necessary or advisable to enable
Iteris, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement; and we hereby do ratify and
confirm all that the such attorneys-in-fact and agents, or either of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jack Johnson Chief Executive Officer, December 17, 1999
______________________________________ President and Director
Jack Johnson (Principal Executive Officer)
/s/ Victor Rumana Chief Financial Officer December 17, 1999
______________________________________ (Principal Financial Officer)
Victor Rumana
/s/ Joel Slutzky Chairman December 17, 1999
______________________________________
Joel Slutzky
/s/ Andrew H. Card, Jr. Director December 17, 1999
______________________________________
Andrew H. Card, Jr.
/s/ Gary Hernandez Director December 17, 1999
______________________________________
Gary Hernandez
/s/ Gregory A. Miner Director December 17, 1999
______________________________________
Gregory A. Miner
/s/ Samuel K. Skinner Director December 17, 1999
______________________________________
Samuel K. Skinner
/s/ William M. Spreitzer Director December 17, 1999
______________________________________
William M. Spreitzer
/s/ Paul E. Wright Director December 17, 1999
______________________________________
Paul E. Wright
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
Stockholders and Board of Directors
Iteris, Inc.
We have audited the financial statements of Iteris, Inc. as of March 31,
1998 and 1999, and for each of the three years in the period ended March 31,
1999, and have issued our report thereon dated December 3, 1999, except for
Note 7, as to which the date is December , 1999 (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Orange County, California
December 3, 1999 except for Note 7
as to which the date is
The foregoing report is in the form that will be signed upon the
reincorporation of the Company in Delaware and the transfer of net assets of
the ITS division of Odetics, Inc. to Iteris, Inc. that is expected to occur
prior to the effectiveness of the Company's initial registration statement on
Form S-1 as described in Note 7 to the consolidated financial statements.
/s/ Ernst & Young LLP
Orange County, California
December 17, 1999
II-5
<PAGE>
ITERIS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions to
beginning costs and Balance at
of year expense Deductions end of year
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Year ended March 31, 1997:
Accounts receivable
allowance.............. $0 $0 $0 $0
Year ended March 31, 1998:
Accounts receivable
allowance.............. $0 $0 $0 $0
Year ended March 31, 1999:
Accounts receivable
allowance.............. $0 $252 $0 $252
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization, dated October 16, 1998, by and
among the Registrant, Odetics, Inc., MMA Acquisition Corp., and Meyer,
Mohaddes Associates, Inc. and its shareholders.
3.1 Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen common stock certificate.
4.2 Registration Rights Agreement between the Registrant and Abbas
Mohaddes, Michael Meyer, Viggen Davidian and Gary Hamrick, dated
October 16, 1998.
5.1* Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
10.1 1998 Stock Incentive Plan.
10.2 Form of 1998 Stock Option Agreement.
10.3 Form of Indemnification Agreement.
10.4 Form of Employee Stock Purchase Plan
10.5* Form of Separation and Distribution Agreement between Registrant and
Odetics.
10.6* Form of Tax Allocation Agreement between Registrant and Odetics.
10.7* Form of Services Agreement between Registrant and Odetics.
10.8* Form of Promissory Note between Registrant and Odetics.
10.9 Employment Agreement and Noncompetition Agreement between Abbas
Mohaddes, Meyer, Mohaddes Associates, Inc., and Registrant, dated
October 16, 1998.
10.10* Cooperative Development Agreement between the Registrant and Daimler-
Benz Aktlengesellschaft, dated July 22, 1998.
10.11+ Agreement between Freightliner Corporation and the Registrant, dated
January 1, 1999.
10.12 Federal Highway Administration Agreement between the U.S. Department
of Transportation and Registrant, dated September 30, 1996.
10.13 Contract for Maintenance Services between the Michigan Department of
Transportation and the Registrant, dated June 17, 1999.
10.14+ Firm Fixed Price Agreement for Odetics Services for MDOT ATMS/ATIS
Operational Deployment, Final Acceptance and Initial Two-Year
Warranty, between Rockwell Collins, Inc. and Registrant dated November
6, 1998.
10.15 Contract for ITS On-Call Technical Services Consultant Contract Number
699-WB between the Virginia Department of Transit and the Registrant,
dated December 15, 1998.
21.1 List of Subsidiaries
23.1* Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation
(included in exhibit 5.1).
23.2 Consent of Independent Auditors.
24.1 Power of Attorney (included on the signature page to this Registration
Statement -- see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Portions of this exhibit are omitted and were filed separately with the
Securities and Exchange Commission pursuant to the Company's application
requesting confidential treatment under Rule 406 of the Securities Act of
1933.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
ODETICS, INC.,
ODETICS ITS, INC.,
MMA ACQUISITION CORP.,
and
MEYER, MOHADDES ASSOCIATES, INC.
AND ITS SHAREHOLDERS
October 16, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
ARTICLE I. THE MERGER............................................................................... 1
1.1 The Merger......................................................................... 1
1.2 Effective Time; Closing............................................................ 2
1.3 Effect of the Merger............................................................... 2
1.4 Articles of Incorporation; Bylaws.................................................. 2
1.5 Directors and Officers............................................................. 2
1.6 Effect on Capital Stock............................................................ 3
1.7 Surrender of Certificates.......................................................... 9
1.8 No Further Ownership Rights in MMA Common Stock.................................... 10
1.9 Tax Consequences................................................................... 10
1.10 Taking of Necessary Action; Further Action......................................... 10
1.11 Employee Vacation Benefits......................................................... 11
1.12 Certain Definitions................................................................ 11
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF MMA AND THE SHAREHOLDERS............................... 13
2.1 Organization and Good Standing..................................................... 13
2.2 Power, Authorization and Validity.................................................. 13
2.3 Capitalization..................................................................... 14
2.4 Subsidiaries....................................................................... 14
2.5 No Violation....................................................................... 15
2.6 MMA's Financial Statements......................................................... 15
2.7 Books and Records.................................................................. 15
2.8 Litigation......................................................................... 15
2.9 Undisclosed Liabilities............................................................ 16
2.10 Absence of Certain Changes......................................................... 16
2.11 Broker's Fees...................................................................... 16
2.12 Title to Assets.................................................................... 16
2.13 Legal Compliance................................................................... 17
2.14 Tax Matters........................................................................ 17
2.15 Properties......................................................................... 18
2.16 Intellectual Property.............................................................. 18
2.17 Material Contracts................................................................. 20
2.18 Notes and Accounts Receivable...................................................... 21
2.19 Bank Accounts; Line of Credit...................................................... 21
2.20 Insurance.......................................................................... 21
2.21 Employees.......................................................................... 21
2.22 Employee Benefits.................................................................. 23
2.23 Guaranties......................................................................... 25
2.24 Environment, Health, and Safety.................................................... 25
2.25 Good and Marketable Title to Shares................................................ 26
2.26 Consents of Third Parties.......................................................... 26
2.27 No Adverse Developments............................................................ 26
2.28 Full Disclosure.................................................................... 27
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.29 Accredited Investors................................................. 27
2.30 Investment Risk...................................................... 27
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ODETICS, ITS AND MERGER SUB........ 27
3.1 Organization and Good Standing....................................... 27
3.2 Power, Authorization and Validity.................................... 28
3.3 Capitalization....................................................... 28
3.4 No Violation......................................................... 29
3.5 Full Disclosure...................................................... 29
3.6 Litigation........................................................... 29
3.7 Financial Statements of ITS.......................................... 30
3.8 Undisclosed Liabilities.............................................. 30
3.9 Absence of Certain Changes........................................... 30
3.10 Broker's Fees........................................................ 30
3.11 Legal Compliance..................................................... 31
3.12 Consents of Third Parties............................................ 31
ARTICLE IV. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ODETICS................. 31
4.1 Organization and Good Standing....................................... 31
4.2 Power, Authorization and Validity.................................... 31
4.3 No Violation......................................................... 32
4.4 SEC Reporting........................................................ 32
4.5 Odetics Class A Common Stock......................................... 32
4.6 Insurance............................................................ 32
4.7 Odetics' Financial Statements........................................ 33
ARTICLE V. COVENANTS OF MMA AND SHAREHOLDERS.................................... 33
5.1 Maintenance of Business by MMA....................................... 33
5.2 Conduct of Business by MMA........................................... 33
5.3 Necessary Consents................................................... 35
5.4 Access of Information................................................ 35
5.5 Certain Defaults; Litigation......................................... 35
5.6 Other Negotiations................................................... 36
5.7 Market Stand-Off Agreement........................................... 36
5.8 Asset Transfer....................................................... 37
5.9 Best Efforts......................................................... 37
ARTICLE VI. COVENANTS OF ITS, MERGER SUB AND ODETICS............................. 37
6.1 Necessary Consents................................................... 37
6.2 Access of Information................................................ 37
6.3 Best Efforts......................................................... 38
6.4 Certain Defaults; Litigation......................................... 38
6.5 Agreement of Merger.................................................. 38
6.6 Release of Personal Guarantees....................................... 38
6.7 Insurance............................................................ 39
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII. INDEMNIFICATION............................................................................ 39
7.1 Indemnification by Shareholders........................................................ 39
7.2 Indemnification by Odetics and ITS..................................................... 40
7.3 Indemnification Procedure for Claims................................................... 40
7.4 Defense by Idemnifying Party........................................................... 41
7.5 Manner of Indemnification.............................................................. 41
7.6 Limitations on Indemnification......................................................... 41
ARTICLE VIII. CONDITIONS TO THE MERGER.................................................................. 42
8.1 Conditions to Obligations of Each Party to Effect the Merger........................... 42
8.2 Additional Conditions to Obligations of MMA............................................ 42
8.3 Additional Conditions to the Obligations of ITS and Merger Sub......................... 43
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER........................................................... 44
9.1 Termination............................................................................ 44
9.2 Effect of Termination.................................................................. 45
ARTICLE X. GENERAL PROVISIONS.......................................................................... 45
10.1 Survival............................................................................... 45
10.2 Further Assurances..................................................................... 45
10.3 Each Party to Bear Own Costs........................................................... 45
10.4 Headings............................................................................... 45
10.5 Entire Agreement; Waivers.............................................................. 45
10.6 Third Parties.......................................................................... 46
10.7 Successors and Assigns................................................................. 46
10.8 Notices................................................................................ 46
10.9 Consents............................................................................... 47
10.10 Attorneys' Fees........................................................................ 48
10.11 Governing Law.......................................................................... 48
10.12 Disputes............................................................................... 48
10.13 Counterparts........................................................................... 48
10.14 Severability........................................................................... 49
10.15 Publicity.............................................................................. 49
</TABLE>
iii
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B Form of Registration Rights Agreements
Exhibit C Persons to Sign Noncompetition Agreements and
Employment Agreements
Exhibit D Forms of Noncompetition Agreements
Exhibit E Forms of Employment Agreement
Exhibit F Form of Opinion of MMA's Counsel
Exhibit G Form of Termination Agreement
Exhibit H Form of Opinion of Odetics' and ITS' counsel
iv
<PAGE>
MMA DISCLOSURE SCHEDULES
SCHEDULE 2.1: DIRECTORS AND OFFICERS OF MMA
SCHEDULE 2.3(b): SHAREHOLDER AGREEMENTS
SCHEDULE 2.9: UNDISCLOSED LIABILITIES
SCHEDULE 2.10: ABSENCE OF CERTAIN CHANGES
SCHEDULE 2.12: TITLE TO ASSETS
SCHEDULE 2.15: REAL AND PERSONAL PROPERTY
SCHEDULE 2.16(a): INTELLECTUAL PROPERTY
SCHEDULE 2.16(b): REGISTERED INTELLECTUAL PROPERTY
SCHEDULE 2.16(c): SOFTWARE BY WORKSTATION
SCHEDULE 2.16(f): MATERIAL INTELLECTUAL PROPERTY CONTRACTS
SCHEDULE 2.17: MATERIAL CONTRACTS
SCHEDULE 2.19: BANK ACCOUNTS
SCHEDULE 2.20: INSURANCE POLICIES
SCHEDULE 2.21(a): EMPLOYMENT AGREEMENTS
SCHEDULE 2.22: EMPLOYEE BENEFIT PLANS
SCHEDULE 2.25: MMA SHAREHOLDERS
SCHEDULE 6.6: PERSONAL GUARANTEES
ITS DISCLOSURE SCHEDULES
SCHEDULE 3.1: OFFICERS AND DIRECTORS OF ITS
SCHEDULE 3.7: DRAFT FINANCIAL STATEMENTS OF ITS
SCHEDULE 3.8: UNDISCLOSED LIABILITIES
SCHEDULE 3.9: ABSENCE OF CERTAIN CHANGES
ODETICS DISCLOSURE SCHEDULES
SCHEDULE 4.1: OFFICERS AND DIRECTORS OF ODETICS
SCHEDULE 4.6: INSURANCE
v
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
---------
and entered into as of October 16, 1998, by and among Odetics, Inc., a Delaware
corporation ("Odetics"); Odetics ITS, Inc., a California corporation and wholly-
-------
owned subsidiary of Odetics ("ITS"); MMA Acquisition Corp., a Delaware
---
corporation and a wholly-owned subsidiary of ITS ("Merger Sub"), Meyer, Mohaddes
----------
Associates, Inc., a California corporation ("MMA"); Michael P. Meyer, an
---
individual ("Meyer"); Abbas Mohaddes, an individual ("Mohaddes"); Viggen
----- --------
Davidian, an individual ("Davidian"); and Gary Hamrick, an individual
--------
("Hamrick"). Meyer, Mohaddes, Davidian and Hamrick shall sometimes hereinafter
-------
collectively be referred to as the "Shareholders."
------------
RECITALS
A. The Boards of Directors of ITS and MMA believe it is in the best
interests of their respective companies and the shareholders of their respective
companies that MMA and Merger Sub combine into a single company through the
statutory merger of Merger Sub with and into MMA (the "Merger") and, in
------
furtherance thereof, such Boards have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding
shares of the Common Stock of MMA, no par value (the "MMA Common Stock"), shall
----------------
be converted into shares of Common Stock of ITS, no par value (the "ITS Common
----------
Stock"), on the terms set forth herein.
- -----
C. For federal income tax purposes, ITS and MMA intend that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the United States~ Internal Revenue Code of 1986, as amended (the "Code").
----
D. ITS and MMA intend to cause the Merger to be treated as a
purchase for accounting purposes.
E. The parties hereto desire to make certain representations and
warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("California
----------
Law"), Merger Sub shall be merged with and into MMA, the separate corporate
- ---
existence of Merger Sub shall cease and MMA shall continue as the surviving
corporation. MMA as the surviving corporation after the Merger is sometimes
hereinafter referred to as the "Surviving Corporation."
---------------------
<PAGE>
1.2 Effective Time; C1osing. Subject to the provisions of this Agreement,
-----------------------
the parties hereto shall cause the Merger to be consummated by filing a properly
executed Agreement of Merger, in substantially the form attached hereto as
Exhibit A, with the California Secretary of State in accordance with the
relevant provisions of California Law (the "Agreement of Merger") (the time of
-------------------
such filing, or such later time as may be agreed in writing by MMA and ITS and
specified in the Agreement of Merger, being the "Effective Time") as soon as
--------------
practicable on or after the Closing Date (as herein defined). The closing of the
Merger and the transactions contemplated hereby (the "Closing") shall take place
-------
simultaneously upon the execution of this Agreement at the offices of Brobeck,
Phleger & Harrison LLP, 38 Technology Drive, Irvine, California 92618, on
October 16, 1998, or as soon thereafter as practicable or at such other time,
date and 1ocation as the parties hereto agree in writing (the "Closing Date").
------------
The Closing shall be deemed to be complete when the parties hereto have
delivered all documents required to be delivered hereunder.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of
California Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of MMA and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of MMA and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation: Bylaws.
---------------------------------
(a) At the Effective Time, the Articles of Incorporation of MMA, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
therein or by California Law.
(b) The Bylaws of MMA, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors and
----------------------
officers of the Surviving Corporation shall be as follows, until their
respective successors are duly elected or appointed and qualified:
Directors: Joel Slutzky
Abbas Mohaddes
Michael P. Meyer
Jack Johnson
Gregory A. Miner
Officers: Abbas Mohaddes - President and Chief Executive
Officer
Michael P. Meyer - Vice President
Gregory A. Miner - Chief Financial Officer
and Secretary
2
<PAGE>
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of Merger Sub, MMA or the holders of
any MMA Common Stock:
(a) Conversion of MMA Common Stock; Holdback Amount. Each share of
-----------------------------------------------
MMA Common Stock issued and outstanding immediately prior to the Effective Time,
will be canceled and extinguished and automatically converted (subject to
Sections 1.6(d) and (e)) into the right to receive (i) within ten (10) business
days after the Closing Date that number of shares of unregistered Class A Common
Stock of Odetics equal to the quotient determined by dividing (A) the aggregate
number of shares of Odetics unregistered Class A Common Stock valued at $250,000
based on the average closing selling price of the Class A Common Stock of
Odetics on the Nasdaq National Market for the five business days immediately
prior to the Effective Time, as reported in The Wall Street Journal (or if not
-----------------------
so reported, as reported in another authoritative source acceptable to Odetics)
by (B) the number of shares of MMA Common Stock outstanding immediately prior to
the Effective Time (which is currently estimated to be 2,160 shares), carried to
the fifth decimal place and (ii) that number of shares of ITS Common Stock equal
to the quotient determined by dividing (A) the ITS Share Amount (as defined
below) by (B) the number of shares of MMA Common Stock outstanding immediately
prior to the Effective Time, carried to the fifth decimal place (the "Exchange
--------
Ratio"), upon surrender of the certificate representing such share of MMA Common
- -----
Stock in the manner provided in Section 1.7 (or in the case of a lost, stolen
or destroyed certificate, upon delivery of an affidavit (and bond, if required).
The initial ITS Share Amount shall be 457,000 subject to adjustment as set forth
in Section 1.6(e) below. At the Effective Time, all rights in respect of such
shares of MMA Common Stock shall cease to exist, other than the right to receive
shares of ITS Common Stock and Odetics Class A Common Stock as provided above.
Until surrendered, each outstanding certificate, if any, which prior to the
Effective Time represented issued and outstanding shares of MMA Common Stock
shall be deemed for all corporate purposes to evidence the right to receive such
amount of ITS Common Stock and Odetics Class A Common Stock. At the Effective
Time, ITS shall holdback and retain stock certificates representing 15.8% of the
total number of initial shares of ITS Common Stock to be issued to each
Shareholder pursuant to this Section 1.6(a) (the "Holdback Amount") to
---------------
accommodate the Purchase Price Adjustment set forth in Section 1.6(f).
Shareholders agree to execute and deliver to ITS at the Closing, blank stock
powers with respect to the shares comprising the Holdback Amount.
(b) Capital Stock of Merger Sub. Each share of Common Stock, no par
---------------------------
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
-----------------------
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, no par value
per share, of the Surviving Corporation. Each certificate evidencing ownership
of shares of Merger Sub Common Stock shall evidence ownership of such shares of
Common Stock of the Surviving Corporation.
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into ITS Common Stock or MMA Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to ITS
Common Stock or MMA Common Stock occurring on or after the date hereof and prior
to the Effective Time.
3
<PAGE>
(d) Fractional Shares. No fraction of a share of ITS Common Stock or
-----------------
Odetics Class A Common Stock will be issued by virtue of the Merger, but in lieu
thereof each holder of shares of MMA Common Stock who would otherwise be
entitled to a fraction of a share of ITS Common Stock. or Odetics Class A Common
Stock, as the case may be (after aggregating all fractional shares of ITS Common
Stock or Odetics Class A Common Stock, as the case may be, that otherwise would
be received by such holder) shall receive from ITS an amount of cash (rounded to
the nearest whole cent) equal to the product of such fraction, multiplied by Ten
Dollars ($10).
(e) Adjustments to ITS Deemed Value.
-------------------------------
(i) IPO Adjustment. In the event ITS completes an initial public
--------------
offering of ITS Common Stock (an "IPO") pursuant to a Registration
---
Statement (the "Registration Statement") filed under the Securities Act of
----------------------
1933, as amended (the "Securities Act") at an IPO price per share of less
--------------
than $9.34, the ITS Share Amount shall be increased by an amount equal to
the difference between (i) $4,250,000 and (ii) the actual IPO price per
share multiplied by 457,000. For example, in the event the IPO price per
share is $9.00, the ITS Share Amount shall be increased by 15,222 shares
based on the following calculation: $4,250,000 - [($9)(457,000)] =
$137,000/9 = 15,222 shares. Notwithstanding the foregoing, ITS agrees not
to consummate an IPO of its ITS Common Stock at an initial public offering
price per share of less than $5.00 without the consent of Abbas Mohaddes,
as representative of the Shareholders.
(ii) Six Month Delay. Subject to Section 1.6(h) hereof, in the
---------------
event the IPO of ITS Common Stock is not consummated within six (6) months
following the Closing Date, Odetics will pay to the Shareholders cash in
the aggregate amount of $250,000 or unregistered Class A Common Stock of
Odetics valued at $250,000 based on the average closing selling price of
the Class A Common Stock of Odetics on the Nasdaq National Market for the
five business days immediately prior to the end of such 180 day period, as
reported in The Wall Street Journal (or if not so reported, as reported in
-----------------------
another authoritative source acceptable to Odetics). Such additional
consideration shall be payable to the Shareholders on the tenth business
day following the expiration of such six month period on a pro rata basis,
based on the number of shares of ITS Common Stock issued to such
Shareholders pursuant to Section 1.6(a). Odetics shall have the sole
discretion to determine whether such additional consideration shall be
payable in cash, in Odetics unregistered Class A Common Stock, or any
combination thereof, provided, however, that the aggregate value of such
additional consideration payable under this Section 1.6(e)(ii) shall not
exceed $250,000.
(iii) Twelve Month Delay. Subject to Section 1.6(h) hereof, in
------------------
the event the IPO of ITS Common Stock is not consummated within twelve (12)
months following the Closing Date, Odetics will pay to the Shareholders
cash in the aggregate amount of $250,000 or unregistered Class A Common
Stock of Odetics valued at $250,000 based on the average closing selling
price of the Class A Common Stock of Odetics on the Nasdaq National Market
for the five business days immediately prior to the end of such twelve
month period, as reported in The Wall Street Journal (or if not so
-----------------------
reported, as reported in another authoritative source acceptable to
Odetics). Such additional consideration shall be payable to the
Shareholders on the tenth business day
4
<PAGE>
following the expiration of such twelve month period on a pro rata basis,
based on the number of shares of ITS Common Stock issued to such
Shareholders pursuant to Section 1.6(a). Odetics shall have the sole
discretion to determine whether such additional consideration shall be
payable in cash, in Odetics unregistered Class A Common Stock, or any
combination thereof, provided, however, that the aggregate value of such
additional consideration payable under Section 1.6(e)(iii) shall not exceed
$250,000.
(iv) Eighteen Month Delay. Subject to Section 1.6(h) hereof, in
--------------------
the event the IPO of ITS Common Stock is not consummated within eighteen
(18) months following the Closing Date, Odetics will pay to the
Shareholders cash in the aggregate amount of $250,000 or unregistered Class
A Common Stock of Odetics valued at $250,000 based on the average closing
selling price of the Class A Common Stock of Odetics on the Nasdaq National
Market for the five business days immediately prior to the end of such
eighteen month period, as reported in The Wall Street Journal (or if not so
-----------------------
reported, as reported in another authoritative source acceptable to
Odetics). Such additional consideration shall be payable to the
Shareholders on the tenth business day following the expiration of such
eighteen month period on a pro rata basis, based on the number of shares of
ITS Common Stock issued to such Shareholders pursuant to Section 1.6(a).
Odetics shall have the sole discretion to determine whether such additional
consideration shall be payable in cash, in Odetics unregistered Class A
Common Stock, or any combination thereof, provided, however, that the
aggregate value of such additional consideration payable under Section
1.6(e)(iv) shall not exceed $250,000.
(v) Twenty-Four Month Delay. Subject to Section 1.6(h) hereof,
-----------------------
in the event the IPO of ITS Common Stock is not consummated within twenty-
four (24) months following the Closing Date, Odetics will pay to the
Shareholders cash in the aggregate amount of $250,000 or unregistered Class
A Common Stock of Odetics valued at $250,000 based on the average closing
selling price of the Class A Common Stock of Odetics on the Nasdaq National
Market for the five business days immediately prior to the end of such
twenty-four (24) month, as reported in The Wall Street Journal (or if not
-----------------------
so reported, as reported in another authoritative source acceptable to
Odetics). Such additional consideration shall be payable to the
Shareholders on the tenth business day following the expiration of such
twenty-four month on a pro rata basis, based on the number of shares of
ITS Common Stock issued to such Shareholders pursuant to Section 1.6(a).
Odetics shall have the sole discretion to determine whether such additional
consideration shall be payable in cash, in Odetics unregistered Class A
Common Stock, or any combination thereof, provided, however, that the
aggregate value of such additional consideration payable under Section
1.6(e)(v) shall not exceed $250,000.
(vi) Thirty Month Delay. Subject to Section 1.6(h) hereof, in
------------------
the event the IPO of ITS Common Stock is not consummated within thirty (30)
months following the Closing Date, Odetics will pay to the Shareholders
cash in the aggregate amount of $250,000 or unregistered Class A Common
Stock of Odetics valued at $250,000 based on the average closing selling
price of the Class A Common Stock of Odetics on the Nasdaq National Market
for the five business days immediately prior to the end of such thirty (30)
month period, as reported in The Wall Street Journal (or if not so
-----------------------
reported, as reported in another authoritative source acceptable to
Odetics). Such additional consideration shall be payable to the
Shareholders on the tenth business day following the
5
<PAGE>
expiration of such thirty month period on a pro rata basis, based on the
number of shares of ITS Common Stock issued to such Shareholders pursuant
to Section 1.6(a). Odetics shall have the sole discretion to determine
whether such additional consideration shall be payable in cash, in Odetics
unregistered Class A Common Stock, or any combination thereof, provided,
however, that the aggregate value of such additional consideration payable
under Section 1.6(e)(vi) shall not exceed $250,000.
(vii) Registration of Additional Shares. With respect to the
---------------------------------
$250,000 of Odetics unregistered Class A Common Stock issued pursuant to
1.6(a) above, Odetics agrees at its sole cost and expense to file a
Registration Statement on Form 5-3 with the Securities and Exchange
Commission within ten (10) days after the Closing Date, to register all of
such shares in accordance with the terms of the Registration Rights
Agreement attached hereto as Exhibit B. To the extent Odetics chooses to
pay the additional consideration identified in Sections 1.6(e)(ii), (iii),
(iv), (v) or (vi) above or in Sections 1.6(g) or (h) below, in Odetics
unregistered Class A Common Stock, Odetics agrees at its sole cost and
expense to file a Registration Statement on Form S-3 with the Securities
and Exchange Commission as soon as reasonably practicable thereafter, but
in no event more than thirty (30) days after the end of the applicable time
period, to register all of such shares in accordance with the terms of the
Registration Rights Agreement attached hereto as Exhibit B.
(f) Purchase Price Adjustment. Within sixty (60) days after the
-------------------------
Effective Time, a balance sheet for MMA as of the Effective Time (the "Closing
-------
Balance Sheet") shall be audited by Ernst & Young LLP. Abbas Mohaddes, as the
- -------------
representative of the Shareholders, shall have the opportunity to review and
comment on the Closing Balance Sheet before Ernst & Young issues its audit
report; however, Ernst & Young shall have the full discretion whether or not to
incorporate such comments. The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles, except that footnotes
may not be required, and the Closing Balance Sheet shall be consistent with
MMA's past practices and with the MMA Balance Sheet as defined in Section 2.6.
The parties hereto agree that a purchase price adjustment shall be made for
each of the following events based on the corresponding items on the Closing
Balance Sheet:
(i) In the event the sum of MMA's cash, trade accounts
receivable net of allowance for doubtful accounts plus costs and estimated
earnings in excess of billings on uncompleted contracts less the sum of
MMA's line of credit balance, trade accounts payable and billings in excess
of cost and estimated earnings on completed contracts ("Net Working Capital
-------------------
Amount") is less than $1.71 million;
------
(ii) In the event the sum of MMA's accrued payroll and related
(including accrued vacation) plus accrued expenses (the "Accrued Expenses")
----------------
exceeds $200,000;
(iii) In the event MMA's deferred tax liabilities (the "Deferred
--------
Tax Liabilities") exceed $700,000; and
---------------
(iv) In the event there are any Taxes Due as defined in Section
1.6(j).
6
<PAGE>
ITS shall be entitled to cancel, on a pro rata basis among the
Shareholders, that number of shares of ITS Common Stock of the Shareholders
in the Holdback Amount with a value equal to the sum of (i) $1.71 million
less Net Working Capital Amount, (ii) the amount by which the Accrued
Expenses exceeds $200,000, (iii) the amount by which the Deferred Tax
Liabilities exceed $700,000 and (iv) the amount of any Taxes Due. For the
purpose of this Section 1.6(f) only, the shares to be cancelled in
accordance with this Section shall be valued at $10 per share.
Notwithstanding the foregoing, in no event shall the purchase price
adjustment exceed the Holdback Amount. The determination of the number of
shares to be cancelled shall be made by Ernst & Young. In the event that
the holders of a majority of the aggregate number of shares of ITS Common
Stock issued to the Shareholders pursuant to this Merger Agreement object
to the determination made by Ernst & Young, they shall notify ITS in
writing of the challenged items in the Closing Balance Sheet, including the
basis for their objection within 14 calendar days of their receipt of the
Ernst & Young determination. Such Shareholders shall then be entitled to
engage Deloitte & Touche LLP or any other mutually agreeable nationally
recognized "big six" accounting firm (the "Reviewing Accountant") to review
--------------------
the challenged items of the Closing Balance Sheet prepared by Ernst &
Young. The expense of such review shall be borne equally by the
Shareholders and ITS. In the event that the review confirms the Closing
Balance Sheet prepared by Ernst & Young or such review is not completed
within 60 calendar days after the engagement of the Reviewing Accountant,
the parties hereto agree that the determination of Ernst & Young will be
final, binding and conclusive for all purposes. In the event the Reviewing
Accountant disagrees with Ernst & Young's treatment of the challenged items
after the Reviewing Accountant consults with Ernst & Young and reviews the
supporting documentation of Ernst & Young, then the determination of the
Reviewing Accountant with respect to the items being challenged shall be
final, binding and conclusive for all purposes. The Shareholders agree to
cooperate with and assist Ernst & Young in its audit, and agree to provide
all such further documentation and assistance as Ernst & Young reasonably
requires to complete the audit required by this Section. As soon as
reasonably practicable following the determination of the number of shares
in the Holdback Amount to be cancelled, if any, ITS shall deliver the
balance of the shares in the Holdback Amount to the Shareholders at their
addresses set forth on the signature page hereof.
(g) The Odetics Put. In the event ITS does not consummate an IPO
---------------
of ITS Common Stock within three (3) years following the Closing Date, each
Shareholder shall have the right to obligate Odetics to purchase all, but
not less than all, of the shares of ITS Common Stock issued to such
Shareholder pursuant to Section 1.6(a) at a purchase price of $10 per
share, which may be payable, at the sole discretion of Odetics, in either
cash, shares of unregistered Class A Common Stock of Odetics, or any
combination thereof. Any Shareholder may exercise this right by giving
written notice of the election of this right to the Corporate Secretary of
Odetics in accordance with Section 10.8 of this Agreement within ten
business days immediately following the termination of such three year
period. Odetics shall deliver payment for the Shareholders' shares of ITS
Common Stock within ten (10) days following actual receipt by Odetics of
the certificates representing such shares of ITS Common Stock. To the
extent Odetics elects to pay the repurchase price in stock, such shares
will be valued based on the average closing sales price of Odetics Class A
Common Stock, over the five business days prior to the end of the three
year period. Odetics shall not be relieved of its obligations under this
Section 1.6(g) as a consequence of the elimination or reduction of the
Shareholders' equity interest in ITS under (i) a bankruptcy or insolvency
proceeding, (ii) the dissolution of ITS, or (iii) a reorganization of ITS.
7
<PAGE>
(h) The Shareholders Call. Odetics has the right exercisable
---------------------
at any time after the Closing Date and prior to the consummation of the IPO
to obligate the Shareholders to sell to Odetics all, but not less than all,
of the shares of ITS Common Stock issued to the Shareholders pursuant to
Section 1.6(a) at a purchase price of $10 per share, which may be
payable, at the sole discretion of Odetics, in either cash, shares of
unregistered Class A Common Stock of Odetics, or any combination thereof.
Odetics may exercise this right by giving written notice of the election of
this right to the Shareholders in accordance with Section 10.8 of this
Agreement. The Shareholders shall deliver the stock certificates
representing such shares of ITS Common Stock within five (5) business days
after Odetics' delivery of the notice of exercise and Odetics shall deliver
payment for such shares to the Shareholders within ten (10) business days
thereafter. To the extent Odetics elects to pay the repurchase price in
stock, such shares will be valued based on the average closing sales price
of Odetics Class A Common Stock, over the five business days prior to the
date notice is deemed given in accordance with Section 10.8 of this
Agreement. Any obligation Odetics and/or ITS may have to pay additional
consideration as a result of a delay in the IPO (as set forth in Sections
1.6(e) hereof) arising after Odetics has given notice of its intention to
repurchase all of the shares of ITS Common Stock in accordance with this
Section shall have no further force or effect.
(i) Securities Law Issues. The ITS Common Stock to be issued
---------------------
in the merger is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"). Each Shareholder agrees to take all
--------------
reasonable actions and execute all documents as ITS may reasonably request
to qualify the ITS Common Stock for such exemptions.
(j) Piggyback Registration Rights. ITS, at its sole expense,
-----------------------------
shall register, and Odetics shall cause ITS to register, not less than
15.6% of the shares of ITS Common Stock to be issued to each Shareholder
pursuant to Section 1.6(a) (without regard to any additional shares issued
pursuant to Sections 1.6(e)) in the Registration Statement on Form 5-1 of
ITS filed in connection with the IPO. ITS shall use its best efforts to
complete the IPO as soon as practicable after the Effective Time provided
that the IPO is on terms acceptable to Odetics. ITS agrees to execute and
deliver at the Closing a Registration Rights Agreement in substantially the
form attached hereto as Exhibit B to give effect to such registration
rights.
(k) Payment of Taxes Due. The Shareholders shall be responsible
--------------------
for any state and federal income taxes payable by MMA for all periods prior
to the Effective Time calculated on a cash basis in accordance with MMA's
prior practices (the "Taxes Due"), subject to the limitations set forth in
---------
and payable as a purchase price adjustment in accordance with Section
1.6(f) above. In calculating the Taxes Due, Ernst & Young shall exclude any
Deferred Tax Liabilities. Within 60 days following the Effective Time,
Ernst & Young shall calculate the amount of the Taxes Due, if any, based on
the Closing Balance Sheet. The Shareholders agree to cooperate with Ernst &
Young and to provide all such documentation which Ernst & Young reasonably
requires to complete its determination under this Section. In the event the
holders of a majority of the aggregate number of shares of ITS Common Stock
issued to the Shareholders pursuant to this Merger Agreement object to the
determination, such Shareholders shall be entitled to engage the Reviewing
Accountant to review the calculation of Taxes Due by Ernst & Young. The
expense of such review shall be borne equally by the Shareholders and ITS.
In the event the Reviewing Accountant disagrees with the determination of
Ernst & Young, after consulting with Ernst & Young and reviewing the
related working papers of Ernst & Young, the
8
<PAGE>
determination of the Reviewing Accountant of the Taxes Due shall be final,
binding and conclusive for all purposes. ITS shall be responsible for all
state and federal income taxes related to periods beginning at the
Effective Time, as well as any deferred state and federal income taxes for
periods prior to the Effective Time resulting solely from the conversion by
MMA from cash basis tax accounting to accrual basis tax accounting.
1.7 Surrender of Certificates.
-------------------------
(a) ITS to Provide ITS Common Stock. Within five (5)
-------------------------------
business days after the Effective Time, ITS and MMA shall exchange in
accordance with this Article I, the shares of ITS Common Stock issuable
pursuant to Section 1.6(a) in exchange for outstanding shares of MMA Common
Stock, and cash in an amount sufficient for payment in lieu of fractional
shares pursuant to Section 1 .6(d) and any dividends or distributions to
which holders of shares of MMA Common Stock may be entitled pursuant to
Section 1.7(c).
(b) Exchange Procedures. Upon surrender to ITS of the
-------------------
certificate(s) (the "Certificates") representing all of a Shareholder's MMA
------------
Common Stock, each such Shareholder shall receive, in exchange therefor, a
certificate representing that number of whole shares of ITS Common Stock to
---
which Shareholder is entitled to receive pursuant to Section 1.6(a),
together with a check representing the value of any fractional shares
determined in accordance with Section 1.6(d) above. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time,
for all corporate purposes, subject to Section 1.7(c) as to the payment of
dividends, to evidence only the ownership of the number of whole shares of
ITS Common Stock into which such shares of MMA Common Stock shall have been
so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(d) and
any dividends or distributions payable pursuant to Section 1.7(c).
(c) Distributions With Respect to Unexchanged Shares. No
------------------------------------------------
dividends or other distributions declared or made after the date of this
Agreement with respect to ITS Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered
certificate& with respect to the shares of ITS Common Stock represented
thereby .until the holders of record of such certificates shall surrender
such certificates. Subject to applicable law, following surrender of any
such certificates, ITS shall deliver to the record holders thereof, without
interest, the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole
shares of ITS Common Stock.
(d) Transfer Restrictions; Legends. The shares of ITS Common
------------------------------
Stock issued in the Merger shall not be transferable in the absence of an
effective registration statement under the Securities Act, or an exemption
therefrom. In the absence of an effective registration statement under the
Securities Act, neither such shares of ITS Common Stock nor any interest
therein shall be sold, transferred, assigned or otherwise disposed of,
unless ITS shall have previously received an opinion of counsel
knowledgeable in federal securities law, in form and substance reasonably
satisfactory to ITS and accompanied by such supporting documents as ITS may
reasonably request, to the effect that registration under the Securities
Act is not required in connection with such disposition. ITS shall be
entitled to give stop transfer instructions to its transfer agent with
respect to such shares of ITS Common Stock in order to enforce the
foregoing restrictions. The certificate or certificates representing the
shares of ITS Common
9
<PAGE>
Stock issued in the Merger shall bear the following legend restricting the
transfer thereof, in addition to any other legend required by applicable law:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
1.8 No Further Ownership Rights in MMA Common Stock. All shares of ITS
-----------------------------------------------
Common Stock issued upon the surrender for exchange of shares of MMA Common
Stock in accordance with the terms hereof (including any cash paid in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of MMA Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of MMA Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.10 Taking of Necessary Action: Further Action. If, at any time after the
------------------------------------------
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of MMA and Merger Sub, the officers and directors of MMA and
Merger Sub are fully authorized in the name of their respective corporations to
take, and shall take, all such lawful and necessary action.
1.11 Employee Vacation Benefits. As of the Effective Time, all employees
--------------------------
of MMA shall accrue vacation and other employment-related benefits in accordance
with the terms and provisions of the Employee Handbook of Odetics; provided,
however, that such employees shall receive credit for the length of their
employment with MMA, and such employees shall continue to accrue vacation
benefits at least at the same rate as such benefits were accrued at MMA
immediately prior to the Merger. Notwithstanding the foregoing, any increases in
the rate at which benefits are to be accrued shall be in accordance with the
Employee Handbook and related policies of Odetics.
1.12 Certain Definitions. As used in this Agreement the following terms
-------------------
have the following meanings (terms in the singular have a correlative meaning
when used in the plural and vice versa). Certain other terms are defined in the
text of this Agreement, the location of which is set forth herein.
10
<PAGE>
(a) "Affiliate" shall mean, as to any party, (i) an officer or
---------
director of such party, (ii) a Person that owns or controls more than 10% of
the voting equity securities of such party or (iii) a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such party.
(b) "Balance Sheet Date" shall have the meaning set forth in Section
------------------
2.6 of this agreement.
(c) "Closing" shall have the meaning set forth in Section 1.2 of this
-------
Agreement.
(d) "Closing Balance Sheet" shall have the meaning set forth in
---------------------
Section 1.6(f) of this Agreement.
(e) "Closing Date" shall have the meaning set forth in Section 1.2 of
------------
this Agreement.
(f) "Damages" shall have the meaning set forth in Section 7.1 of this
-------
Agreement.
(g) "Deductible" shall have the meaning set forth in Section 7.3 of
----------
this Agreement.
(h) "Effective Time" shall have the meaning set forth in Section 1.2
--------------
of this Agreement.
(i) "Employee Benefit Plan" means any (a) nonqualified deferred
---------------------
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; (d)
Multiemployer Plan (as set forth in Section 3(37) of ERISA and Section 414(f) of
the Code; and (e) any other nonqualified plan providing welfare benefits,
including but not limited to medical, dental, life insurance and disability
benefits.
(j) "Employee Pension Benefit Plan" means a plan as set forth in
-----------------------------
Section 3(2) of ERISA.
(k) "Employee Welfare Benefit Plan" means a plan as set forth in
-----------------------------
Section 3(1) of ERISA.
(1) "Environmental and Safety Laws" shall have the meaning set forth
-----------------------------
in Section 2.24(a) of this Agreement.
(m) "Exchange Ratio" shall have the meaning set forth in Section
--------------
1.6(a) of this Agreement.
(n) "Governmental Authority" shall have the meaning set forth in
----------------------
Section 2.2(b) of this Agreement.
11
<PAGE>
(o) "Hazardous Materials" shall have the meaning set forth in
--------------------
Section 2.24(a)(ii) of this Agreement.
(p) "Holdback Amount" shall have the meaning set forth in Section
---------------
1.6(a) of this Agreement.
(q) "Indemnified Party" shall have the meaning set forth in Section
-----------------
7.4 of this Agreement.
(r) "Indemnifying Party" shall have the meaning set forth in Section
------------------
7.4 of this Agreement.
(s) "Information Statement" means the Odetics ITS, Inc. Shareholder
---------------------
Information Statement delivered to the Shareholders.
(t) "Intellectual Property" shall have the meaning set forth in
---------------------
Section 2.16 of this Agreement.
(u) "knowledge" means, (i) when applied to the Shareholders, the
---------
actual knowledge, after reasonable investigation, of any Shareholder and (ii)
when applied to ITS or Merger Sub, the actual knowledge, after reasonable
investigation, of any officer of ITS or Merger Sub or the Chief Executive
Officer or the Chief Financial Officer of Odetics, (iii) when applied to MMA,
the actual knowledge, after reasonable investigation, of the officers of MMA and
the Shareholders, and (iv) when applied to Odetics, the actual knowledge, after
reasonable investigation, of any executive officer of Odetics
(v) "Material Adverse Effect" means any event, change or effect that
-----------------------
is materially adverse to the condition (financial or otherwise), properties,
assets, liabilities, business, operations or results of operations of such
entity and its subsidiaries, taken as a whole.
(w) "MMA Balance Sheet" shall have the meaning set forth in Section
-----------------
2.6 of this Agreement.
(x) "MMA Financial Statements" shall have the meaning set forth in
------------------------
Section 2.6 of this Agreement.
(y) "MMA Intellectual Property" shall have the meaning set forth in
-------------------------
Section 2.16 of this Agreement.
(z) "Net Working Capital Amount" shall have the meaning set forth in
--------------------------
Section 1.6(f) of this Agreement.
(aa) "Ordinary Course of Business" means the ordinary course of
---------------------------
business consistent with past custom and practice (including with respect to
quantity and frequency).
(bb) "ITS Share Amount" shall have the meaning set forth in Section
----------------
1.6(a) of this Agreement.
12
<PAGE>
(cc) "Person" means an individual, a partnership, a corporation, an
------
association, a joint stock MMA, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
(dd) "Security Interest" means any mortgage, pledge, lien, encumbrance
-----------------
or other security interest.
(ee) "Tax Returns" shall have the meaning set forth in Section 2.14
-----------
of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF
MMA AND THE SHAREHOLDERS
Except as disclosed in a document of even date herewith and delivered
by MMA to ITS prior to the execution and delivery of this Agreement and
referring to the section of the applicable representations and warranties in
this Agreement (the "MMA Disclosure Schedule"), MMA and the Shareholders
-----------------------
represent and warrant to ITS and Merger Sub as follows. All representations and
warranties are made as of the Closing Date unless specifically stated otherwise.
2.1 Organization and Good Standing. MMA is (a) a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California; (b) has the requisite corporate power and authority to own and lease
its properties and to carry on its business as now being conducted; and (c) is
qualified as a foreign corporation in each jurisdiction in which a failure to be
so qualified could reasonably be expected to have a Material Adverse Effect.
Schedule 2.1 of the MMA Disclosure Schedule lists the current directors and
- ------------
officers of MMA. MMA is not in material violation of any of the provisions of
its Articles of Incorporation or Bylaws. The Shareholders have provided ITS with
true and complete copies of MMA's Articles of Incorporation and Bylaws, each as
currently in effect on the date hereof.
2.2 Power, Authorization and Validity.
---------------------------------
(a) This Agreement has been duly executed and delivered by the
Shareholders. Each of the Shareholders has the requisite power and authority to
enter into and perform his obligations under this Agreement. MMA has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly and validly approved and authorized by MMA's Board
of Directors. The operations and business now being conducted by MMA have not
been conducted under any other name or entity.
(b) No filing with or authorization or approval of any governmental
or regulatory body, court, agency, official or authority (each, a "Governmental
------------
Authority") on behalf of MMA or any Affiliate of MMA is necessary to enable the
- ---------
Shareholders and MMA to enter into, and to perform their obligations under, this
Agreement, except for filings, authorizations or approvals where the failure to
make or obtain such filings, authorizations or approvals could not reasonably be
expected to have a Material Adverse Effect or substantially interfere with the
ability of the Shareholders or MMA to consummate the transactions contemplated
hereby.
13
<PAGE>
(c) This Agreement is, or when executed by the Shareholders and MMA
will be, a valid and binding obligation of each of the Shareholders and MMA,
enforceable in accordance with its terms, except as to the effect, if any, of
(i) applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (ii) rules of law or principles of equity governing
specific performance, injunctive relief and other equitable remedies, and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities.
2.3 Capitalization.
--------------
(a) The authorized capital stock of MMA consists of 100,000 shares of
MMA Common Stock, of which 2,160 shares are issued and outstanding as of the
date of this Agreement and have been validly issued, fully paid and are
nonassessable. No holder of MMA Common Stock is obligated to MMA under any note
(or other instrument evidencing indebtedness) with respect to the purchase of
such MMA Common Stock. MMA does not hold any shares of its capital stock as
treasury stock.
(b) There are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
any of MMA's authorized but unissued capital stock or any securities convertible
into or exchangeable for shares of MMA Common Stock, or obligating MMA to grant,
extend or enter into any such option, warrant, call, commitment, conversion
privilege or other right or agreement, and there is no liability for accrued but
unpaid dividends. Except as set forth on Schedule 2.3(b) of the MMA Disclosure
---------------
Schedule, there are no voting agreements, rights of first refusal or other
restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of MMA's outstanding
securities. MMA is not under any obligation to register under the Securities Act
any of its presently outstanding securities or any securities that may be
subsequently issued. All MMA Common Stock issued, offered and sold by MMA was
issued, offered and sold in compliance with federal and state securities laws.
2.4 Subsidiaries. MMA does not directly or indirectly own any equity or
------------
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.5 No Violation. Neither the execution and the delivery of this
------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental Authority
to which MMA is subject or any provision of the MMA Articles or the Bylaws of
MMA; (b) (i) conflict with, (ii) result in a breach of, (iii) constitute a
default under, (iv) result in the acceleration of, (v) create in any party the
right to require any notice under, accelerate, terminate, modify, or (vi) result
in the cancellation of any material agreement, contract, lease, license,
instrument, franchise, permit or other arrangement to which MMA is a party or by
which it is bound or to which any of its assets is subject; or (c) create or
impose any lien, charge or encumbrance on any of the assets of MMA.
2.6 MMA's Financial Statements. Ernst & Young has audited the balance
--------------------------
sheet of MMA (the "MMA Balance Sheet") as of December 31, 1997 (the "Balance
----------------- -------
Sheet Date") and the income statement of MMA for the year ended December 31,
- ----------
1997 (together with MMA Balance
14
<PAGE>
Sheet the "MMA Financial Statements"). Copies of the audited MMA Financial
------------------------
Statements have been provided to ITS and such MMA Financial Statements have been
prepared in accordance with generally accepted accounting principles, and (b)
fairly present the financial condition of MMA at the date therein indicated.
2.7 Books and Records. The books, records and accounts of MMA (i) have
-----------------
been maintained in accordance with good business practices on a consistent
basis, (ii) are stated in reasonable detail and reflect the transactions and
dispositions of the assets of MMA, and (iii) fairly reflect the basis for the
MMA Balance Sheet.
2.8 Litigation. MMA has not been and is not a party to any action, suit,
----------
proceeding, hearing, claim or arbitration or investigation that could reasonably
be expected to have a Material Adverse Effect or that may prevent consummation
of any of the transactions contemplated by this Agreement, in or before any
court or administrative agency, nor to the knowledge of the Shareholders, has
any such action, suit, proceeding, hearing, claim, arbitration or investigation
been threatened. Neither MMA nor any of its assets is subject to any outstanding
injunction, judgment, order, decree, ruling or charge. To the knowledge of the
Shareholders, there is no reasonable basis for any former shareholder of MMA, or
any other person, firm, corporation or entity, to assert a claim against MMA
based upon: (i) ownership or rights to ownership of any shares of the MMA's
capital stock, (ii) any rights as shareholder of MMA, including any option or
preemptive rights or rights to notice or to vote, or (iii) any rights under any
agreement among MMA and its shareholders. To the knowledge of the Shareholders,
there are no facts or circumstances which the Shareholders believe could
reasonably form the basis of any claim against MMA which could reasonably be
expected to have a Material Adverse Effect.
2.9 Undisclosed Liabilities. MMA has no liability (whether asserted or
-----------------------
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due except for
liabilities that: (i) are set forth in the MMA Balance Sheet or Schedule 2.9
------------
of the MMA Disclosure Schedule, (ii) could not reasonably be expected to have a
Material Adverse Effect, (iii) are trade payables incurred in the Ordinary
Course of Business, or (iv) are Taxes payable by MMA to the Effective Time.
2.10 Absence of Certain Changes. Except for transactions contemplated by
--------------------------
this Agreement or disclosed expressly on Schedule 2.10 of the MMA Disclosure
Schedule delivered in connection with this Agreement, since the Balance Sheet
Date, MMA has conducted its business only in the Ordinary Course of Business,
and there has not been: (i) any damage, destruction or loss (not covered by
insurance) with respect to any material assets of MMA, (ii) any change by MMA in
its accounting methods, principles or practices except as disclosed in the MMA
Financial Statements, (iii) any declaration, setting aside or payment of any
dividends or distribution in respect of shares of capital stock of MMA, or
redemption, purchase or other acquisition of any shares of capital stock of MMA,
(iv) any increase in the benefits under, or the establishment or amendment of,
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plans, or any increase in the
compensation payable or to become payable to directors, officers or employees of
MMA, (v) a Material Adverse Effect, or (vi) a commitment by MMA to undertake any
of the foregoing.
15
<PAGE>
2.11 Broker's Fees. Neither the MMA nor the Shareholders has any liability
-------------
or obligation to pay any fees or commissions to any broker, finder, agent or
similar Person with respect to the transactions contemplated by this Agreement,
and neither MMA nor the Shareholders has entered into any agreement, written or
oral, with respect to, or held any discussions with, any such broker, finder,
agent or similar Person with respect to the transactions contemplated by this
Agreement, the result of which would entitle such broker, finder, agent or
similar Person to a fee or commission in connection therewith.
2.12 Title to Assets. MMA has good and marketable title to, or a valid
---------------
leasehold interest in, the properties and assets used by it free and clear of
all Security Interests other than (a) those set forth on the search of filings
with respect to MMA under Article 9 of the Uniform Commercial Code, or any
equivalent statute, identified as Schedule 2.12 to the MMA Disclosure Schedule,
-------------
(b) Security Interests for current taxes not delinquent, (c) Security Interests
in connection with workers' compensation, unemployment insurance or other social
security obligations, (d) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
Ordinary Course of Business, (e) mechanic's workman's, materialmen's or other
like security interest arising in the Ordinary Course of Business with respect
to obligations which are not due and (f) such imperfections of title or Security
Interests, if any, which would not have a Material Adverse Effect. Other than
assets currently leased by MMA, no Person other than MMA owns any assets or
properties currently utilized in or reasonably necessary to the operations or
business of MMA. There are no existing contracts, agreements, commitments or
arrangements with any Person to acquire any of the assets or properties of MMA
(or any interest therein) other than in the Ordinary Course of Business, except
for this Agreement.
2.13 Legal Compliance. MMA has complied with all applicable laws (including
----------------
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local and foreign
governments (and all agencies thereof), except for violations that have not had
and could not reasonably be expected to have a Material Adverse Effect. No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, notice or inquiry has been filed or commenced against or received by,
any governmental body alleging any failure to so comply. MMA has all licenses,
permits, approvals, registrations, qualifications, certificates and other
governmental authorizations necessary for the present operations of MMA except
for licenses, permits, approvals, registrations, qualifications, certificates or
other governmental authorizations the lack of which have not had and could not
reasonably be expected to have a Material Adverse Effect.
16
<PAGE>
2.14 Tax Matters.
-----------
(a) For purposes of this Agreement, "Taxes" means all federal, state,
-----
municipal, local or foreign income, gross receipts, windfall profits, severance,
property, production, sales, use, value added, license, excise, franchise,
employment, withholding, capital stock, levies, imposts, duties, transfer and
registration fees or similar taxes or charges imposed on the income, payroll,
properties or operations of MMA, together with any interest, additions or
penalties, deficiencies or assessments with respect thereto and any interest in
respect of such additions or penalties.
(b) MMA has filed all federal and state reports and returns with
respect to Taxes based on income and, to the knowledge of MMA and the
Shareholders, has filed all other reports and returns with respect to all other
Taxes that it was required to file (collectively "Tax Returns"). All federal Tax
-----------
Returns (i) for fiscal years beginning January 1, 1991 through December 31,
1992 were prepared by Grobstein, Goldman, Stevenson, Siegle, LeVine & Mangel on
behalf of MMA, and (ii) for the fiscal years beginning January 1, 1993 through
December 31, 1997 were prepared by Williams & Ribb LLP on behalf of MMA. All
such Tax Returns were correct and complete in all material respects and no such
Tax Returns are currently the subject of audit. All Taxes owed by MMA (whether
or not shown on any Tax Return) were paid in full when due. Any contested Taxes
were contested or are being contested in good faith and, if currently being
contested, are supported by adequate reserves. MMA is not currently the
beneficiary of any extension of time within which to file any Tax Return, and
MMA has not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to any Tax assessment or deficiency.
(c) There is no dispute or claim concerning any liability of MMA for
Taxes either (i) claimed or raised by any authority in writing or (ii) based
upon personal contact with any agent of such authority. There are no tax liens
of any kind upon any property or assets of MMA, except for inchoate liens for
Taxes not yet due and payable.
(d) MMA has not made any payments, is not obligated to make any
payments (other than payments made in connection with the execution of this
Agreement), and is not a party to any agreement that under any circumstances
could obligate it to make any payments that will not be deductible under Code
Section 280G. MMA has not been a United States real property holding corporation
within the meaning of Code Section 897(c) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). MMA is not a party to any tax allocation or
sharing agreement. MMA (i) has not been a member of any affiliated group within
the meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local or foreign law filing a consolidated Federal Income
Return and (ii) has no liability for the taxes of any Person (other than MMA)
under Treas. Reg.(s)1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
2.15 Properties.
----------
(a) MMA does not own any real property.
(b) Schedule 2.15 of the MMA Disclosure Schedule lists all real or
-------------
personal property owned by, or leased or subleased to, MMA and indicates the
historical cost,
17
<PAGE>
depreciation value and date of acquisition of all such property. The
Shareholders have delivered to ITS correct and complete copies of the leases and
subleases listed in Schedule 2.15 of the MMA Disclosure Schedule.
-------------
(c) The material equipment and other tangible assets that MMA owns
and leases are free from material defects, have been maintained in accordance
with normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business, except for defects that could not reasonably be expected to have a
Material Adverse Effect.
2.16 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
---------------------
rights in, arising out of, or associated therewith: (i) all United
States, international and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) all inventions
(whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto
throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark
and service mark registrations and applications therefor throughout
the world; (vi) all databases and data collections and all rights
therein throughout the world; (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world, and
(viii) any similar or equivalent rights to any of the foregoing
anywhere in the world. Schedule 2.16(a) to the MMA Disclosure
Schedule identifies all Intellectual Property owned or licensed by
MMA
"MMA Intellectual Property" shall mean any Intellectual Property that
-------------------------
is owned by, or exclusively licensed to, MMA.
"Registered Intellectual Property" means all United States,
--------------------------------
international and foreign: (i) patents and patent applications
(including provisional applications), (ii) registered trademarks,
applications to register trademarks, intent-to-use applications, or
other registrations or applications related to trademarks, (iii)
registered copyrights and applications for copyright registration, and
(iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other
public legal authority.
"MMA Registered Intellectual Property" means all of the Registered
------------------------------------
Intellectual Property owned by, or filed in the name of, MMA.
(a) No material MMA Intellectual Property or product or service of
MMA is subject to any proceedings or outstanding decree, order, judgment,
agreement or stipulation
18
<PAGE>
restricting in any manner the use, transfer or licensing thereof by MMA, or wich
may affect the validity, use or enforceability of such MMA Intellectual
Property.
(b) To the knowledge of the Shareholders, each material item of MMA
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
MMA Registered Intellectual Property have been made and, to the best of the
Shareholders' and MMA's knowledge, all necessary documents, recordations and
certificates in connection with the MMA Registered Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Intellectual Property. Schedule 2.16(b)
to the MMA Disclosure Schedule identifies all MMA Registered Intellectual
Property.
(c) To the knowledge of the Shareholders, MMA owns and has good and
exclusive title to, or has license (sufficient for the conduct of its business
as currently conducted and as proposed by MMA to be conducted) to, each material
item of MMA Intellectual Property free and clear of any lien or encumbrance
(excluding licenses and related restrictions). Schedule 2.16(c) sets forth by
workstation, all software included on each workstation of MMA. MMA has not made
any unauthorized or unlawful duplications or copies of any Intellectual Property
used in MMA's business. MMA is the exclusive owner of all trademarks and trade
names used in connection with the operation or conduct of the business of MMA,
including the sale of any products or the provision of any services by MMA.
(d) MMA owns exclusively, and has good title to, all copyrighted works
developed by MMA or which MMA otherwise expressly purports to own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for MMA, MMA has a written agreement with
such third party with respect thereto and MMA thereby either (i) has obtained
ownership of, and is the exclusive owner of, or (ii) has obtained a license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to all such third party's Intellectual Property in
such work, material or invention by operation of law or by valid agreement to
the fullest extent it is legally possible to do so.
(f) Schedule 2.16(f) to the MMA Disclosure Schedule lists all
----------------
material contracts, licenses and agreements to which MMA is a party (i) with
respect to MMA Intellectual Property licensed or transferred to any third party
(other than end-user licenses in the ordinary course); or (ii) pursuant to which
a third party has licensed or transferred any material Intellectual Property to
MMA. All such material contracts, licenses and agreements are in full force and
effect and the consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification, cancellation,
termination or suspension of such contracts, licenses and agreements. MMA is in
material compliance with, and has not materially breached any term of any such
contracts, licenses and agreements and, to the knowledge of the Shareholders,
all other parties to such contracts, licenses and agreements are in compliance
with, and have not materially breached any term of, such contracts, licenses and
agreements. Following the Closing Date, MMA will be able to continue to exercise
all of its rights under such contracts, licenses and agreements to the same
extent MMA would have been able to had the transactions contemplated by this
Agreement not occurred and without the
19
<PAGE>
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which MMA would otherwise be required to pay.
(g) To the knowledge of the Shareholders, the operation of the
business of MMA as such business currently is conducted, including MMA's design,
development, manufacture, marketing and sale of the products or services of MMA
(including with respect to products currently under development) has not, does
not and will not infringe or misappropriate the Intellectual Property of any
third party (provided that with respect to patent and trademark rights, such
representation is limited to the Shareholders' knowledge) or, to the knowledge
of the Shareholders, constitute unfair competition or trade practices under the
laws of any jurisdiction.
(h) Neither the Shareholders nor MMA has received actual notice from
any third party that the operation of the business of MMA or any act, product or
service of MMA, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction and to the knowledge of the Shareholders no person has or is
infringing or misappropriating any MMA Intellectual Property.
(i) MMA has taken reasonable steps to protect MMA's rights in MMA's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to MMA.
2.17 Material Contracts. Schedule 2.17 to the MMA Disclosure Schedule sets
------------------ -------------
forth all of the agreements, contracts or understandings of MMA or to which its
properties or assets are bound, whether or not memorialized in writing, which
involve the payment or receipt by MMA of $100,000 in the aggregate (the
"Material Contracts"). The Shareholders have made available to ITS a correct and
------------------
complete copy of each written Material Contract and a written summary setting
for the terms and conditions of each oral Material Contract. With respect to
each Material Contract, (i) such Material Contract is valid, binding,
enforceable, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors rights generally; (ii) to the
knowledge of the Shareholders, no party is in material breach or default, and no
event has occurred, which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification or acceleration,
under the agreement; (iii) to the knowledge of the Shareholders, no party has
repudiated any material provision thereof; (iv) to the knowledge of the
Shareholders, there are no disputes, oral agreements or forbearance programs in
effect with respect thereto; (v) MMA has not assigned, transferred, mortgaged,
deeded in trust or encumbered any interest therein; and (vi) all approvals of
Governmental Authorities (including licenses and permits) required in connection
therewith have been obtained.
2.18 Notes and Accounts Receivable. To the knowledge of the Shareholders,
-----------------------------
all notes and accounts receivable of MMA (i) are reflected properly on the books
and records of MMA, (ii) are not subject to setoffs, defenses or counterclaims,
and (iii) arose in the Ordinary Course of Business and represent the obligations
of MMA's customers.
2.19 Bank Accounts; Line of Credit. Schedule 2.19 of the MMA Disclosure
----------------------------- -------------
Schedule lists all bank accounts of MMA, the authorized signatories to the
account and the name and telephone number of a contact person with respect to
such account. There are no amounts
20
<PAGE>
outstanding under the MMA's credit facility with Bank of America, and MMA has
taken all such actions necessary to terminate this facility on or prior to the
Closing Date.
2.20 Insurance. Schedule 2.20 of the MMA Disclosure Schedule sets forth a
--------- -------------
true and complete list of the current insurance policies of MMA, including names
of carriers, amounts of coverage and premiums therefor. MMA will maintain such
insurance through the Closing Date. The Shareholders have made available to ITS
and Odetics true and complete copies of all insurance policies listed on
Schedule 2.20 of the MMA Disclosure Schedule.
- -------------
2.21 Employees.
---------
(a) MMA does not have any employment contracts or consulting
agreements currently in effect that are not terminable at will (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
(b) Schedule 2.21(a) of the MMA Disclosure Schedule, together with
----------------
Schedule 2.22, lists each employment, severance or other similar contract,
- -------------
arrangement or policy and each plan or arrangement (written or oral) providing
insurance coverage (including any self-insured arrangements), workers' benefits,
vacation benefits, severance benefits, fringe benefits, disability benefits,
death benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or post-
retirement insurance, compensation or benefits for employees, consultants or
directors which (i) is entered into, maintained or contributed to, as the case
may be, by MMA and (ii) covers any former employee of MMA whose employment was
terminated within the past two years or any current employee.
(c) Since the Balance Sheet Date, there has been no amendment to,
written interpretation or announcement (whether or not written) by MMA relating
to, or change in employee participation or coverage under, any Employee Benefit
Plan that would increase materially the expense of maintaining such Employee
Benefit Plan above the level of the expense incurred in respect thereof for the
fiscal year ended on the Balance Sheet Date.
(d) MMA has provided, or will have provided prior to the Closing
Date, to individuals entitled thereto all required notices and coverage, if any,
pursuant to Section 4980B of the Code and the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to any
-----
"qualifying event" (as defined in Section 4980B(f)(3) of the Code) occurring
prior to and including the Closing Date, and no tax payable on account of
Section 4980B of the Code has been incurred with respect to any current or
former employees of MMA or other qualified beneficiaries (as defined in Section
4980B(g)(1)(A) of the Code).
(e) To the knowledge of the Shareholders, no benefit payable or
which may become payable by MMA pursuant to any Employee Benefit Plan shall
constitute an "excess parachute payment" (as defined in Section 280G(b)(1) of
the Code) which is subject to the imposition of an excise tax under Section 4999
of the Code or which would not be deductible by reason of Section 280G of the
Code.
(f) MMA is in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation
21
<PAGE>
matters and the Family Medical Leave Act of 1993, but not including the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Shareholders
-----
have no reason to believe that MMA does not have good labor relations and the
Shareholders have no knowledge that any of MMA's key employees intends to leave
its employ.
(g) To the knowledge of the Shareholders, no employee of MMA is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement or any other contract or agreement, or any restrictive
covenant relating to the right of any such employee to be employed thereby, or
to use trade secrets or proprietary information of others, and the employment of
such employees does not subject MMA to any liability. Neither the Shareholders
nor MMA knows of any grievance of any employee of MMA with respect to which the
aggrieved employee, or his or her representative, has threatened legal action
against MMA.
(h) A complete and correct list of all current employees and
officers of MMA and their current compensation (including salary, bonus or
commission arrangements or other contingencies) has previously been delivered to
ITS.
(i) MMA is not a party to any (i) agreement with any executive
officer or other key employees thereof (A) the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving MMA in the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee, or (C) providing severance benefits or other benefits after such
termination of employment; (ii) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement; or (iii) loans to any officers, directors or
employees.
2.22 Employee Benefits.
-----------------
(a) Schedule 2.22 of the MMA Disclosure Schedule lists each
Employee Benefit Plan that MMA maintains or to which MMA contributes or is
obligated to contribute.
(i) Each such Employee Benefit Plan (and each related trust
or fund established or maintained by MMA) substantially complies in form
and in operation with their terms, the applicable requirements of ERISA,
the Code, and other applicable laws.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s, and Summary Plan
Descriptions) have been timely filed with the applicable Government
Authority or distributed to plan participants, as the case may be, with
respect to each such Employee Benefit Plan. The applicable requirements of
Part 6 of Subtitle B of Title 1 of ERISA and of Code Section 4980B have
been met in all material respects with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan and to which such
requirements apply. To the knowledge of the Shareholders, no event has
occurred and no condition exists with respect to any Employee Benefit Plan
that would subject MMA to any liability or
22
<PAGE>
penalty under Code Sections 4972 or 4976 through 4980 or to a fine under
ERISA Sections 502(i) or 502(1).
(iii) All contributions, premiums or other payments (including
all employer contributions and employee salary reduction contributions)
which are due have been timely paid to each Employee Benefit Plan and all
contributions, premiums or other payments for any period ending on or
before the Closing Date which are not yet due shall have been paid to each
such Employee Benefit Plan by MMA prior to the Closing Date or shall be
accrued in accordance with the custom and practice of MMA.
(iv) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and which is intended to qualify under Code Section
401(a), has received (or an application has been filed to receive) a
favorable determination letter from the Internal Revenue Service with
respect to the qualification of the plan under Code Section 401(a) and the
exemption of any corresponding trust under Code Section 501 pursuant to the
Tax Reform Act of 1986 and subsequent legislation. Nothing has occurred
since the date of the most recent such determination letter that would
cause such Employee Pension Benefit Plan to lose its ability to rely on
such determination letter.
(v) Neither MMA nor any other Person or entity under common
control with MMA within the meaning of Section 414(b), (c) or (m) of the
Code and the regulations thereunder has now or at any previous time,
maintained, established, sponsored, participated in, or contributed to,
any Employee Pension Benefit Plan that is subject to Part 3 of Subtitle B
of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. No
Employee Benefit Plan constitutes, or has constituted, a Multiemployer
Plan. No Employee Welfare Benefit Plan or other Employee Benefit Plan
providing welfare benefits is funded with a trust or other funding vehicle,
other than insurance policies or contracts with a health maintenance
organization or similar health care delivery entity.
(vi) MMA has made available to ITS correct and complete copies
of the current plan documents; the most recent summary plan descriptions;
the most recent advisory opinion notification or determination letter
received from the Internal Revenue Service, if any; the Form 5500 Annual
Report for the most recent plan year; and the current version of all
related trust agreements, insurance policies or contracts, and other
funding agreements which implement each maintained Employee Benefit Plan.
The terms of any such documentation or description permit MMA to amend or
terminate at any time for any reason any such Employee Benefit Plan without
penalty.
(b) With respect to each Employee Benefit Plan that MMA, and/or any
controlled group of corporations within the meaning of Code Section 1563 (a
"Controlled Group of Corporations") which includes MMA, maintains or ever has
--------------------------------
maintained or to which any of them contributes, ever contributed, or ever has
been required to contribute:
(i) There have been no prohibited transactions within the
meaning of ERISA Section 406 and Code Section 4975 with respect to any such
Employee Benefit Plan. No fiduciary within the meaning of ERISA Section
3(21) has any liability for breach of fiduciary duty or any other failure
to act or comply in connection with the
23
<PAGE>
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or
threatened.
(c) MMA does not maintain or contribute to, has never maintained or
contributed to, and has never been required to contribute to, any Employee
Welfare Benefit Plan or any other Employee Benefit Plan providing medical,
health or life insurance or other welfare-type benefits for presently retired or
terminated employees or future retired or terminated employees, or their spouses
or their dependents (other than in accordance with Code Section 4980B or Part 6
of Subtitle B of Title I of ERISA).
(d) There is no liability in connection with any Employee Benefit
Plan that is not fully disclosed or provided for on MMA Balance Sheet for which
disclosure would be required under generally accepted accounting principles.
(e) Neither MMA nor any Employee Benefit Plan has any liability to
any plan participant, beneficiary or other person by reason of the payment of
benefits or the failure to pay benefits with respect to benefits under or in
connection with any such Employee Benefit Plan, other than claims in the normal
administration of such plans.
(f) Except as provided in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or other service provider of MMA to severance benefits or any
other payment, or (ii) increase the amount of compensation due any such employee
or service provider, or accelerate the time of payment or vesting thereof.
(g) Prior to the date of this Agreement, the Board of Directors of
MMA has approved the termination of the Section 401(k) Plan of MMA to be
effective prior to the Closing Date.
2.23 Guaranties. MMA is not a guarantor or surety with respect to any
----------
liability or obligation (including indebtedness) of any other Person.
2.24 Environment, Health, and Safety.
-------------------------------
(a) For purposes of this Agreement, the following terms have the
following meanings:
(i) "Environmental and Safety Laws" means any federal, state
-----------------------------
or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste,
hazardous waste, hazardous or toxic substances, materials, wastes,
pollutants or contaminants, or which are intended to assure the safety of
employees, workers or other persons, including the public.
(ii) "Hazardous Materials" means any toxic or hazardous
-------------------
substance, material or waste or any pollutant or contaminant, or infectious
or radioactive substance
24
<PAGE>
or material, including but not limited to those substances, materials and
wastes defined in or regulated under any Environmental and Safety Laws.
(b) To the knowledge of the Shareholders, MMA (i) currently
complies with the Environmental and Safety Laws (and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, directive
or notice has been filed or commenced against it alleging any such failure to
comply); (ii) is in compliance with all of the terms and conditions of all
permits, licenses, certificates and other authorizations that are required under
the Environmental and Safety Laws; and (iii) has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in the Environmental
and Safety Laws, except for noncompliance that could not reasonably be expected
to have a Material Adverse Effect.
(c) MMA has no known liability (whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) arising out of MMA's
generation, handling or disposal of any Hazardous Materials, and, to the
knowledge of the Shareholders, MMA has not generated, handled or disposed of any
Hazardous Materials, arranged for the disposal of any Hazardous Materials,
exposed any employee or other individual to any Hazardous Materials, or owned,
leased or operated any property or facility that could give rise to any
liability for assessment, cleanup or damage to any site, location, surface
water, groundwater, land surface or subsurface strata, for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental and Safety Law.
(d) To the knowledge of the Shareholders, no Hazardous Materials
are currently located at, on, in, or about any of the properties or equipment
used in the business of MMA in a manner that materially violates any
Environmental and Safety Laws or that requires assessment, cleanup or corrective
action of any kind under any Environmental and Safety Laws.
(e) All information provided by the Shareholders to ITS for use by
ITS in obtaining insurance for claims arising from Environmental and Safety Laws
or Hazardous Materials is true, complete and correct, and, to the knowledge of
the Shareholders, there exists no information not disclosed to ITS which would
be material to an insurance carrier providing insurance for claims arising from
Environmental and Safety Laws or Hazardous Materials.
2.25 Good and Marketable Title to Shares. Each Shareholder is the record
-----------------------------------
and beneficial owner of that number of shares of MMA Common Stock identified
opposite their respective names on Schedule 2.25 of the MMA Disclosure Schedule.
-------------
Each Shareholder has good and marketable title to all of the Shares held by him,
free and clear of any Security Interest, charge, restriction, or other option or
rights of third parties to purchase any shares or acquire any interest therein.
The Shareholders have and will have on the Closing Date, full right, power and
authority to sell, transfer and deliver the Shares as provided in this
Agreement.
2.26 Consents of Third Parties. No consent, waiver or approval of any
-------------------------
third party is necessary for the consummation by the Shareholders of the
transactions contemplated hereby.
2.27 No Adverse Developments. To the knowledge of the Shareholders and
-----------------------
except as would not have a Material Adverse Effect, there is no existing or
threatened development
25
<PAGE>
(exclusive of general economic factors affecting business in general) affecting
MMA (or affecting customers, suppliers, employees, and other Persons which have
relationships with MMA) that would prevent ITS from conducting the business of
MMA following the Closing Date in the manner in which it was conducted or
planned to be conducted by MMA prior to the Closing Date.
2.28 Full Disclosure. No statement by the Shareholders contained in this
---------------
Agreement and the exhibits and schedules attached hereto (when read together),
including the MMA Disclosure Schedule, contains or will contain at the Effective
Time any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading, in light of the circumstances under which they were made.
2.29 Accredited Investors. Each of Michael P. Meyer and Abbas Mohaddes is
--------------------
an "accredited investor" within the meaning of Rule 501(a) promulgated under the
Act.
2.30 Investment Risk. Each Shareholder is aware that the Odetics Class A
---------------
Common Stock and the ITS Common Stock (which term, for purposes of this Section
2.30, shall include the shares of ITS Common Stock to be issued pursuant to
Section 1.6(a)) have not been registered under the Securities Act or any
applicable state securities laws, and agrees that the Odetics Class A Common
Stock and the ITS Common Stock will not be offered or sold in the absence of
registration under the Securities Act and any applicable state securities laws
or an exemption from the registration requirements of the Securities Act and any
applicable state securities laws. Each Shareholder is acquiring the Odetics
unregistered Class A Common Stock and the ITS Common Stock for his or her own
account and for investment, and not with a view to the distribution thereof or
with any present intention of distributing or selling any of the Odetics
unregistered Class A Common Stock and the ITS Common Stock except in compliance
with the Securities Act. Each Shareholder represents that by reason of his or
her business and financial experience, and the business and financial experience
of those persons, if any, retained by him or her to advise him or her with
respect to his or her investment in the Odetics unregistered Class A Common
Stock and the ITS Common Stock, such Shareholder together with such advisors
have knowledge, sophistication and experience in business and financial matters
as to be capable of evaluating the merits and risk of the prospective
investment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ODETICS,
ITS AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered
by ITS to MMA and the Shareholders prior to the execution and delivery of this
Agreement and referring to the section of the applicable representations and
warranties in this Agreement (the "ITS Disclosure Schedule"), ITS, Merger Sub
-----------------------
and Odetics represent and warrant to MMA and the Shareholders as follows. All
representations and warranties of ITS, Merger Sub and Odetics set forth below
are joint and several and are made solely as of the Closing Date. All of the
following representations and warranties assume the transfer by Odetics of all
of the assets currently comprising the ITS business unit of Odetics (the "Asset
Transfer"), which transfer will occur no later than immediately prior to the
initial public offering of ITS Common Stock by ITS.
26
<PAGE>
3.1 Organization and Good Standing. Each of ITS and Merger Sub (a) is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its respective state of incorporation; (b) has the requisite corporate power
and authority to own and lease its properties and to carry on its business as
now conducted; and (c) is qualified as a foreign corporation in each
jurisdiction where the failure to be so qualified could reasonably be expected
to have a Material Adverse Effect. Schedule 3.1 of the ITS Disclosure Schedule
------------
sets forth the current directors and officers of ITS and Merger Sub.
3.2 Power, Authorization and Validity.
---------------------------------
(a) Each of ITS and Merger Sub has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly and
validly approved and authorized by the Board of Directors of ITS and Merger Sub.
Neither ITS nor Merger Sub is in material violation of its Articles of
Incorporation as currently in effect as of the date hereof. ITS has provided MMA
with true and complete copies of the Articles of Incorporation and Bylaws of ITS
and Merger Sub, each as currently in effect as of the date hereof. Schedule 3.1
------------
to the ITS Disclosure Schedule lists the current officers and directors of ITS
and Merger Sub. Neither ITS nor Merger Sub is in material violation of their
respective Articles of Incorporation as currently in effect as of the date
hereof.
(b) No filing with or authorization or approval of any Governmental
Authority on behalf of ITS or Merger Sub is necessary to enable either ITS or
Merger Sub to enter into, and to perform its obligations under, this Agreement
except for (i) such filings as may be required to comply with federal and state
securities laws; and (ii) filings, authorizations or approvals where the failure
to make or obtain such filings, authorizations or approvals would not reasonably
be expected to have a Material Adverse Effect or substantially interfere with
the ability of ITS or Merger Sub to consummate the transactions contemplated
hereby.
(c) This Agreement is, or when executed by ITS and Merger Sub will
be, the valid and binding obligation of ITS and Merger Sub, enforceable in
accordance with its terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(ii) rules of law or principles of equity governing specific performance,
injunctive relief and other equitable remedies, and (iii) the enforceability of
provisions requiring indemnification in connection with the offering, issuance
or sale of securities.
3.3 Capitalization. The authorized capital stock of ITS consists of
--------------
25,000,000 shares of ITS Common Stock, of which 6,000,000 shares were issued and
outstanding as of the date hereof, and 5,000,000 shares of ITS Preferred Stock,
none of which are issued and outstanding on the date hereof. As of the date of
this Agreement, 1,500,000 shares of ITS Common Stock were reserved for issuance
under ITS' 1998 Stock Incentive Plan (the "Stock Incentive Plan"), and 418,000
--------------------
shares of ITS Common Stock were subject to outstanding options granted under the
Stock Incentive Plan. Options to purchase an additional 480,000 shares of ITS
Common Stock were granted in 1997, but are not subject to the Stock Incentive
Plan. All of the outstanding shares of ITS Common Stock are held of record by
Odetics. The authorized capital stock of Merger Sub consists of 10,000 shares of
Merger Sub Common Stock, of which 1,000 shares were issued and outstanding as of
the date hereof. Neither ITS nor Merger Sub holds any shares
27
<PAGE>
of its capital stock as treasury stock. All of the outstanding shares of ITS
Common Stock and Merger Sub Common Stock are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights. All of the shares of
ITS Common Stock issued hereunder will be duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. There are no voting
agreements, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable federal and state securities laws).
Except for registration rights to be granted to the members of U.S. Public
Technologies, LLC, ITS is not under any obligation to register under the
Securities Act any of its presently outstanding securities or any securities
that may be subsequently issued.
3.4 No Violation. Neither the execution and the delivery of this
------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental Authority
to which ITS is subject or any provision of the Articles of Incorporation, as
amended, or Bylaws of ITS or Merger Sub, or (b)(i) conflict with, (ii) result
in a breach of, (iii) constitute a default under, (iv) result in the
acceleration of, (v) create in any party the right to require any notice under,
accelerate, terminate, modify, or (vi) result in the cancellation of any
material agreement, contract, lease, license, instrument, franchise, permit or
other arrangement to which ITS or Merger Sub is a party or by which it is bound
or to which any of its assets is subject.
3.5 Full Disclosure. No statement by Odetics, ITS or Merger Sub contained
---------------
in this Agreement and the exhibits and schedules attached hereto (including the
ITS Disclosure Schedule and the Odetics Disclosure Schedule), when read
together, and the Information Statement contains or will contain at the
Effective Time any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading, in light of the circumstances under which they were
made, except to the extent any such statement is untrue as a consequence of the
failure to transfer all of the assets currently comprising the ITS business unit
of Odetics (the "Asset Transfer") (which transfer will occur no later than
immediately prior to the IPO) or to the extent that additional facts would
otherwise have been disclosed if it were known as of the date of this Agreement
that the Asset Transfer would not occur.
3.6 Litigation. Neither Odetics, ITS nor Merger Sub has been and Odetics,
----------
ITS and Merger Sub are not parties to any action, suit, proceeding, hearing,
claim, arbitration or investigation that could reasonably be expected to have a
Material Adverse Effect or that may prevent consummation of any of the
transactions contemplated by this Agreement, in or before any court or
administrative agency, nor to the knowledge of Odetics, ITS and Merger Sub has
any such action, suit, proceeding, hearing, claim, arbitration or investigation
been threatened. Neither Odetics, ITS, Merger Sub nor their respective assets is
subject to any outstanding injunction, judgment, ruling, order, decree or
charge. To the knowledge of Odetics, ITS or Merger Sub, there are no facts or
circumstances which any of Odetics, ITS or Merger Sub believes could reasonably
form the basis of any claim against any of Odetics, ITS or Merger Sub, which
could reasonably be expected to have a Material Adverse Effect.
3.7 Financial Statements of ITS. Ernst & Young is in the process of
---------------------------
auditing the balance sheet of ITS (the "ITS Balance Sheet") as of March 31, 1998
-------------
(the "Balance Sheet Date") and the income statement of ITS for the year ended
------------------
March 31, 1998 (together with ITS Balance
28
<PAGE>
Sheet, the "ITS Financial Statements"). Copies of the draft ITS Financial
------------------------
Statements are attached hereto as Schedule 3.7 of the ITS Disclosure Schedule.
The ITS Financial Statements (a) have been prepared in accordance with
generally accepted accounting principles, assuming the occurrence of the Asset
Transfer, (b) fairly present the financial condition of ITS at the date therein
indicated assuming the consummation of the Asset Transfer, and (c) will not be
materially different from the final audited ITS Financial Statements.
3.8 Undisclosed Liabilities. Neither Merger Sub nor ITS has any liability
-----------------------
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including, but not limited to, any liability for taxes or accrued vacation
expenses), except for liabilities that: (i) are set forth in the ITS Balance
Sheet or Schedule 3.8 of the ITS Disclosure Schedule, (ii) could not reasonably
------------
be expected to have a Material Adverse Effect, or (iii) are trade payables
incurred by ITS or Merger Sub in the Ordinary Course of Business, or (iv) Taxes
payable by ITS or Merger Sub for the next fiscal year.
3.9 Absence of Certain Changes. Except for transactions contemplated by
--------------------------
this Agreement or disclosed expressly on Schedule 3.9 of the ITS Disclosure
------------
Schedule delivered in connection with this Agreement, since the Balance Sheet
Date, each of ITS and Merger Sub has conducted its business only in the Ordinary
Course of Business, and there has not been: (i) any damage, destruction or loss
(not covered by insurance) with respect to any material assets of ITS or Merger
Sub, (ii) any change by ITS or Merger Sub in its accounting methods, principles
or practices except as disclosed in the ITS Financial Statements, (iii) any
declaration, setting aside or payment of any dividends or distribution in
respect of shares of capital stock of ITS or Merger Sub, or redemption, purchase
or other acquisition of any shares of capital stock of ITS or Merger Sub, (iv)
any increase in the benefits under, or the establishment or amendment of, any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plans, or any increase in the
compensation payable or to become payable to directors, officers or employees of
ITS or Merger Sub, (v) a Material Adverse Effect, or (vi) a commitment by ITS
or Merger Sub to undertake any of the foregoing.
3.10 Broker's Fees. Neither Odetics, ITS nor Merger Sub has any liability
-------------
or obligation to pay any fees or commissions to any broker, finder, agent or
similar Person with respect to the transactions contemplated by this Agreement,
and neither Odetics, ITS nor Merger Sub has entered into any agreement, written
or oral, with respect to, or held any discussions with, any such broker, finder,
agent or similar Person with respect to the transactions contemplated by this
Agreement, the result of which would entitle such broker, finder, agent or
similar Person to a fee or commission in connection therewith.
3.11 Legal Compliance. Each of Odetics, ITS and Merger Sub has complied
----------------
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local and foreign governments (and all agencies thereof), except
for violations that have not had and could not reasonably be expected to have a
Material Adverse Effect. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, notice or inquiry has been filed or commenced
against or received by, any governmental body alleging any failure to so comply.
Odetics has all licenses, permits,
29
<PAGE>
approvals, registrations, qualifications, certificates and other governmental
authorizations necessary for the present operations of ITS and Merger Sub except
for licenses, permits, approvals, registrations, qualifications, certificates or
other governmental authorizations the lack of which have not had and could not
reasonably be expected to have a Material Adverse Effect.
3.12 Consents of Third Parties. No consent, waiver or approval of any
-------------------------
third party is necessary for the consummation by Odetics, ITS or Merger Sub of
the transactions contemplated hereby, which has not already been obtained or
waived.
ARTICLE IV.
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ODETICS
Except as disclosed in a document of even date herewith and delivered
by Odetics to MMA and the Shareholders prior to the execution and delivery of
this Agreement and referring to the section of the applicable representations
and warranties in this Agreement (the "Odetics Disclosure Schedule"), Odetics
---------------------------
represents and warrants to MMA and the Shareholders as follows. All
representations and warranties of Odetics set forth below are made solely as of
the Closing Date.
4.1 Organization and Good Standing. Odetics (a) is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has the requisite corporate power and authority to own and lease
its properties and to carry on its business as now conducted; and (c) is
qualified as a foreign corporation in each jurisdiction where the failure to be
so qualified could reasonably be expected to have a Material Adverse Effect.
Schedule 4.1 of the Odetics Disclosure Schedule sets forth the current directors
- ------------
and officers of Odetics.
4.2 Power, Authorization and Validity.
---------------------------------
(a) Odetics has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement have been duly and validly approved
and authorized by the Board of Directors of Odetics. Odetics is not in material
violation of its Certificate of Incorporation or Bylaws as currently in effect
as of the date hereof. Odetics has provided MMA with true and complete copies of
the Certificate of Incorporation and Bylaws of Odetics, as currently in effect
as of the date hereof.
(b) No filing with or authorization or approval of any Governmental
Authority on behalf of Odetics is necessary to enable Odetics to enter into, and
to perform its obligations under, this Agreement except for (i) such filings as
may be required to comply with federal and state securities laws; and (ii)
filings, authorizations or approvals where the failure to make or obtain such
filings, authorizations or approvals would not reasonably be expected to have a
Material Adverse Effect or substantially interfere with the ability of.Odetics
to consummate the transactions contemplated hereby.
(c) This Agreement is, or when executed by Odetics will be, the
valid and binding obligation of Odetics, enforceable in accordance with its
terms, except as to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (ii) rules of law or
principles of equity governing specific performance, injunctive
30
<PAGE>
relief and other equitable remedies, and (iii) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
4.3 No Violation. Neither the execution and the delivery of this
------------
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental Authority
to which Odetics is subject or any provision of the Articles of Incorporation,
as amended, or Bylaws of Odetics.
4.4 SEC Reporting. Since April 1, 1996, Odetics has filed all forms and
-------------
reports required to be filed by Odetics by the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder (the "SEC Reports") and has made available copies of such forms and
reports to MMA and Shareholders. As of their respective dates, the SEC Reports
(i) were prepared in accordance with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder applicable to such SEC Reports,
and (ii) did not at the time they were filed (or if amended by a filing prior to
the date of this Agreement, then on the date of the filing of such amendment)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statement
therein, in light of the circumstances under which they were made, not
misleading.
4.5 Odetics Class A Common Stock. Each share of Class A Common Stock of
----------------------------
Odetics to be issued to the Shareholders hereunder, when issued in accordance
with the terms of this Agreement, will be fully paid, validly issued and
nonassessable.
4.6 Insurance. Schedule 4.6 of the Odetics Disclosure Schedule sets forth
--------- ------------
a true and complete list of the current insurance policies of Odetics, including
names of carriers, amounts of coverage and premiums therefor. Odetics will
maintain such insurance through the Closing Date. Odetics has made available to
MMA and the Shareholders true and complete copies of all insurance policies
listed on Schedule 4.6 of the Odetics Disclosure Schedule.
4.7 Odetics' Financial Statements. Ernst & Young has audited the balance
-----------------------------
sheet of Odetics (the "Odetics Balance Sheet") as of March 31, 1998 (the
---------------------
"Balance Sheet Date") and the income statement of Odetics for the year ended
------------------
March 31, 1998 (together with Odetics Balance Sheet the "Odetics Financial
-----------------
Statements"). Copies of the audited Odetics Financial Statements have been
- ----------
provided to MMA and the Shareholders and such Odetics Financial Statements have
been prepared in accordance with generally accepted accounting principles, and
(b) fairly present the financial condition of Odetics at the date therein
indicated.
ARTICLE V.
COVENANTS OF MMA AND SHAREHOLDERS
5.1 Maintenance of Business by MMA. During the period from the date of
------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, MMA shall, and each of
the Shareholders shall use his best efforts to cause MMA to, carry on and
preserve the business, goodwill and the relationships of MMA with its
consultants, suppliers, employees and others in substantially the same manner as
they have been prior to the date hereof.
31
<PAGE>
5.2 Conduct of Business by MMA.
--------------------------
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, except as expressly permitted hereby, MMA shall
not, and the Shareholders shall not permit MMA to, without ITS' prior express
written consent:
(i) incur any additional indebtedness, other than
indebtedness in an aggregate amount of $100,000 incurred in the Ordinary
Course of Business; or guarantee any indebtedness or obligation of any
other party; or borrow any funds under MMA's credit facility with Bank of
America;
(ii) issue, redeem or purchase any of MMA's capital stock or
securities convertible into its capital stock or grant or issue any
options, warrants or rights to subscribe for its capital stock or
securities convertible into its capital stock or commit to do any of the
foregoing;
(iii) enter into, amend or terminate any contract, agreement
or understanding which involves the payment or receipt by MMA of $100,000
or more in the aggregate;
(iv) increase the compensation payable or to become payable
to any of MMA's officers, employees or agents, or adopt or amend any
employee benefit plan or arrangement; provided, however, that MMA shall be
permitted to pay performance-based bonuses to its employees at the
discretion of the MMA Board of Directors up to $130,000 in the aggregate so
long as such amount is paid to the employees or into an escrow account
prior to the Closing Date;
(v) enter into any employment contract or agreement with any
existing or prospective employee which is not terminable at will;
(vi) pay any obligation or liability, fixed or contingent,
other than current liabilities;
(vii) cancel, without full payment, any note, loan or other
obligation owing to MMA;
(viii) acquire or dispose of any properties or assets used in
the businesses of MMA except in the Ordinary Course of Business;
(ix) create or suffer to be imposed any lien, mortgage,
security interest or other charge on or against MMA's properties or assets,
except in the Ordinary Course of Business;
(x) engage in any activities or transactions outside the
Ordinary Course of Business of MMA as conducted at the date hereof;
(xi) make or adopt any change in the MMA Articles or the
Bylaws of MMA as in force and effect on the date hereof; or
32
<PAGE>
(xii) take any action, or omit to take any action, within
their control, that would cause, and shall promptly notify ITS in writing
of any event or occurrence which causes any of the representations and
warranties set forth in Section 2 hereof to become untrue, incomplete or
inaccurate in any material respect as or prior to the Closing Date.
(b) From the date hereof until the Closing, except as expressly
permitted hereby, MMA shall, and the Shareholders shall cause MMA to, unless
otherwise expressly consented to in writing by ITS;
(i) maintain MMA's existing insurance policies, unless
comparable insurance is substituted therefor, and shall not take any action
to terminate or modify those insurance policies;
(ii) maintain MMA's books and records consistent with past
practices and policies;
(iii) maintain in good working condition, ordinary wear and
tear excepted, and in compliance in all material respects with all
applicable laws and regulations, all fixed assets owned, leased or
operated, as the case may be, by MMA; and
(iv) observe, perform and remain in compliance with, MMA's
obligations under the Material Contracts.
5.3 Necessary Consents. Prior to the Closing, MMA and the Shareholders
------------------
will obtain such written consents and take such other actions as may be
necessary or appropriate to allow the consummation of the transactions
contemplated hereby and to allow the continuation of MMA's business by the
Surviving Corporation after the Effective Time as conducted at the date hereof
5.4 Access to Information. MMA shall, and the Shareholders shall cause
---------------------
MMA to, give ITS and its accountants, legal counsel and other representatives
full access, during normal business hours throughout the period prior to the
Closing, to all of the properties, books, contracts, commitments and records
relating to the business, assets and liabilities of MMA, and will furnish ITS,
its accountants, legal counsel and other representatives during such period all
such information concerning its affairs as ITS may reasonably request, and to
conduct such examination of the financial condition of MMA as ITS deems
necessary or advisable to familiarize itself with MMA's business, assets and
liabilities and such properties, books, contracts, commitments and records;
provided, that any furnishing of such information pursuant hereto or any
investigation by ITS shall be at ITS' expense and shall not affect ITS' right to
rely on the representations, warranties and covenants made by ITS in this
Agreement. Pending the Closing, ITS will hold in confidence all information so
obtained and will use such information only for purposes related to the
transactions contemplated hereby. ITS further agrees that, pending the Closing,
it will not disclose any such information to any third party except upon the
prior written consent of the Shareholders, or except as required by law or
except to its advisors who have agreed to maintain the confidentiality of such
information. If the transactions contemplated hereby are not consummated, ITS
will return all data to the Shareholders and continue to honor the foregoing
confidentiality and nondisclosure covenants indefinitely or unless disclosure of
any such information is required by law. Such obligation of confidentiality
33
<PAGE>
shall not extend to any information (i) which is shown to be or to have been
generally known to others engaged in the same trade or business as MMA; (ii)
previously known to ITS prior to the start of discussions leading to the
execution of this Agreement; (iii) obtained by ITS in good faith from third
parties who are not obligated to maintain the information confidential; or (iv)
that is or shall be public knowledge through no act or omission by ITS or any of
its directors, officers, employees or representatives.
5.5 Certain Defaults; Litigation. MMA and the Shareholders will give
----------------------------
prompt notice to ITS of:
(a) any notice of default received by the Shareholders or MMA
subsequent to the date of this Agreement and prior to the Closing under any
instrument or agreement to which MMA or its assets is a party or by which it is
bound, which default could, if not remedied, could reasonably be expected to
result in a Material Adverse Effect or which would render incorrect any
representation made herein, and
(b) any suit, action, proceeding or investigation instituted or
threatened against or affecting MMA subsequent to the date of this Agreement and
prior to the Closing which, if adversely determined, could result in a Material
Adverse Effect or which would render incorrect any representation made herein.
5.6 Other Negotiations. Prior to the Closing or such earlier date on
------------------
which this Agreement is terminated in accordance with its terms, the
Shareholders will not, and the Shareholders will cause MMA's officers,
directors, employees, agents and representatives not to, directly or indirectly,
initiate discussions or negotiate, or authorize any person or entity to discuss
or negotiate on behalf of the Shareholders or MMA, with any other party, or
entertain or consider any inquiries or proposals received from any other party,
concerning the possible sale of stock, merger or other business combination or
disposition of MMA's business, assets or capital stock, in whole or in part.
Neither the Shareholders nor MMA will furnish any information concerning MMA to
any person other than ITS or its agents for the purpose of, or with the intent
of, permitting such person or entity to evaluate a possible acquisition of MMA's
business, assets or capital stock, in whole or in part.
5.7 Market Stand-Off Agreement. Each Shareholder hereby agrees that,
--------------------------
during the period of duration specified by ITS and an underwriter of ITS Common
Stock or other securities of ITS, following the effective date of a registration
statement of ITS filed under the Securities Act of 1933, as amended, he shall
not, to the extent requested by ITS or such underwriter as the case may be,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of ITS held of record or beneficially owned by him at any time during
such period, without the prior written consent of such underwriter; provided,
however, that:
(a) such agreement shall be applicable only to such registration
statements of ITS which cover ITS Common Stock (or other securities of ITS) to
be sold on its behalf to the public in an underwritten public offering;
34
<PAGE>
(b) all executive officers and directors of ITS and holders of at
least five percent (5%) of the ITS Common Stock enter into similar agreements;
(c) such market stand-off time period shall not exceed one hundred
eighty (180) days;and
(i) such agreement shall not apply to any shares of ITS
Common Stock registered on such registration statement.
In order to enforce the foregoing covenant, ITS may impose stop-
transfer instructions with respect to the securities of ITS held by each
Shareholder until the end of such period. Each Shareholder agrees that this
Section 5.7 is irrevocable and shall be binding upon his heirs, legal
representatives, successors and assigns.
Notwithstanding the foregoing, the obligations described in this
Section shall not apply to a registration relating solely to employee benefit
plans on Form S-8 or similar form which may be promulgated in the future.
5.8 Asset Transfer. MMA and the Shareholders hereby acknowledge and agree
--------------
that as of the date of this Agreement all of the assets which currently comprise
the ITS business unit of Odetics have not been transferred to ITS and it is the
parties' intention that such assets will only be transferred to ITS immediately
prior to the initial public offering of ITS Common Stock by ITS (should such
public offering occur) and no assets shall be transferred from Odetics to ITS
until such time.
5.9 Best Efforts. The Shareholders and MMA will use their best efforts to
------------
perform and fulfill all obligations on their respective parts to be performed
and fulfilled under this Agreement, and to cause all the conditions precedent to
the consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. The Shareholders and MMA shall cooperate with ITS in
such actions and in securing requisite approvals and shall deliver such further
documents as ITS may reasonably request as necessary to evidence such
transactions.
ARTICLE VI.
COVENANTS OF ITS, MERGER SUB AND ODETICS
6.1 Necessary Consents. Prior to the Closing, ITS, Merger Sub and Odetics
------------------
will use their respective best efforts to obtain such consents and approvals and
take such other actions as may be necessary or appropriate to allow the
consummation of the transactions contemplated hereby.
6.2 Access to Information. ITS, Merger Sub and Odetics shall give the
---------------------
Shareholders and their accountants, legal counsel and other representatives full
access, during normal business hours throughout the period prior to the Closing,
to all of the properties, books, contracts, commitments and records relating to
the business, assets and liabilities of Odetics, ITS and Merger Sub, and will
furnish the Shareholders, their accountants, legal counsel and other
representatives during such period all such information concerning its affairs
as the Shareholders may reasonably request; provided, that any furnishing of
such information pursuant hereto or any investigation by the Shareholders shall
be at the Shareholders' expense and shall not affect the
35
<PAGE>
Shareholders' right to rely on the representations, warranties and covenants
made by ITS, Merger Sub and Odetics in this Agreement. Pending the Closing, the
Shareholders will hold in confidence all information so obtained and will use
such information only for purposes related to the transactions contemplated
hereby. The Shareholders further agree that, pending the Closing, they will not
disclose any such information to any third party except upon the prior written
consent of ITS, Merger Sub and Odetics, or except as required by law or except
to its advisors who have agreed to maintain the confidentiality of such
information. If the transactions contemplated hereby are not consummated, the
Shareholders will return all data to ITS, Merger Sub and Odetics and continue to
honor the foregoing confidentiality and nondisclosure covenants indefinitely
unless disclosure of any such information is required by law. Such obligation of
confidentiality shall not extend to any information (i) which is shown to be or
to have been generally known to others engaged in the same trade or business as
Odetics, ITS and Merger Sub; (ii) previously known to the Shareholders prior to
the start of discussions leading to the execution of this Agreement; (iii)
obtained by the Shareholders in good faith from third parties who are not
obligated to maintain the information confidential; or (iv) that is or shall be
public knowledge through no act or omission by the Shareholders or any of their
representatives.
6.3 Best Efforts. Each of ITS, Merger Sub and Odetics will use its best
------------
efforts to perform and fulfill all obligations on its part to be performed and
fulfilled under this Agreement, and to cause all the conditions precedent to the
consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. ITS, Merger Sub and Odetics shall cooperate with ITS
in such actions and in securing requisite approvals and shall deliver such
further documents as MMA and the Shareholders may reasonably request as
necessary to evidence such transactions.
6.4 Certain Defaults: Litigation. Odetics or ITS will give prompt notice
----------------------------
to Abbas Mohaddes, as representative of the Shareholders, of:
(a) any notice of default received by Odetics or ITS subsequent to
the date of this Agreement and prior to the Closing under any instrument or
agreement to which Odetics, ITS, Merger Sub or either of their assets is a party
or by which it is bound, which default could, if not remedied, could reasonably
be expected to result in a Material Adverse Effect or which would render
incorrect any representation made herein, and
(b) any suit, action, proceeding or investigation instituted or
threatened against or affecting ITS, Merger Sub or Odetics subsequent to the
date of this Agreement and prior to the Closing which, if adversely determined,
could result in a Material Adverse Effect or which would render incorrect any
representation made herein.
6.5 Agreement of Merger. As promptly as practicable, but in no event
-------------------
later than two business days following the Closing Date, ITS shall file the
Agreement of Merger with the California Secretary of State, in substantially the
form attached hereto as Exhibit A.
6.6 Release of Personal Guarantees. Odetics and ITS shall use their best
------------------------------
efforts to cause the Shareholders to be released from all of the personal
guarantees of MMA obligations identified on Schedule 6.6 of the MMA Disclosure
------------
Schedule. For the purposes of this Agreement, "best efforts" shall include the
substitution of another related entity as a guarantor of
36
<PAGE>
the obligation if required by the creditor; provided, however, that no
individual shall be required to provide a personal guaranty. Schedule 6.6 shall
------------
identify with specificity the creditor, the nature of the obligation and the
total amount of the obligation.
6.7 Insurance. At the Effective Time and for a period of not less than
---------
five (5) years thereafter, the errors and omissions insurance coverage in effect
during such period for ITS shall apply to and provide coverage for the employees
of the Surviving Corporation who are employed by the Surviving Corporation
during such period with respect to claims made for occurrences not previously
disclosed to ITS by MMA which occurred after September 1, 1997. ITS or Odetics
will continue to carry professional liability insurance covering such employees
of the Surviving Corporation during such five-year period with policy limits in
an amount not less than $1.0 million per occurrence or $2.0 million in the
aggregate.
ARTICLE VII.
INDEMNIFICATION
7.1 Indemnification by Shareholders. Except as otherwise provided in
-------------------------------
Section 7.3, each Shareholder shall severally and not jointly indemnify and hold
harmless ITS and the Surviving Corporation and their respective officers,
directors, employees, successors and assigns in respect of any and all claims,
actions, suits or other proceedings and any and all losses, costs, expenses,
liabilities, fines, penalties, interest and damages, whether or not arising out
of any claim, action, suit or other proceeding (and including reasonable counsel
and accountants' fees and expenses and all other reasonable costs and expenses
of investigation, defense or settlement of claims and amounts paid in
settlement) (collectively "Damages") incurred by, imposed on or borne by ITS,
-------
MMA or the Surviving Corporation resulting from:
(a) The breach of any of the representations or warranties made by
such Shareholder or MMA in this Agreement;
(b) The breach or the failure of performance by such Shareholder or
MMA of any of the covenants that they are to perform hereunder;
(c) The payment of any taxes (including interest and penalties) of
any kind or nature imposed (other than the Deferred Tax Liabilities as indicated
on the Closing Balance Sheet or any Taxes Due determined in accordance with
Section 1.6(j) that are reflected in the purchase price adjustment provided in
Section 1.6(f) of this Agreement), whether before or after the Closing, by any
government or subdivision thereof upon the business, assets or employees or
independent contractors of MMA or otherwise resulting from or relating to the
business or operations of MMA prior to the Closing or any of its properties or
assets as they existed as of or any time prior to the Closing Date and the
transactions contemplated by this Agreement;
(d) The existence prior to the Closing Date of Hazardous Materials
upon, about or beneath any real property owned, leased or operated by MMA on or
before the Closing or migrating or threatening to migrate from such real
property, or the existence of a violation of Environmental Laws pertaining to
such real property, regardless of whether the existence of such Hazardous
Materials or the violation of Environmental Laws arose prior to the present
ownership or operation of such real property by MMA or was disclosed to ITS by
the Shareholders or MMA;
37
<PAGE>
(e) The death of or injury to any person or damage to property
that occurred prior to the Closing and arose out of or in connection with
the business or operations of MMA (whether asserted, discovered or
established before or after the Closing), and whether or not it is the
subject matter of a claim or action disclosed in the Schedules to this
Agreement; or
(f) All employment-related claims and causes of action that have
arisen or arise out of or in connection with the operations of the business
of MMA conducted prior to the Closing (whether asserted, discovered or
established before or after the Closing).
7.2 Indemnification by Odetics and ITS. Odetics and ITS shall
----------------------------------
indemnify and hold harmless the Shareholders, in respect of any and all
Damages incurred by, imposed on or borne by the Shareholders resulting
from:
(a) The breach of any of the representations or warranties made
by Odetics, ITS or Merger Sub in this Agreement; or
(b) The breach or the failure of performance by Odetics, ITS or
Merger Sub of any of the covenants that it is to perform hereunder.
7.3 Mutual Indemnification for Errors and Omissions. Odetics and
-----------------------------------------------
ITS shall indemnify and hold harmless the Shareholders, and each
Shareholder shall severally and not jointly indemnify and hold harmless
Odetics, ITS and the Surviving Corporation and their respective officers,
directors, employees, successors and assigns, in respect of any and all
Damages incurred by, imposed by or borne by Odetics, ITS, the Surviving
Corporation or the Shareholders, as the case may be, resulting from an
error or omission (except for acts of gross negligence or willful
misconduct) made by an employee of the Surviving Corporation in his
capacity as such and which occurred while such individual was employed by
MMA and during the period prior to September 2, 1997 and on or after
January 3, 1991. Notwithstanding the foregoing, neither Odetics nor ITS
shall have any obligation to indemnify the Shareholders under this Section
7.3 for any singular incident or fact involving an error or omission unless
and until the Shareholders have suffered Damages for such incident or fact
in an amount in excess of $100,000 (the "Deductible"), in which event the
Shareholders may seek indemnity for all such Damages less the Deductible.
In addition, notwithstanding the foregoing the Shareholders shall not have
any obligation to indemnify Odetics, ITS or the Surviving Corporation under
this Section 7.3 for Damages in excess of $100,000 suffered by Odetics, ITS
or the Surviving Corporation with respect to any singular incident or fact
involving an error or omission. The foregoing sentence shall in no way
limit the Shareholders' obligation for the initial $100,000 of Damages
suffered by Odetics, ITS or the Surviving Corporation with respect to any
such incident or fact.
7.4 Indemnification Procedure for Claims. Whenever any claim shall
------------------------------------
arise for indemnification hereunder, the party entitled to indemnification
(the "Indemnified Party") shall promptly notify the other party or parties
-----------------
(the "Indemnifying Party") of the claim and, when known, the facts
------------------
constituting the basis for such claim; provided, that the Indemnified
Party's failure to give such notice shall not affect any rights or remedies
of an Indemnified Party hereunder with respect to indemnification for
damages except to the extent that (i) a claim is not made within the one
year period or five year period, as the case may be, specified in Section
7.7, or (ii) the Indemnifying Party is materially prejudiced thereby. In
the event of any claim for
38
<PAGE>
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnifying Party
shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the
Indemnifying Party (which shall not be unreasonably withheld) unless suit
shall have been instituted against it and the Indemnifying Party shall not
have taken control of such suit after notification thereof as provided in
Section 7.5 of this Agreement.
7.5 Defense by Indemnifying Party. In connection with any claim
-----------------------------
giving rise to indemnity hereunder or resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement,
the Indemnifying Party at its sole cost and expense may, upon written
notice to the Indemnified Party, assume the defense of any such claim or
legal proceeding if it thereafter diligently conducts the defense thereof
with counsel reasonably acceptable to the Indemnified Party. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party fails to conduct in a diligent manner the defense of any
such claim or litigation resulting therefrom, (i) the Indemnified Party may
defend against such claim or litigation, in such manner as it may deem
appropriate, including, without limitation, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate, and (ii) the
Indemnifying Party shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature
of any such settlement, the Indemnifying Party shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settle such third party claim in a reasonably prudent manner.
Each party agrees to cooperate fully with the other, such cooperation to
include, without limitation, attendance at depositions and the provision of
relevant documents as may be reasonably requested by the Indemnifying
Party; provided, that the Indemnifying Party will hold the Indemnified
Party harmless from all of its expenses, including reasonable attorneys'
fees, incurred in connection with such cooperation by the Indemnified
Party.
7.6 Manner of Indemnification. All indemnification hereunder shall be
-------------------------
effected by payment of cash or delivery of a certified or cashiers check to
the Indemnified Party as soon as reasonably practicable after the
conclusion of the proceeding.
7.7 Limitations on Indemnification. Notwithstanding any provision of
------------------------------
this Agreement to the contrary, the parties hereto shall (i) have no
obligation to indemnify any person entitled to indemnity under Section 7.1
unless the persons so entitled to indemnity thereunder have suffered
Damages in an aggregate amount in excess of $100,000 (the "Basket"), in
------
which event, such claims for all Damages may be made (including claims
within the Basket) and (ii) a claim for indemnity under Section 7.1 and
7.2 shall have been made within a one year period after the Closing Date.
In addition, a claim for indemnity under Section 7.3 shall have been made
within a five-year period after the Closing Date. Any Shareholder's
aggregate liability under Section 7.1 and Section 7.3 shall in no event
exceed two-thirds of the Fair Market Value of the ITS Common Stock to be
received by such Shareholder on the Closing Date. For the purposes of this
section, the Fair Market Value of the ITS Common Stock as of the Closing
Date
39
<PAGE>
shall be deemed to equal (i) the IPO price if the IPO has been completed at
the date the indemnification payment is required to be made, or (ii) $10
per share if the IPO has not been completed. Damages shall exclude any
amount with respect to which an Indemnified Party shall have received under
any insurance policy which provides coverage for the liability to which
such amount relates.
ARTICLE VIII.
CONDITIONS TO THE MERGER
8.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the approval of this Agreement and the Merger by all
of the shareholders of MMA.
8.2 Additional Conditions to Obligations of MMA. The obligation of
-------------------------------------------
MMA and the Shareholders to consummate this Agreement and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by Abbas Mohaddes, as the representative of the Shareholders:
(a) Representations and Warranties. Each representation and
------------------------------
warranty of ITS, Merger Sub and Odetics contained in this Agreement (i)
shall have been true and correct as of the date of this Agreement and (ii)
shall be true and correct on and as of the Effective Time with the same
force and effect as if made at the Effective Time.
(b) Agreements and Covenants. ITS, Merger Sub and Odetics shall
------------------------
have performed or complied in all material respects with all of their
respective agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date, and MMA
shall have received a certificate to such effect signed on behalf of ITS,
Merger Sub and Odetics by an authorized officer of each such corporation.
(c) Material Adverse Effect. No Material Adverse Effect with
-----------------------
respect to ITS, Merger Sub or Odetics shall have occurred since the date of
this Agreement.
(d) Certificate of ITS. MMA shall have been provided with a
------------------
certificate executed on behalf of ITS by its Chief Executive Officer to the
effect that, as of the Effective Time:
(i) all representations and warranties made by ITS, Merger
Sub and Odetics under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by ITS, Merger Sub and Odetics on or before
such date have been so performed in all material respects.
Such certificate shall also certify that the Officers of
Odetics, and ITS and Merger Sub executing this Agreement or the
documents contemplated herein have been duly elected, indicating the
positions held by such officers.
40
<PAGE>
(e) Registration Rights Agreement. Each of Odetics and ITS
-----------------------------
shall have entered into a Registration Rights Agreement with each of the
Shareholders in substantially the forms attached hereto as Exhibit B.
---------
(f) Consents. ITS shall have obtained all consents, waivers and
--------
approvals required in connection with the transactions contemplated hereby.
(g) Opinion of Counsel. MMA shall have received a legal opinion
------------------
from Brobeck, Phleger & Harrison LLP, counsel for Odetics and ITS, dated as
of the Closing Date, substantially in the form attached hereto as Exhibit
-------
H.
-
(h) Other Documents. MMA shall have received such other
---------------
documents and instruments as MMA or its counsel shall reasonably deem
necessary to consummate the transactions contemplated hereby.
8.3 Additional Conditions to the Obligations of ITS and Merger Sub.
--------------------------------------------------------------
The obligations of ITS and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by ITS:
(a) Representations and Warranties. Each representation and
------------------------------
warranty of MMA and the Shareholders contained in this Agreement (i) shall
have been true and correct as of the date of this Agreement and (ii) shall
be true and correct on and as of the Effective Time with the same force and
effect as if made at the Effective Time.
(b) Agreements and Covenants. MMA shall have performed or
------------------------
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date, and ITS shall have received a certificate to
such effect signed on behalf of MMA by an authorized officer of MMA.
(c) Material Adverse Effect. No Material Adverse Effect with
-----------------------
respect to MMA and its subsidiaries shall have occurred since the date
of this Agreement.
(d) Noncompetition Agreements and Employment Agreements. Each
---------------------------------------------------
of the persons set forth on Exhibit C hereto shall have entered into a
Noncompetition Agreement and Employment Agreement, in substantially the
forms attached hereto as Exhibit D and E, respectively.
---------------
(e) Consents. MMA shall have obtained all consents, waivers and
--------
approvals required in connection with the consummation of the transactions
contemplated hereby.
(f) Opinion of Counsel. ITS shall have received a legal opinion
------------------
from Cohen & Lord, counsel for MMA and the Shareholders, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit F.
---------
(g) Certificate of MMA. ITS shall have been provided with a
------------------
certificate executed on behalf of MMA by its Chief Executive Officer to the
effect that, as of the Effective Time:
41
<PAGE>
(i) all representations and warranties made by MMA and the
Shareholders under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by MMA and the Shareholders on or before
such date have been so performed in all material respects.
Such certificate shall also certify that the Officers of MMA
executing this Agreement or the documents contemplated herein have
been duly executed, indicating the positions held by such officers.
(h) Termination of Section 401(k) Plan. MMA shall have approved
----------------------------------
the termination of its Section 401(k) Plan prior to the date of this
Agreement and provided to ITS evidence of such termination in a form
reasonably satisfactory to ITS.
(i) Termination Agreement. The Shareholders shall have
---------------------
terminated that certain First Amended and Restated Shareholders' Agreement
dated December 16, 1996, as amended to date, among the Shareholders and
shall have provided to ITS a Termination Agreement, substantially in the
form attached hereto as Exhibit G.
---------
(j) Other Documents. ITS shall have received such other
---------------
documents and instruments as ITS or its counsel shall reasonably deem
necessary to consummate the transactions contemplated hereby.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. At any time prior to the Effective Time, whether
-----------
before or after approval of the matters presented in connection with the
Merger by the shareholders of MMA, this Agreement may be terminated:
(a) by the mutual consent of ITS and MMA; or
(b) By either MMA or ITS if, without fault of the terminating
party, the Closing shall not have occurred on or before December 31, 1998
(or such later date as may be agreed upon in writing by MMA and ITS).
9.2 Effect of Termination. In the event of termination as provided
---------------------
above, this Agreement shall forthwith become of no further force or effect
and all parties hereto shall bear their own costs associated with this
Agreement and all transactions mentioned herein; provided, that such
termination shall not relieve any person of liability for breach of or
interference with this Agreement, and the non-disclosure and non-use
provisions of Section 5.4 and 6.2 shall survive any termination of this
Agreement as provided in such sections.
ARTICLE X.
GENERAL PROVISIONS
10.1 Survival. All representations and warranties made by the
--------
Shareholders herein or in any instrument or document furnished in
connection herewith shall survive the Closing and (a)
42
<PAGE>
the representations and warranties set forth in Sections 2.14 and 2.24 will
survive until the expiration of the respective statute of limitations with
respect to such matters and (b) all other representations and warranties
set forth herein or in any instrument or document furnished in connection
herewith will expire on the first anniversary of the Closing Date. No claim
or action for indemnity pursuant to Sections 7.1 or 7.2 hereof for breach
of any representation or warranty shall be asserted or maintained by any
party hereto after the expiration of such representation or warranty
pursuant to the provisions of this Section 10.1 except for claims made in
writing prior to such expiration and actions (whether instituted before or
after such expiration) based on any claim made in writing prior to such
expiration.
10.2 Further Assurances. At the request of any of the parties hereto,
------------------
and without further consideration, the other parties agree to execute such
documents and instruments and to do such further acts as may be necessary
or desirable to effectuate the transactions contemplated hereby.
10.3 Each Party to Bear Own Costs. Each of the parties shall pay all
----------------------------
costs and expenses incurred or to be incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
10.4 Headings. The subject headings of the sections of this Agreement
--------
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
10.5 Entire Agreement; Waivers. This Agreement and the exhibits and
-------------------------
schedules hereto constitute the entire agreement among the parties
pertaining to the contemporaneous agreements, representations, and
understandings of the parties with regard to the subject matter of this
Agreement and supersedes all such prior agreements, representations and
understandings of the parties. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by all parties.
No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
10.6 Third Parties. Nothing in this Agreement, whether express or
-------------
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over against any party to
this Agreement.
10.7 Successors and Assigns. This Agreement shall be binding on, and
----------------------
shall inure to the benefit of, the parties to it and their respective
heirs, legal representatives, successors, and assigns.
10.8 Notices. Unless otherwise expressly provided herein, all notices,
-------
requests, demands, instructions, documents and other communications to be
given hereunder by either party to the other shall be in writing, shall be
sent to the address/fax number set forth below (provided that any party may
at any time change its address for notice or other such information
43
<PAGE>
by giving written notice thereof in accordance with this Section), and
shall be deemed to be duly given upon the earliest of (a) hand delivery,
(b) the first business day after sending by reputable overnight delivery
service for next-day delivery, (c) the third business day after sending by
first class United States mail, properly addressed, postage prepaid,
certified or registered, (d) the time of successful facsimile transmission
(or in the event the time of receipt of the fax in the city where the fax
is received is not during regular business hours on a business day, then at
the customary hour for the opening of business on the next business day),
but in either case only if a complete copy is also sent by first class
United States mail (postage prepaid) on the same day as facsimile
transmission or on the next business day, or (e) the date actually received
by the other party: All notices shall be properly addressed as follows:
To the Shareholders: At their respective addresses set forth
on the signature page hereof.
To MMA: Meyer, Mohaddes Associates, Inc.
900 Wilshire Boulevard, Suite 1200
Los Angeles, CA 90017
Attn: Mr. Abbas Mohaddes
Tel No.: (213) 488-0345
Fax No.: (213) 488-9440
With a copy to: Doug Gummerman, Esq.
Cohen & Lord, a Professional Corporation
4720 Lincoln Blvd., Suite 200
Marina Del Rey, CA 90292
Tel No.: (310) 821-1163
Fax No.: (310) 821-7828
To ITS and Merger Sub: Odetics ITS, Inc.
1515 South Manchester Avenue
Anaheim, CA 92802
Attn: Chief Executive Officer
Tel No.: (714) 774-5000
Fax No.: (714) 780-7246
To Odetics: Odetics, Inc.
1515 South Manchester Avenue
Anaheim, CA 92802
Attn: Chief Executive Officer
Tel No.: (714) 774-5000
Fax No.: (714) 780-7857
With a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
Attn: Patrick Arrington, Esq.
Tel No.: (949) 790-6300
Fax No.: (949) 790-6301
44
<PAGE>
Any party may change its address or fax number for the purposes of this
paragraph by giving notice of the new address to each of the other parties
hereto in the manner set forth above. Rejection or other refusal to accept,
or the inability to deliver because of a changed address of which no notice
was given, shall not affect the date of such notice sent in accordance with
this Section.
10.9 Consents. No party shall voluntarily or by operation of law
--------
assign, hypothecate, give, transfer, mortgage, sublet, license, or
otherwise transfer or encumber all or any part of its rights, duties, or
other interests in this Agreement or the proceeds thereof (collectively,
Assignment), without the other party's prior written consent, which consent
shall not be unreasonably withheld or delayed. Any attempt to make an
Assignment in violation of this provision shall be a material default under
this Agreement and any Assignment in violation of this provision shall be
null and void.
10.10 Attorneys' Fees. If any party to this Agreement shall bring any
---------------
action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the Prevailing Party shall be
------
entitled to recover as part of any such Action its reasonable attorneys'
fees and costs, including any fees and costs incurred in bringing and
prosecuting such Action and/or enforcing any order, judgment, ruling or
award granted as part of such Action. "Prevailing Party" within the meaning
----------------
of this Section 10.10 includes, without limitation, a party who agrees to
dismiss an Action upon the other party's payment of all or a portion of the
sums allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it.
10.11 Governing Law. The terms of this Agreement shall be governed by
-------------
the laws of the State of California applicable to agreements entered into,
to be wholly performed in and among residents exclusively of California.
10.12 Disputes. If the parties are unable, after good faith
--------
negotiations, which each hereby covenants to undertake, to resolve any
dispute arising between them within fifteen (15) days after notice is given
of such dispute, then the dispute will be referred to arbitration (which
the parties agree is the exclusive means of resolving any such dispute)
before one (1) arbitrator in Orange County, California, or any other place
mutually agreed upon by the parties hereto, in accordance with the
applicable rules then in effect of the Judicial Arbitration and Mediation
Service (or any other form of arbitration mutually acceptable to the
parties). Such arbitrator shall be selected by the mutual agreement of ITS
and Abbas Mohaddes, as representative to the Shareholders, or if no mutual
agreement can be reached within ten (10) days after the termination of the
fifteen day period referenced above, then such arbitrator shall be
appointed by the arbitration service. The civil discovery statutes of the
State of California shall apply to such arbitration. The determination made
in accordance with the rules of JAMS (or such other form of arbitration as
the parties may mutually agree) shall be delivered in writing to the
parties hereto and shall be final, binding and conclusive on the parties
hereto, and the amount of the claim, if any, determined to exist shall be a
valid claim and no further remedy shall be available to either party with
respect to such dispute and judgment may be entered upon such decision in
accordance with applicable law in any court having jurisdiction thereof.
The arbitration award shall include (i) a provision that the prevailing
party in such arbitration recover its costs relating
45
<PAGE>
to the arbitration and reasonable attorneys' fees from the other party;
(ii) the amount of such costs and fees, and (iii) an order that the losing
party pay the fees and expenses of the arbitrator.
10.13 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
10.14 Severability. All provisions contained herein are severable and
------------
in the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such
provision shall be construed as if it were written so as to effectuate to
the greatest possible extent the parties' expressed intent; and in every
case the remainder of this Agreement shall not be affected thereby and
shall remain valid and enforceable, as if such affected provision were not
contained herein.
10.15 Publicity. The parties shall cooperate with each other in the
---------
development and distribution of all news releases and other public
disclosures relating to the transactions contemplated hereby. None of the
parties shall issue or make, or cause to have issued or made, any press
release or announcement concerning the transactions contemplated hereby
without the advance approval in writing of the form and substance thereof
by the other parties, unless otherwise required by applicable law;
provided, however, that Odetics or ITS may make any public announcement
concerning the Merger if MMA fails to grant such consent and, in the
opinion of counsel to ITS or Odetics, such announcements is required to
comply with applicable law.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized respective officers as of the date first
written above.
"ITS" ODETICS ITS, INC.,
a California corporation
By: /s/ Jack Johnson
-----------------------------------
Jack Johnson, President and
Chief Executive Officer
By: /s/ Gregory A. Miner
-----------------------------------
Gregory A. Miner, Secretary
"Merger Sub" MMA ACQUISITION CORP.,
a Delaware corporation
By: /s/ Jack Johnson
-----------------------------------
Jack Johnson, President
By: /s/ Gregory A. Miner
-----------------------------------
Gregory A. Miner, Secretary
"Odetics" ODETICS, INC.,
a Delaware corporation
By: /s/ Joel Slutzky
-----------------------------------
Joel Slutzky, Chairman and
Chief Executive Officer
By: /s/ Jerry F. Muench
-----------------------------------
Jerry F. Muench, Secretary
[Signature Page to Agreement and Plan of Reorganization]
47
<PAGE>
"MMA" MEYER, MOHADDES ASSOCIATES, INC.,
a California corporation
By: /s/ Abbas Mohaddes
---------------------------------------
Abbas Mohaddes, Chief Executive Officer
By: /s/ Michael P. Meyer
---------------------------------------
Michael P. Meyer, Secretary
"Shareholders" /s/ Michael P. Meyer
------------------------------------------
MICHAEL P. MEYER
Address: 2525 Outpost Dr.
--------------------------------
Los Angeles, CA 90068
--------------------------------
Fax No.: 213-878-2569
----------------------------------
Tel No.: 213-878-2525
----------------------------------
/s/ Abbas Mohaddes
------------------------------------------
ABBAS MOHADDES
Address: 3432 Seaglen Dr.
--------------------------------
Rancho P.V. Ca. 90275
--------------------------------
Fax No.: 310-544-3356
----------------------------------
Tel No.: 310-544-5056
----------------------------------
/s/ Viggen Davidian
------------------------------------------
VIGGEN DAVIDIAN
Address: 19714 Eagle Ridge Ln
--------------------------------
Northridge, CA 91326
--------------------------------
Fax No.:
----------------------------------
Tel No.: (818) 363-8195
----------------------------------
[Signature Page to Agreement and Plan of Reorganization - Continued]
48
<PAGE>
/s/ Gary Hamrick
------------------------------
GARY HAMRICK
Address: 47 La Linda Dr.
---------------------
Long Beach CA 90807
---------------------
Fax No.:______________________
Tel No.: 562 427-2666
----------------------
[Signature Page to Agreement and Plan of Reorganization - Continued]
49
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ITERIS, INC.
ARTICLE 1
The name of this corporation is Iteris, Inc. (the "Corporation").
ARTICLE 2
The address of the registered office of the Corporation in the State of
Delaware is 1012 Centre Road, Wilmington, Delaware 19805. The name of the
Corporation's registered agent at that address is Corporation Service Company.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware, as amended from time to time.
ARTICLE 4
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation shall have authority to issue is
45,000,000 shares. The total number of shares of Common Stock which the
Corporation shall have authority to issue is 40,000,000 shares, $0.001 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have authority to issue is 5,000,000 shares, $0.001 par value per share.
The Board of Directors is authorized, subject to limitations prescribed by law,
to provide for the issuance of the shares of Preferred Stock in one or more
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or
restrictions thereof. The authority of the Board with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;
<PAGE>
(d) Whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund; and
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series.
ARTICLE 5
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors and elections of directors need not be
by written ballot unless otherwise provided in the Bylaws. The number of
directors of the Corporation shall be fixed from time to time by the Board of
Directors either by a resolution or Bylaw adopted by the affirmative vote of a
majority of the entire Board of Directors.
Meetings of the stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Delaware Statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or by the Bylaws of the Corporation.
ARTICLE 6
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the director derives an improper personal
benefit.
This Corporation shall, to the maximum extent permitted from time to time
under the law of the State of Delaware, indemnify and upon request shall advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
Corporation or while a director or officer is or was serving at the request of
this Corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim;
provided; however, that the foregoing shall
2
<PAGE>
not require this Corporation to indemnify or advance expenses to any person in
connection with any action, suit, proceeding, claim or counterclaim initiated by
or on behalf of such person. Such indemnification shall not be exclusive of
other indemnification rights arising under any bylaw, agreement, vote of
directors or stockholders or otherwise and shall inure to the benefit of the
heirs and legal representatives of such person. Any person seeking
indemnification under this Article 6 shall be deemed to have met the standard of
conduct required for such indemnification unless the contrary shall be
established.
If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the directors of the
Corporation shall be limited or eliminated to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal or modification of this Article 6 by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE 7
The Board of Directors shall have the power to make, alter, amend, change,
add to or repeal the Bylaws of the Corporation.
Notwithstanding the foregoing provision of this Article 7, the Bylaws may
be rescinded, altered, amended or repealed in any respect by the affirmative
vote of the holders of at least 66-2/3% of the outstanding voting stock of the
Corporation, voting together as a single class.
ARTICLE 8
The Board of Directors shall be and is divided into three classes, Class I,
Class II and Class III. The number of directors in each class shall be the
whole number contained in the quotient arrived at by dividing the number of
authorized directors by three, and if a fraction is also contained in such
quotient then if such fraction is one-third (1/3) the extra director shall be a
member of Class III and if the fraction is two-thirds (2/3) one of the extra
directors shall be a member of Class III and the other shall be a member of
Class II. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that the directors of the Corporation as of the date of
filing of this Certificate of Incorporation are hereby each assigned to a class,
and the director assigned to Class I shall serve for a term ending on the date
of the annual meeting in 2000, the directors assigned to Class II shall serve
for a term ending on the date of the annual meeting in 2001, and the directors
assigned to Class III shall serve for a term ending on the date of the annual
meeting in 2002.
The members of the present Board of Directors are allocated as follows:
Class I Class II Class III
--------------------- -------------------- ----------------------
Gregory Miner Joel Slutzky Jack Johnson
Samuel K. Skinner Gary Hernandez Andrew H. Card, Jr.
Paul E. Wright William M. Spreitzer
In the event of any increase or decrease in the authorized number of
directors, (a) each director then serving as such shall nevertheless continue as
a director of the class of which he or she is a member
3
<PAGE>
until the expiration of his or her current term, or his or her prior death,
retirement, resignation or removal, and (b) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors to such class or classes as shall, so far as possible,
bring the number of directors in the respective classes into conformity with the
formula in this Article 8, as applied to the new number of directors.
Notwithstanding any of the foregoing provisions of this Article 8, each
director shall serve until his successor is elected and qualified or until his
death, retirement, resignation or removal. A director may be removed by the
stockholders only for cause. Should a vacancy occur or be created, the
remaining directors (even though less than a quorum) may fill the vacancy for
the full term of the class in which the vacancy occurs or is created.
ARTICLE 9
No action shall be taken by the stockholders except at an annual or special
meeting of stockholders. The stockholders may not take action by written
consent.
ARTICLE 10
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Chairman of the Board, or by a
majority of the Board of Directors, or by a committee of the Board of Directors
which has been duly designated by the Board of Directors and whose powers and
authority, as provided in a resolution of the Board of Directors or in the
Bylaws of the Corporation, include the power to call such meetings, but such
special meetings may not be called by any other person or persons. The
stockholders may not call a special meeting.
ARTICLE 11
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 statute, and all rights conferred on stockholders herein
are granted subject to this reservation; provided, however, that no amendment,
alteration, change or repeal may be made to Article 5, 8, 9, 10 or 11 without
the affirmative vote of the holders of at least 66 2/3% of the outstanding
voting stock of the Corporation, voting together as a single class.
ARTICLE 12
The name and address of the Incorporator of the Corporation is as follows:
Timothy N. Stickler
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
4
<PAGE>
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereunto set my hand this 14th day of December,
1999.
/S/ Timothy N. Stickler
--------------------------------------
Timothy N. Stickler, Incorporator
5
<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
---------
as of the 16th day of October, 1998, by and between ODETICS ITS, INC., a
California corporation (the "Company"), and the Common Stock investors listed
-------
on the signature page hereto, each of whom is herein referred to collectively as
an "Investor" or the "Investors."
-------- ---------
RECITALS
--------
WHEREAS, the Company, the Investors, Meyer, Mohaddes Associates, Inc.
and Odetics, Inc. are parties to that certain Agreement and Plan of
Reorganization dated October 16, 1998 (the "Merger Agreement"); and
----------------
WHEREAS, the Merger Agreement grants the Investors registration rights
with respect to shares of the Company's Common Stock issuable to the Investors
under the terms of the Merger Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Registration Rights.
-------------------
The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
---
(b) The term "Form S-3" means such form under the Act as in effect on
--------
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
------
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.11 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
--------
1934, as amended.
(e) The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE>
(f) The term "Registrable Securities" means the Common Stock issuable
----------------------
or issued to the Investors in accordance with the Merger Agreement and any
shares of Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
---------------------------------------
shall be determined by the number of shares of Common Stock outstanding which
are held by the Holders and are Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
---
1.2 Company Registration. If (but without any obligation to do so) the
--------------------
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registrable Securities or a registration in which the only Common Stock being
registered Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after the Company provides such notice in
accordance with Section 2.5, the Company shall, subject to the provisions of
Section 1.6, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered. Notwithstanding
anything to the contrary in this Agreement, in the Company's initial public
offering of its Common Stock pursuant to a registration statement filed with the
SEC pursuant to the Act, the Company shall include in such underwritten offering
at least 15.6% of the Registrable Securities that are issued to each Investor
under Section 1.6(a) of the Merger Agreement. The Company shall use its best
efforts to complete its initial public offering as soon as practicable following
the Effective Time as defined in the Merger Agreement, provided that such
offering is on terms acceptable to Odetics, Inc., in its sole discretion.
1.3 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.4 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.2 for each Holder (which right may be assigned as
provided in Section 1.10), including (without limitation) all registration,
filing and qualification
2.
<PAGE>
fees, printers and accounting fees relating or apportionable thereto and the
fees and disbursements of counsel for the Company in its capacity as counsel to
the Company and the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of counsel for the Company and one counsel for the selling Holders
selected by such selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.5 Obligations of the Company. Whenever required under this Section 1
--------------------------
to effect the registration of any Registrable Securities, the Company shall, at
its expense, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to sixty (60) days or until
the distribution contemplated in the Registration Statement has been completed;
provided, however, that (i) such 60-day period shall be extended for a period of
time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 60-day period shall be extended, if necessary,
to keep the registration statement effective until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule under the
Act, permits an offering on a continuous or delayed basis, and provided further
that applicable rules under the Act governing the obligation to file a post-
effective amendment permit, in lieu of filing a post-effective amendment which
(i) includes any prospectus required by Section 10(a)(3) of the Act or (ii)
reflects facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (i) and (ii) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934
Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, or any amendments or supplements to the
prospectus, in conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in
3.
<PAGE>
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.6 Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares of the Company's capital stock (including an initial
public offering), the Company shall not be required under Section 1.2 to include
any of the Holders' securities in such underwriting unless they accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then, except for an initial public offering as provided in Section 1.2, only in
such quantity as the underwriters determine in their sole discretion will
not, jeopardize the success of the offering by the Company. If the total amount
of securities, including Registrable
4.
<PAGE>
Securities, requested by shareholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the Underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will jeopardize the not success
of the offering (the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders). For purposes of
the preceding parenthetical concerning apportionment, for any selling
shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
1.7 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.8 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act or
the 1934 Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (each a "Violation"): (i) any untrue
----------
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, the
1934 Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 1.8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation
5.
<PAGE>
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 1.8(b), in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 1.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 1.8(b) exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 1.8, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such
6.
<PAGE>
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.8
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1 and otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed with the SEC
under the Act by the Company for the offering of its securities to the general
public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.10 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the Company
7.
<PAGE>
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.11 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
1.11 "Market Stand-Off" Agreement. Each Investor hereby agrees that, during
---------------------------
the period of duration specified by the Company and an underwriter of the Common
Stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) all officers and directors of the Company and all holders of more
than five percent of the Company's Common Stock then outstanding enter into
similar agreements; and
(b) such market stand-off time period shall not exceed one hundred
eighty (180) days.
In order to enforce the foregoing covenant, the Company may impose
stop transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-14 or Form S-15 or similar forms which may be promulgated in the
future.
1.12 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 1 upon the expiration of four
(4) years following the date any Registrable Securities are first issued to the
Investors pursuant to the Merger Agreement. Notwithstanding the foregoing, no
Holder shall be entitled to exercise any rights hereunder with respect to any
Registrable Securities that such Holder can sell pursuant to Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration.
2. Miscellaneous.
-------------
2.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective
8.
<PAGE>
successors and assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of California without giving
effect to the principles of conflicts of law thereof.
2.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.5 Notices. Unless otherwise expressly provided herein, all notices,
-------
requests, demands, instructions, documents and other communications to be given
hereunder by either party to the other shall be in writing, shall be sent to the
address/fax number set forth below (provided that any party may at any time
change its address for notice or other such information by giving written notice
thereof in accordance with this Section), and shall be deemed to be duly given
upon the earliest of (i) hand delivery, (ii) the first business day after
sending by reputable overnight delivery service for next-day delivery, (iii) the
third business day after sending by first class United States mail, properly
addressed, postage prepaid, certified or registered, (iv) the time of successful
facsimile transmission (or in the event the time of receipt of the fax in the
city where the fax is received is not during regular business hours on a
business day, then at the customary hour for the opening of business on the next
business day), but in either case only if a complete copy is also sent by first
class United States mail (postage prepaid) on the same day as facsimile
transmission or on the next business day, or (v) the date actually received by
the other party. All notices shall be properly addressed to the parties at the
addresses set forth in the signature pages hereto. Any party may change its
address or fax number for the purposes of this paragraph by giving notice of the
new address to each of the other parties hereto in the manner set forth above.
Rejection or other refusal to accept, or the inability to deliver because of a
changed address of which no notice was given, shall not affect the date of such
notice sent in accordance with this Section.
2.6 Expenses. If any action at law or in equity is necessary to enforce
--------
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or
9.
<PAGE>
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
2.9 Aggregation of Stock. All shares of Registrable Securities held or
--------------------
acquired by Holder or any of Holder's affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
2.10 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
-----------------------------------
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
2.11 Disputes. If the parties are unable, after good faith negotiations,
--------
which each hereby covenants to undertake, to resolve any dispute arising between
them within fifteen (15) days after notice is given of such dispute, then the
dispute will be referred to arbitration (which the parties agree is the
exclusive means of resolving any such dispute) before one (1) arbitrator in
Orange County, California, or any other place mutually agreed upon by the
parties hereto, in accordance with the applicable rules then in effect of the
Judicial Arbitration and Mediation Service (the "JAMS Rules") (or any other form
----------
of arbitration mutually acceptable to the parties). Such arbitrator shall be
selected by the mutual agreement of the Company and Abbas Mohaddes, as the
representative of the Holders, or if no mutual agreement can be reached within
ten (10) days after the termination of the fifteen day period referenced above,
then such arbitrator shall be appointed by the arbitration service. The civil
discovery statutes of the State of California shall apply to such arbitration.
The determination made in accordance with the rules of JAMS (or such other form
of arbitration as the parties may mutually agree) shall be delivered in writing
to the parties hereto and shall be final, binding and conclusive on the parties
hereto, and the amount of the claim, if any, determined to exist shall be a
valid claim and no further remedy shall be available to either party with
respect to such dispute and judgment may be entered upon such decision in
accordance with applicable law in any court having jurisdiction thereof. The
arbitration award shall include (i) a provision that the prevailing party in
such arbitration recover its costs relating to the arbitration and reasonable
attorneys' fees from the other party, (ii) the amount of such costs and fees,
and (iii) an order that the losing party pay the fees and expenses of the
arbitrator.
2.12 No Conflicts. The Company hereby represents and warrants that the
------------
Company's obligations under this Agreement are not in conflict with its
obligations under any other agreement the Company has entered into with any
other party. The Company further represents and warrants that it will not enter
into any agreement or otherwise provide any third party rights which conflict
with the Company's obligation to register 15.6% of each Investor's Registrable
10.
<PAGE>
Securities in an initial public offering of Company's Common Stock as provided
in Section 1.2 of this Agreement.
2.13 Further Assurances. Each of the parties hereto shall, following
------------------
the date of this Agreement, and without charge to the other, take such
additional actions and execute, deliver and file such additional instruments as
may be reasonably requested by the other parties hereto that are necessary or
appropriate to give effect to the transactions contemplated by this Agreement.
11.
<PAGE>
[SIGNATURE PAGE TO ITS REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY: ODETICS ITS, INC.
By: /s/ Jack Johnson
---------------------------------------
Jack Johnson,
Chief Executive Officer and President
Address: 1515 South Manchester Avenue
Anaheim, California 92802
Telephone: _________________________________
Facsimile: _________________________________
INVESTORS: /s/ Michael P. Meyer
--------------------------------------------
MICHAEL P. MEYER
Address: 2525 Outpost Dr.
---------------------------------
Los Angeles, CA 90068
---------------------------------
Telephone: 213-878-2525
---------------------------------
Facsimile: 213-878-2569
---------------------------------
/s/ Abbas Mohaddes
--------------------------------------------
ABBAS MOHADDES
Address: 3432 Seaglen Dr.
---------------------------------
R.P.V., Ca. 90275
---------------------------------
Telephone: 310-544-5056
---------------------------------
Facsimile: 310-544-3356
---------------------------------
12.
<PAGE>
[SIGNATURE PAGE TO ITS REGISTRATION RIGHTS AGREEMENT]
/s/ Viggen Davidian
------------------------------------
VIGGEN DAVIDIAN
Address: 19714 Eagle Ridge LN
-------------------------
Northridge, CA 91326
-------------------------
Telephone: (818) 363-8195
-------------------------
Facsimile: _________________________
/s/ Gary Hamrick
------------------------------------
GARY HAMRICK
Address: 47 La Linda Dr.
-------------------------
Long Beach, CA 90807
-------------------------
Telephone: 562 427-2666
-------------------------
Facsimile: _________________________
13.
<PAGE>
EXHIBIT 10.1
ODETICS ITS, INC.
1998 STOCK INCENTIVE PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1998 Stock Incentive Plan is intended to promote the interests of
Odetics ITS, Inc., a California corporation, by providing eligible persons with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders. Administration
of the Discretionary Option Grant and Stock Issuance Programs with respect to
all other persons eligible to participate in those programs may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with respect to all such
persons.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
E. Administration of the Automatic Option Grant Program shall be
self executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under such program.
2.
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Nonstatutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Plan Effective Date, (ii) those individuals
who first become non-employee Board members on or after the Plan Effective Date,
whether through appointment by the Board or election by the Corporation's
shareholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Shareholders Meetings held after the Plan
Effective Date.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 1,500,000
shares, subject to certain changes in the Corporation's capital structure.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 250,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1998 calendar year.
3.
<PAGE>
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) those
options are cancelled in accordance with the option cancellation/regrant
provisions of Section IV of Article Two. Unvested shares issued under the Plan
and subsequently cancelled or repurchased by the Corporation, at the original
exercise or direct issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, shares subject to any options
surrendered in connection with the stock appreciation right provisions of the
Plan shall not be available for reissuance. Should the exercise price of an
option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year, (iii) the number and/or
class of securities for which grants are subsequently to be made under the
Automatic Option Grant Program to new and continuing non-employee Board members,
and (iv) the number and/or class of securities and the exercise price per share
in effect under each outstanding option under the Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
4.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions (A) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
5.
<PAGE>
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(iii) During the applicable exercise period following
termination of Service, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease to be
outstanding to the extent the option is not otherwise at that time exercisable
for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable Service exercise period following termination of service, not only
with respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. Shareholder Rights. The holder of an option shall have no
------------------
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
6.
<PAGE>
E. Repurchase Rights. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. However, with respect to any option grant made prior to the
Section 12 Registration Date, the Plan Administrator may not impose a vesting
schedule upon that grant or any shares of Common Stock subject to that option
which is more restrictive than twenty percent (20%) per year vesting, with the
initial vesting to occur not later than one (1) year after the option grant
date. Such limitation shall not be applicable to any option grants made to
individuals who are officers of the Corporation, non-employee Board members or
independent consultants and shall not be in effect for any options granted after
the Section 12 Registration Date.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Nonstatutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Nonstatutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
---
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Dollar Limitation. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
7.
<PAGE>
C. 10% Shareholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. However, an outstanding option shall not become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
8.
<PAGE>
E. The Plan Administrator shall have the discretionary authority to
provide for the automatic acceleration of one or more outstanding options under
the Discretionary Option Grant Program upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed in the Corporate
Transaction, so that each such option shall, immediately prior to the effect
date of such Corporate Transaction, become fully exercisable for all of the
shares of Common Stock at the time subject to that option and may be exercised
for any or all of those shares as fully vested shares of Common Stock. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the full and immediate acceleration
of one or more outstanding options under the Discretionary Option Grant Program
in the event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
-------
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may provide that one or more of the Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at the
time of such Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.
G. The Plan Administrator shall have the discretionary authority to
provide for the full and immediate acceleration of one or more outstanding
options under the Discretionary Option Grant Program upon the occurrence of a
Change in Control so that each such option shall, immediately prior to the
effect date of such Change in Control, become fully exercisable for all of the
shares of Common Stock at the time subject to that option and may be exercised
for any or all of those shares as fully vested shares of Common Stock. Each
such accelerated option shall remain exercisable until the expiration or sooner
termination of the option term. In addition, the Plan Administrator shall have
the discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Option Grant Program so that those
rights shall terminate automatically upon the consummation of such Change in
Control, and the shares subject to those terminated rights shall thereupon vest
in full. Alternatively, the Plan Administrator may condition the automatic
acceleration of one or more outstanding options under the Discretionary Option
Grant Program and the termination of one or more of the Corporation's
outstanding repurchase rights under such program upon the subsequent termination
of the Optionee's Service by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of such Change in Control. Each option so accelerated shall remain
exercisable for fully vested shares until the earlier of (i) the expiration of
-------
the option term or (ii) the expiration of the one (1) year period measured from
the effective date of such Involuntary Termination.
9.
<PAGE>
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
equal to the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have the authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to elect
between the exercise of the underlying option for shares Common Stock and the
surrender of that option in exchange for a distribution from the Corporation in
an amount equal to the excess of (a) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion) over (b) the
aggregate exercise price payable for those shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved, then
the distribution to which the Optionee shall be entitled may be made in shares
of Common Stock valued at Fair Market Value on the option surrender date, in
cash, or partly in shares and partly in cash, as the Plan Administrator shall in
its sole discretion deem appropriate.
10.
<PAGE>
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion) on the option
surrender date and may exercise such rights at any time prior to the later of
-----
(a) five (5) business days after the receipt of the rejection notice or (b) the
last day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may, at any time
following the Section 12 Registration Date, be granted limited stock
appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Takeover, each
individual holding one or more options with such a limited stock appreciation
right shall have the unconditional right (exercisable for a thirty (30) day
period following such Hostile Takeover) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for vested
shares of Common Stock. In return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in an amount equal to the
excess of (A) the Takeover Price of the shares of Common Stock which are at the
time vested under each surrendered option (or surrendered portion) over (B) the
aggregate exercise price payable for those shares. Such cash distribution shall
be paid within five (5) days following the option surrender date.
(iii) The Plan Administrator shall pre-approve, at the
time the limited right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V. No
additional approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents evidencing such
option.
11.
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any
combination of the following items of consideration which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. However, with respect to any stock issuance effected under the
Stock Issuance Program prior to the Section 12 Registration Date, the Plan
Administrator may not impose a vesting schedule which is more restrictive than
twenty percent (20%) per year vesting, with initial vesting to occur not later
than one (1) year after the issuance date. Such limitation shall not apply to
any Common Stock issuances made to the officers of the Corporation, non-employee
Board members or independent consultants and shall not be in effect for any
stock issuances effected after the Section 12 Registration Date.
12.
<PAGE>
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the non
attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is
13.
<PAGE>
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued under the Stock
Issuance Program or any time while the Corporation's repurchase rights with
respect to those shares remain outstanding, to structure one or more of those
repurchase rights so that such rights shall not be assignable in connection with
a Corporate Transaction and shall accordingly terminate upon the consummation of
such Corporate Transaction, and the shares subject to those terminated
repurchase rights shall thereupon vest in full.
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding under the Stock Issuance Program, to structure one or more of those
repurchase rights so that such rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, upon (i) a Change in Control or (ii) the subsequent
termination of the Participant's Service by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of such Change in Control or Involuntary Termination.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
14.
<PAGE>
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates
-----------
specified below:
1. Each individual serving as a non-employee Board member on
the Underwriting Date shall automatically be granted at that time a Nonstatutory
Option to purchase 10,000 shares of Common Stock, provided that individual has
not previously been in the employ of the Corporation or any Parent or Subsidiary
and has not previously received an option grant from the Corporation in
connection with his or her Board service.
2. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Nonstatutory Option to purchase 10,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
3. On the date of each Annual Shareholders Meeting,
beginning with the first Annual Shareholders Meeting after the Underwriting
Date, each individual who is to continue to serve as a non-employee Board
member, whether or not that individual is standing for reelection to the Board
at that particular Annual Meeting, shall automatically be granted a Nonstatutory
Option to purchase 5,000 shares of Common Stock, provided such individual has
served as a non-employee Board member for at least six (6) months. There shall
be no limit on the number of such 5,000 share option grants any one non-employee
Board member may receive over his or her period of Board service, and non-
employee Board members who have previously been in the employ of the Corporation
(or any Parent or Subsidiary) or who have previously received stock options in
connection with their Board service prior to the Underwriting Date shall be
eligible to receive one or more such annual option grants over their period of
continued Board service.
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
15.
<PAGE>
C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. Exercise and Vesting of Options. Each initial 10,000 share
-------------------------------
option grant shall be immediately exercisable for any or all of the option
shares. However, the shares of Common Stock purchased under each initial 10,000
share grant shall be subject to repurchase by the Corporation, at the exercise
price paid per share, upon the Optionee's cessation of Board service prior to
vesting in those shares. Each initial 10,000 share grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of three (3) successive
equal annual installments upon the optionee's completion of each year of Board
service over the three (3) year period measured from the option grant date.
Each annual 5,000 share grant shall be immediately exercisable for any or all of
the option shares as fully vested shares of Common Stock and shall remain so
exercisable until the expiration or sooner termination of the option term.
E. Termination of Board Service. The following provisions shall
----------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12) month period
following the date of such cessation of Board service in which to exercise each
such option.
(ii) During the twelve (12) month exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares of Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may, during the
twelve (12) month exercise period following such cessation of Board service, be
exercised for all or any portion of those shares as fully vested shares of
Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the twelve (12)
month exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested shares.
16.
<PAGE>
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. The shares of Common Stock subject to each option outstanding
under this Article Four at the time of a Corporate Transaction but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as fully
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. The shares of Common Stock subject to each option outstanding
under this Article Four at the time of a Change in Control but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully
vested shares of Common Stock. Each such option shall remain exercisable for
such fully vested option shares until the expiration or sooner termination of
the option term or the surrender of the option in connection with a Hostile
Takeover.
C. All outstanding repurchase rights under the Automatic Option
Grant Program shall automatically terminate, and the unvested shares of Common
Stock subject to those terminated rights shall thereupon vest in full,
immediately prior to any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Takeover at any time after the
Section 12 Registration Date, the Optionee shall have a thirty (30) day period
in which to surrender to the Corporation each of his or her outstanding
automatic option grants. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Takeover Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same.
17.
<PAGE>
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
18.
<PAGE>
ARTICLE FIVE
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full recourse, interest bearing promissory note payable in one or more
installments and secured by the purchased shares. However, any promissory note
delivered by a consultant must be secured by collateral in addition to the
purchased shares of Common Stock. All other terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion. In no event may the maximum
credit available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. At any time after the Section 12 Registration Date, the Plan
Administrator may, in its discretion, provide one or more all holders of
Nonstatutory Options or unvested shares of Common Stock under the Plan (other
than the options granted or the shares issued under the Automatic Option Grant
Program) with the right to use shares of Common Stock in satisfaction of all or
part of the Taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation
-----------------
withhold from the shares of Common Stock otherwise issuable upon the exercise of
such Nonstatutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation,
--------------
at the time the Nonstatutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
19.
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board and the Shareholders of the
Corporation on April 14, 1998. The Discretionary Option Grant and Stock Issuance
Programs became effective on the Plan Effective Date and the Automatic Option
Grant Program shall become effective on the Underwriting Date.
B. The Plan shall terminate upon the earliest to occur of (i)
--------
April 13, 2008, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Upon such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing those grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require shareholder
approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow until
there is obtained shareholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such shareholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
20.
<PAGE>
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
VIII. FINANCIAL REPORTS
Prior to the Section 12 Registration Date, the Corporation shall
deliver a balance sheet and an income statement at least annually to each
individual holding an outstanding option under the Plan, unless such individual
is a key Employee whose duties in connection with the Corporation (or any Parent
or Subsidiary) assure such individual access to equivalent information. The
requirement to deliver financial statements under this Section VIII shall
terminate on the Section 12 Registration Date.
21.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option
------------------------------
grant program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-
3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's shareholders,
or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.
D. Common Stock shall mean the Corporation's common stock.
------------
E. Code shall mean the Internal Revenue Code of 1986, as amended.
----
F. Corporate Transaction shall mean either of the following
---------------------
shareholder approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. Corporation shall mean Odetics ITS, Inc., a California
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Odetics ITS, Inc. which shall by appropriate action
adopt the Plan.
A-1.
<PAGE>
H. Discretionary Option Grant Program shall mean the discretionary
----------------------------------
option grant program in effect under the Plan.
I. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as such
price is reported on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
L. Hostile Takeover shall mean the acquisition, directly or
----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's shareholders which the Board does not recommend such
shareholders to accept.
M. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
N. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
A-2.
<PAGE>
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A)
a change in his or her position with the Corporation which materially reduces
his or her duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation (including base
salary, fringe benefits and target bonus under any corporate performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.
O. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
P. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
Q. Nonstatutory Option shall mean an option not intended to satisfy
-------------------
the requirements of Code Section 422.
R. Optionee shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant or Automatic Option Grant Program.
S. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
U. Permanent Disability or Permanently Disabled shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
A-3.
<PAGE>
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
V. Plan shall mean the Corporation's 1998 Stock Incentive Plan, as
----
set forth in this document.
W. Plan Administrator shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
X. Plan Effective Date shall mean April 14, 1998, the date the Plan
-------------------
was adopted by the Board.
Y. Primary Committee shall mean the committee of two (2) or more
-----------------
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
Z. Secondary Committee shall mean a committee of two (2) or more
-------------------
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
AA. Section 12 Registration Date shall mean the date on which the
----------------------------
Common Stock is first registered under Section 12 of the 1934 Act.
BB. Section 16 Insider shall mean an officer or director of the
------------------
Corporation subject to the short swing profit liabilities of Section 16 of the
1934 Act.
CC. Service shall mean the performance of services for the
-------
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
DD. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
EE. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
FF. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under the Plan.
GG. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock
A-4.
<PAGE>
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
HH. Takeover Price shall mean the greater of (i) the Fair Market
-------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Takeover or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Takeover. However, if the surrendered option is an Incentive Option,
the Takeover Price shall not exceed the clause (i) price per share.
II. Taxes shall mean the Federal, state and local income and
-----
employment tax liabilities incurred by the holder of Nonstatutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
JJ. 10% Shareholder shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
KK. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
LL. Underwriting Date shall mean the date on which the Underwriting
-----------------
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
A-5.
<PAGE>
EXHIBIT 10.2
ODETICS ITS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither transferable
-----------------------
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, if this option is designated a Nonstatutory
Option in the Grant Notice, then this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
<PAGE>
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while this option is
outstanding, then the period for which this options shall remain
exercisable shall be limited to a period of three (3) months commencing
with the date of such cessation of Service, but in no event shall this
option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance
with the laws of inheritance shall have the right to exercise this option.
Such right shall lapse, and this option shall cease to be outstanding, upon
the earlier of (i) the expiration of the twelve (12)-month period measured
-------
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then the period for exercising this
option shall be limited to a period of twelve (12) months commencing with
the date of such cessation of Service. In no event, however, shall this
option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any exercisable Option Shares for which the
option has not been exercised. However, this option shall, immediately upon
Optionee's cessation of Service for any reason, terminate and cease to be
outstanding with respect to any Option Shares for which this option is not
otherwise at that time exercisable.
(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.
6. Special Acceleration of Option.
(a) This option to the extent outstanding at the time of a Corporate
Transaction, but not otherwise fully exercisable, shall automatically accelerate
so that this option shall, immediately prior to the effective date of such
Corporate Transaction, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all of those Option
Shares as fully vested shares of Common Stock. No such acceleration of this
option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which
2.
<PAGE>
preserves the spread existing at the time of the Corporate Transaction on the
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same option exercise/vesting schedule set forth in the Grant
Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment to Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Shareholder Rights. The holder of this option shall not have any
------------------
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the recordholder
of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised. However,
if the option is exercised prior to the Section 12 Registration Date, then
a Purchase Agreement for the Option Shares for which the option is
exercised must also be executed and delivered to the Corporation.
3.
<PAGE>
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with
Paragraph 13;
Should the Common Stock be registered under Section 12
Registration Date, the Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (a) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise (or Purchase
Agreement) delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
4.
<PAGE>
(c) In no event may this option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
12. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. Financing. The Plan Administrator may, in its absolute discretion
---------
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.
14. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
5.
<PAGE>
16. Excess Shares. If the Option Shares covered by this Agreement
-------------
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. Additional Terms Applicable to an Incentive Option. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment
as an Incentive Option if (and to the extent) this option is exercised for
one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (B) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for favorable
tax treatment as an Incentive Option if (and to the extent) the aggregate
Fair Market Value (determined at the Grant Date) of the Common Stock for
which such installment first becomes exercisable hereunder would, when
added to the aggregate value (determined as of the respective date or dates
of grant) of the Common Stock or other securities for which this option or
any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar
year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded
in any calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Nonstatutory Option.
(c) Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common
Stock or other securities for which this option or one or more other
Incentive Options granted to Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year, exceed
One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in
the calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year as a
Nonstatutory Option.
6.
<PAGE>
(d) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
7.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Odetics ITS, Inc. (the "Corporation") that I elect to
purchase _______ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ ____ per share (the "Exercise Price")
pursuant to that certain option (the "Option") granted to me under the
Corporation's 1998 Stock Incentive Plan on _______ , 199___.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. If the Option is exercised after the date the shares of Common
Stock are first registered under Section 12 of the Securities Exchange Act of
1934, I may also utilize the special broker-dealer sale and remittance procedure
as specified in my agreement to effect payment of the Exercise Price.
_______________, 199__
Date
______________________________
Optionee
Address:______________________________
______________________________
Print name in exact manner it is to appear on
the stock certificate: ______________________________
Address to which certificate is to be sent, if
different from address above: ______________________________
Social Security Number: _____________________________
Employee Number:
______________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean shares of the Corporation's common
------------
stock.
E. Corporate Transaction shall mean either of the following
---------------------
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. Corporation shall mean Odetics ITS, Inc., a California
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Odetics ITS, Inc. which shall by appropriate action
adopt the Plan.
G. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have
-------------------
been exercised in accordance with Paragraph 9 of the Agreement.
I. Exercise Price shall mean the exercise price per Option Share as
--------------
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option expires
---------------
as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market.
A-1.
<PAGE>
If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
L. Grant Date shall mean the date of grant of the option as
---------- ----
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
-----
basic terms of the option evidenced hereby.
N. Incentive Option shall mean an option which satisfies the
---------------- ----
requirements of Code Section 422.
O. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. 1934 Act shall mean the Securities Exchange Act of 1934, as
-------- ---
amended.
Q. Nonstatutory Option shall mean an option not intended to satisfy
-------------------
the requirements of Code Section 422.
R. Notice of Exercise shall mean the notice of exercise in the form
------------------------
attached hereto as Exhibit I.
S. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option as specified in the Grant Notice.
A-2.
<PAGE>
T. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
U. Parent shall mean any corporation (other than the Corporation)
------
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Permanent Disability shall mean the inability of Optionee to
-------------------- ----
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
W. Plan shall mean the Corporation's 1998 Stock Incentive Plan.
---- ---- -
X. Plan Administrator shall mean either the Board or a committee of
------------------ ----
the Board acting in its capacity as administrator of the Plan.
Y. Purchase Agreement shall mean the stock purchase agreement in
------------------
substantially the form of Exhibit B to the Grant Notice.
Z. Section 12 Registration Date shall mean the date on which the
----------------------------
Common Stock is first registered under Section 12 of the 1934 Act.
AA. Service shall mean the Optionee's performance of services for
-------
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
BB. Stock Exchange shall mean the American Stock Exchange or the New
-------------- ---
York Stock Exchange.
CC. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT ("Agreement") is made on December __, 1999,
between ITERIS, INC., a Delaware corporation (the "Company"), and
_______________________ ("Indemnitee"), an officer and/or member of the Board of
Directors of the Company.
WHEREAS, the Company desires the benefits of having Indemnitee serve as an
officer and/or director secure in the knowledge that expenses, liabilities and
losses incurred by him in his good faith service to the Company will be borne by
the Company or its successors and assigns in accordance with applicable law; and
WHEREAS, the Company desires that Indemnitee resist and defend against what
Indemnitee may consider to be unjustified investigations, claims, actions, suits
and proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company notwithstanding that conditions in the
insurance markets may make directors' and officers' liability insurance coverage
unavailable or available only at premium levels which the Company may deem
inappropriate to pay; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm the
Company's indemnification obligations to Indemnitee and, in addition, set forth
the indemnification agreements contained herein;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties agree as follows:
1. Indemnification. Indemnitee shall be indemnified and held harmless
by the Company to the fullest extent permitted by its Certificate of
Incorporation, Bylaws and applicable law, as the same exists or may hereafter be
amended, against all expenses, liabilities and loss (including attorneys' fees,
judgments, fines, and amounts paid or to be paid in any settlement approved in
advance by the Company, such approval not to be unreasonably withheld)
(collectively, "Indemnifiable Expenses") actually reasonably incurred or
suffered by Indemnitee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Indemnitee is or was a party or is
threatened to be made a party by reason of any action or inaction in
Indemnitee's capacity as a director or officer of the Company, or (ii) with
respect to which Indemnitee is otherwise involved by reason of the fact that
Indemnitee is or was serving as a director, officer, employee or agent of the
Company, or of any subsidiary or division, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Notwithstanding the
foregoing, Indemnitee shall have no right to indemnification for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended.
2. Interim Expenses. The Company agrees to pay Indemnifiable Expenses
incurred by Indemnitee in connection with any Indemnifiable Litigation in
advance of the final disposition thereof, provided that the Company has received
an undertaking by or on behalf of Indemnitee, substantially in the form attached
hereto as Exhibit A, to repay the amount so advanced
---------
<PAGE>
to the extent that it is ultimately determined that Indemnitee is not entitled
to be indemnified by the Company under this Agreement or otherwise. The advances
to be made hereunder shall be paid by the Company to Indemnitee within twenty
(20) days following delivery of a written request therefor by Indemnitee to the
Company.
3. Procedure for Making Demand. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement, give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the Company
at the address set forth in Section 11 hereof (or such other address as the
Company shall designate in writing to Indemnitee). Notice shall be deemed
received three business days after the date postmarked and sent by certified or
registered mail, properly addressed; otherwise notice shall be deemed received
when such notice shall actually be received by the Company. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power. Any
indemnification provided for in Section 1 shall be made no later than forty-five
(45) days after receipt of the written request of Indemnitee.
4. Failure to Indemnify.
(a) If a claim under this Agreement, or any statute, or under any
provision of the Company's Amended and Restated Certificate of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company, within
forty-five (45) days after a written request for payment thereof has been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 12 of this Agreement, if successful in whole or in part,
Indemnitee shall also be entitled to be paid for the expense (including
attorneys' fees) of bringing such action.
(b) It shall be a defense to such action (other than an action brought
to enforce a claim for expenses incurred in connection with any action, suit or
proceeding in advance of its final disposition) that Indemnitee has not met the
standard of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of interim expenses pursuant to Section 2 hereof unless
and until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including its board of
directors, any committee or subgroup of the board of directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
5. Notice to Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 3 thereof, the Company has director and/or officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
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take all necessary or desirable action to cause such insurers to pay, on behalf
of the indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
6. Retention of Counsel. In the event that the Company shall be
obligated to pay Indemnifiable Expenses as a result of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice
of its election to do so. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by that Indemnitee with respect to that same
proceeding, provided that (i) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense, and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not, in fact, have employed counsel to
assume defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company.
7. Successors. This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs and legal representatives of the parties hereto.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company may be
required in the future to undertake to the Securities and Exchange Commission to
submit the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee, and, in that event, the Indemnitee's rights and the Company's
obligations hereunder shall be subject to that determination.
9. Contract Rights Not Exclusive. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may hereafter acquire under any statute, provision of the
Company's Certificate of Incorporation or Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise.
10. Assumption of Indemnification Obligation. The Company hereby
assumes the obligation to indemnify Indemnitee of the Company's corporate
parent, Odetics, Inc., a California corporation ("Odetics ITS"), provided
--------
however, that at all times prior to the effective time of the merger between the
- -------
Company and Odetics ITS, Odetics ITS shall continue to indemnify Indemnitee to
the fullest extent permitted under its Articles of Incorporation, its Bylaws and
the General Corporation Law of the State of California.
11. Indemnitee's Obligations. The Indemnitee shall promptly advise the
Company in writing of the institution of any investigation, claim, action, suit
or proceeding which is or may be subject to this Agreement and keep the Company
generally informed of, and consult with the Company with respect to, the status
of any such investigation, claim, action, suit or proceeding. Notices to the
Company shall be directed to ITERIS, INC., 1515 S. Manchester Avenue, Anaheim,
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<PAGE>
California 92802, Attn: Jack E. Johnson (or other such address as the Company
shall designate in writing to Indemnitee). Notice shall be deemed received three
days after the date postmarked if sent by certified or registered mail, properly
addressed. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
12. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement, or to enforce
or interpret any other terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
13. Severability. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.
14. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether of
not similar) nor shall such waiver constitute a continuing waiver.
15. Choice of Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
ITERIS, INC.
By: __________________________________
Its: _________________________________
INDEMNITEE:
Name: ________________________________
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<PAGE>
EXHIBIT A
UNDERTAKING AGREEMENT
This UNDERTAKING AGREEMENT is made on _______________, 19__, between
___________________, a Delaware corporation (the "Company") and
__________________________, an officer and/or member of the board of directors
of the Company ("Indemnitee").
WHEREAS, Indemnitee may become involved in investigations, claims, actions,
suits or proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company; and
WHEREAS, Indemnitee desires that the Company pay any and all expenses
(including, but not limited to, attorneys' fees and court costs) actually and
reasonably incurred by Indemnitee or on Indemnitee's behalf in defending or
investigating any such suits or claims and that such payment be made in advance
of the final disposition of such investigations, claims, actions, suits or
proceedings to the extent that Indemnitee has not been previously reimbursed by
insurance; and
WHEREAS, the Company is willing to make such payments but, in accordance
with Section 145 of the General Corporation Law of the State of Delaware, the
Company may make such payments only if it receives an undertaking to repay from
Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. In regard to any payments made by the Company to Indemnitee pursuant to
the terms of the Indemnification Agreement dated _____________ ____, 199__,
between the Company and Indemnitee, Indemnitee hereby undertakes and agrees to
repay to the Company any and all amounts so paid promptly and in any event
within thirty (30) days after the disposition, including any appeals, of any
litigation or threatened litigation on account of which payments were made, but
only to the extent that Indemnitee is ultimately found not entitled to be
indemnified by the Company under the Bylaws of the Company and Section 145 of
the General Corporation Law of the State of Delaware, or other applicable law.
2. This Agreement shall not affect in any manner rights which Indemnitee
may have against the Company, any insurer or any other person to seek
indemnification for or reimbursement of any expenses referred to herein or any
judgment which may be rendered in any litigation or proceeding.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written.
______________________________:
By:__________________________________
Its:_________________________________
INDEMNITEE:
Name:________________________________
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EXHIBIT 10.4
ITERIS, INC.
EMPLOYEE STOCK PURCHASE PLAN
This EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby established by
ITERIS, INC., a Delaware corporation (the "Company"), effective ________ ___,
1999.
ARTICLE I
PURPOSE OF THE PLAN
1.1 Purpose. The Company has determined that it is in its the best
interest to provide incentives to attract and retain employees and to increase
employee morale by providing a program through which employees of the Company,
and of such of the Company's subsidiaries as the Company's Board of Directors
(the "Board") may from time to time designate (each a "Designated Subsidiary",
and collectively, "Designated Subsidiaries"), may acquire an equity interest in
the Company through the purchase of shares of the common stock of the Company
("Company Stock"). The Plan is hereby established by the Company to permit
employees to subscribe for and purchase directly from the Company shares of the
Company Stock at a discount from the market price, and to pay the purchase price
in installments by payroll deductions. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended from time to time (the "Code"). The provisions of the Plan are
to be construed in a matter consistent with the requirements of Section 423 of
the Code. The Plan is not intended to be an employee benefit plan under the
Employee Retirement Income Security Act of 1974, and therefore is not required
to comply with that Act.
ARTICLE II
DEFINITIONS
2.1 Compensation. "Compensation" means the amount indicated on the Form
W-2, including any elective deferrals with respect to a plan of the Company
qualified under either Section 125 or Section 401(a) of the Code, issued to an
employee by the Company.
2.2 Employee. "Employee" means each person currently employed by the
Company or any of its Designated Subsidiaries, any portion of whose income is
subject to withholding of income tax or for whom Social Security retirement
contributions are made by the Company or any Designated Subsidiary.
2.3 Effective Date. "Effective Date" means the effective date of the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission (the "SEC") in connection with the Company's initial public
offering.
2.4 5% Owner. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company. For purposes of this
Section, the ownership attribution rules of Section 424(d) of the Code shall
apply and stock which the Employee may purchase under outstanding options shall
be treated as stock owned by the Employee.
<PAGE>
2.5 Grant Date. "Grant Date" means the first day of each Offering Period
(January 1 and July 1) under the Plan. In the first Plan Year only, the initial
Grant Date shall be the Effective Date.
2.6 Participant. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.7 Plan Year. "Plan Year" means the twelve consecutive month period
ending on December 31.
2.8 Offering Period. "Offering Period" means the six-month periods from
January 1 through June 30 and July 1 through December 31 of each Plan Year.
However, the first Offering Period shall commence on the Effective Date and
shall end on June 30, 1999.
2.9 Purchase Date. "Purchase Date" means the last day of each Offering
Period (June 30 or December 31).
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Each Employee of the Company, or any Designated
Subsidiary, who, on the Grant Date, is customarily engaged on a regularly-
scheduled basis of more than 20 hours per week for more than five months per
calendar year and who has been employed for at least 90 days (or, for the
initial Offering Period only, such Employees who are employed on the Effective
Date) in the rendition of personal services to the Company, or any Designated
Subsidiary, may become a Participant in the Plan on the Grant Date coincident
with or next following his satisfaction of such requirements of employment with
the Company or any Designated Subsidiary.
3.2 Participation. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Secretary of the Company of a Subscription
Agreement provided by the Company (the "Subscription Agreement") authorizing
payroll deductions. Payroll deductions for a Participant shall commence on the
Grant Date coincident with or next following the filing of the Participant's
Subscription Agreement and shall remain in effect until revoked by the
Participant by the filing of a notice of withdrawal from the Plan under Article
VIII or by the filing of a new Subscription Agreement providing for a change in
the Participant's payroll deduction rate under Section 5.2.
3.3 Special Rules. Under no circumstances shall:
(a) A 5% Owner be granted a right to purchase Company Stock under the
Plan;
(b) A Participant be entitled to purchase Company Stock under the
Plan which, when aggregated with all other employee stock purchase plans of the
Company, exceed an amount equal to the Aggregate Maximum. "Aggregate Maximum"
means an amount equal to $25,000 worth of Company Stock (determined using the
fair market value of such Company Stock at each applicable Grant Date) during
each Plan Year; or
(c) The number of shares of Company Stock purchasable by a
Participant on any Purchase Date exceed 5,000 shares, subject to periodic
adjustments under Section 10.4.
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ARTICLE IV
OFFERING PERIODS
4.1 Offering Periods. The initial grant of the right to purchase Company
Stock under the Plan shall occur on the Effective Date. Thereafter, the Plan
shall provide for Offering Periods commencing on each Grant Date and terminating
on the next following Purchase Date. The Board shall have the power to change
the Offering Periods without stockholder approval.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Participant Election. Upon completion of the Subscription Agreement,
each Participant shall designate the amount of payroll deductions to be made
from his paycheck to purchase Company Stock under the Plan. The amount of
payroll deductions shall be designated in whole percentages of Compensation, not
to exceed 15%. The amount so designated upon the Subscription Agreement shall
be effective as of the next Grant Date and shall continue until terminated or
altered in accordance with Section 5.2 below.
5.2 Changes in Election. A Participant may terminate participation in the
Plan at any time prior to the close of an Offering Period and withdrawal the
amounts held in his Account as provided in Article 8. A Participant may also
terminate payroll deductions and have accumulated deductions for the Offering
Period applied to the purchase of Company Stock as of the next Purchase Date by
completing and delivering to the Secretary a new Subscription Agreement setting
forth the desired change. A Participant may decrease or increase the rate of
payroll deductions one time during any Offering Period by completing and
delivering to the Secretary of the Company a new Subscription Agreement setting
forth the desired change at least 15 days prior to the end of the Offering
Period. Any change under this Section shall become effective on the next
payroll period (to the extent practical under the Company's payroll practices)
following the delivery of the new Subscription Agreement.
5.3 Participant Accounts. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. Other than
through payroll deductions, an Employee may not make any other payments into his
Account. No interest will be paid or allowed on amounts credited to a
Participant's Account. All payroll deductions received by the Company under the
Plan are general corporate assets of the Company and may be used by the Company
for any corporate purpose. The Company is not obligated to segregate such
payroll deductions.
ARTICLE VI
GRANT OF PURCHASE RIGHTS
6.1 Right to Purchase Shares. On each Grant Date, each Participant shall
be granted a right to purchase at the price determined under Section 6.2 that
number of shares, rounded down to the nearest whole, of Company Stock that can
be purchased with the amounts held in his Account, subject to the limits set
forth in Section 3.3. If there are amounts held in a Participant's Account that
are not used to purchase Company Stock, such amounts shall remain in the
Participant's Account and shall be eligible to purchase Company Stock in any
subsequent Offering Period, unless otherwise withdrawn pursuant to Section 8.1.
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6.2 Purchase Price. The purchase price for any Offering Period shall be
the lesser of:
(a) 85% of the Fair Market Value of Company Stock on the Grant Date;
or
(b) 85% of the Fair Market Value of Company Stock on the Purchase
Date.
6.3 Fair Market Value. "Fair Market Value" for the initial Grant Date
(which is the Effective Date) shall be the initial price to the public as set
forth in the final prospectus included within the registration statement on Form
S-1 filed with the SEC for the initial public offering of the Company's common
stock. For any subsequent date thereafter, "Fair Market Value" shall mean the
value of one share of Company Stock, determined as follows:
(a) If the Company Stock is then listed or admitted to trading on the
Nasdaq National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the closing sale price on the date of
valuation on the Nasdaq National Market System or principal stock exchange on
which the Company Stock is then listed or admitted to trading, or, if no closing
sale price is quoted or no sale takes place on such day, then the Fair Market
Value shall be the closing sale price of the Company Stock on the Nasdaq
National Market System or such exchange on the next preceding day on which a
sale occurred.
(b) If the Company Stock is not then listed or admitted to trading on
the Nasdaq National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the average of the closing bid and asked
prices of the Company Stock in the over-the-counter market on the date of
valuation. If no sales take place on such day, then the fair market value shall
be the average of the closing bid and asked prices on the next preceding day on
which sales occurred.
(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the Board or any committee
appointed by the Board in good faith using any reasonable method of valuation,
which determination shall be conclusive and binding on all interested parties.
ARTICLE VII
PURCHASE OF STOCK
7.1 Purchase of Company Stock. Absent an election by the Participant to
terminate and have his Account returned, on each Purchase Date, the Plan shall
purchase on behalf of each Participant the maximum number of whole shares of
Company Stock at the purchase price determined under Section 6.2 above as can be
purchased with the amounts held in each Participant's Account. In the event
that there are amounts held in a Participant's Account that are not used to
purchase Company Stock, all such amounts shall be held in the Participant's
Account and carried forward to the next Offering Period, unless otherwise
withdrawn pursuant to Section 8.1.
7.2 Delivery of Company Stock.
(a) Company Stock acquired under the Plan may either be issued
directly to Participants or may be issued to a contract administrator
("Administrator") engaged by the Company to administer the Plan under Article
IX. If the Company Stock is issued in the name of the Administrator, all
Company Stock so issued ("Plan Held Stock") shall be held in the name of the
Administrator for the benefit of the Plan. The Administrator shall maintain
accounts for the benefit
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of the Participants which shall reflect each Participant's interest in the Plan
Held Stock. Such accounts shall reflect the number of shares of Company Stock
that are being held by the Administrator for the benefit of each Participant.
(b) Any Participant may elect to have the Company Stock purchased
under the Plan from his Account be issued directly to the Participant. Any
election under this paragraph shall be on the forms provided by the Company and
shall be issued in accordance with paragraph (c) below.
(c) In the event that Company Stock under the Plan is issued directly
to a Participant, the Company will deliver to each Participant a stock
certificate or certificates issued in his name for the number of shares of
Company Stock purchased as soon as practicable after the Purchase Date. The
time of issuance and delivery of shares may be postponed for such period as may
be necessary to comply with the registration requirements under the Securities
Act of 1933, as amended, the listing requirements of any securities exchange on
which the Company Stock may then be listed, or the requirements under other laws
or regulations applicable to the issuance or sale of such shares.
ARTICLE VIII
WITHDRAWAL
8.1 In Service Withdrawals. At any time prior to the Purchase Date of an
Offering Period, any Participant may withdraw the amounts held in his Account by
executing and delivering to the Secretary for the Company written notice of
withdrawal on the form provided by the Company. In such a case, the entire
balance of the Participant's Account shall be paid to the Participant, without
interest, as soon as is practicable. Upon such notification, the Participant
shall cease to participate in the Plan for the remainder of the Offering Period,
and for the immediately following Offering Period in which the notice is given.
Any Employee who has withdrawn under this Section shall be excluded from
participation in the Plan for the remainder of the Offering Period and for the
immediately following Offering Period, but may then be reinstated as a
Participant for a subsequent Offering Period by executing and delivering a new
Subscription Agreement to the Secretary of the Company.
8.2 Termination of Employment.
(a) In the event that a Participant's employment with the Company
terminates for any reason, the Participant shall cease to participate in the
Plan on the date of termination. As soon as is practical following the date of
termination, the entire balance of the Participant's Account shall be paid to
the Participant or his beneficiary, without interest.
(b) A Participant may file a written designation of a beneficiary who
is to receive any shares of Company Stock purchased under the Plan or any cash
from the Participant's Account in the event of his death subsequent to a
Purchase Date, but prior to delivery of such shares and cash. In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's Account under the Plan in the event of his death
prior to a Purchase Date under paragraph (a) above.
(c) Any beneficiary designation under paragraph (b) above may be
changed by the Participant at any time by written notice. In the event of the
death of a Participant, the
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Committee may rely upon the most recent beneficiary designation it has on file
as being the appropriate beneficiary. In the event of the death of a Participant
where no valid beneficiary designation exists or the beneficiary has predeceased
the Participant, the Committee shall deliver any cash or shares of Company Stock
to the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed to the knowledge of the Committee,
the Committee, in its sole discretion, may deliver such shares of Company Stock
or cash to the spouse or any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Committee,
then to such other person as the Committee may designate.
ARTICLE IX
PLAN ADMINISTRATION
9.1 Plan Administration.
(a) Authority to control and manage the operation and administration
of the Plan shall be vested in the Board or a committee ("Committee") thereof.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee. The Administrator shall have all powers
necessary to supervise the administration of the Plan and control its
operations.
(b) In addition to any powers and authority conferred upon the
Administrator elsewhere in the Plan or by law, the Administrator shall have the
following powers and authority:
(i) To designate agents to carry out responsibilities relating
to the Plan;
(ii) To administer, interpret, construe and apply this Plan and
to answer all questions which may arise or which may be raised under this
Plan by a Participant, his beneficiary or any other person whatsoever;
(iii) To establish rules and procedures from time to time for
the conduct of its business and for the administration and effectuation of
its responsibilities under the Plan; and
(iv) To perform or cause to be performed such further acts as it
may deem to be necessary, appropriate, or convenient for the operation of
the Plan.
(c) Any action taken in good faith by the Board or Committee in the
exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board or Committee shall be absolute.
9.2 Limitation on Liability. No Employee of the Company nor member of the
Board or Committee shall be subject to any liability with respect to his duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any other Employee of the Company with duties under the Plan who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative, or
investigative, by reason of the person's conduct in the performance of his
duties under the Plan.
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ARTICLE X
COMPANY STOCK
10.1 Limitations on Purchase of Shares. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
________ shares, subject to adjustment under Section 10.4 below. The shares of
Company Stock to be sold to Participants under the Plan will be issued by the
Company. If the total number of shares of Company Stock that would otherwise be
issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available in as
uniform and equitable manner as is practicable. In such event, the Company
shall give written notice of such reduction of the number of shares to each
Participant affected thereby and any unused payroll deductions shall be returned
to such Participant if necessary.
10.2 Voting Company Stock. The Participant will have no interest or
voting right in shares to be purchased under Section 6.1 of the Plan until such
shares have been purchased.
10.3 Registration of Company Stock. Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.
10.4 Changes in Capitalization of the Company. Subject to any required
action by the stockholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under rights or which have been returned
to the Plan upon the cancellation of a right, as well as the purchase price per
share of Company Stock covered by each right under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock resulting from a stock split,
stock dividend, spin-off, reorganization, recapitalization, merger,
consolidation, exchange of shares or the like. Such adjustment shall be made by
the Board of Directors for the Company, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Company
Stock subject to any right granted hereunder.
10.5 Merger of Company. In the event that the Company at any time merges
into, consolidates with or enters into any other reorganization pursuant to
which the Company is not the surviving entity (sells substantially all of its
assets, enters into a transaction in which securities of the Company possessing
at least 50% of the total combined voting power of all outstanding securities of
the Company are transferred in one transaction or a series of related
transactions or engages in a "reverse" merger in which the Company is the
surviving entity and in which securities possessing more than 50% of the total
combined voting power of all outstanding voting securities of the Company are
transferred to persons different from the persons holding those securities
immediately prior to the merger), the Plan shall terminate, unless provision is
made in writing in connection with such transaction for the continuance of the
Plan and for the assumption of rights theretofore granted, or the substitution
for such rights of new rights covering the shares of a successor corporation,
with appropriate adjustments as to number and kind of shares and prices, in
which event the Plan and the rights theretofore granted or the new rights
substituted therefor, shall continue in the manner and under the terms so
provided. If such provision is not made in such transaction for the continuance
of
7
<PAGE>
the Plan and the assumption of rights theretofore granted or the substitution
for such rights of new rights covering the shares of a successor corporation,
then the Board of Directors or its committee shall cause written notice of the
proposed transaction to be given to the persons holding rights not less than 10
days prior to the anticipated effective date of the proposed transaction, and,
concurrent with the effective date of the proposed transaction, such rights
shall be exercised automatically in accordance with Section 7.1 as if such
effective date were a Purchase Date of the applicable Offering Period unless a
Participant withdraws from the Plan as provided in Section 8.1.
ARTICLE XI
MISCELLANEOUS MATTERS
11.1 Amendment and Termination. The Plan shall terminate on the ten year
anniversary of the Effective Date. Since future conditions affecting the
Company cannot be anticipated or foreseen, the Company reserves the right to
amend, modify, or terminate the Plan at any time. Upon termination of the Plan,
all benefits shall become payable immediately. Notwithstanding the foregoing,
no such amendment or termination shall affect rights previously granted, nor may
an amendment make any change in any right previously granted which adversely
affects the rights of any Participant. In addition, no amendment may be made
without prior approval of the stockholders of the Company if such amendment
would:
(a) Increase the number of shares of Company Stock that may be
issued under the Plan;
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits which accrue to Participants
under the Plan.
11.2 Stockholder Approval. Continuance of the Plan and the effectiveness
of any right granted hereunder shall be subject to approval by the stockholders
of the Company, within twelve months before or after the date the Plan is
adopted by the Board.
11.3 Benefits Not Alienable. Benefits under the Plan may not be assigned
or alienated, whether voluntarily or involuntarily. Any attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Article VIII.
11.4 Transferability. Neither payroll deductions credited to a
Participant's Account, nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 8.2 hereof) by the Participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds from the Offering Period in accordance with Article VIII hereof.
11.5 No Enlargement of Employee Rights. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Employee or to be consideration for, or an
inducement to, or a condition of, the employment of any Employee. Nothing
contained in the Plan shall be deemed to give the right to any Employee
8
<PAGE>
to be retained in the employ of the Company or to interfere with the right of
the Company to discharge any Employee at any time.
11.6 Governing Law. To the extent not preempted by Federal law, all legal
questions pertaining to the Plan shall be determined in accordance with the laws
of the State of Delaware.
11.7 Non-business Days. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.8 Compliance With Securities Laws. Notwithstanding any provision of the
Plan, the Committee shall administer the Plan in such a way to ensure that the
Plan at all times complies with any requirements of Federal Securities Laws. For
example, affiliates may be required to make irrevocable elections in accordance
with the rules set forth under Section 16b-3 of the Securities Exchange Act of
1934.
9
<PAGE>
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT ("Agreement") is made on December __, 1999,
between ITERIS, INC., a Delaware corporation (the "Company"), and
_______________________ ("Indemnitee"), an officer and/or member of the Board of
Directors of the Company.
WHEREAS, the Company desires the benefits of having Indemnitee serve as an
officer and/or director secure in the knowledge that expenses, liabilities and
losses incurred by him in his good faith service to the Company will be borne by
the Company or its successors and assigns in accordance with applicable law; and
WHEREAS, the Company desires that Indemnitee resist and defend against what
Indemnitee may consider to be unjustified investigations, claims, actions, suits
and proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company notwithstanding that conditions in the
insurance markets may make directors' and officers' liability insurance coverage
unavailable or available only at premium levels which the Company may deem
inappropriate to pay; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm the
Company's indemnification obligations to Indemnitee and, in addition, set forth
the indemnification agreements contained herein;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties agree as follows:
1. Indemnification. Indemnitee shall be indemnified and held
harmless by the Company to the fullest extent permitted by its Certificate of
Incorporation, Bylaws and applicable law, as the same exists or may hereafter be
amended, against all expenses, liabilities and loss (including attorneys' fees,
judgments, fines, and amounts paid or to be paid in any settlement approved in
advance by the Company, such approval not to be unreasonably withheld)
(collectively, "Indemnifiable Expenses") actually reasonably incurred or
suffered by Indemnitee in connection with any present or future threatened,
pending or contemplated investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Indemnifiable Litigation"), (i) to which Indemnitee is or was a party or is
threatened to be made a party by reason of any action or inaction in
Indemnitee's capacity as a director or officer of the Company, or (ii) with
respect to which Indemnitee is otherwise involved by reason of the fact that
Indemnitee is or was serving as a director, officer, employee or agent of the
Company, or of any subsidiary or division, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Notwithstanding the
foregoing, Indemnitee shall have no right to indemnification for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended.
2. Interim Expenses. The Company agrees to pay Indemnifiable
Expenses incurred by Indemnitee in connection with any Indemnifiable Litigation
in advance of the final disposition thereof, provided that the Company has
received an undertaking by or on behalf of Indemnitee, substantially in the form
attached hereto as Exhibit A, to repay the amount so advanced
---------
<PAGE>
to the extent that it is ultimately determined that Indemnitee is not entitled
to be indemnified by the Company under this Agreement or otherwise. The advances
to be made hereunder shall be paid by the Company to Indemnitee within twenty
(20) days following delivery of a written request therefor by Indemnitee to the
Company.
3. Procedure for Making Demand. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement, give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the Company
at the address set forth in Section 11 hereof (or such other address as the
Company shall designate in writing to Indemnitee). Notice shall be deemed
received three business days after the date postmarked and sent by certified or
registered mail, properly addressed; otherwise notice shall be deemed received
when such notice shall actually be received by the Company. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power. Any
indemnification provided for in Section 1 shall be made no later than forty-five
(45) days after receipt of the written request of Indemnitee.
4. Failure to Indemnify.
(a) If a claim under this Agreement, or any statute, or under any
provision of the Company's Amended and Restated Certificate of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company, within
forty-five (45) days after a written request for payment thereof has been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 12 of this Agreement, if successful in whole or in part,
Indemnitee shall also be entitled to be paid for the expense (including
attorneys' fees) of bringing such action.
(b) It shall be a defense to such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standard of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of interim expenses pursuant to Section 2 hereof unless
and until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including its board of
directors, any committee or subgroup of the board of directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
5. Notice to Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 3 thereof, the Company has director and/or officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
2
<PAGE>
take all necessary or desirable action to cause such insurers to pay, on behalf
of the indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
6. Retention of Counsel. In the event that the Company shall be
obligated to pay Indemnifiable Expenses as a result of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice
of its election to do so. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by that Indemnitee with respect to that same
proceeding, provided that (i) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense, and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not, in fact, have employed counsel to
assume defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company.
7. Successors. This Agreement establishes contract rights which
shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
8. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the Company
may be required in the future to undertake to the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee, and, in that event, the Indemnitee's rights and the
Company's obligations hereunder shall be subject to that determination.
9. Contract Rights Not Exclusive. The contract rights conferred by
this Agreement shall be in addition to, but not exclusive of, any other right
which Indemnitee may have or may hereafter acquire under any statute, provision
of the Company's Certificate of Incorporation or Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise.
10. Assumption of Indemnification Obligation. The Company hereby
assumes the obligation to indemnify Indemnitee of the Company's corporate
parent, Odetics, Inc., a California corporation ("Odetics ITS"), provided
--------
however, that at all times prior to the effective time of the merger between the
- -------
Company and Odetics ITS, Odetics ITS shall continue to indemnify Indemnitee to
the fullest extent permitted under its Articles of Incorporation, its Bylaws and
the General Corporation Law of the State of California.
11. Indemnitee's Obligations. The Indemnitee shall promptly advise
the Company in writing of the institution of any investigation, claim, action,
suit or proceeding which is or may be subject to this Agreement and keep the
Company generally informed of, and consult with the Company with respect to, the
status of any such investigation, claim, action, suit or proceeding. Notices to
the Company shall be directed to ITERIS, INC., 1515 S. Manchester Avenue,
Anaheim,
3
<PAGE>
California 92802, Attn: Jack E. Johnson (or other such address as the Company
shall designate in writing to Indemnitee). Notice shall be deemed received three
days after the date postmarked if sent by certified or registered mail, properly
addressed. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
12. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement, or to enforce
or interpret any other terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
13. Severability. Should any provision of this Agreement, or any
clause hereof, be held to be invalid, illegal or unenforceable, in whole or in
part, the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.
14. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether of
not similar) nor shall such waiver constitute a continuing waiver.
15. Choice of Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
ITERIS, INC.
By: ________________________________
Its: ________________________________
INDEMNITEE:
Name: _________________________________
5
<PAGE>
EXHIBIT A
UNDERTAKING AGREEMENT
This UNDERTAKING AGREEMENT is made on _______________, 19__, between
___________________, a Delaware corporation (the "Company") and
__________________________, an officer and/or member of the board of directors
of the Company ("Indemnitee").
WHEREAS, Indemnitee may become involved in investigations, claims, actions,
suits or proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company; and
WHEREAS, Indemnitee desires that the Company pay any and all expenses
(including, but not limited to, attorneys' fees and court costs) actually and
reasonably incurred by Indemnitee or on Indemnitee's behalf in defending or
investigating any such suits or claims and that such payment be made in advance
of the final disposition of such investigations, claims, actions, suits or
proceedings to the extent that Indemnitee has not been previously reimbursed by
insurance; and
WHEREAS, the Company is willing to make such payments but, in accordance
with Section 145 of the General Corporation Law of the State of Delaware, the
Company may make such payments only if it receives an undertaking to repay from
Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. In regard to any payments made by the Company to Indemnitee pursuant
to the terms of the Indemnification Agreement dated _______________, 199 __,
between the Company and Indemnitee, Indemnitee hereby undertakes and agrees to
repay to the Company any and all amounts so paid promptly and in any event
within thirty (30) days after the disposition, including any appeals, of any
litigation or threatened litigation on account of which payments were made, but
only to the extent that Indemnitee is ultimately found not entitled to be
indemnified by the Company under the Bylaws of the Company and Section 145 of
the General Corporation Law of the State of Delaware, or other applicable law.
2. This Agreement shall not affect in any manner rights which Indemnitee
may have against the Company, any insurer or any other person to seek
indemnification for or reimbursement of any expenses referred to herein or any
judgment which may be rendered in any litigation or proceeding.
1
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written.
______________________________:
By: ________________________
Its: ________________________
INDEMNITEE:
Name: ________________________
2
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
---------
of the Effective Time (as defined below), by and among Meyer, Mohaddes
Associates, Inc., a California corporation ("MMA"), Odetics ITS, Inc., a
---
Delaware corporation ("ITS"), and Abbas Mohaddes (the "Employee"). All
--- --------
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Reorganization Agreement (as defined below).
WHEREAS, Odetics, ITS, Merger Sub, MMA and Shareholders have
entered into an Agreement and Plan of Reorganization dated as of October 16,
1998 (the "Reorganization Agreement"), pursuant to which Merger Sub will merge
------------------------
(the "Merger") with and into MMA and MMA will become a wholly-owned subsidiary
------
of ITS at the Effective Time (as defined in the Reorganization Agreement).
WHEREAS, prior to the consummation of the Reorganization
Agreement, the Employee was a shareholder and officer of MMA.
WHEREAS, ITS, MMA and the Employee desire to enter into an
employment relationship pursuant to which subsequent to the consummation of the
Reorganization Agreement the Employee will continue to be employed by MMA or, in
the event MMA should merge with and into ITS, the Employee will become an
employee of ITS.
WHEREAS, as a condition to consummation of the transactions
contemplated by the Reorganization Agreement and concurrently herewith, the
Employee, MMA and ITS have entered into a Noncompetition Agreement (the
"Noncompetition Agreement"), pursuant to which the Employee has agreed to
------------------------
refrain from competing with MMA and ITS or taking certain other actions as
provided in the Noncompetition Agreement.
WHEREAS, it is a condition to consummation of the transactions
contemplated by the Reorganization Agreement that MMA, ITS and the Employee
enter into this Agreement, and the parties have been materially induced to enter
into the Reorganization Agreement on account of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
1. Employment and Performance. During the Term (as defined below),
--------------------------
MMA hereby agrees to employ, and ITS hereby agrees to cause MMA to employ, the
Employee full-time as an officer of MMA, or, in the event MMA should merge with
and into ITS, as an upper-management level officer of ITS, and the Employee
hereby accepts such employment. The Employee agrees to faithfully and diligently
perform such related duties and services as may be reasonably determined and
assigned to him from time to time by MMA and/or ITS. The Employee's initial
duties shall be to act as the President of MMA, reporting to and subject to the
direction of a Vice President of ITS. The Employee agrees to abide by the
Articles of
<PAGE>
Incorporation and Bylaws of ITS and MMA and all applicable laws and regulations,
as each shall be amended and in effect from time to time, in performing the
duties and services described herein.
2. No Conflict. The Employee covenants and represents that he is not a
-----------
party to any agreement or understanding which impairs or prohibits his ability
to enter into, and perform services under, this Agreement.
3. Term. The Employee shall be employed by MMA (or ITS in the event MMA
----
merges with and into ITS) on a full-time basis for a term of four (4) years plus
additional one (1)-year terms as set forth herein (the "Term"), commencing at
----
the Effective Time; subject, however, to earlier termination as hereinafter
provided. Following the initial four (4)-year term, this Agreement shall
automatically renew for successive one (1)-year periods unless either party
gives the other at least sixty (60) days prior written notice of its intent not
to renew this Agreement. The Employee shall devote all of his working time and
attention to the affairs of MMA and/or ITS, except as may be specifically
approved by the Board of Directors of MMA or ITS (the "Board"). The Term shall
-----
terminate upon the Employee's death or Total Disability. For purposes of this
Agreement, "Total Disability" shall mean the Employee's disability for a
continuous period of one hundred twenty (120) days, if such disability prevents
him from performing his duties for MMA and/or ITS (the existence of such Total
Disability shall be determined in good faith by the Board in the exercise of its
reasonable judgment).
4. Compensation. During the Term, the Employee shall be entitled
------------
to receive the following compensation for his services:
a. Base Salary. The Employee shall receive a salary equal to
-----------
Ten Thousand Dollars ($10,000) per month (the "Base Salary"), which Base Salary
-----------
shall only be reduced in connection with a general decrease in the salary of all
other executive officers of ITS and then in accordance with the average
percentage decrease as applicable to all other executive officers of ITS. Such
Base Salary shall be paid on a regular basis in accordance with ITS's normal
payroll procedures and policies (including any deductions required by law (such
as state and federal withholding taxes, social security taxes and other taxes)
or deductions elected by the Employee (such as health care insurance premiums)).
2
<PAGE>
b. Employee Benefits. The Employee shall be entitled to
-----------------
participate, subject to the provisions, rules and regulations applicable
thereto, including provisions empowering the Board to modify and/or terminate
any such plan or programs, in all Odetics', MMA's or ITS's, at the sole
discretion of ITS, employee benefit and equity plans or programs (including
bonuses, stock options, employee stock purchase plans, 401(k) plans, employee
profit sharing plans, optional ITS-assisted vehicle ownership plan, vacation
time, sick leave, health coverage, insurance and holidays) in accordance with
the terms and conditions thereof, and, except as otherwise provided herein, such
benefits shall be substantially similar to the benefits provided to similarly
situated employees of ITS or Odetics whose primary function is to provide
employment-related services for the benefit of ITS and/or the ITS business unit
of Odetics (which business unit shall exist until such time as Odetics transfers
to ITS all of the assets currently comprising such unit) as determined in good
faith by ITS (the "Employee Benefits"). With respect to the ITS-assisted
-----------------
vehicle ownership plan, the Employee shall be entitled to a vehicle with an
annual value of no greater than Seven Thousand Dollars ($7,000). With respect to
Employee's vacation time and notwithstanding the foregoing, the number of
vacation days per year to which the Employee is entitled as of the Closing Date
under MMA's vacation policy shall be the number of vacation days per year to
which Employee will be entitled after the Closing Date under ITS's vacation
policy until such time as Employee is entitled to additional vacation days under
the ITS vacation policy. For the purposes of determining the number of
additional vacation days to which Employee is entitled under the ITS vacation
policy, Employee's "start date" shall be deemed to be the date Employee
commenced accruing vacation days under the MMA vacation policy.
c. Expenses. In accordance with MMA's or ITS's policies
--------
established from time to time, MMA or ITS will also continue to pay or reimburse
the Employee for all reasonable and necessary out-of-pocket expenses incurred by
him in the performance of his duties under this Agreement, subject to the prior
authorization thereof or subsequent presentment of appropriate receipts and
vouchers therefor.
d. Insurance. During the Term of this Agreement, the errors and
---------
omissions insurance coverage in effect for ITS during such period shall apply to
and provide coverage for Employee with respect to claims made for occurrences
not previously disclosed to ITS by MMA which occurred after September 1, 1997.
ITS or its parent, Odetics, Inc. ("Odetics") will continue to carry professional
liability insurance covering Employee during the Term with policy limits in an
amount not less than $1.0 million per occurrence or $2.0 million in the
aggregate.
5. Termination.
-----------
a. Termination by MMA or ITS for Cause. At any time MMA and/or
-----------------------------------
ITS shall have the right to immediately terminate the Employee's employment
hereunder by written notice to the Employee upon a good faith finding by the MMA
or ITS Board, in its reasonable judgment, of any of the following occurrences:
3
<PAGE>
(i) the Employee's conviction of (a) a felony,
or (b) another serious crime involving material harm to the
standing or reputation of MMA and/or ITS;
(ii) the Employee's misconduct or negligence in
the performance of his duties for MMA and/or ITS which causes
or may cause material harm to MMA and/or ITS;
(iii) the Employee's intentional conduct bringing
MMA and/or ITS into public disgrace or disrepute, including,
but not limited to, dishonesty, fraud, material and deliberate
injury or attempted injury, in each case related to MMA and/or
ITS or their respective businesses; or
(iv) a material breach by the Employee of any
of the terms or conditions of this Agreement or the
Noncompetition Agreement which, if curable, is not cured to
MMA's and/or ITS's reasonable satisfaction within fifteen (15)
days (or such other time period as the parties may mutually
agree in writing) of written notice thereof.
b. Voluntary Termination by the Employee (other than for Good
----------------------------------------------------------
Reason) Payments Upon Voluntary Termination or Termination for Cause. The
- --------------------------------------------------------------------
Employee shall have the right to voluntarily terminate this Agreement at any
time upon fifteen (15) days prior written notice. In the event that the Employee
voluntarily terminates his employment hereunder (other than for Good Reason) or
this Agreement is terminated pursuant to Section 5.a above, MMA or ITS shall
pay the Employee's Base Salary through the date of such termination only and
shall have no responsibility for the payment of any other compensation or
benefits to the Employee for any time period subsequent to such termination,
including, without limitation, any bonuses. Nothing herein shall affect MMA's or
ITS's obligation to provide benefits as required by COBRA or any other
applicable federal or state law.
c. Termination by MMA and/or ITS Without Cause: Termination by
------------------------------------------------------------
Employee for Good Reason. MMA and/or ITS may terminate this Agreement upon
- ------------------------
fifteen (15) days written notice "without cause" (i.e. , other than pursuant to
Section 5.a above). Employee may terminate this Agreement for Good Reason by
written notice to ITS. If MMA and/or ITS exercises this right, or if the
Employee terminates employment for Good Reason, MMA or ITS shall pay to the
Employee, as his sole and exclusive remedy for termination of his employment
pursuant to this Section 5.c, the Base Salary and Employee Benefits that the
Employee would have received had he remained in the employ of MMA or ITS, as the
case may be, through and until the earlier to occur of (i) twelve (12) months
from the effective date of Employee's termination or (ii) the expiration of the
Term. Any amounts payable under this Section shall be paid according to the same
schedule as would have applied if the Employee had remained in the employ of MMA
or ITS, as the case may be, for such period, regardless of whether the Employee
finds other employment. For purposes of this Agreement, "Good Reason" means the
occurrence of any of the following (unless the Employee consents thereto in
writing) which, if curable, is not cured to the Employee's reasonable
satisfaction within fifteen (15) days (or such
4
<PAGE>
other time period as the parties may mutually agree in writing) of written
notice thereof: (i) the assignment to the Employee of any duties materially
inconsistent with his status as a senior executive of MMA or ITS, as the case
may be, or a substantial alteration in the nature or status of his
responsibilities (except alterations contemplated by MMA, ITS and the Employee
at the Effective Time, including but not limited to the integration of the
finance and accounting functions of MMA with ITS's finance and accounting
functions); (ii) MMA's or ITS's material breach of any of the terms or
conditions of this Agreement; (iii) the failure by MMA or ITS to pay the
Employee the Base Salary payable under Section 4.a; (iv) the failure by MMA or
ITS to provide the Employee with the Employee Benefits under Section 4.b; (v)
the material breach by ITS of any of the terms and provisions of that certain
Registration Rights Agreement of even date herewith among ITS, Employee and the
other shareholders of MMA immediately prior to the Merger; (vi) the material
breach by Odetics of any of the terms and provisions of that certain
Registration Rights Agreement of even date herewith among Odetics, Employee and
the other shareholders of MMA immediately prior to the Merger; (vii) the failure
of ITS or Odetics to pay to Employee any consideration due Employee under the
Reorganization Agreement; or (viii) the failure by MMA or ITS to provide the
Employee with the Employee Benefits under Section 4.b.
d. Payments Upon Death or Total Disability. In the event that
---------------------------------------
the Employee's employment hereunder is terminated on account of his death or
Total Disability, MMA or ITS shall pay to the Employee's estate or the Employee,
as the case may be, the Base Salary to which the Employee was entitled through
the date of such death or Total Disability (the date of Total Disability shall
mean the one hundred twentieth (120th) day of the Employee's disability for a
continuous period, if such disability prevents him from performing his duties
for MMA or ITS, as the case may be, as determined by the Board in the exercise
of its reasonable judgment).
6. Place of Employment. Employee shall be primarily assigned
-------------------
throughout the Term of this Agreement to a site located in either the County of
Los Angeles or the County of Orange, California.
7. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the successors and assigns of ITS and MMA, and, unless
clearly inapplicable, all references herein to ITS and MMA shall be deemed to
include any such successor. In addition, this Agreement shall be binding upon
and inure to the benefit of the Employee and his heirs, executors, legal
representatives and assigns; provided, that this Agreement and any provision
hereunder shall not be assigned, transferred or delegated by the Employee
without the prior written approval of the Board.
8. Covenants. During the term of this Agreement, the Employee
---------
will faithfully and diligently do and perform the acts and duties required in
connection with his employment hereunder.
9. Entire Agreement: Waivers. This Agreement constitutes the
-------------------------
entire agreement between the parties pertaining to the contemporaneous
agreements, representations, and understandings of the parties. No supplement,
modification, or amendment of this Agreement
5
<PAGE>
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other provision, whether or not similar, nor shall any waiver constitute
a continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
10. Severability. All provisions contained herein are severable and
------------
in the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such provision
shall be construed as if it were written so as to effectuate to the greatest
possible extent the parties' expressed intent; and in every case the remainder
of this Agreement shall not be affected thereby and shall remain valid and
enforceable, as if such affected provision were not contained herein.
11. Notices. Unless otherwise expressly provided herein, all
-------
notices, requests, demands, instructions, documents and other communications to
be given hereunder by either party to the other shall be in writing, shall be
sent to the address or fax number set forth below (provided that any party may
at any time change its address for notice or other such information by giving
written notice thereof in accordance with this Section), and shall be deemed to
be duly given upon the earliest of (a) hand delivery, (b) the first business day
after sending by reputable overnight delivery service for next-day delivery, (c)
the third business day after sending by first class United States mail, properly
addressed, postage prepaid, certified or registered, (d) the time of successful
facsimile transmission (or in the event the time of receipt of the fax in the
city where the fax is received is not during regular business hours on a
business day, then at the customary hour for the opening of business on the next
business day), but in either case only if a complete copy is also sent by first
class United States mail (postage prepaid) on the same day as facsimile
transmission or on the next business day, or (e) the date actually received by
the other party: All notices shall be properly addressed as follows:
To the Employee at: Abbas Mohaddes
3432 Seaglen Drive
Rancho Palos Verdes, CA 90275
Tel: (310) 544-5056
Fax: (310) 544-3356
With a copy to: Cohen & Lord, a professional corporation
4720 Lincoln Boulevard, Suite 200
Marina del Rey, CA 90292
Attn: Doug Gummerman
Tel: (310) 821-1163
Fax: (310) 821-7828
6
<PAGE>
To MMA or ITS: Odetics ITS, Inc.
1515 South Manchester Avenue
Anaheim, CA 92802
Attn: Chief Executive Officer
Tel: (714) 758-0200
Fax: (714) 780-7246
With a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618-2301
Attn: Patrick Arrington
Tel: (949) 790-6300
Fax: (949) 790-6301
Any party may change its address, fax number or the person designated to receive
notice by giving notice of the new address to each of the other parties hereto
in the manner set forth above. Rejection or other refusal to accept, or the
inability to deliver because of a changed address of which no notice was given,
shall not affect the date of such notice sent in accordance with this Section.
12. Applicable Law. The terms of this Agreement shall be governed by
--------------
and construed in accordance with the laws of the State of California without
reference to the choice of law principles thereof.
13. Disputes. If the parties are unable, after good faith negotiations,
--------
which each hereby covenants to undertake, to resolve any dispute arising between
them within fifteen (15) days after notice is given of such dispute, then the
dispute will be referred to arbitration (which the parties agree is the parties'
exclusive means of resolving any such dispute) before one (1) arbitrator in
Orange County, California, or any other place mutually agreed upon by the
parties hereto, in accordance with the applicable rules then in effect of the
Judicial Arbitration and Mediation Service (the "JAMS Rules") (or under any
other form of arbitration mutually acceptable to the parties). Such arbitrator
shall be selected by the mutual agreement of ITS and Employee, or if no mutual
agreement can be reached within ten (10) days after the termination of the 15
day period referenced above in this Section, then such arbitrator shall be
appointed by the arbitration service. The civil discovery statutes of the State
of California shall apply to such arbitration. The determination made in
accordance with the rules of JAMS (or such other form of arbitration as the
parties may mutually agree) shall be delivered in writing to the parties hereto
and shall be final and binding and conclusive upon the parties hereto and the
amount of the claim, if any, determined to exist shall be a valid claim and no
further remedy shall be available to either party with respect to such dispute
and judgment may be entered upon such decision in accordance with applicable law
in any court having jurisdiction thereof. The arbitration award shall include
(i) a provision that the prevailing party in such arbitration recover its costs
relating to the arbitration and reasonable attorneys' fees from the other party,
(ii) the amount of such costs and fees, and (iii) an order that the losing party
pay the fees and expenses of the arbitrator.
7
<PAGE>
14. Indemnification. In the event ITS enters into an
---------------
Indemnification Agreement with any of its other executive officers, ITS agrees
to enter into an Indemnification Agreement, in substantially the same form, with
Employee at the same time.
8
<PAGE>
COUNTERPART SIGNATURE PAGE TO MOHADDES EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ODETICS ITS, INC.
By: /s/ Jack Johnson
------------------------------------
Jack Johnson, President
By: /s/ Gregory A. Miner
------------------------------------
Gregory A. Miner, Secretary
MEYER, MOHADDES ASSOCIATES, INC.
By: /s/ Jack Johnson
------------------------------------
Jack Johnson, Chairman
By: /s/ Gregory A. Miner
------------------------------------
Gregory A. Miner, Secretary
EMPLOYEE
/s/ Abbas Mohaddes
-----------------------------------------
Abbas Mohaddes
9
<PAGE>
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is entered into as of
---------
the Effective Time (as defined below), by and among Odetics ITS, Inc., a
California corporation ("ITS"), and Meyer, Mohaddes Associates, Inc., a
---
California corporation ("MMA") (ITS and MMA are sometimes hereinafter referred
---
to collectively as the "Company"), on the one hand, and Abbas Mohaddes (the
-------
"Employee"), on the other hand. All capitalized terms used herein and not
--------
otherwise defined shall have the meanings ascribed to such terms in the
Reorganization Agreement (as defined below).
WHEREAS, Odetics, ITS, Merger Sub, Shareholders and MMA have entered
into an Agreement and Plan of Reorganization dated as of October 16, 1998 (the
"Reorganization Agreement"), pursuant to which Merger Sub will merge with and
------------------------
into MMA and MMA will become a wholly-owned subsidiary of ITS (the
"Reorganization") at the Effective Time (as defined in the Reorganization
--------------
Agreement);
WHEREAS, prior to the consummation of the Reorganization Agreement,
Employee was an officer and shareholder of MMA and, upon consummation of the
transactions contemplated by the Reorganization Agreement, will receive
significant benefit;
WHEREAS, contemporaneously herewith ITS, MMA and Employee have entered
into an Employment Agreement (the "Employment Agreement"), pursuant to which
MMA or ITS will employ Employee and provide certain benefits to Employee, as
further described in such agreement;
WHEREAS, Employee possesses valuable knowledge of the business and
affairs of the Company and its Affiliates (as defined below) and their policies,
procedures, proprietary information and personnel and will be in a position to
obtain such knowledge after the date hereof relating to the Company;
WHEREAS, Employee has agreed to enter into this Agreement as a
material inducement to the Company to enter into and consummate the transactions
contemplated by the Reorganization Agreement on the terms and conditions set
forth therein;
WHEREAS, it is a condition to the Company's obligations under the
Reorganization Agreement that Employee enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises in this
Agreement and in the Reorganization Agreement, the parties agree as follows:
1 . Agreement Not to Compete.
------------------------
a. Employee hereby agrees that he or she shall not, during the
Restricted Period (as defined below), for any reason, directly or indirectly,
engage in any business that Competes (as defined below) with the Company or any
of its Affiliates, and shall not, directly or indirectly,
1
<PAGE>
have any interest in, own, manage, operate, control, be connected with as a
stockholder (other than as a stockholder of less than five percent (5%) of the
issued and outstanding stock of a publicly-held corporation), joint venture,
officer, partner, employee, consultant, other representative or agent or
otherwise in any other capacity engage or invest or participate in, any business
that Competes with the Company or any of its Affiliates. As used herein, the
term "Competes" with the Company or any of its Affiliates shall mean selling,
--------
offering for sale or assisting a third party to sell or offer for sale any
product or service which competes with a product or service of the Company or
its Affiliates, or otherwise competing with any of the businesses or reasonably
anticipated businesses conducted by the Company or any of its Affiliates in any
county or any other political subdivision of any state of the United States of
America or in any other country in the world where the Company or any of its
Affiliates conducts such business on the date hereof or at any time during the
Restricted Period. Notwithstanding the foregoing definition of "Compete," the
-------
Company hereby acknowledges and agrees that Employee's employment or other
engagement by a governmental entity or agency and teaching activities are not
prohibited under the terms of this Agreement. Employee acknowledges that the
Company's business currently serves all geographic and customer markets
throughout the United States and the rest of the world. The term "Restricted
----------
Period" shall mean the longer of (i) the four year period following the
- ------
Effective Time, or (ii) the Employee's term of employment with MMA or ITS or any
of their respective Affiliates plus the following: (A) in the event of
termination of the Employee's employment pursuant to Sections 5.a or 5.b of the
Employment Agreement, the twelve month period following the Employee's
termination of employment, and (B) in the event of termination of the Employee's
employment pursuant to Section 5.c of the Employment Agreement, the period
through the conclusion of the Term.
b. The parties expressly acknowledge and agree that the duration and
geographic area for which the covenant not to compete set forth in this Section
1 is to be effective are reasonable. In the event that any court determines that
the time period or the geographic areas provided for in this Section 1, or both
of them, are illegal or unenforceable, the parties intend that such court shall
limit such time period or geographic scope to the minimum extent necessary so
that such covenant shall remain in full force and effect for the greatest time
period and in the greatest geographical area that would not render it
unenforceable. The parties intend that this covenant shall be deemed to be a
series of separate covenants, one for each and every county of each and every
state or other political subdivision of the United States of America and for any
other country in the world where this covenant is intended to be effective.
c. The parties agree that damages would be an inadequate remedy for the
Company in the event of a breach or threatened breach of any provision of this
Agreement and thus, in any such event, the Company may, either with or without
pursuing any potential damage remedies, immediately obtain and enforce an
injunction prohibiting Employee from violating this Agreement.
d. As used in this Agreement, "Affiliates" shall mean a person or
----------
entity who directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with, such specified person or
entity (and shall be deemed to include the Parent).
2
<PAGE>
e. Notwithstanding anything to the contrary in this Agreement, the
Restricted Period shall terminate ten (10) business days following the receipt
by the Company of written notice from Employee of a Termination Event, provided
that the Termination Event is not cured by the end of such ten day period. In
order to constitute valid notice, such notice must identify the Termination
Event and the specific actions necessary for the Company to cure the Termination
Event. For the purposes of this Section l.e, a "Termination Event" shall mean
-----------------
(i) the Company's failure to make any payments required under Section 4 of the
Employment Agreement, unless such payments have been disputed in good faith by
the Company, (ii) the Company's failure to pay any of the consideration due to
Employee under the Reorganization Agreement, unless such payments have been
disputed in good faith by the Company, (iii) the Company's failure to comply
with its obligations to register Employee's shares of the Company's Common Stock
under that certain Registration Rights Agreement of even date herewith among the
Company, Employee and the other Shareholders, unless the Company in good faith
disputes its obligation to register such shares, or (iv) the failure of Odetics,
Inc., a Delaware corporation ("Odetics"), to comply with its obligations to
register Employee's shares of Odetics' Class A Common Stock under that certain
Registration Rights Agreement of even date herewith among Odetics, Employee and
the other investors listed on the signature pages thereof, unless Odetics in
good faith disputes its obligation to register such shares.
2. Agreement Not to Solicit.
------------------------
During the Restricted Period, Employee shall not, acting in any capacity,
directly or indirectly: (i) solicit, offer employment to, otherwise attempt to
hire, or assist in the hiring of, any person employed by, or acting as a
representative or agent of or consultant or adviser to, the Company or any
Affiliate either on the date hereof or within the year preceding any such action
on behalf of any person or entity other than the Company and its Affiliates,
(ii) encourage or induce, directly or indirectly, any person to leave the
employment or engagement by the Company or any Affiliate; (iii) divert, or
attempt to divert any person which is furnished services by the Company or any
Affiliate or furnishes services for or to the Company or any Affiliate from
doing business with the Company or any Affiliate (including any person or entity
known by Employee to be a prospective customer, supplier or material service
provider of the Company or Affiliate); or (iv) induce or attempt to induce any
customer, supplier or material service provider of the Company or any Affiliate
to cease being (or not become) a customer, supplier or material service provider
of the Company and its Affiliates (including any person or entity known by
Employee to be a prospective customer, supplier or material service provider of
the Company or any Affiliate).
3. Nondisclosure of Confidential Information.
-----------------------------------------
a. Employee acknowledges that, as between the parties, the Company and
its Affiliates, own all right, title and interest in and to their respective
Confidential Information (as defined below) and Employee agrees to assign and
does hereby assign any and all rights Employee may have or acquire in such
Confidential Information to the Company or its Affiliates, as applicable,
without further compensation or award of any kind to Employee from the Company
or any third party. Except as may be required by law or Employee's duties with
respect to his employment with the Company, Employee shall not at any time,
directly or
3
<PAGE>
indirectly, use, communicate, disclose, disseminate, lecture upon, publish
articles or otherwise put in the public domain, any Confidential Information.
b. All documents, records, notebooks, notes, memoranda, computer records
and other repositories of or containing Confidential Information or any other
information of a secret, proprietary, confidential or unpublished or undisclosed
nature relating to the Company or any of its Affiliates, or to their respective
products, operations or activities made or compiled by Employee at any time or
made available to Employee, including any and all copies, extracts and summaries
thereof, shall be the property of the Company or its Affiliates, as appropriate,
shall be held by Employee in trust solely for the benefit of the Company or its
Affiliates, as appropriate, and shall be delivered to the Company or its
Affiliates, as appropriate, by Employee immediately on request.
"Confidential Information" means any and all information received, developed,
------------------------
created or discovered by or for the Company which has value in the Company's
business or is of a secret, proprietary, confidential or unpublished or
undisclosed nature relating to the Company or any of its Affiliates, or their
respective products, operations or activities, including, without limitation,
all trade secret information and other information relating to the Company or
any Affiliates' performance, sales, financial, pricing, cost, manufacturing,
contractual, and marketing information, ideas, knowledge and data, and all
processes, products, formulae, designs, practices, methods, techniques,
research, know-how, computer software and algorithms, customer lists, technical
requirements of customers and identity and purchasing terms of suppliers, unless
such information is in the public domain to such an extent as to be readily
available to competitors without a violation of any confidentiality obligation.
4. Disclosure and Assignment of Inventions.
---------------------------------------
a. Employee shall make full disclosure to the Company and its
Affiliates (as appropriate) and will hold in trust for the sole right and
benefit of the Company and its Affiliates (as appropriate) any Inventions (as
defined below) which Employee may (in whole or in part, either alone or jointly
with others) conceive, or develop, or reduce to practice, or cause to be
conceived or developed or reduced to practice at any time during the term of his
employment with the Company. For purposes of this Section 4, the term
"Invention" shall mean discoveries, developments, improvements, trade secrets,
---------
computer software, concepts and ideas, whether patentable or not, including
processes, methods, designs, practices, formulae and techniques, as well as
improvements thereof or know-how related thereto, concerning any past, present
or prospective activities of the Company or its Affiliates with which Employee
has or may become acquainted as a result of his or her involvement with the
Company or any of its Affiliates.
b. With respect to (i) Inventions made or conceived by Employee either
during the term of Employee's employment or thereafter for so long as such
information does not legally become public knowledge (whether or not with the
use of the facilities, materials or personnel of the Company or any of its
Affiliates) in whole or in part, either alone or jointly with others, and which
are based on or related to Confidential Information, or (ii) Inventions made or
conceived by Employee during the term of his employment with the Company
(whether or not with the use of the facilities, materials or personnel of the
Company or any of its Affiliates), in
4
<PAGE>
whole or in part, either alone or jointly with others, which relate to the
business of the Company or Affiliate or to the Company's or any of its
Affiliates' actual or reasonably anticipated research or development, or result
from any work performed by Employee for the Company or any Affiliates, Employee
hereby agrees:
(1) that, as between the parties, the Company or its Affiliates
(as appropriate) own all the right, title and interest in and to all such
Inventions and all patent rights, copyright rights, trade secret rights, mask
work rights and all other intellectual property and proprietary right anywhere
in the world ("Rights") therein; and
------
(2) to perform, during and after employment with the Company, all
acts deemed necessary or desirable by the Company to permit and assist it, at
the Company's expense but without any charge by Employee to the Company, in
evidencing, perfecting, obtaining, maintaining, defending and enforcing
Employee's assignment of Inventions and Rights pursuant to this Agreement in any
and all countries, without further consideration to Employee above and beyond
his previously agreed salary (if the services are performed during Employee's
employment with the Company) or without further consideration above and beyond a
reasonably and mutually agreeable compensation (if the services are performed
after Employee's employment with the Company).
In this regard, if the Company or its Affiliates (as appropriate) are
unable for any reason whatsoever (other than by reason of a good faith dispute
between the Company, or any of its Affiliates, and Employee concerning
Employee's rights to any Inventions of which Employee has notified the Company
in accordance with Section 5.g hereof) to secure Employee's signature to any
lawful and necessary documents for the above purposes, Employee hereby
irrevocably constitutes and appoints the Company or its Affiliates (as
appropriate) and its officers, and each of them, as its agent and attorney in
fact, with full power of substitution, to act for and on behalf, to execute and
file any such applications and to do all other lawfully permitted acts to
further the above purposes with the same legal force and effect as if executed
by Employee.
5. Miscellaneous.
-------------
a. This Agreement is not a contract of employment and does not give
Employee any right to employment for any specific period of time. Unless and
until Employee shall have entered into a written employment agreement with MMA
or ITS, Employee shall remain an employee at will during the term of Employee's
employment at the Company. If there is a contract of employment between the
Employee and MMA or ITS in effect at any time (e.g., the Employment
Agreement), whether effective before or after this Agreement becomes effective,
this Agreement shall be deemed to be an amendment to such contract of employment
unless such contract of employment expressly cancels this Agreement.
b. All of the provisions set forth in this Agreement are continuing
terms and shall survive both the execution of this Agreement and the
Reorganization Agreement.
C. This Agreement constitutes the entire agreement between the parties
with respect to its subject matter and supersedes any prior agreement or
understanding; provided, however,
5
<PAGE>
that Employee's obligations pursuant to any proprietary information and
inventions agreement executed for the benefit of the Company shall not be
affected except to the extent such agreement conflicts with the provisions of
this Agreement. No supplement, modification, or amendment of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other provision, whether or not similar, nor shall any waiver constitute
a continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California without regard to its conflict of law
provisions.
e. Each provision of this Agreement shall be considered severable and if
a provision is for any reason held to be invalid, all remaining provisions shall
be enforceable. If any provision of this Agreement is held to impose a
restriction upon Employee which is unenforceable in scope but could be made
enforceable by limiting the scope, Employee and the Company agree to a
modification of the invalid or unenforceable provision to the extent required
for enforceability.
f. This Agreement shall be binding and inure to the benefit of the
parties and their respective successors in interest of any kind whatsoever.
g. If the parties are unable, after good faith negotiations, which each
hereby covenants to undertake, to resolve any dispute arising between them
within fifteen (15) days after notice is given of such dispute, then the dispute
will be referred to arbitration (which the parties agree is the exclusive means
of resolving any such dispute) before one (1) arbitrator in Orange County,
California, or any other place mutually agreed upon by the parties hereto, in
accordance with the applicable rules then in effect of the Judicial Arbitration
and Mediation Service (the "JAMS Rules") (or any other form of arbitration
----------
mutually acceptable to the parties). Such arbitrator shall be selected by the
mutual agreement of the Company and Employee, or if no mutual agreement can be
reached within ten (10) days after the termination of the fifteen day period
referenced above, then such arbitrator shall be appointed by the arbitration
service. The civil discovery statutes of the State of California shall apply to
such arbitration. The determination made in accordance with the rules of JAMS
(or such other form of arbitration as the parties may mutually agree) shall be
delivered in writing to the parties hereto and shall be final, binding and
conclusive on the parties hereto, and the amount of the claim, if any,
determined to exist shall be a valid claim and no further remedy shall be
available to either party with respect to such dispute and judgment may be
entered upon such decision in accordance with applicable law in any court having
jurisdiction thereof. The arbitration award shall include (i) a provision that
the prevailing party in such arbitration recover its costs relating to the
arbitration and reasonable attorneys' fees from the other party, (ii) the amount
of such costs and fees, and (iii) an order that the losing party pay the fees
and expenses of the arbitrator.
h. Unless otherwise expressly provided herein, all notices, requests,
demands, instructions, documents and other communications to be given hereunder
by either party to the other shall be in writing, shall be sent to the
address/fax number set forth below (provided that any party may at any time
change its address for notice or other such information by giving
6
<PAGE>
written notice thereof in accordance with this Section), and shall be deemed to
be duly given upon the earliest of (i) hand delivery, (ii) the first business
day after sending by reputable overnight delivery service for next-day delivery,
(iii) the third business day after sending by first class United States mail,
properly addressed, postage prepaid, certified or registered, (iv) the time of
successful facsimile transmission (or in the event the time of receipt of the
fax in the city where the fax is received is not during regular business hours
on a business day, then at the customary hour for the opening of business on the
next business day), but in either case only if a complete copy is also sent by
first class United States mail (postage prepaid) on the same day as facsimile
transmission or on the next business day, or (v) the date actually received by
the other party. All notices shall be properly addressed as follows:
To Employee at: Abbas Mohaddes
3432 Seaglen Drive
Rancho Palos, Verdes, CA 90275
Tel: (310) 544-5056
Fax: (310) 544-3356
With a copy to: Cohen & Lord, a professional corporation
4720 Lincoln Boulevard, Suite 200
Marina del Rey, CA 90292
Attn: Doug Gummerman, Esq.
Tel: (310) 821-1163
Fax: (310) 821-7828
To the Company at: Odetics ITS, Inc.
1515 South Manchester Avenue
Anaheim, CA 92802
Attn: Chief Executive Officer
Tel: (714) 758-0200
Fax: (714) 780-7246
With a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618-2301
Attn: Patrick Arrington, Esq.
Tel: (949) 790-6300
Fax: (949) 790-6301
Any party may change its address or fax number for the purposes of this
paragraph by giving notice of the new address to each of the other parties
hereto in the manner set forth above. Rejection or other refusal to accept, or
the inability to deliver because of a changed address of which no notice was
given, shall not affect the date of such notice sent in accordance with this
Section.
<PAGE>
[SIGNATURE PAGE TO MOHADDES NONCOMPETITION AGREEMENT]
The parties have agreed to and executed this Noncompetition Agreement as of the
date first set forth above.
"ITS" ODETICS ITS, INC.,
a California corporation
By: /s/ Jack Johnson
---------------------------
Jack Johnson, President and Chief
Executive Officer
By: /s/ Gregory A. Miner
---------------------------
Gregory A. Miner, Secretary
"MMA" MEYER, MOHADDES ASSOCIATES, INC.,
a California corporation
By: /s/ Abbas Mohaddes
---------------------------
Abbas Mohaddes, Chief Executive
Officer
By: /s/ Gregory A. Miner
---------------------------
Gregory A. Miner, Secretary
"EMPLOYEE" /s/ Abbas Mohaddes
--------------------------------
ABBAS MOHADDES
8
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EXHIBIT 10.11
Confidential Treatment Requested Confidential
Portion Has Been Filed Separately With
the Securities and Exchange Commission
AGREEMENT
THIS AGREEMENT is entered into and effective as of the date of signing by
the last of the parties to sign below, and is by and between FREIGHTLINER
CORPORATION, of 4747 N. Channel Avenue, Portland, Oregon 97208 (hereinafter
"Freightliner"), and ODETICS ITS, INC., of 1515 S. Manchester Avenue, Anaheim,
California 92802 (hereinafter "Odetics ITS").
BACKGROUND
----------
1. Odetics ITS, and Daimler-Benz of Stuttgart, Germany, have been
involved in developing a product for, among other purposes, detecting when a
vehicle departs from a highway lane. The Lane Tracking System (hereinafter
"LTS") portion of this product is that portion which detects a potential lane
departure of a vehicle at an early stage to provide a warning to the vehicle
driver.
2. Odetics ITS and Freightliner desire to work together to develop a Lane
Tracking System adapted for North American driving conditions (hereinafter
"North American Lane Tracking System" or "NALTS"). It is expected that the NALTS
will be particularly useful for truck operators and may have applications
outside North America. A preliminary description of the NALTS product as it
exists as of the effective date of this agreement is attached hereto as Exhibit
A.
3. The parties hope that much of the work previously accomplished by
Odetics ITS, in connection with developing the LTS with Daimler-Benz will be
applicable to the development of the NALTS. It is also expected that
Freightliner's familiarity with road conditions in North America, and with truck
development in general, will also assist in the more rapid completion of an
acceptable NALTS product.
4. This Agreement establishes the basis by which Freightliner and Odetics
ITS, will cooperate in the development of a NALTS product. In addition, this
Agreement establishes the terms under which Freightliner may purchase NALTS
products from Odetics ITS for resale to customers as an optional equipment item
for its Class 3-8 trucks, to other Original Equipment Manufacturers, and to
after-market customers. This agreement also includes terms restricting Odetics
ITS to the sale in North America of NALTS products for Class 3-8 trucks to
Freightliner on an exclusive basis for a limited period of time.
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NOW, THEREFORE, the parties agree as follows:
I. Definitions
-----------
A. The terms "System", "North American Lane Tracking System" and "NALTS"
are equivalent names for the lane departure detection product covered by this
Agreement and which will have particular applicability to North American road
conditions. The NALTS product will include a physical assembly consisting of 1)
an electronic module that includes a host processor, an image capture device,
circuits that receive inputs and provide outputs, and an external interface
connector; 2) embedded lane departure detection Application Software; 3)
embedded Operating System Software; and 4) embedded Lane Detection Techniques.
The NALTS product does not include external sensors or detectors for providing
vehicle data or road data inputs.
B. "Application Software" shall mean software which operates in the
selected host Operating System Software environment that implements algorithms
used in the System to process captured images, implement the Lane Detection
Techniques to determine Lane departure from an evaluation of specified inputs,
and provide a warning of lane departure based on these determined conditions.
The Application Software shall be jointly developed with Odetics ITS as the lead
and Freightliner as support.
C. "Lane Detection Techniques" shall mean algorithms and techniques for
detecting the existence of lane markings along a roadway for use by the
Application Software in determining possible lane departure. Freightliner will
develop the Detection Techniques with support by Odetics ITS.
D. "Operating System Software" shall mean software developed and provided
by Odetics ITS, that operates a system processor included in the System and that
also hosts the Application Software.
E. "Background Technology" shall mean drawings, data, know-how,
inventions, software, and other technical information owned or possessed by a
party prior to February 6, 1998, the commencement of cooperation between the
parties in connection with developing the System. In the case of Odetics ITS,
Background Technology shall include, but is not limited to, Odetics ITS vision
sensor products to detect changes in images of highway lane markings, to process
detected images, and to provide outputs to warning devices. Freightliner
Background Technology shall include, but is not limited to, techniques for
presenting
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information to drivers and the integration of electronics on Freightliner
trucks.
F. "Foreground Technology" shall mean all drawings, data, know-how,
inventions, software and other technical information developed subsequent to
February 6, 1998, the commencement of cooperation between the parties in
connection with developing the system, and which specifically relates to the
NALTS.
G. "Developed" shall mean developed, invented, authored, or created, but
does not include mere ideas prior to the time a substantial effort is made to
incorporate the ideas into software or into an embodiment of the System.
H. "Software" shall mean the specifications, high level and detailed
level design, code in all of its forms, tests and integration test documents,
and the underlying algorithms incorporated into code.
I. "Testing Procedure" shall mean a testing procedure mutually agreed to
by the parties to which NALTS prototype products and NALTS production products
are subjected prior to delivery to Freightliner.
J. "Freightliner Owned Tooling" shall mean any tooling for which
Freightliner has agreed in advance to make payment and for which payment has
been made by Freightliner.
K. "Freightliner Companies", when used in this Agreement, shall mean
Freightliner Corporation, its subsidiaries and joint ventures throughout the
world, including, but not limited to Sterling Truck Corporation, Alliance,
Freightliner Custom Chassis Corporation, and America LaFrance Corporation, but
does not include Daimler-Benz.
L. "C-sample" or "C-sample prototypes" shall mean production-intent NALTS
products produced, as much as possible, using production tools and production
processes.
II. Development of Customer Product Definition
------------------------------------------
A. The parties shall cooperatively work with one another to prepare a
Customer Product Definition for the NALTS product. Time is of the essence and it
is expected the Customer Product Definition will be completed by January 29,
1999.
B. The Customer Product Definition will include, but is not limited to: a
detailed definition of the Operating System
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Software and of the Application Software which will further functionally define
the NALTS System; a detailed list of hardware which is required for the
Operating System Software and Application System Software to operate; a block
diagram and/or a functional description of circuits required for a NALTS product
to operate in a truck environment with the Application Software and Operating
System Software; a projected time schedule for producing prototypes of the NALTS
product and for going into production with such products following the
acceptance of prototypes; an estimated price for NALTS products FOB Freightliner
acceptance criteria and testing procedures for Operating System Software,
Application Software and NALTS prototypes products.
C. The Customer Product Definition is to be agreed upon and accepted by
both parties concurrently with the development of NALTS prototype products.
Subject to an extension by mutual written agreement of the parties, either party
may terminate this Agreement for any or no reason upon written notice to the
other party without any further obligation or liability to the other party if a
Customer Product Definition, which is acceptable to each party, is not completed
by March 31, 1999. In the event this Agreement is terminated for lack of a
mutually acceptable Customer Product Definition, Freightliner and Odetics ITS
shall have a paid-up, royalty-free, worldwide license to utilize the Customer
Product Definition without any duty to account to the other party; provided,
however, this license to use the Customer Product Definition does not constitute
a license to either party to utilize background or foreground technology solely
owned by the other party. Each party shall bear its own costs and expenses
incurred in connection with the development of the Customer Product Definition.
D. Unless altered by the Customer Product Definition, the
responsibilities of the parties for development work in connection with NALTS
prototypes and production products shall be as follows:
1. Freightliner and Odetics ITS shall jointly be responsible for:
(a) cooperating in developing a Customer Product Definition; and (b) adapting
the Lane Detection Techniques from the Odetics ITS/Daimler-Benz cooperative
effort to operate in North America.
2. Freightliner shall have primary responsibility for: (a) [*]; and
(b) [*].
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[*] Confidential Treatment Requested for Redacted Portion
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3. Odetics ITS shall have primary responsibility for: (a) [*]; (b)
[*]; (c) [*]; (d) [*]; (e) [*]; (f) [*]; (g) [*]; and, (h) [*].
III. Modifications Following the Approval of
----------------------------------------
the Customer Product Definition
-------------------------------
Following the approval by both parties of the Customer Product Definition
for the NALTS product, any design change for the NALTS product by either party
will not be made without prior evaluation and approval of the proposed change by
the other party.
IV. Production of NALTS Prototypes
------------------------------
The parties agree to promptly work toward producing C-sample prototypes
with each party carrying out their responsibilities as set forth above. Unless
the parties by mutual agreement extend the time for production of C-sample
prototypes, by no later than [*] Odetics ITS will provide C-sample prototype
NALTS products to be tested for compliance with the Customer Product Definition
as it exists at the time of delivery of the prototypes to Freightliner for
evaluation and field testing. The exact quantity of prototype NALTS products to
be provided by Odetics ITS will be mutually agreed to prior to assembly and
delivery of such prototypes. The price for prototypes shall be as stated in
Exhibit B, which Freightliner shall promptly pay upon delivery of such
prototypes. If such prototypes in compliance with the Customer Product
Definition are not provided to
__________
[*] Confidential Treatment Requested for Redacted Portion
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Freightliner within the time frame specified by this paragraph of the Agreement,
each party shall have the option of terminating this Agreement without further
liability to the other party. In the event of any such termination, Freightliner
(for use on its class 3-8 trucks) and Odetics ITS (excluding class 3-8 trucks in
North America) shall have a paid-up, royalty-free, worldwide license to utilize
jointly-developed Foreground Technology without any duty to account to the other
party; provided, however, this license to use the jointly-developed Foreground
Technology does not constitute a license to either party to utilize background
or foreground technology solely owned by the other party. Freightliner and
Odetics ITS shall in good faith negotiate appropriate licenses for use of
jointly-developed Foreground Technology for applications excluded above and for
use of solely owned background or foreground technology.
V. Supply of NALTS Products
------------------------
A. Following the acceptance of NALTS prototypes by Freightliner and
during the term of this Agreement, Odetics ITS shall, subject to receipt of a
Freightliner purchase order, deliver NALTS products to Freightliner for sale in
its Class 3-8 trucks, sale to other OEM, and/or sale through its after-market
channels. The price(s) for NALTS products shall be as set forth in Exhibit B.
Provided Odetics ITS is able to meet Freightliner's quality, delivery schedule,
product specification and warranty requirements, Freightliner may, but is not
required to, purchase NALTS products from Odetics ITS. Based upon Freightliner's
forecast of NALTS product sales, Odetics ITS shall allocate sufficient NALTS
product production capabilities to supply Freightliner with NALTS products which
are purchased by Freightliner from Odetics ITS. In the event of a shortage of
components, production capacity or other circumstances which prevent or
interfere with Odetics ITS filling of customer orders, Freightliner shall
receive preference.
B. The base prices for NALTS products shall be as set forth in Exhibit B.
These base prices shall only be adjusted after good faith negotiation between
the parties and modification of Exhibit B by mutual agreement. With respect to
modifications in NALTS products which may be mutually approved by the parties
over time following the acceptance of the prototypes, the price(s) in Exhibit B
shall be used as a base line for negotiating in good faith the initial price for
the modified product. Odetics ITS shall supply NALTS products, as well as
modified NALTS products, to Freightliner to the extent Freightliner issues
purchase orders to Odetics ITS for such products. Freightliner shall have no
purchase requirements with
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respect to any NALTS product provided NALTS products are made available to
Freightliner customers as a published option on or before [*]. If Freightliner
does not include NALTS as a published option on or before [*] it shall
reimburse Odetics ITS for reasonable NALTS non-recurring engineering and
development costs. In addition, exclusivity provisions are subject to purchase
goals specified in Article VI.
C. The parties acknowledge the importance of reducing the price of NALTS
products sold by Odetics ITS to Freightliner and they shall cooperate with one
another to reduce the cost of materials and production of the NALTS products,
including modified versions of such products, to thereby result in a reduction
in the price to Freightliner for such products. Any price change resulting from
price reduction cooperation shall be negotiated in good faith by the parties and
shall be effective only upon modification of Exhibit B by mutual agreement.
D. Unless otherwise agreed by the parties, Freightliner shall pay tooling
costs for tooling (but not for production equipment) specifically required to
produce NALTS products for Freightliner. All tooling for which Freightliner has
been invoiced and for which Freightliner has made full payment of the invoice,
shall be owned solely by Freightliner. Odetics ITS agrees that it will not use
Freightliner owned tooling to produce any products for any other party, unless
authorized in writing in advance by Freightliner.
E. The parties agree that the terms and conditions of Freightliner's
standard purchase order as modified in Exhibit C shall apply to any and all
orders for NALTS products by Freightliner from Odetics ITS whether or not these
modified terms and conditions are cited therein.
F. Odetics ITS shall be responsible for integrating and incorporating
software into any NALTS products, at the time of manufacture, regardless of who
develops the software. Odetics ITS shall maintain a NALTS product identification
system to enable a determination of the specific version of software and
hardware included in each NALTS product from an examination of the NALTS
product.
G. Odetics ITS and Freightliner recognize the benefits of supplying a
quality product to the purchaser of Freightliner vehicles. To better ensure that
NALTS products will meet the temperature and other conditions experienced in
Freightliner trucks, such products will be tested in accordance with a test
procedure to be mutually agreed upon in good faith by the
__________
[*] Confidential Treatment Requested for Redacted Portion
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parties. Odetics ITS shall bear the cost of compliance with the test procedure
for stand-alone product testing; Freightliner shall bear the cost of compliance
with the test procedure for in-truck system level and road testing.
H. Odetics ITS shall provide Freightliner with sufficient information
concerning the NALTS product, including any software included in such product
(including source code if required) to enable Freightliner and its designees to
service NALTS products. Odetics ITS hereby grants Freightliner and its designees
a paid up, royalty fee, worldwide license to maintain, service, install any
authorized modification or upgrade, and repair any NALTS products purchased by
Freightliner Companies from Odetics ITS. Such license does not authorize
Freightliner or its designees to manufacture, have manufactured, incorporate or
make derivatives of any NALTS products for any purpose.
VI. Exclusivity
-----------
A. Recognizing Freightliner's contributions to the development of NALTS
products, for a period of three (3) years from the commercial availability of
NALTS products to Freightliner customers, Odetics ITS will not provide any NALTS
product developed pursuant to this Agreement, or any product incorporating any
Odetics ITS or Freightliner Background or Foreground Technology, or any lane
departure detection product to any other Class 3-8 vehicle manufacturer or for
use in Class 3-8 vehicles knowingly destined for delivery or sale to end users
in North America. This initial three (3) year exclusivity period is contingent
upon Freightliner achieving the agreed minimum purchase goals listed in the
following table. A two (2) year extension of the exclusivity to five (5) years
is subject to a mutually agreed marketing method addressing non-Freightliner
fleet purchases.
Minimum Purchase Goals
----------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Time from First Notice or Total Unit Volume of
Offering of NALTS Products for Purchase Orders of
Sale NALTS Products by
To Freightliner Customers Freightliner Companies
- -------------------------------------------------------------------------------
<S> <C>
0 to one year [*]
- -------------------------------------------------------------------------------
One year and one day [*]
to two years
- -------------------------------------------------------------------------------
Two years and one day [*]
to three years
- -------------------------------------------------------------------------------
</TABLE>
__________
[*] Confidential Treatment Requested for Redacted Portion
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It is specifically understood by the parties that Freightliner is not obligated
to make any purchases from Odetics ITS. Should Freightliner not make the minimum
purchases from Odetics ITS during any calendar year, Odetics ITS shall have as
its sole remedy, waiver of all restrictions in this paragraph VI for sale of any
NALTS product developed pursuant to this Agreement, or any product incorporating
any Odetics ITS or Freightliner Background or Foreground Technology, or any lane
departure detection product to any other Class 3-8 vehicle manufacturer or for
use in Class 3-8 vehicles.
B. Recognizing Odetics ITS contributions to the development of NALTS
products, for the same time periods specified in paragraph VI A, Freightliner:
(1) will not cooperate or participate in the development of any product
competitive to any NALTS product incorporating any Odetics ITS Background
Technology, Freightliner Foreground Technology or jointly-developed Foreground
Technology; and (2) will specify the NALTS products developed under this
agreement as the Freightliner recommended and preferred Lane Departure Detection
product or system.
C. Except for any license which is expressly set forth in this
Agreement, neither party to this Agreement grants the other party any rights in
its own Background or Foreground Technology or in any other technology owned by
the other party. Subject to whatever patent and copyright rights the other party
may have, and subject to the exclusivity provisions of the preceding paragraphs
(paragraphs VI. A and VI. B of this Agreement, either party is free to
independently develop, offer to sell or sell any products or services even
though such products or services may be similar to the products covered by this
Agreement.
VII. Confidentiality
---------------
The Confidentiality Agreement dated September 9, 1998 which is now in
effect between the parties shall remain in effect.
VIII. Intellectual Property Rights/Licensing
--------------------------------------
The following provisions shall apply to the rights and obligations of the
parties with respect to the results of the development work:
A. Background Technology
Each party shall retain ownership of its own Background Technology; and
unless otherwise expressly provided herein,
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neither party grants the other any license to disclose such technology or to use
such technology in connection with the manufacture or sale of any products.
B. Foreground Technology
1. Foreground Technology developed by an employee or representative
of a party and any patents or other intellectual property rights based thereon,
shall be owned by that party. The parties shall inform each other of patent
applications which are filed on such inventions. The parties specifically agree
that, as between the parties, the Lane Detection Techniques developed in whole
or in part by Freightliner shall be deemed Freightliner owned Foreground
Technology. Freightliner shall, as between the parties, solely own the Lane
Detection Techniques and all worldwide rights therein, including, but not
limited to worldwide copyright and patent rights therein.
2. Foreground Technology developed jointly by employees or
representatives of both parties, and any patents or other intellectual property
rights based thereon, shall be jointly owned by both parties. In order for
Foreground Technology to be jointly developed, employees or representatives of
both parties must contribute substantially to a completed design. A substantial
contribution to a completed design does not include mere specification of form,
fit and function or testing or critiquing a completed design.
3. The party to whose business a jointly made invention most closely
relates shall have the first option to file a U.S. patent application and any
foreign patent application(s) using counsel of its choice, and the other party
will cooperate fully therein, including in the execution of all necessary
documents. If such party chooses not to file on a jointly made invention, the
other party may file and shall have the cooperation of the non-filing party.
Neither party is obligated to file any patent application on any invention. In
the absence of a written agreement to the contrary, the party who proceeds with
the filing of a patent application shall bear all costs associated with
obtaining patent protection on an invention and may abandon its attempt to seek
patent protection or any resulting patent without notice to the other party.
Either party, at its own expense, may file foreign (non-U.S.) patent
applications on jointly made inventions. The other party shall jointly own any
such foreign patent applications and any patent rights issuing thereon and is
not obligated to make any payment therefore.
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C. Patents and Copyrights
1. As between the parties, all worldwide copyrights in Freightliner
Background Technology and in the Lane Detection Techniques and in all derivative
works thereof shall belong to Freightliner. Odetics ITS will execute all
documents, prepared at Freightliner expense, required to assign and/or confirm
such rights in Freightliner.
2. As between the parties, all worldwide copyrights in Odetics ITS
Background Technology and in all derivative works thereof shall belong to
Odetics ITS. Freightliner will execute all documents, prepared at Odetics ITS
expense, required to assign and/or confirm such rights in Odetics ITS.
3. As between the parties, all worldwide copyrights in jointly-
developed Foreground Technology shall be belong to both parties and either party
may copy, use, or make derivative works without accounting to the other party.
Worldwide copyrights in derivative works shall belong to the party creating the
derivative works.
D. Licensing
1. At any time while this Agreement is in effect and following the
completion of NALTS prototypes acceptable to the parties, in the event Odetics
ITS is unable or unwilling to supply any NALTS products to Freightliner pursuant
to this Agreement, Odetics ITS hereby grants to Freightliner upon any such
occurrence a paid-up, royalty-free, perpetual, nonexclusive, worldwide right and
license to use any technology incorporated in any NALTS product previously
delivered to Freightliner, and modifications and derivative works based
thereupon, in any Freightliner Corporation class 3-8 truck. This license shall
extend to use and resale by Freightliner, its subsidiaries, joint ventures and
their customers of products incorporating this technology. In such an event,
Odetics ITS agrees to transfer any Freightliner owned tooling to Freightliner
and grants Freightliner a license to any patents, copyrights and other
technology required to enable Freightliner to carry out the provision of this
paragraph VIII. D. 1 of this Agreement.
2. Providing NALTS products conforming to the Customer Product
Definition are developed and prototypes are delivered to Freightliner,
Freightliner grants Odetics ITS a paid-up, exclusive, royalty-free, worldwide,
license to utilize Freightliner Foreground Technology to make, have made, use,
offer to sell or sell in any lane tracking device provided such devices
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are for other than Class 3-8 trucks in North America during any effective
exclusivity period.
3. During any effective exclusivity period, Odetics ITS shall have
no right to use Freightliner Background or Foreground Technology, including Lane
Detection Techniques and derivatives thereof, in any product for use in any
class 3 - 8 truck(s) except as such products are sold to Freightliner or
Freightliner designees. Beginning upon expiration of any exclusivity period or
failure by Freightliner to meet Minimum Purchase Goals and continuing for three
(3) years thereafter, Odetics ITS shall pay Freightliner a royalty for use of
Freightliner Background or Foreground Technology in the amount of three percent
(3%) of the net sales price for any NALTS product, or derivative thereof
incorporating Freightliner Technology, sold to a party other than Freightliner
or Freightliner designee for use in any end user class 3-8 truck in North
America. Thereafter, sales of NALTS products or derivatives thereof
incorporating Freightliner Technology to another party shall be royalty free.
Net sales price will not include shipping costs, sales and excise taxes, export
duties or fees, sales commissions, or the cost of parts purchased from Odetics
ITS. Such royalties will be payable semi-annually on or before thirty (30) days
after June 30 and December 31.
IX. Term and Termination
--------------------
A. Unless earlier terminated in accordance with its terms, this Agreement
shall remain in force for a period of ten (10) years from its effective date.
B. This Agreement may be terminated by either party upon a material
breach by the other party which is not cured within sixty (60) days of written
notice to the breaching party from the non-breaching party. The following
provisions of the Agreement shall remain in effect following termination: VI,
--
VII, and VIII
- -------------
X. Warranties
----------
A. Each party warrants that it has the right to enter into this
Agreement.
B. In the event a claim is received by one party that alleges the NALTS
Products or any part thereof infringes upon the patent, copyright, trademark or
proprietary rights of others, the receiving party shall immediately notify the
other party in writing of such claim. The party whose Background or Foreground
Technology is the subject of the claim, or the party whose
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business more closely relates to a jointly developed Foreground Technology that
is the subject of the claim shall be authorized the sole power to defend or
settle such claim, and exercise its best efforts to procure for the other party
the right to use the NALTS Products or modify the NALTS Products to avoid
infringement. The other party will cooperate, at its own expense, in the defense
of any such claims as reasonably requested by the defending party. The defending
party shall indemnify and hold the other party harmless from any damages
resulting from a judgment of infringement from a competent authority.
XI. Miscellaneous
-------------
A. The rights and obligations of the Parties to this Agreement and all
interpretations of this Agreement shall be governed in all respects by the
domestic laws of the State of Oregon, except for its rules with respect to
conflict of laws.
B. Any notices, reports and submittals required by this Agreement must be
in writing and may be given by U.S. Express Mail (or other written means if
receipt is acknowledged or if proof of delivery is obtained) to:
FREIGHTLINER CORPORATION ODETICS ITS, INC.
Attn: Kristi Kerbs Attn: Dan Gilliam
4747 N. Channel Avenue 1515 S. Manchester Avenue
P.O. Box 3849 Anaheim, CA 92802
Portland OR 97208-3849 Phone: 714/780-7259
Phone: 503/735-6987 Fax: 714/780-7246
Fax: 503/735-7328
C. This Agreement may not be changed, amended or modified except by means
of a written document executed by the duly authorized representatives of the
parties.
D. This Agreement, including the Exhibits A-B and the Confidentiality
Agreement identified in Article VII, which are each incorporated by reference
herein, shall constitute the entire agreement between the parties related to its
subject matter and supersedes any prior contemporaneous discussions,
understandings' representations or proposals' written or oral between the
parties. No party has relied upon any representation (whether express, implied
or by way of omission) unless such representation is contained in this
Agreement. If any portion of this Agreement is held illegal or unenforceable by
a court of competent jurisdiction, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired.
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E. No term of this Agreement shall be considered waived, and no breach
excused by either party unless made in writing executed by an authorized
representative of the party which is waiving or excusing the breach. No consent,
waiver or excuse by any party, whether express or implied, shall constitute a
subsequent consent, waiver or excuse.
F. Neither this AGREEMENT nor any interest herein may be assigned, in
whole or in part, by either party hereto without the prior written consent of
the other party hereto, except that without securing such prior consent, either
party hereto shall have the right to assign this AGREEMENT to any successor or
to such party by way of merger or consolidation or the acquisition of
substantially all of the entire business and assets of such party relating to
the subject matter of this AGREEMENT, provided that such successor shall
expressly assume all of the obligations and liabilities of such party under this
AGREEMENT, and provided further, that such party shall remain liable and
responsible to the other party hereto for the performance and observance of all
such obligations.
G. With the exception of injunctive relief sought by either party, any
dispute unresolved between the parties arising out of or in connection with this
Agreement shall be settled by binding arbitration. Arbitration shall be
conducted in a mutually convenient location in accordance with the rules of the
American Arbitration Association ("AAA"). In any case, there shall be only one
arbitrator who shall be selected by mutual agreement of the parties. The Civil
Discovery Rules of the State of Oregon shall apply to such arbitration. The
prevailing party shall be entitled to reasonable costs and attorney fees.
Judgment upon any award may be entered in any court having jurisdiction thereof.
H. This Agreement may be executed in duplicate with each party retaining
a fully executed copy with each such executed copy having the full force and
effect of an original.
I. The subheadings of this Agreement, including those in the Exhibits
hereto, are provided for purposes of convenience and are not to be considered
nor are they to affect the interpretation of this Agreement.
J. The parties are independent contractors relative to one another.
Nothing in this Agreement shall be construed as creating a fiduciary
relationship between the parties or making the parties partners, joint ventures
or employees of the other, or to
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make either party liable for any of the debts or obligations of the other party.
Neither party shall be considered as an agent, employee or representative of the
other in any dealings with third parties, or otherwise. Neither party shall act
for or make any representations on behalf of the other party and shall have no
power to contract on behalf of the other party.
K. Force Majeure - Neither party shall be liable to the other for failure
to perform its obligations under the Agreement when performance is prevented by
flood, drought, fire, war, riot, acts of God, Government interference, or any
other cause beyond its control.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives as of the dates set forth below.
Freightliner Corporation Odetics ITS, Inc.
(Freightliner) (Odetics ITS)
By: /s/ V.W. THOMAS By: /s/ JACK JOHNSON
----------------------------- -----------------------------
Name: V.W. Thomas Name: Jack Johnson
----------------------------- -----------------------------
Title: V.P. Purchasing Title: President
----------------------------- -----------------------------
Date: 1-11-94 Date: December 23, 1998
----------------------------- -----------------------------
-15-
<PAGE>
EXHIBIT A
PRELIMINARY DESCRIPTION OF NALTS PRODUCT
----------------------------------------
The North American Lane Tracking System (NALTS) is a single board electronic
module for Freightliner Corporation class 3-8 trucks,which when properly
located, aimed, and focused will capture roadway images, process them to
identify lane markings, track the lane markings, collect other vehicle inputs,
evaluate lane marking positions with respect to the other vehicle inputs, and
generate an audible tone warning when an imminent lane departure is calculated.
The module consists of a power subsystem (voltage regulator and transient
protection); an imaging subsystem (lens, lens mount, +imager, and video buffer);
a processing subsystem (digital signal processor, volatile memory, non-volatile
memory, and control logic); a discrete interface subsystem (two input receivers
and an output driver with protection circuitry); a CAN interface subsystem (CAN
processor and CAN transceivers); a warning generation subsystem (pulse
generator, amplifier, and protection circuitry); and an interface subsystem. The
figure below shows a graphical representation of the system. The module hosts a
complete lane tracking software solution including image capture and
improvement, lane detection techniques, and drivers for the various system
interfaces.
[DIAGRAM OF PROPOSED NALTS PRODUCT APPEARS HERE]
-16-
<PAGE>
EXHIBIT B
BASE PRICES FOR NALTS PRODUCTS
------------------------------
===================================================================
Annual Order Quantity
--------------------------------
[*] [*] [*]
-------------------------------------------------------------------
Unit Price $[*] $[*] $[*]
===================================================================
C Samples $815 each
Notes:
1. All prices quoted FOB Sellers Factory in 1999 U. S. dollars.
2. Price breaks are based upon annual order quantities.
3. Price for quantity [*] is based upon a planned design update for cost
reduction.
__________
[*] Confidential Treatment Requested for Redacted Portion
-17-
<PAGE>
EXHIBIT C - FREIGHTLINER TERMS AND CONDITIONS OF PURCHASE (Modified)
1. DELIVERY AND ACCEPTANCE - Time of delivery is of the essence of this
purchase order. Acceptance of this purchase order shall be unqualified,
unconditional, and subject to the terms and conditions herein. No additional or
different terms and conditions, including those which appear in any quotation,
acceptance or acknowledgment of Seller, shall be of any force or effect unless
Buyer expressly agrees in writing to such additional or different terms and
conditions. Seller agrees that it will not assert, as a defense to the
enforcement of the conditions of this purchase order, any limitation set out in
its acceptance or acknowledgment of this order. Upon acceptance, this purchase
order shall constitute the entire agreement between Buyer and Seller unless
otherwise agreed to in writing by both Buyer and Seller.
2. PACKING, MARKING AND SHIPPING - Shipments shall be routed in accordance
with Buyer's instructions, and Seller agrees to reimburse Buyer for all expense
incurred by Buyer as a result of improper packing, marking or routing. Buyer's
purchase order number, part number, and Seller's shipment identification (SID)
number will appear on each package and bill of lading. Goods for two or more of
Buyer's locations will be shipped in separate packages for the different
locations. Shipments in excess of those authorized may be returned to Seller,
and Seller shall pay the transportation charges both ways for such shipments.
Subject to item 8, CHANGES herein, Buyer may from time to time change shipping
schedules previously furnished Seller, or direct temporary suspension of
scheduled shipments. Buyer's count will be accepted as final on all shipments.
Unless otherwise expressly agreed to in writing by Buyer, no charge shall be
made by Seller for containers, crating, boxing, bundling, dunnage, drayage, or
storage.
3. PERFORMANCE/DELAYS - (a) Seller agrees not to give any other customer of
Seller any priority over Buyer in the allocation of Seller's production. (b)
Timely delivery is essential; however, neither party shall be liable to the
other for any material delay or failure to perform where such delay or failure
is caused by events beyond the control of the affected party. The foregoing
shall be subject to the affected party giving reasonable notice to the other
party. In the event of a material delay or failure to perform by Seller, Buyer
may, without waiving its right to seek damages caused by the delay, either
terminate this purchase
-18-
<PAGE>
order or reject any partial or future performance, without further liability of
Buyer, upon written notice to Seller.
4. INVOICES - Delay in receiving invoices, also errors and omissions on
invoices, will be considered just cause for withholding payment without losing
cash discount privileges.
5. TAXES - Buyer will not pay Seller any state or local sales, use, or similar
tax unless Seller is required by law to collect such taxes from Buyer. Federal
excise taxes charged to Buyer shall be separately stated or it shall be
indicated as being included in the unit price. Seller agrees that no tax for
which an exemption is indicated hereon or otherwise by Buyer is or will be
included in the prices stated hereon, nor will they be subsequently charged.
Seller agrees to pay any and all personal property and/or ad valorem taxes
assessed or otherwise levied against any property placed in the hands of Seller
by Buyer for the purpose of fulfilling this purchase order.
6. WARRANTY - Seller warrants that all goods and services covered by this
order shall, at the time of delivery to Buyer, conform to the specifications,
drawings, samples or other description upon which this order is based (software
shall not be included for purposes of this order), shall be of good material and
workmanship and free from defect. This warranty shall run to Buyer, its dealers,
customers, and users of its products. Seller agrees to promptly replace or
correct defects of any goods or services not conforming to the foregoing
warranty provided the nonconforming item is returned to Seller promptly upon
discovery of nonconformity, but in no case later than ninety (90) days after
warranty period has expired. This warranty shall be void in the event, (i) the
item fails, malfunctions or is damaged as the result of improper modifications
or repairs, (ii) the item fails as the result of improper or insufficient
maintenance, (iii) the item is damaged by accident or induced failure or (iv)
the item is subjected to abuse or improper use.
NO OTHER WARRANTIES OR GUARANTEES, EXPRESSED OR IMPLIED INCLUDING
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARISING BY LAW, CUSTOM, OR
CONDUCT, SHALL BE APPLICABLE. THE RIGHTS AND REMEDIES PROVIDED HEREIN ARE
EXCLUSIVE AND IN LIEU OF ANY OTHER RIGHTS OR REMEDIES.
7. INDEMNITY - Seller agrees to indemnify and save harmless Buyer, its agents
and employees, against any claims, actions or demands against Buyer, its agents
and employees, and against any damages, liabilities or expenses, for injury to
or death of any person and for loss of or damage to any and all property arising
out of a claim of defect in the materials, workmanship, or
-19-
<PAGE>
manufacture of products delivered under this agreement (software is not included
for purposes of this order).
8. CHANGES - Buyer may at any time and from time to time make changes in the
drawings, designs or specifications, method of shipping or packing, and the
place of delivery of any goods and/or work covered hereby. Any such change is
subject to negotiation of an equitable change in price and/or schedule.
9. PATTERNS, TOOLS AND DIES - All patterns, tools, dies, or other material
furnished by Buyer to Seller, or which are specifically paid for by Buyer, and
any replacement thereof, or anything affixed or attached thereto, shall be and
remain Buyer's personal property. Such property, if it can reasonably be done,
shall be plainly marked or otherwise adequately identified by Seller as
"Property of Freightliner", and shall be safely stored separate and apart from
Seller's property. Seller shall not substitute any property for such and shall
not use such property except for filling Buyer's order. While in Seller's
custody or control, such property shall be held at Seller's risk, and shall be
subject to removal at Buyer's request.
10. RECALL OR REPAIR CAMPAIGN - In the event it is determined that a product of
Seller purchased hereunder creates or contributes to a vehicle repair campaign
or safety recall due to a vehicle defect, or non-compliance with the National
Motor Vehicle and Traffic Safety Act, Seller shall pay the cost of repair or
recall and correction, including labor and administrative costs, based upon
Seller's proportionate responsibility for the defect or non-compliance. This
section shall not limit Seller's liability under other provisions hereof.
11. WORK ON BUYER'S OR ITS CUSTOMERS' PREMISES - If Seller's work under this
purchase order involves operations by Seller on the premises of Buyer, Seller
shall take all necessary precautions to prevent the occurrence of any injury to
person or property during the progress of such work. Seller agrees to indemnify
and protect Buyer against all liabilities, claims, or demands for injuries or
damage to any person or property growing out of the performance of this purchase
order, and to pay Buyer's costs and expenses in connection with any thereof.
Seller shall maintain such public liability property damage, and employer's
liability and worker's compensation insurance as will protect Buyer from said
risks and from any claims under any applicable worker's compensation,
occupational disease, or similar act. Seller shall furnish certificates of
insurance to Buyer at Buyer's request.
-20-
<PAGE>
12. INFRINGEMENT - Refer to Article X, paragraph B of this agreement.
13. USE AND PROTECTION OF INFORMATION - Refer to Article VII of this agreement.
14. COMPLIANCE WITH LAWS - Seller agrees to comply with all applicable federal,
state and local laws, regulations and ordinances and to indemnify Buyer against
all liability for Seller's failure so to comply. The provisions of Executive
Order 11246 relating to Equal Employment Opportunity, the Vietnam Era Veterans
Readjustment Assistance Act of 1974, and the Rehabilitation Act of 1973 relating
to handicapped persons, are made a part of this purchase order by reference.
15. RELATIONSHIP - Neither Seller nor its subcontractors or the employees or
agents of any of them, shall be deemed to be Buyer's employees, or agents, it
being understood that Seller and its subcontractors are independent contractors
for all purposes and at all time, and Seller shall be wholly responsible for
withholding or payment of all federal, state and local income and other payroll
taxes with respect to its employees, including contributions from them and as
required by law.
16. TERMINATION AT OPTION OF BUYER - At its option, Buyer may terminate all or
a part of the work under this purchase order. In such case, Buyer shall have no
liability with respect to goods or components procured, or work done, or
supplies partially fabricated, in excess of authority contained in this order or
in any shipment release and issued to Seller pursuant hereto. In no event shall
Buyer be liable for prospective or anticipated profits by reason of such
termination.
17. TERMINATION ON DEFAULT OF SELLER - By notice in writing to Seller, Buyer
may terminate this purchase order, without liability except as hereinafter
stated, upon (a) Seller's failure to conduct its operations in the normal course
of business (including liability to meet its obligations as they occur) or(b)
the instituting of any proceedings by or against Seller under the bankruptcy or
insolvency laws, or (c) appointment or application for a receiver for Seller, or
(d) an assignment by Seller for the benefit of creditors, or (e) Seller's
default in any other particular in the performance of this purchase order. Upon
termination pursuant to this paragraph, Buyer shall pay Seller for deliveries
previously made and not paid for,for materials and/or work-in-process as a
direct result of an active delivery order or shipment release from Buyer, and
for goods completed at the time of termination in accordance with this purchase
order
-21-
<PAGE>
and subsequently delivered according to the purchase order or the shipment
release and issued pursuant hereto.
18. ENFORCEMENT AND SEVERABILITY - Buyer's failure at any time to enforce any
of the provisions of this purchase order or any right with respect thereto, or
to exercise any option herein provided, shall in no way be construed to be a
waiver of such provisions, rights, or options or in any way to affect the
validity of this purchase order. This purchase order is to be governed by and
construed under the laws of the State of Oregon. In the event that any one or
more of the provisions contained herein shall for any reason to be held invalid
and/or unenforceable in any respect, such invalidity/unenforceability shall not
affect any other provision of this purchase order. This purchase order shall
then be construed as if such invalid/unenforceable provision(s) had never been
contained herein.
19. ELECTRONIC DATA INTERCHANGE - If Buyer and Seller use electronic data
interchange for order processing, all transactions shall be in accordance with
Buyer's electronic data interchange users manual.
20. HAZARDOUS SUBSTANCES/LABELS - Seller shall notify Buyer in writing upon
receipt of this purchase order if goods sold hereunder are subject to laws or
regulations relating to hazardous or toxic substances; or when disposed of, to
regulations governing hazardous waste, or to any other environmental or safety
and health regulations. Seller shall furnish all appropriate shipping
certification and instructions for shipping, safety, handling, exposure, and
disposal (including without limitation material data safety sheets) in a form
sufficiently clear for use by Buyer's non-technical personnel and sufficiently
specific to identify all action which the user must take concerning the
material. All labels must conform to the ANSI Z535 standard for product safety
labels.
21. ASSIGNMENT - Refer to Article XI, paragraph F of this agreement.
22. HEADINGS - Captions and headings in this agreement are intended for ease of
reference only and shall not in any manner affect the construction or meaning of
this purchase order or the rights and obligations of the parties.
-22-
<PAGE>
EXHIBIT 10.12
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Mofidication No. 13 9-30-99 77-99-9202
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAAM 30-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS ---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended.
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
No Cost
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- --- NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
[X]
Exercise of Option
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and ___________ copies to the issuing office.
return
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
The purpose of this modification is to accomplish the following:
1. Exercise Option 2, extending the period of performance of Contract No. DTFH61-96-C-00103 from September 30, 1999 to
September 29, 2000.
2. Option 2 Period Summary:
Estimated Total Value of Option 2: $1,671,810
Total Estimated Cost: $1,558,368
Maximum Fee: $113,442
Option 2 funds shall be obligated to the contract as tasks for the Option 2 period are executed.
Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 18C. DATE SIGNED
SIGNED
___________________________________________ BY /s/ Robert B. Robel
(Signature of person authorized to sign) --------------------------------------------
(Signature of Contracting Officer) 9-8-99
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 13
Page 2 of 2
1.0 SECTION F-DELIVERIES OR PERFORMANCE
-----------------------------------
1.1 PERIOD OF PERFORMANCE
Delete last sentence of second paragraph and substitute the following:
By exercising Option 2, the current contract period has been extended
through September 29, 2000.
1.2 PLACE OF DELIVERY
Delete Office Code HVH-1 in "Ship to" and "Mark For" lines and substitute
--------- ----------
Office Code HOIT.
Delete Office Code HAM4O-D for Office of Acquisition Management and
substitute Office Code HAAM3O-D.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 12 8-16-99 77-99-9180
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X439-060-770-R60060-770100-2523 $99,886.00 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
[X]
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation /contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
The purpose of this modification is to accomplish the following:
1. Obligate an additional $99,886 (reference Task Order OD-9907), increasing total obligated dollars from $5,894,404 to
$5,994,290.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
___________________________________________ BY /s/ ROBERT B. ROBEL
(Signature of person authorized to sign) --------------------------------------------
(Signature of Contracting Officer) 8-16-99
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 12
Page 2 of 2
1. SECTION G - CONTRACT ADMINISTRATIVE DATA
----------------------------------------
1.1 FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $5,994,290 are obligated to this
contract.
b. The balance of funding under this contract ($3,069,533) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $ 270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $ 53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $ 130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $ 937,000
------------------
9. Modification No. 8 X391-050-210-389010-210100-2523 $ 139,827
------------------
10. Modification No. 9 X439-060-210-R60060-210100-2523 $ 311,074
------------------
11. Modification No. 10 X439-060-210-R60060-210100-2523 $1,952,759
-------------------
12. Modification No. 11 X439-060-210-R60060-210100-2523 $ 249,948
-------------------
13. Modification No. 12 X439-060-770-R60060-770100-2523 $ 99,886
------------------ ----------
TOTAL $5,994,290
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (If applicable)
Modification No. 11 2-19-99 21-99-9065
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- ----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended.
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X439-060-210-R60060-210100-2523 $249,948.00 increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
[X]
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [_] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
The purpose of this modification is to accomplish the following:
1. Obligate an additional $249,948 (reference Task Order OD-9906), increasing total obligated dollars from $5,644,456 to
$5,894,404.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
BY /s/ ROBERT B. ROBEL
___________________________________________ --------------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer) 2-19-99
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
Prescribed by GSA
This form was electronically produced by Elite Federal Forms, Inc. FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 11
Page 2 of 2
1. SECTION G - CONTRACT ADMINISTRATIVE DATA
----------------------------------------
1.1 FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $5,894,404 are obligated to this
contract.
b. The balance of funding under this contract ($3,169,419) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $ 270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $ 53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $ 130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $ 937,000
------------------
9. Modification No. 8 X391-050-210-389010-210100-2523 $ 139,827
------------------
10. Modification No. 9 X439-060-210-R60060-210100-2523 $ 311,074
------------------
11. Modification No. 10 X439-060-210-R60060-210100-2523 $1,952,759
-------------------
12. Modification No. 11 X439-060-210-R60060-210100-2523 $ 249,948
------------------- ----------
TOTAL $5,894,404
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 10 12-15-98 21-99-9027
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended.
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation or as amended, by one of the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE
HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already
submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and
this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X439-060-210-R60060-210100-2523 $1,952,759.00 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- --- NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
The purpose of this modification is to accomplish the following:
1. Obligate an additional $1,952,759 (reference Task Orders OD-9901, OD-9902, OD-9903, OD-9904, and OD_9905), increasing total
obligate dollars from $3,691,697 to $5,644,456.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Anthony Martoccia
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
BY /s/ Anthony Martoccia
___________________________________________ --------------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer) 12-15-98
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 10
Page 2 of 2
1. SECTION G - CONTRACT ADMINISTRATIVE DATA
----------------------------------------
1.1 FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $5,644,456 are obligated to this
contract.
b. The balance of funding under this contract ($3,419,367) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
FUNDING RECAPITULATION:
1. Base Contract: X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $ 1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $ 270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $ 53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $ 130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $ 937,000
------------------
9. Modification No. 8 X391-050-210-389010-210100-2523 $ 139,827
------------------
10. Modification No. 9 X439-060-210-R60060-210100-2523 $ 311,074
------------------
11. Modification No. 10 X439-060-210-R60060-210100-2523 $ 1,952,759
------------------- -----------
TOTAL $ 5,644,456
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 3
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 09 9-30-98 21-88-8207
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- ---------------
Department of Transportation Robert M. Degnan (202) 366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
ANAHEIM, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH81-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended.
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment: (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X439-060-210-R60060-210100-2523 $311,074 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
[X]
Exercise of Option
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [_] is not, [X] is required to sign this document and 3 copies to the issuing office.
return ----------
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
The purpose of this modification is to accomplish the following:
1. Exercise Option 1, extending Contract No. DTFH61-96-C-00103 from September 30, 1998 through September 29, 1999.
2. Obligate an additional $311,074 (reference Task Order OD-9803)
3. Revise Period of Performance paragraph under Section F and add sentence to Task Order Procedure paragraph under Section G.
4. Raise contractual travel calling for any twelve month period.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ------------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Jim D. Reams
Business Manager Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
/s/ Jim D. Reams BY /s/ Robert B. Robel
---------------------------------------- ----------------------------------------
(Signature of person authorized to sign) 9/23/98 (Signature of Contracting Officer) 9/25/98
- ------------------------------------------------------------------------------------------------------------------------------------
PREVIOUS EDITION UNUSABLE STANDARD FORMS 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 09
Page 2 of 3
1. SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
-------------------------------------------------
1.1 Option Years
------------
Delete fourth paragraph, second sentence and substitute the following:
Travel and per diem shall not exceed $200,000 during any base year or 12
month option period.
2. SECTION F - DELIVERIES OR PERFORMANCE
-------------------------------------
2.1 PERIOD OF PERFORMANCE
Delete second paragraph in its entirety and substitute the following:
All work and services required hereunder, including preparation and
submission of the final report, shall be completed on or before the
completion date specified in the final task order. The Government shall
have 30 days to review and approve the final report. The total contract
period, including all options if exercised, shall not exceed 60 months. By
exercising Option 1, the current contract period has been extended through
September 29, 1999.
3. SECTION G - CONTRACT ADMINISTRATIVE DATA
----------------------------------------
3.1 TASK ORDER PROCEDURE
Add the following sentence to the first paragraph.
The Government shall not place, nor is the contractor obligated to perform,
any new task order issued subsequent to the end of the contract period as
determined by the base period of the contract plus any exercised option.
3.2 FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $3,691,697 are obligated to this
contract.
<PAGE>
DTFH61-96-C-00103
Modification No. 09
Page 3 of 3
b. The balance of funding under this contract ($5,372,126) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $ 270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $ 53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $ 130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $ 937,000
------------------
9. Modification No. 8 X391-050-210-389010-210100-2523 $ 139,827
------------------
10. Modification No. 9 X439-060-210-R60060-210100-2523 $ 311,074
------------------ ----------
TOTAL $3,691,697
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 08 2-3-98 21-98-8079
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics ITS
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE [X] 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended.
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X391-050-210-389010-210100-2523 $139,827 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
This modification is to accomplish the following:
1. Increase total obligated funds under this agreement by $139,827, from $3,240,796 to $3,380,623.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Anthony Martoccia
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
BY /s/ Anthony Martoccia
___________________________________________ --------------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer) 2-3-98
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 08
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $937,000
------------------
9. Modification No. 8 X391-050-210-389010-210100-2523 $139,827
------------------ ----------
TOTAL $3,380,623
1. SECTION G - CONTRACT ADMINISTRATIVE DATA
FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $3,380,623 are obligated to this
contract.
b. The balance of funding under this contract ($5,683,200) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 07 1-12-98 21-98-8068
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO.
---
Odetics
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
[X] 10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X391-050-210-389010-210100-2523 $937,0000 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
This modification is issued to accomplish the following:
1. Increase obligated funds under this contract by $937,000, from $2,303,796 to $3,240,796.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Anthony Martoccia
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
BY /s/ A Martoccia
___________________________________________ --------------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer) 1-12-98
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 07
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $130,000
------------------
8. Modification No. 7 X391-050-210-389010-210100-2523 $937,000
------------------ ----------
TOTAL $3,240,796
1. SECTION G - CONTRACT ADMINISTRATIVE DATA
FUNDS AVAILABLE
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $3,240,796 are obligated to this
contract.
b. The balance of funding under this contract ($5,823,027) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (If applicable)
Modification No. 06 11-1-97 PR21-97-1101-97
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration
400 Seventh Street, SW, Room 4410
Washington, DC 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO.
* * ---
Odetics
---------------------------------------
1515 South Manchester Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92802-2907
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE [X] 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended,
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
None
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
(X) C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
FAR 43.103(a) Mutual Agreement of the Parties
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [ ] is not, [X] is required to sign this document and return 3 copies to the issuing office.
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
This modification is issued to add the following final report specifications to the statement of work, at no additional charge
to the Government.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Jim Reams Anthony Martoccia
Business Manager
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
/s/ Jim Reams BY /s/ Anthony Martoccia
- ------------------------------------------- --------------------------------------------
(Signature of person authorized to sign) 12/17/97 (Signature of Contracting Officer) 1/12/98
____________________________________________________________________________________________________________________________________
PREVIOUS EDITION UNUSABLE STANDARD FORM 30 (Rev. 10-83)
This form was electronically produced by Elite Federal Forms, Inc. Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Page 2 of 2
Add the following to the end of Section C:
SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK
--------------------------------------------------------
SPECIFICATIONS FOR FINAL REPORT
- -------------------------------
The contractor shall provide the government with the following for all final
report(s) developed under this contract:
(1) A completed Technical Report Documentation form DOT F 1700.7 (8-72). This
form is necessary to ensure all reports are entered into the National
Technical Information Service database (Form is located on
http://www.bts.gov/itc/1700-7.pdf);
(2) An executive summary under separate cover;
(3) A camera-ready copy including all art work (illustrations, photographs,
charts, or tables) ready for printing by photographic or other means;
(4) An electronic (in Wordperfect 6.0) version of the report;
(5) A one-page description of the report, including the title, why it is
important, what it embodies, findings and or benefits (expected or
realized), real-world example of who is involved (principals, team, or
other significant participants) and the audience;
(6) A completed ITS Electronic Clearinghouse Document Profile Sheet.
All other terms and conditions of the contract remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (If applicable)
Modification No. 4 21-97-7222
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- ----------------
Department of Transportation Robert Degnan
Federal Highway Administration (202) 366-6010
Office of Acquisition Management
400 Seventh Street, S.W., Room 4410
Washington, D.C. 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Rockwell International Corporation
---------------------------------------
Transportation Systems 9B. DATED (SEE ITEM 11)
3370 Miraloma Avenue
-------------------------------------------
Anaheim, CA 92803-3105 10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 09/30/96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers
[_] is extended, [_] is not extended
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
See Item 14
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
This modification is issued to increase total obligated funds under this Agreement by $453,956, from $1,849,840 to $2,303,796.
ACCOUNTING AND APPROPRIATION DATA
9969-04E-210-96904E-210100-2523 $270,000 Increase
7967-04E-210-96704E-210100-2523 $ 53,956 Increase
X390-050-210-398010-210100-2523 $130,000 Increase
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
BY /s/ Robert Robel
___________________________________________ --------------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer) 8-28-97
____________________________________________________________________________________________________________________________________
NSN 7540-01-152-8070 30-105 (PF V2.1, 2/1/95) STANDARD FORM 30 (Rev. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
Far (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No.04
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $ 1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------
5. Modification No. 4 9969-04E-210-96904E-210100-2523 $ 270,000
------------------
6. Modification No. 4 7967-04E-210-96704E-210100-2523 $ 53,956
------------------
7. Modification No. 4 X390-050-210-398010-210100-2523 $ 130,000
------------------ -----------
TOTAL $ 2,303,796
1. PART I, SECTION G, Paragraph "FUNDS AVAILABLE"
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $2,303,796 are obligated to this
contract.
b. The balance of funding under this contract ($6,760,027) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGE
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (If applicable)
Modification No. 03 21-97-7206
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM 40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration E-mail address: [email protected]
Office of Acquisition Management
400 Seventh Street, S.W., Room 4410
Washington, D.C. 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Rockwell International Corporation
Transportation Systems ---------------------------------------
3370 Miraloma Avenue 9B. DATED (SEE ITEM 11)
Anaheim, CA 92803-3105
-------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
DTFH61-96-C-00103
[X]
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 09/30/96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers
[_] is extended, [_] is not extended
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
9969-04E-210-96904E-210170-2523 $298,456 Increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
__ A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
NO. IN ITEM 10A.
---
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriate date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
Service: ITS National Architecture Maintenance/Support
This modification is issued to increase total obligated funds under this Agreement by $298,456, from $1,551,384 to $1,849,840.
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 18C. DATE SIGNED
8/19/97
BY /s/ ROBERT B. ROBEL
__________________________________________ -----------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
____________________________________________________________________________________________________________________________________
NSN 7540-01-152-8070 30-105 (PF V2.1, 2/1/95) STANDARD FORM 30 (Rev. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 03
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. Modification No. 2 X390-050-210-398010-210100-2523 $ 38,884
------------------
4. Modification No. 3 9969-04E-210-96904E-210170-2523 $ 298,456
------------------ ----------
TOTAL $1,849,840
1. PART I, SECTION G, Paragraph "FUNDS AVAILABLE"
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $1,849,840 are obligated to this
contract.
b. The balance of funding under this contract ($7,213,983) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
All other terms and conditions remain unchanged.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 02 21-97-7077
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM40-D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration
Office of Acquisition Management
400 Seventh Street, SW., Room 4410
Washington, D.C. 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Rockwell International Corporation
---------------------------------------
Transportation Systems 9B. DATED (SEE ITEM 11)
3370 Miraloma Avenue
-------------------------------------------
Anaheim, CA 92803-3105 10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 9-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X390-050-210-398010-210100-2523 $38,884 INCREASE
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
This modification is issued to increase the total funds available under this Agreement by $38,884, from $1,512,500 to
$1,551,384
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
___________________________________________ BY /s/ Robert B. Robel
(Signature of person authorized to sign) ----------------------------------------
(Signature of Contracting Officer) 2-19-97
____________________________________________________________________________________________________________________________________
NSN 7540-01-152-8070 30-105 (PF V2.1. 2/1/95) STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-C-00103
Modification No. 02
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
-------------
2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
------------------
3. This Modification X390-050-210-398010-210100-2523 $ 38,884
----------------- ----------
TOTAL $1,551,384
1. PART I, SECTION G, Paragraph "FUNDS AVAILABLE"
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $1,551,384 are obligated to this
contract.
b. The balance of funding under this contract ($7,512,439) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
1 2
- ------------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO 5. PROJECT NO. (If applicable)
Modification No. 01 21-97-7032
- ------------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE HAM-40D 7. ADMINISTERED BY (If other than Item 6) CODE
-------------------- -----------------
Department of Transportation Robert M. Degnan (202)366-6010
Federal Highway Administration
Office of Acquisition Management
400 Seventh Street, S.W., Room 4410
Washington, D.C. 20590
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) ( ) 9A. AMENDMENT OF SOLICITATION NO.
---
Rockwell International Corporation
---------------------------------------
Transportation Systems 9B. DATED (SEE ITEM 11)
3370 Miraloma Avenue
-------------------------------------------
Anaheim, CA 92803-3105 10A. MODIFICATION OF CONTRACT/ORDER NO.
[X]
DTFH61-96-C-00103
---------------------------------------
10B. DATED (SEE ITEM 13)
- -----------------------------------------------------------------------------------------
CODE FACILITY CODE 09-30-96
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[_] The above numbered solicitation is amended as set forth in Item 14. [_] is extended, [_] is not extended
The hour and date specified for receipt of Offers
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods:
(a) By completing Items 8 and 15, and returning _______________ copies of the amendment; (b) By acknowledging receipt of this
amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation
and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO
THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer
already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)
X391-050-210-389010-210100-2523 $1,250,000 increase
- ------------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
( ) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER
- ---
NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ------------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT:
Contractor [X] is not, [_] is required to sign this document and return ___________ copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where
feasible.)
This modification is issued to increase the total funds available under this agreement by an additional $1,250,000, from
$262,500 to $1,512,500. (See Page 2)
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
____________________________________________________________________________________________________________________________________
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Robert B. Robel
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
SIGNED
___________________________________________ BY /s/ Robert B. Robel
(Signature of person authorized to sign) --------------------------------------
(Signature of Contracting Officer) 12-19-96
____________________________________________________________________________________________________________________________________
NSN 7540-01-152-8070 30-105 (PF V2.1. 2/1/95) STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE>
DTFH61-96-X-00103
Modification No. 01
Page 2 of 2
FUNDING RECAPITULATION:
1. Base Contract X391-050-210-389010-210100-2523 $ 262,500
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2. Modification No. 1 X391-050-210-389010-210100-2523 $1,250,000
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1. PART I, SECTION G, Paragraph "FUNDS AVAILABLE"
Delete subparagraphs "a." and "b." and substitute the following:
a. Currently, funds in the amount of $1,512,500 are obligated to this
contract.
b. The balance of funding under this contract ($7,551,323) will be
obligated subject to availability of funds and formal modification to
this contract by the Contracting Officer.
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<S> <C>
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AWARD/CONTACT 1. THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350) 1 24
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2. CONTRACT (Proc. Inst. Ident.) NO 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
DTFH61-96-C-00103 See Block 20C 21-96-6110
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5. ISSUED BY CODE HAM 40-D 6. ADMINISTERED BY (If other than Item 5) CODE
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Department of Transportation SAME AS BLOCK #5
Federal Highway Administration
Office of Acquisition Management
400 Seventh Street, S.W., Room 4410
Washington, D.C. 20590
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7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and ZIP Code) 8. DELIVERY
F.O.B. Destination
[ ] FOB ORIGIN [X] OTHER (See below)
Rockwell International Corporation -------------------------------------------
Transportation Systems 9. DISCOUNT FOR PROMPT PAYMENT
3370 Miraloma Avenue
Anaheim, Orange County, CA 97803-3105 None
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10. SUBMIT INVOICES ITEM
(4 copies unless other-
-------------------------------------------------------------------------------------- wise specified) TO THE
CODE FACILITY CODE ADDRESS SHOWN IN: See Block #5
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11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE HFS-24
See Section F ------------------------- Federal Highway Administration -------------
Finance Division, Room 4314
400 7th St., SW., Washington, D.C. 20590
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13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETI- 14. ACCOUNTING AND APPROPRIATION DATA
TION.
[ ] 10 U.S.C. 2304(c)( ) [X] 41 U.S.C. 253(c)( ) X391-050-210-389010-210100-2523 - $262,500
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15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
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"National Architecture Maintenance/Suppport"
Min - $100,000
Max - 40,400 Direct Labor Hours
Total Potential Value (Base and Options)
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15G. TOTAL AMOUNT OF $9,063,823.00
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16. TABLE OF CONTENTS
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(X) SEC. DESCRIPTION PAGE(S) (X) SEC DESCRIPTION PAGE(S)
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PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
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X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 16
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X B SUPPLIERS OR SERVICES AND PRICES/COSTS 2 PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
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X C DESCRIPTION/SPEC./WORK STATEMENT 3 X J LIST OF ATTACHMENTS 24
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X D PACKAGING AND MARKING 5 PART IV - REPRESENTATIONS AND INSTRUCTIONS
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X E INSPECTION AND ACCEPTANCE 5 REPRESENTATIONS, CERTIFICATIONS AND
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X F DELIVERIES OR PERFORMANCE 6 K OTHER STATEMENTS OF OFFERORS
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X G CONTRACT ADMINISTRATION DATA 8 L INSTRS., CONDS., AND NOTICES TO OFFERORS
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X H SPECIAL CONTRACT REQUIREMENTS 14 M EVALUATION FACTORS FOR AWARD
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CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
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17. [X] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor 18. [X] AWARD (Contractor is not required to sign this
is required to sign this document and return 3 copies to document). Your offer on Solicitation Number ____________,
issuing office). Contractor agrees to furnish and deliver including the additions or changes made by you which
all items or perform all the services set forth or otherwise additions or changes are set forth in full above, is
identified above and on any continuation sheets for the hereby accepted as to the items listed above and on any
consideration stated herein. The rights and obligations continuation sheets. This award consummates as the
of the parties to this contract shall be subject to and contract which consists of the following documents: (a) the
governed by the following documents: (a) this Government's solicitation and your offer, and (b) this
award/contract, (b) the solicitation, if any, and award/contract. No further contractual document is
(c) such provisions, representations, certifications, and necessary.
specifications, as are attached or incorporated by
reference herein. (Attachments are listed herein).
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19A. NAME AND TITLE OF SIGNER (Type or print) Clifford D. Heise 20A. NAME OF CONTRACTING OFFICER
Project Manager
Rockwell International Corporation Anthony Martoccia, Contracting Officer
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19B. NAME OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY /S/ [ILLEGIBLE] BY /S/ ANTHONY MARTOCCIA
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(Signature of person authorized to sign) 09/27/96 (Signature of Contracting Officer) 09/30/96
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NSN 7540-04-152-8069 26-107 STANDARD FORM (REV. 4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
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DTFH61-96-C-00103
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PART I
SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
-------------------------------------------------
The Contractor shall furnish all necessary facilities, materials, and personnel
and shall perform all services necessary to provide support for transitioning
the National Intelligent Transportation Systems (ITS) Architecture from the
architecture development phase to the ITS deployment phase entitled "National
Architecture Maintenance/Support."
The total estimated amount for the performance of this indefinite quantity,
cost-plus-fixed-fee contract (base period plus three option years) is
$9,063,823; which consists of the estimated cost of $8,445,106 and a maximum fee
that may be paid over 60 months, not to exceed $618,717. The total fixed fee
paid for all periods shall be based on the cost incurred for tasks issued.
Base Period
- -----------
The total estimated amount for the performance of base period (2 years) of this
contract is $3,979,282; which consists of the estimated cost of $3,705,932 and a
maximum fee that may be paid over 24 months, not to exceed $273,350. The total
fixed fee paid shall be based on the cost incurred for the task orders issued
during the base period.
Option Years
- ------------
The total estimated amount for the first option year of this contract is
$2,125,650; which consists of the estimated cost of $1,979,119 and a maximum fee
that may be paid over the first option year, not to exceed $146,531. The total
fixed fee of shall be based on the cost incurred for the task orders issued
during the first option year.
The total estimated amount for the second option year of this contract is
$1,671,810; which consists of the estimated cost of $1,558,368 and a maximum fee
that may be paid in the second option year, not to exceed $113,442. The total
fixed fee paid shall be based on the cost incurred for the task orders issued
during the second option year.
The total estimated amount for the third option year of this contract is
$1,287,081; which consists of the estimated cost of $1,201,687 and a maximum fee
that may be paid in the third option year, not to exceed $85,394. The total
fixed fee paid shall be based on the cost incurred for the task orders issued
during the third option year.
All travel shall be reimbursed at cost in accordance with the Travel and Per
Diem clause (reference Section G). Travel and per diem shall not exceed $100,000
during any year. This amount is contained within the amounts stated above.
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DTFH61-96-C-00103
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SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK
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CONTRACT OBJECTIVES
The objectives of this contract are to:
1. Evaluate/execute changes to the architecture due to changes in
requirements, corrections required to the National ITS Architecture
documentation, changes in US DOT policy, and progress made in
completing development of ITS standards.
2. Participate in outreach efforts to explain the National ITS
Architecture to US DOT regional offices and assist efforts to explain
the architecture to state and local planners/implementors/ integrators
and manufacturers.
3. Provide support to standards development activities as ITS standards
are developed. This includes working with the SDOs to understand the
architecture definition and to explain the standards requirements
provided as part of the architecture documentation and supporting US
DOT in ensuring compatibility between the National ITS Architecture
and related standards.
4. Support US DOT policy makers in defining policy consistent with the
National ITS Architecture and in making sure that the architecture
reflects new policies.
5. Support coordination with other JPO activities (e.g., data
dictionaries, AHS, etc.)
SCOPE
To provide for continuing technical and program support for moving the National
ITS Architecture from the architecture development phase to the ITS deployment
phase. The National ITS Architecture was developed to serve as a framework for
future national ITS and ITI deployments. The contractor(s) will provide support
to the US DOT in ensuring that the National ITS Architecture documentation set
is maintained and kept up-to-date and reflects all changes, additions, and
corrections necessitated by the continually evolving ITS Program. Additionally,
the Contractor will support the US DOT in technical evaluation of policies and
actions that might affect the architecture. The Contractor shall also perform
outreach to regional/state/local implementors to help explain the architecture,
provide technical support regarding the standards development process, and
perform outreach to the various administrations, and their constituents, within
US DOT that are affected by the National ITS Architecture.
DELINEATION OF WORK
In order to accomplish the contract objectives, the following list of task areas
shall be performed:
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DTFH61-96-C-00103
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TASK Area A - Project Management
- --------------------------------
Develop and maintain the work program for each task order to be issued in each
option year. Deliver required program status briefings and reports, and ensure
that necessary facilities, staff, and equipment needed to carry out the tasks
are on-hand.
TASK Area B - Architecture Maintenance
- --------------------------------------
Under the overall management of the Government, the Contractor will provide
overall technical and administrative support in maintaining the National ITS
Architecture. Specific activities may include:
1. Develop an architecture configuration management plan.
2. Manage the architecture configuration control process.
3. Evaluate proposed changes to the architecture to determine their impact on
the architecture itself and to other on-going US DOT activities.
4. Implement changes to the architecture following US DOT approval.
5. Maintain the integrity of the National ITS Architecture documentation set.
6. Publish updated versions of the architecture documentation set as required.
7. Keep abreast of ITS developments that may require changes to the
architecture and propose such changes when they are identified.
TASK Area C - Deployment and Standards Development Support
- ----------------------------------------------------------
The Contractor will provide overall support to the US DOT in ensuring that the
National ITS Architecture is considered in all local and national ITS and ITI
deployments. The Contractor will support architecture outreach efforts to US DOT
regional offices, to state and local implementors, the various administrations
within the US DOT, and other stakeholders as required. The Contractor will also
provide support to the standards development process to ensure continuity
between the architecture and evolving standards. Specific activities may
include:
1. Support US DOT ITI and ITS outreach programs.
2. Meet with US DOT regional offices and others who are working with
state/local implementors to explain/interpret the architecture.
3. Meet with equipment manufacturers to explain the architecture.
4. Coordinate with other US DOT contractors to prepare deployment guidance.
5. Support electronic outreach of the architecture including activities such
as maintaining a site on the World Wide Web and preparing an interactive
CD-ROM.
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DTFH61-96-C-00103
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6. Support access to architecture definition databases (i.e., distribute them
and answer questions.)
7. Prepare briefings/white papers for policy, quarterly, etc. meetings
8. Explain and update standards requirements as necessary
9. Provide technical representation at CSO meetings and work with SDOs
as required
10. Assess impacts of US DOT actions on the National ITS Architecture.
11. Prepare tailored architecture information as required.
12. Develop and teach a training course for stakeholder groups on using
and interpreting the National ITS Architecture.
13. Support US DOT Model Deployment Program to explain/interpret the
Architecture.
SPECIFICATIONS FOR REPORTS
Applicable reports shall be prepared in accordance with the "Guidelines for
Preparing Federal Highway Administration Publications" (FHWA-AD-88-001), dated
January 1988, and as amended by Change 1, dated May 20, 1994. All reports or
other documentation shall provide units of measurement in SI (Metric) System
with their English equivalents as follows:
a. In text, quantities or values expressed in Metric units shall be
followed immediately with the English equivalent expressed in
appropriate units in parentheses.
b. In tables and illustrations (such as graphs) expressed in Metric
units, the conversion to English Systems is required for each Metric
unit used and it shall appear consistently as either a legend or
footnote, or as part of the caption.
c. The American Society for Testing and Materials publications "Standards
for Metric Practice" ASTM E 380-76 is the FHWA standard and shall be
used as a basis for conversion.
SECTION D - PACKAGING AND MARKING
---------------------------------
There are NO articles for this section.
SECTION E - INSPECTION AND ACCEPTANCE
-------------------------------------
All work hereunder shall be subject to review by the Government. Acceptance of
the final report shall be made in writing by the Contracting Officer.
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DTFH61-96-C-00103
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52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available.
52.246-5 Inspection of Services - Cost-Reimbursement (APR 1984)
SECTION F - DELIVERIES OR PERFORMANCE
-------------------------------------
PERIOD OF PERFORMANCE
The period of performance for each Task Order will be specified within the Task
Order document.
All work and services required hereunder including preparation and submission of
the final report shall be completed on or before 24 months after the effective
date of the contract. The Government shall have 30 days to review and approve
the final report. The total period of performance including all options, if
exercised shall not exceed 60 months.
LEVEL OF EFFORT REQUIRED TO ACCOMPLISH THE WORK
Maximum; In the performance of task orders pursuant to this contract, the
Contractor shall provide a maximum of 40,400 direct productive labor
------
hours of staff effort during the base period of performance (24
months). Direct productive labor hours are defined as actual work
hours exclusive of vacation, holiday, sick leave and all other
absences.
Minimum: The Government shall order a minimum of $100,000 for fully burdened
--------
effort during the base period (24 months).
52.217-9 OPTION TO EXTEND THE TERM OF THE CONTRACT (MAR 1989)
(a) The Government may extend the term of this contract by written notice to
the Contractor within 30 days; provided, that the Government shall give the
Contractor a preliminary written notice of its intent to extend at least 60
days before the contract expires. The preliminary notice does not commit
the Government to an extension.
(b) If the Government exercises this option, the extended contract shall be
considered to include this option provision.
(c) The contract will be for a base period of 24 months, with three one-year
option periods. The total duration of this contract, including the exercise
of any options under this clause, shall not exceed 60 months.
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PLACE OF DELIVERY
All deliverables and a copy of the monthly reports (See Section G) under the
contract shall be delivered F.O.B. Destination, under transmittal letter, to the
following address:
Ship to: Federal Highway Administration
ITS Joint Program Office, HVH-1
400 Seventh Street, SW
Washington, D.C. 20590
Mark For: Mr. Lee Simmons, HVH-1
The Bi-monthly progress report and other items as specified shall be delivered
to the Contracting Officer at the following address:
Federal Highway Administration
Office of Acquisition Management
HAM40-D, Room 4410
400 Seventh Street, S.W.
Washington, D.C. 20590
DELIVERABLES
The Contractor shall deliver to the Contracting Officer according to the
schedule in the individual task orders as negotiated.
SCHEDULE OF WORK
All tasks set forth in the Statement of Work shall be performed in accordance
with the task orders, and all terms and conditions, and prices applicable under
each task order and the contract.
52.242-15 STOP-WORK ORDER (AUG 1989) - ALTERNATE I (APR 1984)
(a) The Contracting Officer may, at any time, by written order to the
Contractor, require the Contractor to stop all, or any part, of the work
called for by this contract for a period of 60 days after the order is
delivered to the Contractor, and for any further period to which the
parties may agree. The order shall be specifically identified as a stop-
work order issued under this clause. Upon receipt of the order, the
Contractor shall immediately comply with its terms and take all reasonable
steps to minimize the incurrence of costs allocable to the work covered by
the order during the period of work stoppage. Within a period of 60 days
after a stop-work order is delivered to the Contractor, or within any
extension of that period to which the parties shall have agreed, the
Contracting Officer shall either:
(1) Cancel the stop-work order, or
(2) Terminate the work covered by the order as provided in the
Termination clause of this contract.
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(b) If a stop-work order issued under this clause is canceled or the period of
the order or any extension thereof expires, the Contractor shall resume
work. The Contracting Officer shall make an equitable adjustment in the
delivery schedule, the estimated cost, the fee, or a combination thereof,
and in any other terms of the contact that may be affected, and the
contract shall be modified, in writing, accordingly, if:
(1) The stop-work order results in an increase in the time required for,
or in the Contractor's cost properly allocable to, the performance of
any part of this contract; and
(2) The Contractor asserts its right to the adjustment within 30 days
after the end of the period of work stoppage; provided, that, if the
Contracting Officer decides the facts justify the action, the
Contracting Officer may receive and act upon a proposal submitted at
any time before final payment under this contract.
(c) If a stop-work order is not canceled and the work covered by the order is
terminated for the convenience of the Government, the Contracting Officer
shall allow reasonable costs resulting from the stop-work order in arriving
at the termination settlement.
(d) If a stop-work order is not canceled and the work covered by the order is
terminated for default, the Contracting Officer shall allow, by equitable
adjustment or otherwise, reasonable costs resulting from the stop-work
order.
SECTION G - CONTRACT ADMINISTRATIVE DATA
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TASK ORDER PROCEDURE
All funds expended under this contract shall be incurred and accounted for under
individual task orders.
Within the direct productive labor hours specified in the Level-of-Effort clause
of this contract, the Contractor shall incur costs under this contract in the
performance of task orders and task order modifications issued in accordance
with this ordering procedure. No other costs are authorized without the written
consent of the Contracting Officer.
Performance under this contract is subject to the following ordering procedure:
a. From time to time during the terms of this contract, the Contracting
Officer's Technical Representative (COTR) will issue Task Order Proposal
Requests (TOPR) to the Contractor. Each TOPR will indicate the objectives
or results desired by the Government. These objectives shall be within the
scope, period, and maximum value of the contract.
b. The TOPR may be placed by written communications or other electronic means.
Each TOPR will state the due date for proposal submission.
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C. Each TOPR will contain, as a minimum, the following information:
(1) Name and Signature of the COTR;
(2) Contract Number, order number, due date and time, and number of copies
required;
(3) Description of work;
(4) Maximum number of contract labor hours and other resources authorized;
(5) Documentation requirements;
(6) Delivery/performance schedule;
(7) Quality assurance standards, as appropriate;
(8) Travel authorized; and
(9) Evaluation criteria
d. Proposals shall be delivered on or before the due date to the address
specified in the TOPR. If no address is given, proposals shall be delivered
both to the COTR and to the CO at the following addresses:
Federal Highway Administration Federal Highway Administration
ITS Joint Program Office, HVH-1 Office of Acquisition Manage-
400 Seventh Street, S.W. ment, HAM40-D
Washington, D.C. 20590 400 Seventh Street, S.W.
Washington, D.C. 20590
Each proposal must clearly state the contract number, and TOPR number on the
outside of the submission envelope.
e. The Contractor shall submit, by the due date, its proposal. The proposal
will outline the Contractor's overall approach for completing the task
order and shall, at a minimum, include:
(1) Signed cover letter stating this is the task plan to the TOPR;
(2) Discussion of technical approach for performing the work;
(3) Estimated date of commencement of work, and any changes proposed to
the schedule of performance;
(4) Direct labor hours, both straight time and overtime (if authorized),
by applicable labor category, and the total direct labor hours,
including those in (6) below, estimated to complete the task; direct
labor costs, by labor category, and applicable indirect costs;
34
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(5) The travel and material costs estimates;
(6) An estimate for subcontractors and consultants, including the direct
labor hours, if applicable.
(7) Estimated computer use time and cost required, if applicable.
(8) Other pertinent information, such as indirect costs, as cited in
this section and inter-divisional transfer;
(9) The total estimated cost and fee, where appropriate, for completion
of the task order.
f. Soliciting offers from one or more awards under this contract shall
satisfy the primary "competing independently" requirements of 48 CFR, as
implemented under Federal Acquisition Regulation (FAR) 15.804-3(b)(3). At
Government discretion, orders may be issued based upon the Contractor's
technical expertise and performance on prior orders under this contract.
This evaluation and selection may be accomplished without soliciting TOPRs.
g. Ordering procedures need not comply with the competition requirements of 48
Code of Federal Regulations (CFR) part 6. The Contracting Officer need not
request written proposals or conduct discussions with multiple Contractors
before issuing orders unless the Contracting Officer determines such
actions necessary. However, competition would be the preferred method
of task award, with allowance for single source and rotational awards as
approved by the Contracting Officer.
h. Secondary competition for task orders among awardess may be waived at the
discretion of the Contracting Officer when:
(1) The agency need for such services or supplies is the best interest of
the Government. This determination will be at the sole discretion
of the agency;
(2) Only one such Contractor is capable of providing such services or
supplies required at the level of quality required because the
services or supplies ordered are unique or highly specialized;
(3) The order should be issued on a sole-source basis in the interest of
economy efficiency as a logical follow-on to an order already under
the contract; or
(4) It is necessary to place an order to satisfy a minimum guarantee.
i. The Contracting Officer will provide each awardee a fair opportunity to be
considered for each Task Order where appropriate. The Contracting Officer
has broad discretion and may consider factors such as past performance,
quality of deliverables, cost control, price, cost, or other factors that
the Contracting Officer, in the exercise of sound business judgement,
believes are relevant to the placement of orders.
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j. The Contractor who is best able to meet the needs of the Government will be
selected in accordance with the stated evaluation criteria. The Contracting
Officer shall approve in writing the Contractor's proposal (work plan) and
any plan revisions either (1) as being in accordance with the task order or
(2) with identified variations constituting a modification to the task
order. All approvals shall be prior to commencement of work, unless other
authorized by the contracting Officer.
k. Written complaints may be submitted to the Contracting Officer. The
Contracting Officer shall review complaints from the Contractors and ensure
that all Contractors are afforded a fair opportunity to be considered,
consistent with the procedures in the contract.
1. No protest under 48 CFR (FAR) part 33 is authorized in connection with the
issuance of an order under this contract.
m. The Contracting Officer may modify task orders in the same manner as they
are issued.
n. In the event that there is a conflict between the requirements of the task
order and the Contractor's work plan, the task order shall prevail.
0. If the Contractor either at the time of receipt of a task order or at
any time during work assignment performance has reason to believe that the
cost or number of labor hours will exceed the estimates set forth in the
task order, the Contractor shall immediately notify the Contracting
Officer in writing and suggest a revised estimate for completion of the
work required thereunder. The Contracting Officer will make the final
determination of the approved cost and number of direct productive labor
hours for each work assignment.
p. The Contractor shall not exceed the estimated level of effort and cost
specified in each task order without written authorization of the
Contracting Officer.
BI-MONTHLY PROGRESS REPORT
The Contractor shall furnish one copy of a bi-monthly letter-type progress
report to the Contracting Officer and 5 to the Contracting Officer's Technical
Representative (COTR) on or before the 15th of the month following the calendar
month being reported. Each report shall contain concise statements covering the
activities relevant to the tasks, including:
1. A clear and complete account of the work performed on each task.
2. An outline of the work to be accomplished during the next report
period.
3. A bar chart showing the work completed by task versus the
Schedule of Work of the contract. (See Attachment lb.)
4. A description of any problem encountered or anticipated that will
affect the completion of the contract within the time and fiscal
constraints as set forth in the contract, together with recommended
solutions to such problems; or, a statement that no problems were
encountered.
5. A tabulation of the planned, actual and cumulative person-hours
expended by the personnel identified in the Professional Staffing of
the contract.
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6. A chart showing current and cumulative expenditures by tasks versus
planned expenditures. (See Attachment 1c.)
7. Current and cumulative hours and costs expended for ADP services
(programming, computer time, etc.) or a statement that there were
none.
(See Attachment la for items 1, 2, 4, 5, and 7.)
FUNDS AVAILABLE
a. Currently, funds in the amount of $262,500 are obligated to this contract.
b. The balance of funding under this contract ($8,801,323) will be obligated
subject to availability of funds and formal modification to this contract
by the Contracting Officer.
C. The clause entitled "LIMITATION OF FUNDS" applies to this contract. Any
notification required on the part of the Contract shall be made in writing
to the Contracting Officer. In the event that the contract is not funded
beyond the estimated cost set forth in the schedule, the Contractor shall
deliver to the Contracting Officer the data collected and the material
produced or in process or acquired in connection with the performance of
the project provided herein together with a summary report in five copies
of its progress and accomplishments to date.
PAYMENT
a. The Contractor may be reimbursed for direct and indirect costs incurred in
the performance hereof as are allowable under the provisions of Subpart
31.2 of the Federal Acquisition Regulation in the not-to-exceed amount of
$8,445,106 subject to the Limitation of Funds Clause.
b. The Government shall pay the Contractor for performing this contract the
fixed fee specified in the task orders. Payment of the fixed fee shall be
made as specified in the task orders providing that after payment of 85% of
the fixed fee, the Contracting Officer may withhold further payment of the
fee until completion of tasks and the Contracting Officer's satisfaction.
C. Each monthly interim payment request shall be supported by a statement
of costs incurred by the Contractor in the performance of this contract and
claimed to constitute allowable costs. In accordance with the clause
52.232-25, "Prompt Payment," these payments shall be made by the 30th day
after receipt of proper request by the designated billing office. Any
payments hereunder will be made upon determination by the Contracting
Officer that the requirements of the contract are being met.
d. Final invoice payment shall be made upon the Contracting Officer's
determination that all requirements of the contract have been completed.
The payment due date for final invoice shall be established in compliance
with the clause 52.232-25.
e. Each monthly interim payment request and the final invoice shall be
submitted in accordance with the format contained in the attached "The FHWA
Billing Instructions for
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Cost-Reimbursement Contracts" to be considered proper for payment. Prior
approval of the Contracting Officer is required if the Contractor wishes
to use a different format.
INDIRECT COSTS
Pending the establishment of final indirect cost rates which shall be negotiated
based on audit of actual costs as provided in Subpart 42.7 of the Federal
Acquisition Regulation, the Contractor shall be reimbursed for allowable
indirect costs hereunder at the billing rates as seen in Attachment No. 6. This
INDIRECT COST provision does not operate to waive the LIMITATION OF FUNDS
Clause. The Contractor's audited final indirect costs are allowable only insofar
as they do not cause the contractor to exceed the total estimated costs for
performance of the contract listed on page 2 (SECTION B) and under the PAYMENT
provision above.
TRAVEL AND PER DIEM
Travel and Per Diem authorized under this contract shall be reimbursed in
accordance with the Government Travel Regulations currently in effect.
Travel requirements under this contract shall be met using the most economical
form of transportation available. If economy class transportation is not
available, the request for payment voucher must be submitted with justification
for use of higher class travel indicating dates, times, and flight numbers. All
travel shall be scheduled sufficiently in advance to take advantage of offered
discount rates, unless authorized by the Contracting Officer.
CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (COTR)
The Contracting Officer has designated Mr. Lee Simmons as the Contracting
Officer's Technical Representative (COTR) to assist in monitoring the work under
this contract. The COTR is responsible for the technical administration of the
contract and technical liaison with the Contractor. The COTR IS NOT authorized
to change the scope of work or specifications as stated in the contract, to make
any commitments or otherwise obligate the Government or authorize any changes
which affect the contract price, delivery schedule, period of performance or
other terms or conditions.
The Contracting Officer is the only individual who can legally commit or
obligate the Government for the expenditure of public funds. The technical
administration of this contract shall not be construed to authorize the revision
of the terms and conditions of this contract. Any such revision shall be
authorized in writing by the Contracting Officer.
SUBCONTRACTS - ADVANCE NOTIFICATION AND CONSENT
Under this contract, the requirements of FAR 44.2, CONSENT TO SUBCONTRACTS,
have been fulfilled for the following subcontracts: None
Any future change or revision to the Statement of Work or other applicable
aspects of this contract shall include the subcontract(s) only to the extent
that performance of the subcontract(s) is directly affected by the change or
revision.
<PAGE>
DTFH61-96-C-00103
Page 14 of 24
KEY PERSONNEL
The Contractor has designated Mr. Clifford Heise as the key personnel under this
contract. In the event that any key personnel become unavailable to continue in
the performance of this contract, the appointment of a replacement shall be
subject to prior approval of the contracting Officer.
PROFESSIONAL STAFFING
The Contractor agrees to assign the following professional staffing to this
contract work. In the event the Contractor finds it necessary to replace any
of the assigned personnel during the performance of the contract, the
Contracting Officer shall be notified.
Program Manager Mr. Clifford Heise
Principal Investigator Dr. Jim Larson
Systems Engineer Mr. Ron Ice
Traffic/Transportation Engineer Mr. Jim Barbaresso
Communications Engineer Mr. Gary Belda
Software Engineer Ms. Sara J. Gilbertson
Administration Support Mr. Dan Gilliam
SECTION H - SPECIAL CONTRACT REQUIREMENTS
-----------------------------------------
1252.209-70 DISCLOSURE OF CONFLICTS OF INTEREST (OCT 1994)
It is the Department of Transportation's (DOT) policy to award contracts to only
those offerors whose objectivity is not impaired because of any related past,
present, or planned interest, financial or otherwise, in organizations regulated
by DOT or in organizations whose interests may be substantially affected by
Department activities. Based on this policy:
(a) The offeror shall provide a statement in its proposal which describes in a
concise manner all past, present or planned organizational, financial,
contractual or other interest(s) with an organization regulated by DOT, or
with an organization whose interest(s) described shall include those of the
proposer, its affiliates, proposed consultants, proposed subcontractors and
key personnel of any of the above. Past interest shall be limited to within
one year of the date of the offeror's technical proposal. Key personnel
shall include any person owning more than 20% interest in the offeror, and
the offeror's corporate officers, its senior managers and any employee who
is responsible for making a decision or taking an action on this contract
where the decision or actions can have an economic or other impact on the
interests of a regulated or affected organization.
(b) The offeror shall describe in detail why it believes in light of the
interest(s) identified in (a) above, that performance of the proposed
contract can be accomplished in an impartial and objective manner.
(c) In the absence of any relevant interest identified in (a) above, the
offeror shall submit in its proposal a statement certifying that to its
best knowledge and belief no affiliation exists
<PAGE>
DTFH61-96-C-00103
Page 15 of 24
relevant to possible conflicts of interest. The offeror must obtain the
same information from potential subcontractors prior to award of a
subcontract.
(d) The Contracting Officer will review the statement submitted and may require
additional relevant information from the offeror. All such information, and
any other relevant information known to DOT, will be used to determine
whether an award to the offeror may create a conflict of interest. If any
such conflict of interest is found to exist, the Contracting Officer may
(1) disqualify the offeror, or (2) determine that it is otherwise in the
best interest of the United States to contract with the offeror and include
appropriate provisions to mitigate or avoid such conflict in the contract
awarded.
(e) The refusal to provide the disclosure or representation, or any additional
information required, may result in disqualification of the offeror for
award. If nondisclosure or misrepresentation is discovered after award, the
resulting contract may be terminated. If after award the Contractor
discovers a conflict of interest with respect to the contract awarded as a
result of this solicitation, which could not reasonably have been known
prior to award, an immediate and full disclosure shall be made in writing
to the Contracting Officer. The disclosure shall include a full
description of the conflict, a description of the action the Contractor has
taken, or proposes to take, to avoid or mitigate such conflict. The
Contracting Officer may, however, terminate the contract for convenience
if he or she deems that termination is in the best interest of the
Government.
UNAUTHORIZED DISCLOSURE OF PROPRIETY INFORMATION
To the extent that the work under this contract requires access to proprietary,
business confidential, or financial data of other companies, and as long as such
data remains proprietary or confidential, the Contractor shall protect such data
from unauthorized use and disclosure and agrees not to use it to compete against
such companies. To this end, the Contractor, and all employees substantially
affiliated with this contract shall comply with this provision, and the Conflict
of Interest and Non-Disclosure Agreements contained as attachments to this
contract.
LIMITATION ON FUTURE CONTRACTING
1. It is agreed by the parties of this contract that the Contractor will be
restricted in its future contracting with FHWA to the manner described
below.
2. If the Contractor, under the terms of this contract,is required to develop
specifications or statements of work, or materials leading directly,
predictable or without delay to a statement of work to be used in the
competitive procurement of a system or services, the Contractor shall be
ineligible to perform the work described within that solicitation as a
prime contractor, subcontractor, consultant, or in any capacity to any
supplier under an ensuing FHWA contract. Such restrictions shall remain in
effect for three years following the issue date of the initial
solicitation.
<PAGE>
DTFH61-96-C-00103
Page 16 of 24
PART II
SECTION I - CONTRACT CLAUSES
----------------------------
FH.1 PRINTING RESTRICTIONS
All printing funded by this agreement must be done in conformance with Joint
Committee on Printing regulations as prescribed in Title 44, United States Code,
and Section 308 of Public Law 10 1-163, and all applicable Government Printing
Office and Department of Transportation regulations.
52.203-9 REQUIREMENT FOR CERTIFiCATE OF PROCUREMENT INTEGRITY-MODIFICATION (SEP
1995)
(a) Definitions. The definitions set forth in FAR 3.104-4 are hereby
incorporated in this clause.
(b) The Contractor agrees that it will execute the certification set forth in
paragraph (c) of this clause when requested by the Contracting Officer in
connection with the execution of any modification of this contract.
(c) Certification. As required in paragraph (b) of this clause, the officer or
employee responsible for the modification proposal shall execute the
following certification. The certification in paragraph (c)(2) of this
clause is not required for a modification which procures commercial items.
CERTIFICATE OF PROCUREMENT INTEGRITY-MODIFICATION (NOV 1990)
(1) I, ___________________________(Name of certifier) am the officer or
employee responsible for the preparation of this modification proposal
and hereby certify that, to the best of my knowledge and belief with
the exception of any information described in this certification, I
have no information concerning a violation or possible violation of
subsection 27(a), (b), (d), or (f) of the Office of Federal
Procurement Policy Act, as amended* (41 U.S.C. 423), (hereinafter
referred to as "the Act"), as implemented in the FAR, occurring
during the conduct of this procurement ____________ (contract and
modification number).
(2) As required by subsection 27(e)(1)(B) of the Act, I further certify
that to the best of my knowledge and belief each officer, employee,
agent, representative, and consultant of (Name of Offeror) who has
participated personally and substantially in the preparation or
submission of this proposal has certified that he or she is familiar
with, and will comply with, the requirements of subsection 27(a) of
the Act, as implemented in the FAR, and will report immediately to me
any information concerning a violation or possible violation of
subsections 27(a), (b), (d), or (f) of the Act, as implemented in
the FAR, pertaining to this procurement.
(3) Violations or possible violations: (Continue on plain bond paper
if necessary and label Certificate of Procurement Integrity-
Modification (Continuation Sheet), ENTER NONE IF NONE EXISTS)
<PAGE>
DTFH61-96-C-00103
Page 17 of 24
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
___________________________________________________________________________
(Signature of the officer or employee responsible for the modification
proposal and date)
___________________________________________________________________________
(Typed name of the officer or employee responsible for the modification
proposal)
* Subsections 27 (a), (b),and (d) are effective on December 1, 1990. Subsection
27(f) is effective on June 1,1991..
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY OF THE
UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT CERTIFICATION
MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER TITLE 18, UNITED STATES CODE,
SECTION 1001.
(End of certification)
(d) In making the certification in paragraph (2) of the certificate, the
officer or employee of the competing Contractor responsible for the offer
or bid, may rely upon a one-time certification from each individual
required to submit a certification to the competing Contractor,
supplemented by periodic training. These certifications shall be obtained
at the earliest possible date after an individual required to certify
begins employment or association with the Contractor. If a contractor
decides to rely on a certification executed prior to the suspension of
section 27 (i.e., prior to December 1, 1989), the Contractor shall ensure
that an individual who has so certified is notified that section 27 has
been rein.stated. These certifications shall be maintained by the
Contractor for a period of 6 years from the date a certifying employee's
employment with the company ends or, for an agency, representative, or
consultant, 6 years from the date such individual ceases to act on behalf
of the contractor.
(e) The certification required by paragraph (c) of this clause is a material
representation of fact upon which reliance will be placed in executing this
modification.
52.215-42 REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION OTHER THAN COST
OR PRICING DATA--MODIFICATIONS (OCT 1995)
(a) Exceptions from cost or pricing data.
(1) In lieu of submitting cost or pricing data for modifications under
this contract, for price adjustments expected to exceed the threshold
set forth at FAR 15.804-2(a)(l) on the date of the agreement on price
or the date of the award, whichever is later, the Contractor may
submit a written request for exception by submitting the information
described in the following subparagraphs. The Contracting Officer may
require
<PAGE>
DTFH61-96-C-00103
Page 18 of 24
additional supporting information, but only to the extent necessary to
determine whether an exception should be granted, and whether the
price is fair and reasonable--
(i) Information relative to an exception granted for prior or
repetitive acquisitions.
(ii) Catalog price information as follows:
(A) Attach a copy of or identify the catalog and its date, or
the appropriate pages for the offered items, or a
statement that the catalog is on file in the buying office
to which this proposal is being made.
(B) Provide a copy or describe current discount policies and
price lists (published or unpublished), e.g., wholesale,
original equipment manufacturer, and re-seller.
(C) Additionally, for each catalog item that exceeds [*]
(extended value not unit price), provide evidence of
substantial sales to the general public. This may include
sales order, contract, shipment, invoice, actual recorded
sales or other records that are verifiable. In addition,
if the basis of the price proposal is sales of essentially
the same commercial item by affiliates, other
manufacturers or vendors, those sales may be included. The
offeror shall explain the basis of each offered price and
its relationship to the established catalog price. When
substantial general public sales have also been made at
prices other than catalog or price list prices, the
offeror shall indicate how the proposed price relates to
the price of such recent sales in quantities similar to
the proposed quantities.
*Insert dollar amount for sampling (see 15.804-1(c)(1)).
(iii) Market price information. Include the source and date or period
of the market quotation or other basis for market price, the
base amount, and applicable discounts. The nature of the market
should be described. The supply or service being purchased
should be the same as or similar to the market price supply or
service. Data supporting substantial sales to the general
public is also required.
(iv) Identification of the law or regulation establishing the price
offered. If the price is controlled under law by periodic
rulings, reviews, or similar actions of a governmental body,
attach a copy of the controlling document, unless it was
previously submitted to the contracting office.
(v) Information on modifications of contracts or subcontracts for
commercial items.
<PAGE>
DTFH61-96-C-00103
Page 19 of 24
(A) If(l) The original contract or subcontract was granted an
exception from cost or pricing data requirements because
the price agreed upon was based on adequate price
competition, catalog or market prices of commercial items,
or prices set by law or regulation, and (2) the
modification (to the contract or subcontract) is not
exempted based on one of these exceptions, then the
Contractor may provide information to establish that the
modification would not change the contract or subcontract
from a contract or subcontract for the acquisition of a
commercial item to a contract or subcontract for the
acquisition of an item other than a commercial item.
(B) For a commercial item exception, the Contractor may
provide information on prices at which the same item or
similar items have been sold in the commercial market.
(2) The Contractor grants the Contracting Officer or an authorized
representative the right to examine, at any time before award, books,
records, documents, or other directly pertinent records to verify any
request for an exception under this clause, and the reasonableness of
price. Access does not extend to cost or profit information or other
data relevant solely to the Contractor's determination of the prices
to be offered in the catalog or marketplace.
(3) By submitting information to qualify for an exception, an offeror is
not representing that this is the only exception that may apply.
(b) Requirements for cost or pricing data. If the Contractor is not granted an
exception from the requirement to submit cost or pricing data, the
following applies:
(1) The Contractor shall submit cost or pricing data on Standard Form (SF)
1411, Contract Pricing Proposal Cover Sheet (Cost or Pricing Data
Required), with supporting attachments prepared in accordance with
Table 15-2 of FAR 15.804-6(b)(2).
(2) As soon as practicable after agreement on price, but before award
(except for unpriced actions), the Contractor shall submit a
Certificate of Current Cost or Pricing Data, as prescribed by FAR
15.804-4.
52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990)
(a) The use of overtime is authorized under this contract if the overtime
premium cost does not exceed zero or the overtime premium is paid for work-
(1) Necessary to cope with emergencies such as those resulting from
accidents, natural disasters, breakdowns of production equipment, or
occasional production bottlenecks of a sporadic nature;
<PAGE>
DTFH61-96-C-00103
Page 20 of 24
(2) By indirect-labor employees such as those performing duties in
connection with administration, protection, transportation,
maintenance, standby plant protection, operation of utilities, or
accounting;
(3) To perform tests, industrial processes, laboratory procedures, loading
or unloading of transportation conveyances, and operations in flight
or afloat that are continuous in nature and cannot reasonably be
interrupted or completed otherwise; or
(4) That will result in lower overall costs to the Government.
(b) Any request for estimated overtime premiums that exceeds the amount
specified above shall include all estimated overtime for contract
completion and shall -
(1) Identify the work unit; e.g., department or section in which the
requested overtime will be used, together with present workload,
staffing, and other data of the affected unit sufficient to permit the
Contracting Officer to evaluate the necessity for the overtime;
(2) Demonstrate the effect that denial of the request will have on the
contract delivery or performance schedule;
(3) Identify the extent to which approval of overtime would affect the
performance or payments in connection with other Government contracts,
together with identification of each affected contract; and
(4) Provide reasons why the required work cannot be performed by using
multishift operations or by employing additional personnel.
52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available.
I. FEDERAL ACQUISiTION REGULATION (48 CFR CHAPTER 1) CLAUSES
1. 52.202-1 Definitions (OCT 1995)
2. 52.203-3 Gratuities(APR 1984)
3. 52.203-5 Covenant Against Contingent Fees (APR 1984)
4. 52.203-6 Restrictions on Subcontractor Sales to the government (OCT 1995)
5. 52.203-7 Anti-Kickback Procedures (OCT 1988)
6. 52.203-10 Price or Fee Adjustment for Illegal or Improper Activity (SEP
1999)
<PAGE>
DTFH61-96-C-00103
Page 21 of 24
7. 52.203-12 Limitation on Payments for Illegal or Improper Activity (SEP
1990)
8. 52.204-4 Printing/Copying Double-Sided on Recycled Paper (MAY 1995)
9. 52.209-6 Protecting the Government's Interest When Subcontracting
With Contractors Debarred, Suspended, or Proposed for
Debarment (JUL 1995)
10. 52.215-2 Audit and Records--Negotiation (OCT 1995)
11. 52.215-22 Price Reduction for Defective Cost or Pricing Data (OCT
1995)
12. 52.215-24 Subcontractor Cost or Pricing Data (OCT 1995)
13. 52.215-25 Subcontractor Cost or Pricing Data - Modifications (OCT
1995)
14. 52.215-27 Termination of Defined Benefit Pension Plans (SEP 1989)
15. 52.215-33 Order of Precedence (JAN 1986)
16. 52.215-39 Reversion or Adjustment of Plans for Post-Retirement
Benefits Other than Pensions (PRB) (FEB 1995)
17. 52.215-40 Notification of Ownership Changes (FEB 1995)
18. 52.216-7 Allowable Cost and Payment (JUL 1991)
19. 52.216-8 Fixed Fee (APR 1984)
20. 52.216-18 Ordering (APR 1984)
21. 52.216-22 Indefinite Quantity (OCT 1995)
22. 52.219-8 Utilization of Small, Small Disadvantaged and Women-Owned
Small business Concerns (OCT 1995)
23. 52.222-3 Convict Labor (APR 1984)
24. 52.222-26 Equal Opportunity (APR 1984)
25. 52.222-35 Affirmative Action for Special Disabled and Vietnam Era
Veterans (APR 1984)
26. 52.222-36 Affirmative Action for Handicapped Workers (APR 1984)
27. 52.222-37 Employment Reports on Special Disabled Veterans and Veterans
of the Vietnam Era (JAN 1988)
<PAGE>
DTFH61-96-C-00103
Page 22 of 24
28. 52.223-2 Clean Air and Water (APR 1984)
29. 52.223-6 Drug-Free Workplace (JUL 1990)
30. 52.225-3 Buy American Act - Supplies (JAN 1994)
31. 52.225-11 Restrictions on Certain Foreign Purchases (MAY 1992)
32. 52.226-1 Utilization of Indian Organizations and Indian-Owned Economic
Enterprises (AUG 1991)
33. 52.227-1 Authorization and Consent - Alternate I (APR 1984)
34. 52.227-2 Notice and Assistance Regarding Patent and Copyright
Infringement (APR 1984)
35. 52.227-14 Rights in Data - General (JUN 1987)
36. 52.227-16 Additional Data Requirements (JUN 1987)
37. 52.228-7 Insurance - Liability to Third Persons (MAR 1996)
38. 52.230-2 Cost Accounting Standards (AUG 1992)
39. 52.230-3 Disclosure and Consistency of Cost Accounting Practices (NOV
1993)
40. 52.230-5 Administration of Cost Accounting Standards (FEB 1995)
41. 52.232-9 Limitation on Withholding of Payments (APR 1984)
42. 52.232-17 Interest (JAN 1991)
43. 52.232-22 Limitation of Funds (APR 1984)
44. 52.232-23 Assignment of Claims (JAN 1986)
45. 52.232-25 Prompt Payment (MAR 1994)
46. 52.232-28 Electronic Funds Transfer Payment Methods (APR 1989)
47. 52.233-1 Disputes (MAR 1994)
48. 52.233-3 Protest After Award (OCT 1995)--Alternate I (JUN 1985)
49. 52.237-3 Continuity of Services (JAN 1991)
50. 52.242-1 Notice of Intent to Disallow Costs (APR 1984)
<PAGE>
DTFH61-96-C-00103
Page 23 of 24
51. 52.242-3 Penalties for Unallowable Costs (OCT 1995)
52. 52.242-4 Certification of Indirect Costs (OCT 1995)
53. 52.242-13 Bankruptcy (JUL 1995)
54. 52.243-2 Changes - Cost-Reimbursement (AUG 1987)--Alternate II
(APR 1984)
55. 52.244-2 Subcontractor (Cost-Reimbursement and Letter Contracts)
(FEB 1995)
56. 52.244-5 Competition in Subcontracting (JAN 1996)
57. 52.249-6 Termination (Cost-Reimbursement)(MAY 1986)
58. 52.249-14 Excusable Delays (APR 1984)
59. 52.253-1 Computer Generated Forms (JAN 1991)
II. DEPARTMENT OF TRANSPORTATION ACQUISITION REGULATIONS (48 CHAPTER
12) CLAUSES
1. 1252.215-70 Key Personnel and/or Facilities (OCT 1994)
2. 1252.242-71 Contractor Testimony (OCT 1994)
3. 1252.242-72 Dissemination of Contract Information (OCT 1994)
52.252-4 ALTERATIONS IN CONTRACT (APR 1984)
Portions of this contract are altered as follows:
None
<PAGE>
DTFH61-96-C-00103
Page 24 of 24
PART III
SECTION J - LIST OF ATTACHMENTS
-------------------------------
1. Sample Formats for Progress Reports
a. Bi-Monthly Progress Report - 1 page
b. Progress by Task - 1 page
c. Fiscal Summary by Task - 1 page
2. Billing Instructions - Cost Reimbursement Contracts - 8 pages
3. FHWA ADP Information and Requirements and Documentation Guidelines for
Microcomputer Applications Information Systems - 9 pages
4. Subcontracting Plan - 12 pages
5. Provisional Staffing Rates - 1 page
6. Indirect Provisional Billing Rates - 2 page
7. Conflict of Interest - 8 pages
8. Nondisclosure Agreement - 1 page
<PAGE>
DTFH61-96-C-00103
Attachment la
Format
for
Bi-Monthly Progress Reports
A.1/ Accomplishments/Significant Findings by Task this Month:
- -------
B. Work Planned for Next Month by Task:
C.2/ Effort Expended by Key Personnel:
- ---
<TABLE>
<CAPTION>
Effort (Percent of Time)
---------------------------------------------
Contract Time Cumulative This Cumulative
Employee Name Allocated Last Month Month This Month
------------- ------------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
Principal Invest.:
Other Key People:
D.2/ ADP Usage:
-
<CAPTION>
Usage
---------------------------------------------------------------------
Cost Cumulative Cost Time Used Cost Cum. Cost
Item Allocated Last Month This Month This Month This Month
---- --------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Labor:
Equipment:
E.3/ Research Costs:
-
</TABLE>
F. Identification of Problems/Recommended Solutions:
1/ Evidence of Work Accomplished Must be Attached for Fixed Cost Contracts
- -
2/ Not Required for Fixed Cost Contracts
- -
3/ Only Narrative of Fiscal Data Required for Fixed Cost Contracts
<PAGE>
Contract Title: EXAMPLE
Progress by Task
<TABLE>
<CAPTION>
Contract Number: Reporting Date _____________________
- ------------------------------------------------------------------------------------------------------------------------------------
Task 1980 1981 1982
--------------------------------------------------------------------------------------------------------
SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A. State of Art Survey
Planned % 20 50 85 100
==============
Actual % 18 40 62 76 85 95 95 99 ----------> 100
B. Prototype Design
Planned % 25 50 75 100
===============
Actual % 25 50 70 85 95 100
C. Prototype Construction
Planned % 10 20 30 40 55 70 80 90 100
===================================
Actual % 10 15 20 27 34 40 60 70 80
D. Lab and Field Testing
Planned % 10 20 25 35 40 50 65 85 100
====================================
Actual % 10 15 25 30
E. Validation
Planned % 10 40 80 95 100
==================
Actual %
f. Concept Demonstration
Planned % 100
===
Actual %
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL
Planned % 3 8 17 23 26 34 38 42 46 52 60 66 72 78 80 82 85 89 92 93 95 98 99 100
---------------------------------------------------------------------------------------------------------
Actual % 3 6 14 19 24 31 3? ?8 41 44 48 63 65 68
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DTFH61-96-C-00103
Attachment 1c
Contract Title: Reporting Date:
Contract Number:
<TABLE>
<CAPTION>
FISCAL SUMMARY BY TASK
Cumulative
Percent Work
-------------------------------------------------------
Cumulative This Cumulative Completed
Task Title Budgeted Last Month Month To Date To Date
---- ----- -------- ---------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
FEBRUARY 1991
DEPARTMENT OF TRANSPORTATION
FEDERAL HIGHWAY ADMINISTRATION
OFFICE OF CONTRACTS AND PROCUREMENT
Billing Instructions
Cost Reimbursement Contracts
1. Introduction:
------------
Reimbursement procedures related to negotiated cost type contracts involve the
preparation and submission by Contractors of properly prepared vouchers to the
Government. These instructions are provided for the use of Contractors in the
preparation and submission of vouchers requesting reimbursement for work
performed under the contract. The submission of vouchers as suggested herein
will keep correspondence and other causes for delay to a minimum and will thus
assure prompt payment to the Contractor.
2. Forms to be Used:
----------------
In requesting reimbursement, Contractors are urged to use the regular Government
voucher forms, Public Voucher for Purchases and Services Other than Personal
SF-1034, and Continuation Sheet, SF-4035, or the Contractor's own forms. If
--
Contractor's forms are used, billing shall be arranged as shown in the attached
- -------------------------------------------------------------------------------
Exhibits A and B, Public Voucher Forms.
- -----------------
3. Preparation:
-----------
Each billing shall be prepared in an original and five carbon copies, arranged
in two parts as follows and submitted at intervals as specified by the terms of
the contract:
Part I - Summary of all Costs: (See Exhibit A attached)
- -------------------------------------------------------
This portion consists of a listing of cost elements, by general categories,
i.e., direct labor, overhead, etc., showing the amounts, incurred during the
period covered by the billing. The reimbursement costs incurred, and the dates
of the period for which billing is made, must fall within the period as set
forth in the contract.
The Contractor shall include the following signed certification for support
service contracts:
"I certify that the hours and/or materials identified are allocable to the
job being billed and that the costs are justified as attributable solely to
the performance of this Government contract."
<PAGE>
The Contractor shall include the following signed certification for all other
cost reimbursement contracts other than support services:
"I certify that all payments requested have been incurred, are allocable to
this contract and have not been billed previously."
Part II - Details of Direct and Indirect Costs:
- ----------------------------------------------
(See Exhibit attached)
----------------------
This part consists of a detailed statement of direct and indirect costs and
supports each category of costs shown in Part I. The Contractor shall include a
breakdown for the current billing period and cumulative totals since contract
execution. Exhibits A and B illustrate a typical voucher for submission after
the first month of contractor performance. Exhibits C and D are examples of a
voucher for submission after 6 months of contractor performance. This detailed
information to be continued in Part II is to assist the Contracting Officer and
program office personnel in verifying vouchers vis-a-vis contract performance.
The categories of costs will be itemized and described as follows:
a. Direct Labor
------------
Direct labor costs consist of salaries and wages paid for scientific,
technical and other work performed directly pursuant to the terms of the
contract labor costs and shall be billed as follow:
List employees whose salaries or wages, or portions thereof, were charged
to the contract; show the name, title, rate, days (or hours) worked and
amount for each individual. Indicate if the labor rates include fringe
benefits. If it is the Contractor's established practice to treat fringe
benefits as a direct cost at a percentage of total labor cost, show the
rate and amount as a separate item. If it is the Contractor's established
practice to treat fringe benefits as an indirect cost, such costs shall be
billed separately as an indirect cost item.
The cost of direct labor charged directly to the contract shall be
supported by time records maintained in the Contractor's office.
(NOTE: Fringe benefits, bonuses, etc., are usually treated as indirect
-----
costs for inclusion in the overhead pool; however, they may be treated as
direct labor costs or as "Other Direct Costs" if this treatment is in
accordance with generally accepted accounting standards).
Premium pay is the difference between the rates normally paid on a straight
time basis, and amounts paid for overtime or shift work. Such pay is
not included in the direct labor and shall not be included in the billing
for "direct labor" unless the Contractor has permission to utilize premium
rates.
<PAGE>
Unless provided for in the contract, Premium pay must be authorized by the
Contracting Officer in advance. Billings for unauthorized premium pay cause
delays in payment due to suspensions and exchange of correspondence.
Citations to authorizations for premium pay will avoid delays in payment.
Authorization premium may be shown in Part I as a single item; in Part II
it must be separately itemized for each position or job category showing
the amount and a citation of the Contracting Officer's letter of
authorization.
If there is an annual escalation clause for direct labor in the contract,
these rates shall not be exceeded in the billings.
b. Materials and Supplies:
----------------------
Only those items which the Contractor normally treats as "direct costs"
shall be claimed under this heading. Only major classifications of material
(e.g. film, rentals, office supplies, which exceed $25.00 in any class)
should be billed separately under appropriate classification. Items costing
less than $25.00 must be listed by category of materials or supplies. Show
the description and dollar amount of individual classifications. All such
charges must be supported by the Contractor's records.
Other Direct Costs:
------------------
NOTE: Other direct costs represent expenses related directly to the
---- --------
contract, provided such expenses are consistently treated as direct costs
rather than indirect costs.
c. Travel:
------
When authorized in the contract as a direct cost, travel costs directly
related to specific contract performance may be billed as a direct cost.
Travel cost detail in Part II shall include:
1. Name of traveler and official title.
2. Purpose of trip.
3. Dates of departure and return to starting point (station or airport).
4. Transportation costs, identified as to rail, air, private automobile
(including mileage and rate) and taxi.
5. If claim for subsistence is on per diem basis show the number of days,
rate and amount, as authorized in contract. If claim is based on actual
costs of subsistence show on a daily basis the amounts claimed for
lodging and meals separately.
<PAGE>
For purposes of computing per diem charges in lieu of actual subsistence
charges, and unless otherwise provided in the contract, a day is divided
into four quarters which begin at 12:00 midnight, 6:00 a.m., 12 noon and
6:00 p.m. for example, at an authorized per diem rate $22.00 per day, a
traveler who departed at 8:00 a.m., on January 9 and returned at 5:30 p.m.,
on January 10 would be entitled to $33.00.
If travel is made at other than economy fares, a statement shall be
included indicating the reason for the deviation. Also, a copy of the air
or rail ticket shall be included.
d. Consultant Fees:
---------------
Part II of the voucher shall include the consultant's name, rate, number of
days or parts of days and the total amount of charges.
e. Equipment:
---------
Nonexpendable equipment must be identified under Part II of voucher showing
name of article, make, model, number of units, unit cost, and total cost.
f. Indirect Costs:
--------------
Pending the establishment of final negotiated indirect rates for the
Contractor's fiscal year or period of contract, whichever is applicable,
indirect costs i.e., overhead fringe benefits and general and
-------------------------------------------------------------
administrative expense must be billed at rates set forth in the contract.
------------------------------------------------------------------------
Rates can be changed during performance of the contract only by contract
------------------------------------------------------------------------
modification. When the rates are changed the Contractor shall show revised
------------
rates on succeeding vouchers.
g. Fixed-Fee:
---------
Fixed-fee, is to be billed in accordance with the terms of the contract.
h. Cost of Money:
-------------
If applicable, cost of money shall be billed at rates set forth in the
contract.
i. Withholding:
------------
Indicate the amount of cost/fee to be deducted from the cost subtotal,
along with the percentage of withholding, as set forth in the contract.
<PAGE>
<TABLE>
<S> <C>
PAGE 5
SAMPLE (PART 1) EXHIBIT A
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Form 1034 PUBLIC VOUCHER FOR PURCHASES AND VOUCHER NO.
Received January 1998 SERVICES OTHER THAN PERSONAL
Department of the Treasury
????????? 2000 1
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. DEPARTMENT, BUREAU, OR ESTABLISHMENT AND LOCATION DATE VOUCHER PREPARED SCHEDULE NO.
U.S. Department of Transportation March 15, 1991
Federal Highway Administration ------------------------------------------------------------------------
Office of Acquisition Management CONTRACT NUMBER AND DATE PAID BY
Washington, D.C. 20590 DTFH61-91-C-
--------------------------------------------------
REQUISITION NUMBER AND DATE
- --------------------------------------------------------------------------------------------------------------
. .
PAYEE'S H. I. Way Engineers, Inc.
NAME 101 Main Street, NW. ----------------------
AND Washington, D.C. 20030 DATE INVOICE RECEIVED
ADDRESS
----------------------
DISCOUNT TERMS
----------------------
. . PAYEE'S ACCOUNT NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
SHIPPED FROM TO WEIGHT GOVERNMENT S/L NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE OF ARTICLES OR SERVICES QUAN- UNIT PRICE AMOUNT
AND DATE DELIVERY (Enter description, item number of contracts or Federal supply ------------------------------------
OF ORDER OR SERVICE schedules, and other information deemed necessary) TITY COST PER /(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
Feb. 1, Direct Labor 3,487.00
1991 Materials and Supplies 200.00
thru Travel 750.00
Feb. 28, Consultant Fees 500.00
1991 Equipment 450.00
Indirect Costs 5,392.00
(Less 5% Withholding) (539.00)
--------
"I certify that all payments requested have been incurred, are
allocable to this contract and have not been billed previously."
------------------------
Jane Doe, Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
(Use continuation sheet(s) if necessary) (Payee must NOT use the space below) Total 10,240.00
- ------------------------------------------------------------------------------------------------------------------------------------
PAYMENT: APPROVED FOR EXCHANGE RATE DIFFERENCES--------------------------
[_] PROVISIONAL =$ =$1.00
----------------------------------------------------------------------------------------------------------------
[_] COMPLETE BY:
----------------------------------------------
[_] PARTIAL
----------------------------------------------
[_] FINAL Amount verified, correct for
----------------------------------------------------------------------------------------------------------------
[_] PROGRESS TITLE (Signature or initials)
[_] ADVANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Pursuant to authority vested in me, I certify that this voucher is correct and proper for payment.
----------------- ----------------------------------------------------------- ------------------------------------------------
(Date) (Authorized Certifying Officer)/2/ (Title)
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNTING CLASSIFICATION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PAID BY CHECK NUMBER ON ACCOUNT OF U.S. TREASURY CHECK NUMBER ON (Name of bank)
- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
CASH DATE PAYEE/3/
- ------------------------------------------------------------------------------------------------------------------------------------
/1/ When stated in foreign currency, insert name of currency. PER
/2/ If the ability to certify and authority to approve are combined in one person, one
signature only is necessary: otherwise the approving officer will sign in the space
provided, over his official title.
/3/ When a voucher is receipted in the name of a company or corporation, the name of the -------------------------------------
person writing the company or corporate name, as well as the capacity in which he TITLE
signs, must appear. For example: "John Doe Company, per John Smith, Secretary", or
"Treasurer", as the case may be.
- ------------------------------------------------------------------------------------------------------------------------------------
previous edition usable *U.S. GPO. 1987-181-247/60006 NSN 75-40-00-634-4204
</TABLE>
- --------------------------------------------------------------------------------
PRIVACY ACT STATEMENT
The information requested on this form is required under the provisions of 31
U.S.C. 82b and 82c, for the purpose of disbursing Federal money. The
information requested is
<PAGE>
Page 6
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Voucher No.
1
-------------------------------------------
Standard Form 1035 PUBLIC VOUCHER FOR PURCHASES AND SCHEDULE NO.
September 1973 SERVICES OTHER THAN PERSONAL
4 Treasury FRM 3000 -------------------------------------------
1035-110 STREET NO.
CONTINUATION SHEET
- -----------------------------------------------------------------------------------------------------------------------------
U.S. DEPARTMENT, BUREAU, OR ESTABLISHMENT
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER DATE OF ARTICLE OR SERVICES UNIT PRICE AMOUNT
AND DATE DELIVERY (Enter description, item number of contract or -----------------------------------
OF ORDER OR SERVICE Federal supply schedule, and other QUANTITY COST PER
information deemed necessary)
- -----------------------------------------------------------------------------------------------------------------------------
DIRECT LABOR CURRENT CUMUL.
-------------- ------- -----
T. C. Brown 60 hrs. 25.00 hr. 1,500 1,500
Project Director
A. E. Smith 73 hrs. 19.00 hr. 1,387 1,387
Research Analyst
F. C. Jones 50 hrs. 12.00 hr. 600 600
------ ------
Research Assistant
Total Direct Labor 3,487 3,487
------------------
MATERIAL and SUPPLIES
---------------------
Rental: Automobile 1 200.00 mo. 200 200
------
TRAVEL
------
A. E. Smith; Research Analyst; 730 730
Purpose of Trip: Field Test &
Data Collection; 2/21-22/91;
Wash., D.C. to Atlanta & return.
CONSULTANT FEES
---------------
R. S. Anderson, 2/14-15/91 2 da. 250.00 da. 500 500
EQUIPMENT
---------
Steel Tray #04; Serial #1678; 1 450.00 unit 450 450
------ ------
Re: Contracting Officer letter
of 2/4/91.
Total Direct Costs 5,387 5,387
------------------
INDIRECT COSTS
--------------
Overhead
95% of Total Direct Labor 3,313 3,313
Fringe Benefits
21% of Total Direct Labor 732 732
General & Administrative Expense
25% of Total Direct Costs 1,347 1,347
------ ------
Total Indirect Costs 5,392 5,392
-------------------- ------ ------
Subtotal 10,779 10,779
--------
(LESS 5% WITHHOLDING)
(539) (539)
------ ------
Total 10,240 10,240
-----
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
PAGE 7
SAMPLE (PART 1) EXHIBIT C
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Form 1034 PUBLIC VOUCHER FOR PURCHASES AND VOUCHER NO.
Received January 1998 SERVICES OTHER THAN PERSONAL
Document of the Treasury
????????? 2000 6
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. DEPARTMENT, BUREAU, OR ESTABLISHMENT AND LOCATION DATE VOUCHER PREPARED SCHEDULE NO.
U.S. Department of Transportation August 15, 1991
------------------------------------------------------------------------
Federal Highway Administration CONTRACT NUMBER AND DATE PAID BY
Office of Contracts & Procurement DTFH61-91-C-
--------------------------------------------------
Washington, D.C. 20590 REQUISITION NUMBER AND DATE
- --------------------------------------------------------------------------------------------------------------
. .
PAYEE'S H. I. Way Engineers, Inc.
----------------------
NAME 101 Main Street, N.W. DATE INVOICE RECEIVED
AND Washington, D.C. 20030
----------------------
ADDRESS DISCOUNT TERMS
----------------------
. . PAYEE'S ACCOUNT NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
SHIPPED FROM TO WEIGHT GOVERNMENT S/L NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE OF ARTICLES OR SERVICES QUAN- UNIT PRICE AMOUNT
AND DATE DELIVERY (Enter description, item number of contracts or Federal supply ------------------------------------
OF ORDER OR SERVICE schedules, and other information deemed necessary) TITY COST PER /(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
July 1, Direct Labor 2,963.00
1991 Materials and Supplies 200.00
thru Travel 950.00
July 31, Consultant Fees 250.00
1991 Equipment 500.00
Indirect Costs 4,622.00
(Less 5% Withholding) (474.00)
--------
"I certify that all payments requested have been
incurred, are allocable to this contract and have
-----------------------
not been billed previously)." Jane Doe Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
(Use continuation sheet(s) if necessary) (Payee must NOT use the space below) TOTAL 9,011.00
- ------------------------------------------------------------------------------------------------------------------------------------
PAYMENT: APPROVED FOR EXCHANGE RATE DIFFERENCES__________________________
[_] PROVISIONAL =$ =$1.00
----------------------------------------------------------------------------------------------------------------
[_] COMPLETE BY:
----------------------------------------------
[_] PARTIAL
----------------------------------------------
[_] FINAL Amount verified: correct for
----------------------------------------------------------------------------------------------------------------
[_] PROGRESS TITLE (Signature or initials)
[_] ADVANCE
- ------------------------------------------------------------------------------------------------------------------------------------
Pursuant to authority vested in me, I certify that this voucher is correct and proper for payment.
----------------- ----------------------------------------------------------- ------------------------------------------------
(Date) (Authorized Certifying Officer):/2/ (Title)
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNTING CLASSIFICATION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PAID BY CHECK NUMBER ON ACCOUNT OF U.S. TREASURY CHECK NUMBER ON (Name of bank)
- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
CASH DATE PAYEE:/3/
- ------------------------------------------------------------------------------------------------------------------------------------
/1/ When stated in foreign currency, insert name of currency. PER
/2/ If the ability to certify and authority to approve are combined in one person, one
signature only is necessary: Otherwise the approving officer will sign in the space
provided, over his official title. -------------------------------------
/3/ When a voucher is receipted in the name of a company or corporation, the name of the TITLE
person writing the company or corporate name, as well as the capacity in which he
signs, must appear. For example: "John Doe Company, per John Smith, Secretary", or
"Treasurer", as the case may be.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PRIVACY ACT STATEMENT
<PAGE>
<TABLE>
Page 8
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------------
VOUCHER NO.
Standard Form 1035 -----------------
September 1973 PUBLIC VOUCHER FOR PURCHASES AND SCHEDULE NO.
4 Treasury FRM 3000 SERVICES OTHER THAN PERSONAL -----------------
1035-110 STREET NO.
CONTINUATION SHEET
- --------------------------------------------------------------------------------------------------------------------------------
U.S. DEPARTMENT, BUREAU, OR ESTABLISHMENT
- --------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE OF ARTICLES OR SERVICES UNIT PRICE AMOUNT
AND DATE DELIVERY (Enter description, item number of contract or Federal supply QUAN- ----------------------------
OF ORDER OR SERVICE schedule, and other information deemed necessary) TITY COST PER
- --------------------------------------------------------------------------------------------------------------------------------
DIRECT LABOR
------------
T. C. BROWN 45 hrs 25.00 hr. 1,125 7,650
Project Director
A. E. Smith 62 hrs 19.00 hr. 1,178 7,465
F. G. Jones 55 hrs 12.00 hr. 660 3,785
---
Research Assistant
Total Direct Labor 2,963 18,900
------------------
MATERIALS & SUPPLIES
--------------------
Rental Automobile 1 200.00 mo. 200 1,200
TRAVEL
------
A. E. Smith; Research Analyst; Purpose of Trip: Witness 950 1,700
crash tests; 7/23-24/91; Wash., D.C. to College Station,
TX & return
CONSULTANT FEES
---------------
R. S. Anderson, 7/17/91 1da. 250.00 da 250 2,000
EQUIPMENT
---------
Calibration Box #101; Serial #424 1 500.00 unit 500 950
--- ---
Re: Contracting Officer letter of 7/3/91
Total Direct Costs 4,863 24,750
------------------
INDIRECT COSTS
--------------
Overhead 2,815 17,955
95% of Total Direct Labor
Fringe Benefits 591 3,969
21% of Total Direct Labor
General & Administrative Expense 1,216 6,188
----- ------
25% of Total Direct Labor
Total Indirect Costs 4,622 28,112
-------------------- -------------
Subtotal 9,485 52,862
--------
- -------------------------------------------------------------------------------------------------------------------------------
(LESS 5% WITHHOLDING) (474) (2,643)
----- ------
TOTAL 9,011 50,219
</TABLE>
<PAGE>
DTFH61-96-C-00103
Attachment 3
Page 1 of 9
FHWA ADP INFORMATION AND REQUIREMENTS
-------------------------------------
A. Contracts for Mainframe/Minicomputer Systems or Software
--------------------------------------------------------
- - Any computer programs developed or modified for FHWA as a result of this
project must be deliverable items to FHWA and written in either ANSI
FORTRAN or Federal Standard COBOL. Exceptions to the use of these standard
languages are permissible where other languages offer clear advantages.
Such exceptions should be approved by the Contracting Officer's Technical
Representative and the Chief of Data Systems Division.
- - Any computer programs that are deliverable items to FHWA must be
independent of any proprietary software packages.
- - All computer systems/programs must be documented according to Federal
Information Processing Standards Publication (FIPS PUB) #38, "Guidelines
for Documentation of Computer Programs and Automated Data Systems," FIPS
PUB #64, "Guidelines for Documentation of Computer Programs and Automated
Data Systems for the Initiation Phase," and FHWA Documentation Guidelines
as specified in Chapter VII of the FHWA IRM Manual (copy attached).
- - All data and programs must be compatible with DOT's computer systems,
AMDAHL 580, or compatible with a computer system at a facility agreed upon
by the FHWA and the contractor.
- - To facilitate complete evaluation on the part of FHWA, a complete
documentation package, i.e., source programs, job control language set-ups,
test data, systems and programming documentation as well as operations and
users manuals, must be submitted to the Contracting Officer's Technical
Representative (COTR) for final review and acceptance. The programs
developed must be tested and debugged by the contractor for successful
operation before submission.
- - The programs must be acceptance tested on the DOT's computer system or on a
computer system at an agreed upon facility prior to acceptance by the COTR.
That is, the contractor must demonstrate that these programs can be
successfully compiled and executed, using test data. The results of this
test will be validated and reviewed for acceptance by the COTR.
B. Contracts for Microcomputer Systems
-----------------------------------
- - Any computer programs developed or modified for FHWA as a result of this
project must be deliverable items to FHWA.
<PAGE>
Page 2 of 9
- - If it is necessary to utilize a proprietary software package in this
project, this package must be readily available off-the-shelf and must run
on MS/DOS machines without any hardware or software modifications.
- - All computer systems/programs must be documented according to applicable
FIPS PUBS and the Documentation Guidelines contained in Chapter VII of the
FHWA IRM Manual.
- - Any programs developed must be acceptance tested on an FHWA microcomputer.
The results of this test will be validated and reviewed for acceptance by
the COTR.
C. All ADP Systems or Software Contracts
-------------------------------------
- - All data collected for FHWA as a result of this project must be deliverable
items to FHWA.
- - Punched cards must conform to the standards as specified in FIPS PUBS # 1,
13, 14, and 15, "Code for Information Interchange," "Rectangular Holes in
Twelve Row Punched Cards," "Hollerith Punched Card Code," and "Subsets of
the Standard Code for Information Interchange," respectively.
- - Magnetic tapes must conform to the standards as specified in FIPS PUBS
# 3 and 25, "Recorded Magnetic Tape for Information Interchange."
- - Analog data reported on magnetic tape shall either be capable of being
converted on FHWA's A/D conversion system or shall be converted to 9-track
digital magnetic tape or punched cards in accordance with the previously
mentioned FIPS PUBS.
- - NOTE: The Federal Technical Information Service Publications, FIPS PUBS,
----
are incorporated by reference and may be obtained upon request from the
address listed below:
National Technical Information Service
5285 Port Royal Road
Springfield, Virginia 22161
Telephone Number: (703) 487-4650
<PAGE>
Page 3 of 9
CHAPTER VII FHWA IRM MANUAL
DOCUMENTATION
FOR
MICROCOMPUTER APPLICATIONS
AND INFORMATION SYSTEM
<PAGE>
Page 4 of 9
DOCUMENTATION GUIDELINES
FOR MICROCOMPUTER APPLICATIONS
AND INFORMATION SYSTEM
Two types of documentation are required to document microcomputer applications
and information systems: a Users Guide and a System Maintenance Manual. The
basic purpose of a Users Guide is to provide enough information to permit use of
a system by someone unfamiliar with it. The purpose of a System Maintenance
Manual is to provide sufficient information to allow a programmer to correct any
problems that arise and to permit the program to be maintained and updated as
necessary. The following guidelines for preparing the Users Guide and System
Maintenance Manual are geared to large, complex, microcomputer systems that have
many users. For simpler systems with one or only a few users, it is sufficient
to provide enough documentation to meet the basic purpose of a user guide or
system maintenance manual.
There is an additional quick and easy way augment the documentation provided in
the Users Guide and the System Maintenance Manual: by using comments in the
source or program code. This addition to other documentation can be especially
helpful when added to the more limited documentation provided for simpler
applications.
<PAGE>
Page 5 of 9
A. USERS GUIDE
The information in the Users Guide is presented in four sections:
Section 1 Introduces the Users Guide and provides system background.
---------
Section 2 Provides a general description of the application.
---------
Section 3 Contains step-by-step operating procedures.
---------
Section 4 Describes each output report and provides a sample of each.
---------
Each of these four sections is described in more detail below.
NOTE: Data that are too numerous or too detailed to be presented in figures or
- -----
in narrative texts should be incorporated into appendices and referenced in the
relevant paragraphs of the text.
1. INTRODUCTION. The introductory section of the Users Guide should include
-------------
the following:
a. Purpose of the Users Guide. Use the following paragraph, modified as
---------------------------
necessary, to describe the purpose and format of the Users Guide:
The purpose of the Users Guide for (Project Name, Name of
Application, responsible organization, and location) is (1) to
describe the system so that potential users can determine its
applicability, and, (2) to provide users with all the information
necessary to operate and use the system efficiently and
effectively.
b. Background Information. This paragraph summarizes the relevant aspects
-----------------------
of the history and development of the system or application,
describing briefly:
(1) The basis for the system (e.g., policy, directive of management,
-----
IRM improvement project)
(2) The general nature and intended users of the system or
-------------------------------------
application (e.g., program management, technical application,
administrative application, or utility/other), and when it would
be appropriate to use the application.
(3) System owner (indicate the organization responsible for the
system).
(4) Standards used in system development, such as hardware, software,
--------------
telecommunications, etc.
(5) Previously published documentation on this or a related
----------------------------------
application.
<PAGE>
Page 6 of 9
c. Terms and Abbreviations. This Users Guide should be written in non-
-----------------------
technical language for use by non-ADP personnel. An appendix to the
Users Guide should define the technical terms, abbreviations, and
acronyms used. However, data element names and data codes should not
be included in the list of terms and abbreviations. Instead, include
them in Section 2.f. (see below).
d. Security. Discuss fully all security considerations, including
--------
provisions for applying the Privacy Act. Describe any measures
provided by the system to protect the database, such as User IDs, and
the security responsibilities imposed on the users. Also discuss any
measures for limiting entry to the system and access to the database.
2. DESCRIPTION OF THE APPLICATION. The second section of the Users Guide
------------------------------
should provide the following:
a. Description. Furnish a brief description of the objectives,
-----------
capabilities, and any special features or benefits of the system or
application.
b. Functions. Provide a narrative description of the functions performed
---------
by the system. Include a chart showing the data flow through the
system and the relationships of the operating functions to the
organizations that are the sources of the data input and recipients of
information outputs.
c. System Configuration. List or describe the hardware, software, and
--------------------
communications environment required by the system, including any
relevant options.
d. System Organization. Provide a general overview of the logical parts
-------------------
into which the system is divided, and the role of each part in the
total system process. System may be divided into processing modules or
subsystems, or, in the case of systems developed using a commercial
data base management software such as dBASE III+, they may be
organized according to pre-packaged programs or standard data base
files. In these cases also describe the substructure.
e. Performance. Briefly describe the overall performance capabilities and
-----------
limitations of the system and the quality assurance factors
incorporated to protect the integrity of the system software and data.
Where appropriate include:
(1) Quantitative information on inputs, outputs, response time,
processing times, data limitations and error rates.
(2) Qualitative information about flexibility and reliability.
<PAGE>
Page 7 of 9
f. Data Base. Describe the data files in the database that are
---------
referenced, supported, or kept current by the software. Describe each
data element in a data element dictionary and relate the data element
to the file(s) in which it is used. This information may be presented
in a figure(s) or in an appendix, or, for simple systems, within the
narrative text.
g. General Description of System Inputs and Outputs.
------------------------------------------------
(1) Inputs. Briefly describe the media and procedures used for
------
entering data into the system. Describe any user source
documents. Provide samples of source documents and the function
(menu or prompt) screens used for data entry in appendices and
reference them in the text.
(2) Outputs. Briefly describe the type of outputs produced by the
-------
system. Reference the reports provided in conjunction with
Section 4, Output Reports, below. Also reference any display
screen outputs that are included in an appendix.
3. SYSTEM OPERATION
----------------
Provide step-by-step instructions to permit the user to operate the system and
generate outputs. The structure of this section may vary, but it should start
with a paragraph on start up procedures and conclude with a paragraph on exiting
-------- -------
the system. In between, step-by-step instructions should be provided for each
- ----------
different procedure.
If the operating procedures are too complex to be presented in the narrative
text, or if the system contains more than one processing module or subsystem,
then the procedures should be placed in an appendix, with appropriate references
in the text. Also, refer to appendices containing sample input and output
screens, or any other data pertinent to the operation of the system.
These instructions should be as simple as possible. They should be test by
having at least one and preferably more employees who are not familiar with the
--- --------
application sit down with the draft instructions and try to run the program
without additional instruction.
4. OUTPUT REPORTS
--------------
Prepare a narrative description of each output report available to the user.
Include all the information necessary for the user, including the purpose,
distribution, security, and use of each report. Provide samples of each report
in an appendix referenced in this section. If only a few reports are involved,
the samples may be included in this section.
<PAGE>
Page 8 of 9
B. SYSTEM MAINTENANCE MANUAL
-------------------------
The information in the System Maintenance Manual is presented in three sections:
Section 1 Introduces the manual and provides background information on
---------
the system.
Section 2 Describes the environment in which the system operates.
---------
Section 3 Describes program and data characteristics in detail and
---------
lists the systems programs.
NOTE: Data that are too extensive or too detailed to be presented in figures or
- ----
in narrative are incorporated in appendices and referenced in the text.
1. INTRODUCTION. The introductory section of the System Maintenance Manual
------------
should include the following:
a. Purpose of the System Maintenance Manual. Use the following paragraph,
----------------------------------------
modified as appropriate, to describe the purpose of the System
Maintenance Manual:
The System Maintenance Manual for (project name, name of developing
organization), provides programmers with the information necessary to
maintain the system efficiently and effectively.
b. Project Description and References. Briefly describe the system
----------------------------------
including its objectives and uses. Specify the general nature of the
application, i.e., program management, technical application,
administrative application, or utility/other. Indicate the
organization responsible for the system, the projected user(s), and
when it would be appropriate to use the application.
Summarize the relevant aspects of the history and development of the
application. Attach the following documents or list them showing the
author or source, reference number, title, date, point of contact, and
security classification (if any):
(1) Users Guide.
(2) Project request and other pertinent documentation on the
project.
(3) Standards used in system development, such as hardware,
software, telecommunications, etc.
<PAGE>
Page 9 of 9
c. Terms and Abbreviations. The System Maintenance Manual may be
-----------------------
written in standard ADP technical language. List and define terms
unique to the system, as well as more general ADP terms that may be
subject to interpretation. Include abbreviations and acronyms in an
appendix and reference it in the text. Do not include data element
names and data codes in this list; instead include them in Section
3.b, data descriptions.
2. SYSTEM DESCRIPTION
------------------
a. System Application. Describe the objectives and organization of the
------------------
system and the functions performed. Provide a flowchart(s) showing the
interrelationships of the major components of the system.
b. System Environment. Describe the system hardware characteristics and
------------------
the software used to support the system.
c. Communications. Describe any communication facilities necessary or
--------------
available to operate or interface with the system.
d. Interfaces. Briefly describe any existing or potential hardware or
----------
software interfaces with other equipment.
e. Security. Discuss the security measures instituted to protect system
--------
software and data.
3. PROGRAM AND DATA DESCRIPTIONS
-----------------------------
a. Program Descriptions. Supply all the details and characteristics of
--------------------
each program and subroutine or equivalent needed by the programmer in
order to maintain the system. Identify (by title, tag, and version
number), list, and described each program. Include all appropriate
information on program functions, inputs and outputs, operations
performed, error conditions, and interfaces with other systems,
programs, and/or subroutines. Provide program listings of each program
and subroutine or the equivalent file listings in an appendix and
reference them in the text.
b. Data Description. Provide a complete description of the system's
----------------
database(s), including the database structure and the components of
each data element/field in the database. Indicate storage requirements
and limitations. Present record descriptions in a data element
dictionary or on record content sheets in an appendix and reference
them in the text.
<PAGE>
Rockwell International Corporation Enclosure (5) to
Transportation Systems 96ANA73808
Anaheim, California 92803 Page 1
COST PLUS FIXED FEE PROPOSAL FOR
NATIONAL ARCHITECTURE MAINTENANCE/SUPPORT
SUBCONTRACTING PLAN
<PAGE>
"INFORMATION CONTAINED HEREIN IS PRIVILEGED OR CONFIDENTIAL INFORMATION OF
ROCKWELL INTERNATIONAL CORPORATION"
ROCKWELL INTERNATIONAL CORPORATION
MASTER SMALL,
SMALL DISADVANTAGED AND WOMEN OWNED SMALL
BUSINESS SUBCONTRACTING PLAN
FISCAL YEAR 1996
1. SUBCONTRACTING PLAN ADMINISTRATION
----------------------------------
The Administrator of this plan is responsible for the development of
procedures to ensure that an effective Small, Small Disadvantaged, and
Women Owned Small Business (SB/SDB/WOSB) Program is implemented and
provides for utilization of historically black colleges and universities,
and minority institutions (HBCU's/MI's) and is in compliance with PL 95-
507, 99-661 and other applicable Federal regulations. The Administrator
will have individual discussions with each SB/SDB/WOSB and HBCU/MI supplier
when requested and will direct the supplier to procurement personnel
responsible for the supplier's products or services. The Administrator will
follow through to ensure that qualified or qualifiable suppliers are given
equal and fair consideration for opportunities to compete for subcontracts.
The Administrator will maintain liaison with cognizant Government
representatives concerned with SB/SDB/WOSB and HBCU/MI performance and
achievement of goals and report, as required, to company management and
Federal agencies. The individual responsible for administering this plan is
named in Exhibit "A" of this plan.
2. SUBCONTRACTING PLAN GOALS
-------------------------
a. Subcontracting plan goals are set forth in Paragraph 4 of Exhibit "A"
of this plan. Goals are expressed as a percent of total dollars planned
to be subcontracted to all suppliers.
b. Subcontracting plan goals are derived from a detailed examination of
the prime or subcontract requirements within Bills of Material,
Hardware Utilization Lists and other procurement records. This
examination includes an in-depth evaluation of the major item
procurement, complex articles and components to determine the
suitability for procurement from SB/SDB/WOSB and HBCU/MI concerns.
c. Paragraph 5 of Exhibit "A" describes the principal products and
services to be subcontracted under this plan and the planned
subcontracting for SB/SDB/WOSB and HBCU/MI concerns.
d. If any products or services have been identified as purchased for
common production, inventory accounts or similar common usage
accounts, an explanation will be included describing the method used to
apportion such amounts in establishing SB/SDB/WOSB and HBCU/MI goals.
e. Subcontracting plans for contracts containing options that meet the
required threshold of more than $500,000 ($1,000,000 for construction
of any public facility) will separately address goals for both the
basic contract term and each option.
<PAGE>
3. COMMERCIAL BUSINESSES - COMPANY-WIDE SUBCONTRACTING PLAN
--------------------------------------------------------
The approved Master Small Business Subcontracting Plan may be used by the
commercial businesses as a company-wide subcontracting plan for selling
commercial products to government agencies. When the Master Small Business
Subcontracting Plan is used as a company-wide subcontracting plan for
selling commercial products, the plan goals and achievement toward those
goals (SF 295) is due to the government 30 days after the close of
reporting period (September 30). The plan includes all subcontracting
activity during the government fiscal year. The reports reflect performance
within U.S. Possessions, Puerto Rico and the Trust Territory of the
Pacific Islands. The SF 295 lines 11A thru 15 reflect activity of the
entire business. Line 16 (Remarks section) specifies the total value of
government contracts and a proration of the government contracts total by
the percentages established for the program on lines 11A thru 15.
When the Master Small Business Subcontracting plan is used as a company-
wide subcontracting plan for selling of commercial products submittal of SF
294's is no longer necessary. However, the submittals of SF 295's are still
required, representing annual goals for the entire business and progress
made toward those goals. The Master Small Business Subcontracting Plan is
submitted as an attachment to the SF 295.
4. DESCRIPTION OF EFFORTS.
----------------------
a. Rockwell Corporate Policy No. G-0l states in part that "It also is the
policy of the Corporation that small business concerns, including those
owned and controlled by women and by socially and economically
disadvantaged individuals shall have the maximum practicable
opportunity to Participate in the competitive process for the
Corporation's purchase orders and subcontracts for materials, supplies
and services, consistent with the goals of the Corporation and its
customers." In furtherance of this policy, the Corporate Vice
President - Business Practices has been designated by the Corporation
to serve as Corporate Small Business Liaison Officer with
responsibility to ensure the establishment and implementation of
policies and procedures relating to the Corporation's SB/SDB/WOSB and
HBCU/MI Programs. The Corporate Small Business Programs Manager serves
as a focal point to provide technical guidance in carrying out these
policies and procedures. The senior Material executive at each location
has designated himself or another individual as the location
Administrator of SB/SDB/WOSB and HBCU/MI Programs.
b. Rockwell executive management provides SB/SDB/WOSB and HBCU/MI Program
support and direction via written policy and procedures, and reviews
statistical information to ensure program effectiveness. SB/SDB/WOSB
statistics are reported quarterly to Corporate and Division management
for review.
c. The SB/SDB/WOSB and HBCU/MI Program goals, objectives, outreach efforts
and related issues are conveyed in formal and informal training
sessions to personnel who are in a position to implement or influence
decisions concerning source selection. Individuals who have made
significant contributions toward the achievement of SB/SDB/WOSB and
HBCU/MI objectives are periodically recognized.
d. Rockwell will actively seek SB/SDB/WOSB firms and HBCU/MI's for
development as qualified suppliers and will, when appropriate, provide
specifications, drawings and other pertinent data to qualified or
qua1ifiable SB/SDB/WOSB firms and HBCU/MI's to aid them in preparing
their bids.
e. Rockwell will also make allowances consistent with contract
requirements and good procurement practices to permit delivery of
economical quantities within reasonable delivery schedules. When
mutually beneficial, Rockwell will provide management and technical
assistance to SB/SDB/WOSB firms and HBCU/MI's. The type of assistance
offered may inc1ude, but not be limited to, quality control guidance,
technical, manufacturing and financial consultation and assistance.
f. Commercial and Government source directories and lists are obtained
by Divisions and utilized in establishing potential bidders lists.
Rockwell representatives attend procurement conferences,
seminars, trade fairs, and other functions to seek out additional
qualified or qua1ifiable SB/SDB/WOSB firms and HBCU/MI's.
<PAGE>
8. RECORDS
-------
Rockwell maintains records which ensure implementation of an aggressive
and effective SB/SDB/WOSB program and provide management visibility of
program achievement. Examples of such records are:
a. SB/SDB/WOSB and HBCU/MI source list guides, and other data
identifying SB/SDB/WOSB and HBCU/MI concerns.
Primary Source Lists are:
1) Existing company source lists including Rockwell Supplier
database (RSDB) and Small Business Sourcing File (SBSF)
2) U.S. SBA - Procurement Automated Source System (PASS)*
3) National Minority Supplier Development Council (NMSDC) Source
Guides
4) Regional Minority Supplier Development Councils
5) Minority Business Development Agency Source Guides
6) Minority Trade Organizations and Business Associations
7) HBCU/MI directories, (e.g., NAFEO Capability Inventory of
HBCU's and MI's)
8) Regional Small Business Development Councils
*The PASS listing of suppliers is included in the Rockwell Supplier
Database for company-wide computer access to small businesses.
b. Organizations contacted for SB/SDB/WOSB and HBCU/MI sources.
c. On a contract-by-contract basis, records on all subcontract awards
over $100,000, indicating in each procurement case file (1) whether
SB/SDB/WOSB or HBCU/MI was solicited and if not, why not; and (2)
reasons for the failure of any responding SB/SDB/WOSB or HBCU/MI to
receive subcontract awards. Any Rockwell commercial business using
the Master Small, Small Disadvantaged and Women Owned Small
Business Subcontracting plan as a comprehensive subcontracting plan
is excluded from filing individual contract-by-contract or
subcontract-by-subcontract plans; and keeping records to support
award data submitted by the offeror to the government, including
the name, address, and business size of each contractor.
d. Records to support such efforts as:
1) Contacts with disadvantaged and small business trade
associations;
2) Contacts with business development organizations; and
3) Attendance at SB/SDB/WOSB procurement conferences and trade
fairs.
e. Records to support internal activities to guide and encourage
buyers such as:
1) Workshops, seminars, training programs, etc; and
2) Monitoring activities to evaluate compliance.
f. On a contract-by-contract basis, records to support award data
submitted to the government including name, address, and size
status of subcontractors (except those commercial businesses using
the Master Small, Small Disadvantaged and Women owned Small
Business Subcontracting plan as a company-wide subcontracting
plan).
<PAGE>
g. Rockwell's Make or Buy Committees meet as necessary to review and
rule on all Make or Buy decisions. The Division Administrator for
SB/SDB/WOSB Programs participates in the Committee meeting to
ensure that consideration is given to SB/SDB/WOSB firms and
HBCU/MI's. The senior Material executive serves as permanent
secretary of the Committee.
h. Rockwell will restrict subcontract awards for exclusive competition
among small business and/or small disadvantaged owned business
concerns, where practicable, to facilitate the accomplishment of
subcontracting plan goals.
5. CLAUSE FLOW DOWN
----------------
In compliance with its Government Prime Contracts, Rockwell will: (1)
include in each subcontract that offers further subcontracting opportunity
the FAR 52.219-8 clause that is entitled "Utilization of Small Business and
Small Disadvantaged Business Concerns," and (2) FAR 52.219-9 requires all
subcontractors (except Small Business concerns) who receive subcontracts in
excess of $500,000 ($1,000,000 for construction of any public facility) to
adopt a plan similar to Rockwell's subcontracting plan.
6. SUBCONTRACTOR PERFORMANCE
-------------------------
a. Rockwell agrees to secure subcontracting plans, similar to that agreed
to by Rockwell, from its subcontractors (except SB concerns) that
receive subcontracts awarded under a Government Prime contract in
excess of $500,000 ($1,000,000 for construction of any public
facility). Plans so received will be reviewed by the SB/SDB/WOSB
Administrator and the cognizant buyer for compliance with applicable
regulations, and will be kept on file in the case file or in the
location SB/SDB/WOSB Administrator's office.
b. Subcontractors shall be required to update a subcontracting plan by
submission of a revised plan whenever there are changes to an order in
excess of $500,000 ($1,000,000 for construction of any public
facility).
c. Rockwell will provide notice to subcontractors concerning penalties and
remedies for misrepresentations of business status as small business
or small disadvantaged business for the purpose of obtaining a
subcontract in all solicitations exceeding $10,000 for requirements
issued under government contracts.
7. REPORTS
-------
Rockwell will submit "Subcontracting Report for Individual Contracts"
Standard Form 294, and "Summary Subcontract Report" Standard Form 295, in
accordance with the instructions therein. In addition, Rockwell will ensure
that its subcontractors agree to submit said forms. Rockwell will cooperate
in any studies or surveys as may be required. An SF 294 is not required of
a Rockwell commercial business using the Master Small Business
Subcontracting Plan as a company-wide subcontracting plan for selling of
commercial products to government. However, the submittal of Standard Form
295 is required annually, reflecting the businesses progress toward their
goals as established in Exhibit "A", of the Master Small Business
Subcontracting Plan (submitted as an attachment to the SF 295).
<PAGE>
EXHIBIT "A"
"INFORMATION CONTAINED HEREIN IS PRIVILEGED OR CONFIDENTIAL INFORMATION
OF ROCKWELL INTERNATIONAL CORPORATION."
ROCKWELL INTERNATIONAL CORPORATION
Autonetics & Missile Systems Division
SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL BUSINESS
SUBCONTRACTING PLAN GOALS
1. REFERENCE: MASTER SMALL, SMALL DISADVANTAGED AND WOMEN-
OWNED SMALL BUSINESS SUBCONTRACTING PLAN FISCAL YEAR 1996
2. PRIME OR SUBCONTRACT NUMBER:
REFERENCE: Deal No. AN96-5459
DESCRIPTION: Federal Highways ADM RFP DTFH6I-96-R-00082
3. INDIVIDUAL RESPONSIBLE FOR ADMINISTERING PLAN: A. J. Long
TELEPHONE NUMBER: (714) 762-2875.
4. SUBCONTRACTING PLAN GOALS
Rockwell has established the following goals for awards to
SB/SDB/WOSB/HBCU/MI'S:
Total to be subcontracted $ -0- 0%
------- -----
a. To large business firms $ -0- 0%
------- -----
b. To small business firms $ -0- 0%
------- -----
1) To nondisadvantaged firms $ -0- * 0%
------- -----
2) To disadvantaged firms $ -0- * 0%
------- -----
3) To Women owned small business $ -0- * 0%
------- -----
c. To HBCU/MI's $ 0 0
(*This amount included in b above) ------- -----
d. Indirect purchases:
(X) Are not included in this plan
( ) Are included in this plan and were calculated as follows:
<PAGE>
V. PRINCIPAL PRODUCTS AND SERVICE
The principal products and services to be subcontracted under the
referenced prime contract or subcontract, and those areas where Rockwell
plans to utilize SB/SDB/WOSB firms are described below:
WOMEN OWNED
SMALL --------------
PRODUCT SMALL DISADVANTAGED SMALL BUSINESS LARGE
------- ----- ------------- -------------- -----
NO MATERIAL
NOTE: Due to the nature of proposed material, there are no opportunities for
WOSB or SDB.
ROCKWELL INTERNATIONAL CORPORATION
Autonetics & Missile Systems Division
/s/ A.J. Long
A.J. Long
Small Business Programs Administrator
Small Business Administration
Date: June 27, 1996
This Particular Effort Does Not Require the Involvement of Higher Educational
Institutions, Ref. HBCU/MI
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Autonetics & Missile Systems Division
/s/ J.H. Mihelich
NAME: ----------------------------
J.H. Mihelich
TITLE:Deputy Director. Material
----------------------------
DATE: Nov. 7, 1995
----------------------------
APPROVED:
/s/ William A. Detki
NAME: ----------------------------
W.A. Detki
TITLE: Divisional Administrative
----------------------------
Contracting Officer
DATE: Nov. 7, 1995
----------------------------
<PAGE>
Attachment No.5
Rates and Factors DTFH61-96-C-00103
Direct Labor
<TABLE>
<CAPTION>
Base Base Base Option Option Option
Base Base Year Year 1 Year 2 Year 1 Year 2 Year 3
Rate Slope Mo Midpoint Rate Rate Rate Rate Rate
---- ----- -- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Program Manager-Offsite 26.9 0.82 Jan-96 Feb-97 27.86 28.68 29.50 30.32 31.14
Program Manager-Onsite 34.34 0.94 Jan-96 Feb-97 35.44 36.38 37.32 38.26 39.20
Engineer - MTS 2 20.662 0.81 Jun-96 Feb-97 21.27 22.08 22.89 23.70 24.51
Engineer - MTS 3 24.104 0.81 Jun-96 Feb-97 24.71 25.52 26.33 27.14 27.95
Engineer - MTS 4 27.986 0.81 Jun-96 Feb-97 28.59 29.40 30.21 31.02 31.83
Engineer - MTS 5 32.69 0.81 Jun-96 Feb-97 33.30 34.11 34.92 35.73 36.54
Engineer - MTS 6 38.879 0.81 Jun-96 Feb-97 39.49 40.30 41.11 41.92 42.73
Engineer - MTS 7 45.901 0.81 Jun-96 Feb-97 46.51 47.32 48.13 48.94 49.75
Administrative Support 23.05 0.59 Jan-96 Feb-97 23.74 24.33 24.92 25.51 26.10
</TABLE>
Composite Engineering Rate Calculation
- --------------------------------------
<TABLE>
<CAPTION>
Base Base Base Base Option Option Option Option Option Option
Year 1 Year 1 Year 2 Year 2 Year 1 Year 1 Year 2 Year 2 Year 3 Year 3
Rate Comp Rate Comp Rate Comp Rate Comp Rate Comp
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Systems Eng MTS 2 0% 21.270 0.000 22.080 0.000 22.890 0.000 23.700 0.000 24.510 0.000
MTS 3 0% 24.710 0.000 25.520 0.000 26.330 0.000 27.140 0.000 27.950 0.000
MTS 4 35% 28.590 10.007 29.400 10.290 30.210 10.574 31.020 10.857 31.830 11.141
MTS 5 35% 33.300 11.655 34.110 11.939 34.920 12.222 35.730 12.506 36.540 12.789
MTS 6 5% 39.490 1.975 40.300 2.015 41.110 2.056 41.920 2.096 42.730 2.137
MTS 7 25% 46.510 11.628 47.320 11.830 48.130 12.033 48.940 12.235 49.750 12.438
------ ------ ------ ------ ------
100% 35.265 36.074 36.885 37.694 38.505
Software Eng MTS 2 25% 21.270 5.318 22.080 5.520 22.890 5.723 23.700 5.925 24.510 6.128
MTS 3 30% 24.710 7.413 25.520 7.656 26.330 7.899 27.140 8.142 27.950 8.385
MTS 4 25% 28.590 7.148 29.400 7.350 30.210 7.553 31.020 7.755 31.830 7.958
MTS 5 15% 33.300 4.995 34.110 5.117 34.920 5.238 35.730 5.360 36.540 5.481
MTS 6 5% 39.490 1.975 40.300 2.015 41.110 2.056 41.920 2.096 42.730 2.137
MTS 7 0% 46.510 0.000 47.320 0.000 48.130 0.000 48.940 0.000 49.750 0.000
----- ----- ----- ----- -----
100% 26.849 27.658 28.469 29.278 30.089
Communications Eng MTS 2 0% 21.270 0.000 22.080 0.000 22.890 0.000 23.700 0.000 24.510 0.000
MTS 3 0% 24.710 0.000 25.520 0.000 26.330 0.000 27.140 0.000 27.950 0.000
MTS 4 50% 28.590 14.295 29.400 14.700 30.210 15.105 31.020 15.510 31.830 15.915
MTS 5 50% 33.300 16.650 34.110 17.055 34.920 17.460 35.730 17.865 36.540 18.270
MTS 6 0% 39.490 0.000 40.300 0.000 41.110 0.000 41.920 0.000 42.730 0.000
MTS 7 0% 46.510 0.000 47.320 0.000 48.130 0.000 48.940 0.000 49.750 0.000
----- ----- ----- ----- -----
100% 30.945 31.755 32.565 33.375 34.185
Transportation Eng MTS 2 0% 21.270 0.000 22.080 0.000 22.890 0.000 23.700 0.000 24.510 0.000
MTS 3 10% 24.710 2.471 25.520 2.552 26.330 2.633 27.140 2.714 27.950 2.795
MTS 4 30% 28.590 8.577 29.400 8.820 30.210 9.063 31.020 9.306 31.830 9.549
MTS 5 30% 33.300 9.990 34.110 10.233 34.920 10.476 35.730 10.719 36.540 10.962
MTS 6 20% 39.490 7.898 40.300 8.060 41.110 8.222 41.920 8.384 42.730 8.546
MTS 7 10% 46.510 4.651 47.320 4.732 48.130 4.813 48.940 4.894 49.750 4.975
----- ----- ----- ----- -----
100% 33.587 34.397 35.207 36.017 36.827
</TABLE>
Use or disclosure of data contained on this page is subject to the restrictions
on the title page of this proposal.
<PAGE>
Attachment No. 6
DTFH61-96-C-00103
Rates and Factors
Overhead Rates
Fiscal Year Period October - September
<TABLE>
<CAPTION>
Indirect Rates Cost of Money
-------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Base Year 1
- -----------
Transportation Offsite FY96 17% 27.24 4.63 0 0.000000
FY97 83% 27.33 22.68 0 0.000000
------ --------
27.31 0.000000
Eng FY96 17% 39.43 6.70 0.883638 0.150218
FY97 83% 40.53 33.64 1.127692 0.935984
------ --------
40.34 1.086202
G&A FY96 17% 22.7% 3.860% 0.4227% 0.0719%
FY97 83% 19.5% 16.190% 0.4185% 0.3474%
------ --------
20.050% 0.4193%
Base Year 2
- -----------
Transportation Offsite FY97 17% 27.33 4.65 0 0.000000
FY98 83% 27.50 22.83 0 0.000000
------ --------
27.48 0.000000
Eng FY97 17% 40.53 6.89 1.127692 0.191708
FY98 83% 40.50 33.62 1.175588 0.975738
------ --------
40.51 1.167446
FY97 17% 19.5% 3.320% 0.4185% 0.0711%
FY98 83% 18.6% 15.440% 0.4144% 0.3440%
------ --------
18.760% 0.4151%
Option Year 1
- -------------
Transportation Offsite FY98 17% 27.50 4.68 0 0.000000
FY99 83% 28.44 23.61 0 0.000000
------ --------
28.29 0.000000
Eng FY98 17% 40.50 6.89 1.175588 0.199850
FY99 83% 40.50 33.61 1.175588 0.975738
------ --------
40.50 1.175588
G&A FY98 17% 18.6% 3.160% 0.4144% 0.0704%
FY99 83% 18.6% 15.440% 0.4144% 0.3440%
------ --------
18.600% 0.4144%
Option Year 2
- -------------
Transportation Offsite FY99 17% 28.44 4.83 0 0.000000
FY00 83% 29.43 24.43 0 0.000000
------ --------
29.26 0.000000
Eng FY99 17% 40.50 6.89 1.175588 0.199850
FY00 83% 40.50 33.61 1.175588 0.975738
------ --------
40.50 1.175588
G&A FY99 17% 18.6% 3.160% 0.4144% 0.0704%
FY00 83% 18.6% 15.440% 0.4144% 0.3440%
------ --------
18.600% 0.4144%
</TABLE>
Use or disclosure of data contained on this page is subject to the restrictions
on the title page of this proposal.
<PAGE>
Attachment No. 6
DTFH61-96-C-00103
Rates and Factors
Overhead Rates
Fiscal Year Period October - September
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Option Year 3
- -------------
Transportation Offsite FY00 17% 29.43 5.00 0 0.000000
FY01 83% 30.49 25.31 0 0.000000
------ --------
30.31 0.000000
Eng FY00 17% 40.50 6.89 1.175588 0.199850
FY01 83% 40.50 33.61 1.175588 0.975738
------ --------
40.50 1.175588
G&A FY00 17% 18.6% 3.160% 0.4144% 0.0704%
FY01 83% 18.6% 15.440% 0.4144% 0.3440%
------ --------
18.600% 0.4144%
</TABLE>
Use or disclosure of data contained on this page is subject to the restrictions
on the title page of this proposal.
<PAGE>
DIFH66-96-C-00103
Attachment 7
CONFLICT OF INTEREST AGREEMENT
Contract No. XXXXXX
In accordance with the Federal Acquisition Regulation 9.505-3, the Federal
Highway Administration (FHWA) is requiring the contractor to adhere to the
following safeguards in order to ensure objectivity and to protect the
Government's interests.
The contractor shall comply with the attached Policy Letter 9-1, "COnflict
of Interest Policies Applicable to Consultants." Pursuant to the policy 1etter,
the FHWA is requiring that the contractor provide certified information
describing the nature and extent of any conflicts of interest that may exist
with respect to this contract.
The contractor shall submit a complete and accurate certificate as required
under the above policy letter. This certification shall become part of this
conflict of interest agreement.
All questions, disclosures, or other communications regarding this
obligation shall be addressed to the Contracting Officer.
In the event of a breach of this conflict of interest obligation, the FHWA
shall be entitled to all avai1ab1e legal remedies, including termination of this
contract, suspension, debarment, as well as penalties associated with false
certifications or such other provisions provided for by law or regulation.
Contractor: ______________________________
Contractor's Signature: ______________________________
Program Manager: ______________________________
Key Personnel: ______________________________
Attachment (Policy Letter 89-l)
<PAGE>
54 FR 51805
Allan V. Burman,
Administrator Designate.
December 8, 1989.
Policy Letter 89-1
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Conflict of Interest Policies Applicable to Consultants
1. Purpose. The purpose of this Policy Letter is (a) to establish policy
re1ating to conflict of interest standards for persons who provide consu1ting
services to the government and to its contractors and (b) to provide procedures
to promote compliance with those standards.
2. Authority. This Policy Letter is issued pursuant to section 8141 of the
1989 Department of Defense Appropriation Act, Pub. L. l00-463, 102 Stat. 227
(1988) (hereinafter referred to as "the Act") and section 6 of the Office of
Federal Procurement Policy (OFPP) Act, codified at 41 U.S.C. section 404.
3. Background. This Policy Letter is intended to implement section 8141 of
the Act. That section provides, in part, as follows:
"(a) Not later than 90 days after the date of enactment of this Act, the
Administrator of the Office of Federal Procurement Policy shall issue a policy
and not later than 180 days thereafter government-wide regulations shall be
issued under the Office of Federal Procurement Policy Act which set forth:
"(1) conflict of interest standards for persons who provide consulting
services described in subsection (b); and
"(2) procedures, including such registration, certification, and enforcement
requirements as may be appropriate, to promote compliance with such standards
"(b) The regulations required by subsection (a) shall apply to the
following types of consulting services:
"(1) advisory and assistance services provided to the government to the
extent necessary to identify and evaluate the potential for conflicts of
interest that could be prejudicial to the interests of the United States;
"(2) services related to support of the preparation or submission of bids
proposals for federa1 contracts to the extent that inclusion of such services
such regulations is necessary to identify and evaluate the potential for
conflicts of interest that could be prejudicial to the interests of the United
States; and
"(3) such other services related to federal contracts as may be specified
the regulations prescribed under subsection (a) to the extent necessary to
<PAGE>
54 FR 51805
identify and evaluate the potential for conflicts of interest that could be
prejudicial to the interests of the United States.
4. Definitions.
(a) "Advisory and assistance services" means advisory and assistance serve
as defined in OMB Circular No. A-120, "Guide1ines for the Use of Advisory and
Assistance Services," dated January 4, 1988, and any amendments thereto. Only
those compensated services provided pursuant to nonpersonal service contracts
are covered by this Policy Letter.
(1) Such services include
(i) services provided by individual-experts and consultants;
(ii) management and professional Support services;
(iii) the conduct and preparation of studies, analyses, and evaluations; a
(iv) engineering and technical services.
(2) Exclusions. In addition to the exclusion in OMB Circular A-120, the
following services are excluded from the coverage of this Policy Letter:
(i) routine engineering and technical services (such as installation,
operation, or maintenance of system, equipment, software, components, or
facilities):
(ii) routine legal, actuarial, auditing, and accounting services; and
(iii) training services.
(b) "Agency" means an executive department specified in section 10l of
title 5, United States Code; a military department specified in section 102 of
such title and independent establishment as defined in section 104(1) of such
title and a wholly owned government corporation fully subject to the provisions
of chapter 91 of title 31, United States Code.
(c) "Conflict of interest means that condition or circumstance wherein a
person is unable or is potentially unable to render impartial assistance or
advice to the government because of other activities or relationships with other
persons, or wherein a person has an unfair competitive advantage.
The critical element in this definition is the existence of a relationship
or potential re1ationship that might cause an offeror, if awarded a contract, to
make recommnendations or interpretations that, at the expense of the
government, favor the interests of the offeror directly, or those of persons
or entities presently or potentially able to confer a benefit on the offeror.
Types of potential conflicts include, but are not limited to, the
following:
(1) evaluating a contractor's, or potential contractor's products or
services, where the evaluator is or was substantially involved in the
development or marketing of those products or services;
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54 FR 51805
(2) serving as a consultant to a contractor seeking the award of a contract
(or seeking to be awarded the contract directly) after preparing or assisting
substantial1y in the preparation of specifications, or other significant
contract provisions or requirements, to be used in the same acquisition;
(3) serving as a consultant to a contractor seeking the award of a contract
(or seeking to be awarded the contract directly) after having access to source
selection or proprietary information not available to other persons competing
for the contract; and
(4) providing advice and assistance to an agency where such advice and
assistance could benefit the contractor's other clients.
(d) An "unfair competitive advantage" exists, in addition to the situation
addressed in FAR Subpart 9.5, where a contractor competing for award of any
federal contract possesses
(1) proprietary information that was obtained from a government official
without proper authorization, or
(2) source selection information that is relevant to the contract but is
not available to all competitors, and such information would assist that
contractor in obtaining the contract.
(e) "Marketing Consu1tant" means any independent contractor who furnishes
advice, information, direction, or assistance to any other contractor in support
of the preparation or submission of a bid or proposal for a government contract
by such contractor. An independent contractor is not a marketing consultant if
he or she would be rendering advisory and assistance services pursuant to any
the exclusions in paragraph 4(a) (2), above.
5. Exemptions. The following may be exempted from the application of
policy and regulations issued under this Policy Letter:
(a) Inte11igence activities. Services rendered in connection with
intelligence activities as defined in section 3.4(e) of Executive Order 12333 a
comparable definitional section in any successor order, or in connection with
special access programs; and
(b) Public interest considerations. Specific contract actions where the
head of an agency grants a waiver on the basis of the public interest.
6. Policy. Agencies must comply with the following po1icies:
(a) Responsibility for identifying and preventing potential conflicts of
interest in government contracts is shared among the government contracting
officer, the requester of the service, and other government officials with
access to applicable information. The responsibility for deciding whether to
award a particular contract, however, rests with the government contracting
officer;
(b) Prior to contract award, contracting officers shall take appropriate
steps to identify and evaluate the potential for conflicts of interest that
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54 FR 51805
could be prejudicial to the interests of the United States with regard to
persons who provide advisory and assistance services to the government, and to
take steps to avoid or mitigate any conf1icts believed to exist; similar action
will be taken with regard to any unfair competitive advantage that marketing
consultants provide to contractors;
(c) Federal contracting officers shall require, for contrats covered by the
Policy Letter, that the apparent successful offeror provide certified
information describing the nature and extent of any conflicts of interest that
may exist with respect to the proposed award. Marketing consultants shall also
be required to certify that they have provided no information to the contractor
employing them that would give the contractor an unfair competitive advantage;
(d) Federal procurement officials shall encourage contractors to consider
carefully the potential for conflicts of interest in all of their activities
associated with federal procurement, and shall be sensitive to the appearance of
conflicts of interest in any contracting actions; and
(e) Federal procurement regulations that implement this policy and address
conflicts of interest shall take into account the need to (1) encourage
participation of highly qualified persons and firms in federal procurement
programs; (2) enhance and safeguard the Nation's industrial base; (3) promote
full and open competition in the award of government contracts; and (4) improve
the overall effectiveness and efficiency of the government's procurement
programs.
7. Responsibilities of the Defense Acquisition Regulatory Council and
Civilian Agency Acquisition Council. The Councils shall promulgate the
government-wide regulations specified in section 8141 of the Act within 180
days of the effective date of this Policy Letter. Such regulations shall
conform to the policies established herein. Only solicitations issued after the
effective date of the regulations are affected by these policies.
8. Responsiblities of prime contractors employing marketing consultants.
An individual or firm that employs, retains, or engages one or more marketing
consultants in connection with a federal acquisition must submit to the.
contracting officer, with respect to each marketing consultant, the certificate
described below, if the individual or firm is notified that it is the apparent
successful offeror.
(a) Certificate required. No certificates are required for contracts of
$200,000 or less. For contracts over $200,000, the contractor must file the
certificate described below with respect to each marketing consultant, or
provide a written statement to the contracting officer giving the reasons why
such certification can be made. The reasons given must be satisfactory to the
contracting officer as to why such certificate cannot be made.
(b) Contents of certificate. The certificate to be submitted must contain
the following
(1) the name of the agency and the number of the solicitation in question,
(2) the name, address, telephone number, and federal taxpayer
identification number of the marketing consultant;
<PAGE>
(3) the name, address, and telephone number of a responsible officer or
employee of the marketing consultant who has personal knowledge of the market
consultant's involvement in the contract;
(4) a description of the nature of the services rendered by or to be rend
by each marketing consultant;
(5) based on information provided to the contractor by the marketing
consultant, if any marketing consultant is rendering or, in the 12 months
preceding the date of the certificate, has rendered services respecting the
subject matter of the instant solicitation, or directly relating to such sub
matter, to the government or any other client (including any foreign government
or person), the name, address, and telephone number of the client or clients,
and the name of a responsible officer or employee of the marketing consultant
who is knowledgeable about, the services provided to such client(s), and a
description of the nature of the services rendered to such client(s);
(6) a statement that the person who signs to certificate for the prime
contractor has informed the marketing consultant of the existence of this Policy
Letter and associated regulations; and
(7) the signature, name, title, employer's name, address, and telephone
number of the persons who signed the certificates for both the prime contract
and the marketing consultant.
(c) Marketing consultant certificate. In addition, the prime contractor
will forward to the contracting officer a certificate addressed to the
government signed by the marketing consultant that (i) such marketing consultant
has been told of the existence of the regulations implementing this Policy
Letter and (ii) such marketing consultant has made inquiry, and to the best of
his or her knowledge and belief, he or she has provided no unfair competitive
advantage to the prime contractor with respect to the services rendered or to be
rendered connection with the solicitation, or that any unfair competitive
advantage that to the best of his or her knowledge and belief, does or may
exist, has been disclosed to the prime contractor. Prime contractors may request
such a certificate from a marketing consultant, or make inquiries of any
marketing consultant, at any time they negotiate for the marketing consultant's
services or afterwards, until an award is made, to satisfy themselves that the
marketing consultant has provided no unfair competitive advantage.
9. Responsibilities of contractors providing advisory and assistance
services. Those individuals or firms providing advisory and assistance service
to the government must submit to the contracting officer the certificate or
certificates described below if the individual or firm is notified that it is
the apparent successful offeror.
(a) Certificate required. No certificates are required for contracts of
$25,000 or less. For contracts over $25,000, the certificate described in (b),
below, must be filed or a written statement provided to the contracting office
giving the reasons that no such certification can be made. The reasons given
must be satisfactory to the contracting officer as to why such certificate
cannot be made.
(b) Contents of the certificate. The certificate must contain the
following
<PAGE>
(1) name of the agency and the number of the solicitation in question;
(2) the name, address, telephone number, and federal taxpayer
identification number of the apparent successful offeror,
(3) a description of the nature of the services rendered by or to be
rendered on the instant contract;
(4) if, in the 12 months preceding the date of the certification, Service
were rendered to the government or any other client (including a foreign
government or person) respecting the same subject matter, of the instant
solicitation, or directly relating to such subject matter, the name, address
telephone number of the client or client(s), a description of the services
rendered to the previous client(s), and the name of a responsible officer or
employee of the offeror who is knowledgeable about the services rendered to
client. The agency and contract number under which the services were rendered
must also be included, if applicable;
(5) a statement that the person who signs the certificate has made inquiry
and that, to the best of his or her knowledge and belief, (a) no actual or
potential conflict of interest or unfair competitive advantage exists with
respect to the advisory and assistance services to be provided in connection
with the instant contract, or (b) that any actual or potential conf1ict of
interest or unfair competitive advantage that does or may exist with respect the
contract in question has been communicated in writing to the contracting officer
or his or her representative; and
(6) the signature, name, employer's name, address, and telephone number of
the person who signed the certificate.
10. Responsibilities of Executive Branch Agencies.
(a) Maintenance of data files. Each agency must maintain the certificates
described by this Policy Letter in the contract file. Agencies may extract and
categorize such information from these files and consolidate them in a central
registry, as appropriate, subject only to the requirement to safeguard
information (1) as requested by the submitter of the certificate as
confidential, sensitive, privileged, proprietary, or otherwise not re1easable,
or (2) based on independent agency determinations not to release the information
pursuant to the Freedom of Information Act, or other authority.
(b) Avai1ability of data. Certificates must be made available to
department or agency contracting officers and their superiors, advisors, or
their designees, as well as to inspectors general and government audit
officials.
(c) Nondisclosure of information. Agencies and departments must protect,
to the fullest extent permitted by law, all sensitive business and other
information submitted pursuant to any policy devised or regulation promulgated
pursuant to the Act. Contractors and consultants must take care to identify what
information is not releasable. Opportunity to so mark such information shall be
afforded to the submitter of the information at any time.
(d) Preaward conflict of interest analysis; special contract provisions.
Agency officials must, before an award of a contract is made, determine whether
a conflict of interest exists with regard to those providing advisory and
<PAGE>
Attachment No. 8
DTFH61-96-C-00103
AGREEMENT NOT TO DISCLOSE CONFIDENTIAL INFORMATION
CONTRACT NO. XXXXXX
Pursuant to Transportation Acquisition Regulation clause 1252.242-72,
the contractor shall not publish, permit to be published or distribute for
public consumption, any information, oral or written concerning the results or
conclusions made pursuant to the performance of this contract, without the prior
written consent of the Contracting Officer.
During the course of this contract, the contractor will be given access
to nonpublic, proprietary or confidential information for purposes of assisting
the Department of Transportation. The contractor shall not disclose any
information or data concerning information obtained during the performance of
this contract, with out the prior written consent of the Contracting Officer.
This obligation shall not apply to information which:
(a) is or becomes publicly known through no wrongful act on the
contractor's part;
(b) is, at the time of disclosure in performance of this contract,
already known to the contractor without restriction on
disclosure;
(c) is or subsequently becomes the rightfully and without breach
of this obligation, in the contractor's possession without any
obligation restricting disclosure;
(d) is independently developed by the contractor without breath
of this obligation;
(e) is furnished to a third party by the FHWA without a similar
restriction on the third party's rights; or
(f) is explicitly approved for released by written authorization
of the Contracting Officer.
All requests for authorization or other communications regarding this obligation
shall be addressed to the Federal Highway Administration (FHWA) Contracting
Officer's Technical Representative.
In the event of a breach of this obligation not to disclose confidential
information, the FHWA shall be entitled to all available legal remedies,
including an injunction by any competent court to enjoin and restrain the
unauthorized disclosure of such information.
Contractor: _____________________________________
Contractor's Signature: _____________________________________
Program Manager: _____________________________________
Key Personnel: _____________________________________
<PAGE>
54 FR 51805
assistance services to the government, or whether an unfair competitive
advantage exists with respect to services provided by a marketing consultant
connection with a particular contract action. In performing this function, may
use (a) information from any certificates or statements previously submit or
submitted with the bid or offer in question and (b) any other substantive
information available to them. The contracting officer shall award the contract
to the apparent successful offeror unless a conflict of interest or unfair
competitive advantage is believed to exist that cannot be avoided or mitigated.
Finally, before the contracting officer decides not to award a contract based on
conflict of interest considerations, he or she shall notify the prime
contractor, or the contractor rendering advisory and assistance services, and
provide a reasonable opportunity to respond. Where the contracting officer that
it is in the best interest of the United States to award the contract
notwithstanding such conflict or unfair competitive advantage, the contract
should be documented to reflect the basis for that finding.
(e) Other information. This Policy Letter does not prohibit contracting
officers from requesting other information relevant to the goals of this
Policy Letter. In addition, in special cases, and if approved by the head of the
contracting activity, the contracting officer may request that the certificate
described above, be made with respect to a period as long as, but no longer
than, 36 months preceding the date of the certificate.
11. Responsibilities of the Federal Acquisition Regulatory Council. All
government-wide regulations to be issued pursuant to section 8141 of the Act
will be provided to the Federal Acquisition Regulatory Council for review not
less than thirty days prior to publication in the Federal Register for public
comment.
12. Remedies. Persons required to certify in accordance with this Policy
Letter's associated regulations but who fail to do so may be determined to be
ineligible for award of a contract. Misrepresentation of any fact may result in
suspension or debarment, as well as penalties associated with false
certifications or such others provisions provided for by law or regulation.
13. Information contact. For information regarding this Policy Letter
please contact Richard A. Ong Deputy Associate Administrator, the Office of
Federal Procurement Policy, 725 17th Street, N.W., Washington, DC 20503.
Telephone (202) 395-6810.
14. Effective date. The effective date of this Policy Letter is 30 days
from the date of issuance on the first page.
15. Sunset review date. This Policy Letter will be reviewed three
years from the date of issuance and every three years thereafter to ensure
accuracy and relevancy. This review must include a reexamination of the
threshold amounts in the light of any changes made in the small purchase amount
provided for in FAP. Part 13.
Allan V. Burman,
Administrator Designate.
<PAGE>
EXHIBIT 10.13
MDOT NO. 99-0355
AGENDA: CAB
MICHIGAN DEPARTMENT OF TRANSPORTATION
ODETICS ITS, INCORPORATED
CONTRACT FOR MAINTENANCE SERVICES
THIS CONTRACT, made and entered into this date of JUN 17 1999, by and
between Odetics ITS, Incorporated, of 1515 South Manchester Avenue, Anaheim,
California 92802-2908, hereinafter referred to as the "CONTRACTOR," and the
Michigan Department of Transportation, hereinafter referred to as the
"DEPARTMENT."
WITNESSETH:
WHEREAS, the DEPARTMENT desires to engage the services of the CONTRACTOR to
provide maintenance of the Intelligent Transportation Systems (ITS) in Detroit,
Michigan.
NOW, THEREFORE, IT IS HEREBY AGREED by and between the parties hereto that:
THE CONTRACTOR WILL:
1. Perform the work in Items 1 through 8 below, as set forth in Exhibit A
(pages 1 through 42), dated May 7, 1999, dated May 7, 1999, attached hereto and
made a part hereof, said work performed by the CONTRACTOR to be hereinafter
referred to as the "SERVICES."
ITEM 1 - Provide all personnel, parts, test equipment, and diagnostics
for remedial and preventative maintenance of the MDOT ATMS/ATIS
during the principal period of maintenance for the period of June 17,
1999, through October 16, 2000.
ITEM 2 - Provide on-call services outside of the principal period of
maintenance for the period of June 17, 1999, through October 16, 2000.
ITEM 3 - Provide operations support at the MITSC, including system
back-ups, adding or deleting equipment to the system, adding or
deleting user IDs, restoring the system in the event of crashes,
defragmenting disks, training, and database management.
ITEM 4 - Provide coordination with other MDOT contractors and staking
for the protection of all sites containing a cabinet, loops, CCTV pole,
CMS or other device.
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<PAGE>
This effort will be provided when the CONTRACTOR is notified by MDOT of
construction planned near one of the project sites in order to avoid
damage to ATMS/ATIS underground facilities.
Provide coordination with other MDOT contractors and staking of cable
plant that is buried along MDOT right-of-way as part of the system, but
not associated with a single site.
ITEM 5 - Provide out-of-scope repair services for repair-replacement of
equipment/facilities damaged or destroyed by third parties, acts of
God, or pavement deterioration on a time and materials basis.
ITEM 6 - Provide personnel, parts test equipment, and diagnostics to
repair and maintain the legacy system during PPM on a time and
materials basis.
ITEM 7 - Provide on-call services for maintenance of the legacy system
outside the principal period of maintenance.
ITEM 8 - Provide engineering support services, including the provision
of engineering studies, specifications, and system enhancements, as
requested, on a time and materials basis.
2. Submit written progress reports to the DEPARTMENT monthly, as set forth
in Exhibit A (pages 1 through 42), dated May 7, 1999, attached hereto and made a
part hereof, and otherwise as requested.
3. Submit billings to the DEPARTMENT for Items 1 through 8, as set forth
below and in Section 8, not to exceed a total of Four Million Thirty-One
Thousand Dollars ($4,031,000.00). Budget amounts listed below for Items 2
through 8 maybe reallocated from one item to another upon written authorization
by the DEPARTMENT.
ITEM 1 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for a
monthly lump sum amount of $158,187.50 less available credit, if any,
from the previous month. Available credit shall be calculated as set
forth in Exhibit A, pages 1 through 42, dated May 7, 1999. The total
lump sum amount for Item 1 shall be $2,531,000.00 less sum of
available credits.
ITEM 2 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for on-call services outside of the principal
period of maintenance at a fixed labor rate of $125.00 per hour. The
budget for Item 2 is $95,000.00.
2
<PAGE>
ITEM 3 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for operations support at the MITSC at a fixed
labor rate of $105.00 per hour. The budget for Item 3 is $30,000.00.
ITEM 4 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for a
fixed lump sum amount of $350.00 per occurrence for each staking event
at a project site. The CONTRACTOR shall submit an invoice to the
DEPARTMENT for a fixed rate of $0.10 per linear foot per occurrence
for staking cable plant buried in MDOT right-of-way but not associated
with a single project site. The budget for Item 4 is $25,000.00.
ITEM 5 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for on-call services for repair/replacement of
equipment/facilities damaged or destroyed by third parties, acts of
God, or pavement deterioration at a fixed labor rate of$105.00 per hour
for Engineering and a fixed labor rate of $85.00 per hour for
Technicians. Costs for material, equipment, subcontractors, and other
direct costs shall be invoiced at actual costs with additives, as
authorized in blue book. The budget for Item 5 is $400,000.00.
ITEM 6 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for repair and maintenance of the legacy system
during the principal period of maintenance at a fixed labor rate of
$105.00 per hour for Engineering and a fixed labor rate of $85.00 per
hour for Technicians. Costs for materials, equipment, subcontractors,
and other direct costs shall be invoiced at actual costs with
additives, as authorized in blue book. The budget for Item 6 is
$700,000.00.
ITEM 7 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for repair and maintenance of the legacy system
outside the principal period of maintenance at a fixed labor rate of
$125.00 per hour for Engineering or for Technicians. Costs for
materials, equipment, subcontractors, and other direct costs shall be
invoiced under Item 6, as appropriate. The budget for Item 7 is
$50,000.00.
ITEM 8 - The CONTRACTOR shall submit an invoice to the DEPARTMENT for
hours of labor recorded for engineering support services at a fixed
labor rate of $105.00 per hour. Costs for materials, equipment,
subcontractors, and other direct costs shall be invoiced at actual
costs with additives, as authorized in blue book. The budget for Item 8
is $200,000.00.
The CONTRACTOR hereby agrees that the costs reported to the DEPARTMENT for
this Contract shall represent only those items which are properly chargeable in
accordance with this Contract. The CONTRACTOR also hereby certifies that it has
read the Contract terms and has made
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<PAGE>
itself aware of the applicable laws, regulations, and terms of this Contract
that apply to the reporting of costs incurred under the terms of this Contract.
4. a. The CONTRACTOR shall establish and maintain accurate records, in
accordance with generally accepted accounting principles, of all
expenses incurred for which payment is sought or made under this
Contract, said records to be hereinafter referred to as the
"RECORDS." Separate accounts shall be established and maintained
for all costs incurred under this Contract.
b. The CONTRACTOR shall maintain the RECORDS for at least three (3)
years from the date of final payment made by the DEPARTMENT under
this Contract. In the event of a dispute with regard to the
allowable expenses or any other issue under this Contract, the
CONTRACTOR shall thereafter continue to maintain the RECORDS at
least until that dispute has been finally decided and the time
for all available challenges or appeals of that decision has
expired.
c. The DEPARTMENT or its representative may inspect, copy, or audit
the RECORDS at any reasonable time after giving reasonable
notice.
d. If any part of the work is subcontracted, the CONTRACTOR shall
assure compliance with subsections (a), (b), and (c) above.
5. In connection with the performance of the services under this
Contract, the CONTRACTOR agrees to comply with the State of Michigan provisions
for "Prohibition of Discrimination in State Contracts," as set forth in Appendix
A, dated March 1998, attached hereto and made a part hereof.
6. Provide Workers' Compensation Insurance as required by law.
7. Comply with any and all federal, state, and local statutes,
ordinances, and regulations and will obtain all permits that are applicable to
the entry into and the performance of this Contract.
THE DEPARTMENT SHALL:
8. Pay the CONTRACTOR for the SERVICES after receipt of proper billings.
Compensation for the SERVICES will be on a fixed price lump sum basis for
Item 1, a fixed price per occurrence basis for Item 4, and a time and materials
basis for Items 2, 3, 5, 6, 7, and 8. Costs for materials, equipment,
subcontractors, and other direct costs shall be invoiced at actual costs with
additives, as authorized in blue book. The total contract cost will not exceed
Four Million Thirty-One Thousand Dollars ($4,031,000.00). Reimbursement for
costs incurred are subject to the cost criteria set forth in 48 C.F.R., Federal
Acquisition Regulations, Part 31, incorporated herein by reference as if the
same were repeated in full herein.
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<PAGE>
IT IS FURTHER AGREED by the parties hereto that:
9. No portion of the work, as heretofore defined, shall be sublet except
with the prior written consent of the DEPARTMENT. Consent to sublet any portion
of the work shall not be construed to relieve the CONTRACTOR of any
responsibility or obligation under or for the fulfillment of this Contract. All
contracts with subconsultants, including amendments, in excess of Twenty Five
Thousand Dollars ($25,000.00) shall be submitted to the DEPARTMENT for approval
prior to execution and shall contain all applicable provisions of this Contract.
Any such approvals shall not be construed as a warranty of the subcontractor's
qualifications, professional standing, ability to perform the work being
subcontracted, or financial integrity.
10. In the event that an audit performed by or on behalf of the DEPARTMENT
indicates an adjustment to the costs reported under this Contract or questions
the allowability of an item of expense, the DEPARTMENT shall promptly submit to
the CONTRACTOR a Notice of Audit Results and a copy of the audit report, which
may supplement or modify any tentative findings verbally communicated to the
CONTRACTOR at the completion of an audit.
Within sixty (60) days after the date of the Notice of Audit Results, the
CONTRACTOR shall (a) respond in writing to the responsible Bureau of the
DEPARTMENT indicating whether or not it concurs with the audit report, (b)
clearly explain the nature and basis for any disagreement as to a disallowed
item of expense, and (c) submit to the DEPARTMENT a written explanation as to
any questioned or no opinion expressed item of expense, hereinafter referred to
as the "RESPONSE." The RESPONSE shall be clearly stated and shall provide any
supporting documentation necessary to resolve any disagreement or questioned or
no opinion expressed item of expense. Where the documentation is voluminous, the
CONTRACTOR may supply appropriate excerpts and make alternate arrangements to
conveniently and reasonably make that documentation available for review by the
DEPARTMENT. The RESPONSE shall refer to and apply the language of the Contract.
The CONTRACTOR agrees that failure to submit a RESPONSE within the sixty (60)
day period constitutes agreement with any disallowance of an item of expense and
authorizes the DEPARTMENT to finally disallow any items of questioned or no
opinion expressed cost.
The DEPARTMENT shall make its decision with regard to any Notice of Audit
Results and RESPONSE within one hundred twenty (120) days after the date of the
Notice of Audit Results. If the DEPARTMENT determines that an overpayment has
been made to the CONTRACTOR, the CONTRACTOR shall repay that amount to the
DEPARTMENT or reach agreement with the DEPARTMENT on a repayment schedule within
thirty (30) days after the date of the invoice from the DEPARTMENT. If the
CONTRACTOR fails to repay the overpayment or reach agreement with the DEPARTMENT
on a repayment schedule within the thirty (30) day period, the CONTRACTOR agrees
that the DEPARTMENT shall deduct all or a portion of the overpayment from any
funds then or thereafter payable by the DEPARTMENT to the CONTRACTOR under this
Contract or any other contract or payable to the CONTRACTOR under the terms of
1951 PA 51, as applicable. Interest will be assessed on any partial payments or
repayment schedules based on the unpaid balance at the end of each month until
the balance is paid in full. The assessment of interest will begin thirty (30)
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<PAGE>
days from the date of the invoice. The rate of interest will be based on the
Michigan Department of Treasury common cash funds interest earnings. The rate
of interest will be reviewed annually by the DEPARTMENT and adjusted as
necessary based on the Michigan Department of Treasury common cash funds
interest earnings. The CONTRACTOR expressly consents to this withholding or
offsetting of funds under those circumstances, reserving the right to file a
lawsuit in the Court of Claims to contest the DEPARTMENT's decision only as to
any item of expense the disallowance of which was disputed by the CONTRACTOR in
a timely filed RESPONSE.
11. The CONTRACTOR agrees to indemnify and save harmless the State of
Michigan, the Michigan State Transportation Commission, the DEPARTMENT, and all
officers, agents, and employees thereof:
a. from any and all claims by persons, firms, or corporations for
labor, services, materials, or supplies provided to the
CONTRACTOR in connection with the services which the CONTRACTOR
shall perform under the terms of this Contract, and
b. from any and all claims for injuries to or death of any and all
persons, for loss of or damage to property, from environmental
damage, degradation, response and cleanup costs, and from
attorney fees or other related costs arising out of, under, or by
reason of this Contract, except claims resulting from the sole
negligence or wilful acts or omissions of said indemnitee, its
agents, or its employees.
The DEPARTMENT shall not be subject to any obligations or liabilities by
contractors of the CONTRACTOR, their subcontractors, or any other person not a
party to this Contract without its specific consent and notwithstanding its
concurrence in or approval of the award of any contract, subcontract, or the
solicitation thereof.
It is expressly understood and agreed that the CONTRACTOR shall take no
action or conduct that arises either directly or indirectly out of its
obligations, responsibilities, and duties under this Contract that results in
claims being asserted against or judgments being imposed against the State of
Michigan, the DEPARTMENT, and/or the Michigan State Transportation Commission.
In the event that the same occurs, it will be considered as a breach of
this Contract, thereby giving the State of Michigan, the DEPARTMENT, and/or the
Michigan State Transportation Commission a right to seek and obtain any
necessary relief for remedy, including, but not limited to, a judgment for money
damages.
12. All software used by the CONSULTANT in the performance of services for
the DEPARTMENT under this Contract or, either for sale or license to the
DEPARTMENT and used by the DEPARTMENT prior to, during, or after the calendar
year 2000, includes or will include, at no added cost to the DEPARTMENT, design
and performance so as not to cause delay in completion
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<PAGE>
of the services under this Contract or cause the DEPARTMENT to experience
software abnormalities and/or the generation of incorrect results from the
software due to date-oriented processing in the operation of the business of the
DEPARTMENT. Also, any software used by the CONSULTANT to carry out its normal
business, e.g. accounting and payroll, will not cause delay in completion of the
services under this Contract due to date-oriented processing in the operation of
the business of the CONSULTANT. Therefore, any business failure due to software
problems attributed to the calendar year 2000 is unacceptable as a cause for
delay in providing services under this contract.
To insure year 2000 compatibility, the software design will include, but is
not limited to, data structures (databases, data files, etc.) that provide 4-
digit date century; stored data that contain date century recognition,
including, but not limited to, data stored in databases and hardware device
internal system dates; calculations and program logic (e.g., sort algorithms,
calendar generation, event recognition, and all processing actions that use or
produce date values) that accommodates same century and multi-century formulas
and date values; interfaces that supply data to and receive data from other
systems or organizations that prevent non-compliant dates and data from entering
any State system; user interfaces (i.e., screens, reports, etc.) that accurately
show 4-digit years; and assurance that the year 2000 will be correctly treated
as a leap year within all calculation and calendar logic.
13. All questions which may arise as to the quality and acceptability
of work, the manner of performance and rate of progress of the work, and the
satisfactory and acceptable fulfillment of the terms of this Contract shall be
decided by the DEPARTMENT.
14. In accordance with 1980 PA 278, MCL 423.321 et seq; MSA 17.458(22) et
------ --
seq, the CONTRACTOR in the performance of this Contract shall not enter into a
- ---
contract with a subcontractor, manufacturer, or supplier listed in the register
maintained by the State of Michigan, Department of Labor, of employers who have
been found in contempt of court by a federal court of appeals on not less than
three (3) occasions involving different violations during the preceding seven
(7) years for failure to correct an unfair labor practice, as prohibited by
Section 8 of Chapter 372 of the National Labor Relations Act, 29 U.S.C. 158. The
DEPARTMENT may void this Contract if the name of the CONTRACTOR or the name of a
subcontractor, manufacturer, or supplier utilized by the CONTRACTOR in the
performance of this Contract subsequently appears in the register during the
performance period of this Contract.
15. This Contract will be in effect from the date of award through October
16, 2000.
Prior to expiration, the time for completion of performance under this
Contract may be extended by the DEPARTMENT upon written request and
justification from the CONTRACTOR. Upon approval and authorization by the
DEPARTMENT, a written "Notice of Extension" will be prepared and issued by the
DEPARTMENT. The terms or conditions of the extension will be set forth in the
notice. In no event may the time for performance be extended by a total period
exceeding
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twelve (12) months without a prior written amendment to this Contract. Any such
extension shall not operate as a waiver by the DEPARTMENT of any of its rights
herein set forth.
16. For the purposes of this Contract, the CONTRACTOR will be considered
an independent contractor and not an employee of the DEPARTMENT.
17. Any change in scope, character, cost, compensation, or term of this
Contract shall be by execution of a prior written amendment to this Contract by
the parties hereto, except as provided in Section 14 hereof.
18. In the event the CONTRACTOR fails to complete all of the services in a
manner satisfactory to the DEPARTMENT, the DEPARTMENT may terminate this
Contract. Written notice of termination shall be sent to the CONTRACTOR, and all
costs incurred, as set forth in Sections 3 and 8, up to receipt of said Notice
of Termination shall be reimbursed.
This Contract may be terminated for convenience by the DEPARTMENT
before the services are completed. In the event of such termination, the
DEPARTMENT shall provide the CONTRACTOR with written notice of termination
thirty (30) days prior to the date of such termination. The DEPARTMENT shall pay
the CONTRACTOR costs incurred, as herein defined in Sections 3 and 8, up to the
time of termination. The amounts included for profit, if any, shall be subject
to prior written approval by the DEPARTMENT.
In the event that termination by the DEPARTMENT is necessitated by any
wrongful breach, failure, default, omission, or failure to adequately progress
by the CONTRACTOR, the DEPARTMENT shall be entitled to pursue whatever remedy is
available to them, including, but not limited to, withholding funds or setting-
off against funds owed to the CONTRACTOR under this Contract or any other
existing or future contracts or agreements between the CONTRACTOR and the
DEPARTMENT for any and all damages and costs incurred or sustained by the
DEPARTMENT as a result of its termination of this Contract due to the wrongful
breach, failure, default, or omission by the CONTRACTOR.
In case of breach or default by the CONTRACTOR, the DEPARTMENT may
terminate the Contract immediately and procure the services from other sources
and hold the CONTRACTOR responsible for any damages or excess costs occasioned
thereby.
In the event of termination for any reason, the DEPARTMENT shall
receive the results to date of all services produced by the CONTRACTOR under
this Contract up to the time of termination, prior to the CONTRACTOR being
reimbursed. In no case shall the compensation paid to the CONTRACTOR for partial
completion exceed the amount the CONTRACTOR would have received had the Contract
been completed.
19. In the event of a conflict between the body of this Contract and any
exhibits hereto, the body of this Contract will govern.
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20. Any approvals, reviews, and inspections of any nature by the
DEPARTMENT shall not be construed as a warranty or assumption of liability on
the part of the DEPARTMENT. It is expressly understood and agreed that any such
approvals are for the sole and exclusive purposes of the DEPARTMENT, which is
acting in a governmental capacity under this Contract, and that such approvals
are a governmental function incidental to this Contract.
Any such approvals, reviews and inspections by the DEPARTMENT will not
relieve the CONTRACTOR of its obligations hereunder, nor are such approvals,
reviews, and inspections by the DEPARTMENT to be construed as a warranty as to
the propriety of the CONTRACTOR's performance but are undertaken for the sole
use and information of the DEPARTMENT.
21. This Contract shall become binding upon the parties hereto and of full
force and effect upon the signing thereof by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Contract to be awarded.
ODETICS ITS, INCORPORATED
BY /s/ Regional Vice President
-------------------------------
TITLE: Regional Vice President
MICHIGAN DEPARTMENT OF TRANSPORTATION
BY /s/ Department Director
-------------------------------
TITLE: Department Director
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APPENDIX A
PROHIBITION OF DISCRIMINATION IN STATE CONTRACTS
In connection with the performance of work under this contract; the contractor
agrees as follows:
1. In accordance with Act No. 453, Public Acts of 1976, the contractor hereby
agrees not to discriminate against an employee or applicant for employment
with respect to hire, tenure, terms, conditions, or privileges of
employment, or as a matter directly or indirectly related to employment,
because of race, color, religion, national origin, age, sex, height, weight,
or marital status. Further, in accordance with Act No. 220, Public Acts of
1976 as amended by Act No. 478, Public Acts of 1980 the contractor hereby
agrees not to discriminate against an employee or applicant for employment
with respect to hire, tenure, terms, conditions, or privileges of
employment, or a matter directly or indirectly related to employment,
because of a disability that is unrelated to the individual's ability to
perform the duties of a particular job or position. A breach of the above
covenants shall be regarded as a material breach of this contract.
2. The contractor hereby agrees that any and all subcontracts to this contract,
whereby a portion of the work set forth in this contract is to be performed,
shall contain a covenant the same as hereinabove set forth in Section 1 of
this Appendix.
3. The contractor will take affirmative action to insure that applicants for
employment and employees are treated without regard to their race, color,
religion, national origin, age, sex, height, weight, marital status or a
disability that is unrelated to the individual's ability to perform the
duties of a particular job or position. Such action shall include, but not
be limited to, the following: employment, upgrading, demotion or transfer,
recruitment advertising; layoff or termination; rates of pay or other forms
of compensation; and selection for training, including apprenticeship.
4. The contractor will, in all solicitations or advertisements for employees
placed by or on behalf of the contractor, state that all qualified
applicants will receive consideration for employment without regard to race,
color, religion, national origin, age, sex, height, weight, marital status
or disability that is unrelated to the individual's ability to perform the
duties of a particular job or position.
5. The contractor or his collective bargaining representative will send to each
labor union or representative of workers with which he has a collective
bargaining agreement or other contract or understanding, a notice advising
the said labor union or workers' representative of the contractor's
commitments under this appendix.
6. The contractor will comply with all relevant published rules, regulations,
directives, and orders of the Michigan Civil Rights Commission which may be
in effect prior to the taking of bids for any individual state project.
7. The contractor will furnish and file compliance reports within such time and
upon such forms as provided by the Michigan Civil Rights Commission, said
forms may also elicit information as to the practices, policies, program,
and employment statistics of each subcontractor as well as the contractor
himself, and said contractor will permit access to his books, records, and
accounts by the Michigan Civil Rights Commission and/or its agent,
for purposes of investigation to ascertain compliance with this contract and
relevant with rules, regulations, and orders of the Michigan Civil Rights
Commission.
8. In the event that the Civil Rights Commission finds, after a hearing held
pursuant to its rules, that a contractor has not complied with the
contractual obligations under this agreement, the Civil Rights Commission
may, as part of its order based upon such findings, certify said findings to
the Administrative Board of the State of Michigan, which Administrative
Board may order the cancellation of the contract found to have been violated
and/or declare the contractor ineligible for future contracts with the state
and its political and civil subdivisions, departments, and officers, and
including the governing boards of institutions of higher education, until
the contractor complies with said order of the Civil Rights Commission.
Notice of said declaration of future ineligibility may be given to any or
all of the persons with whom the contractor is declared ineligible to
contract as a contracting party in future contracts. In any case before the
Civil Rights Commission in which cancellation of an existing contract is a
possibility, the contracting agency shall be notified of such possible
remedy and shall be given the option by the Civil Rights Commission to
participate in such proceedings.
9. The contractor will include, or incorporate by reference, the provisions of
the foregoing paragraphs (1) through (8) in every subcontract or purchase
order unless exempted by the rules, regulations or orders of the Michigan
Civil Rights Commission, and will provide in every subcontract or purchase
order that said provisions will be binding upon each subcontractor or
seller. March, 1998
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EXHIBIT 10.14
Agreement No. 9-642117
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MDOT No. CM84909-37040A
---------------
Confidential Treatment Requested Confidential
Portion Has Been Filed Separately With
the Securities and Exchange Commission
FIRM FIXED PRICE AGREEMENT FOR ODETICS SERVICES FOR MDOT
ATMS/ATIS OPERATIONAL DEPLOYMENT, FINAL ACCEPTANCE AND INITIAL
TWO-YEAR WARRANTY
Agreement dated 06 November 1998 by and between Rockwell Collins, Inc., a
Delaware Corporation (herein called "Buyer"), and Odetics ITS, Inc., a
California Corporation. (herein called "Seller").
In consideration of the mutual promises herein contained, Buyer and Seller agree
as follows:
1.0 SCOPE OF SERVICES
During the term of this Agreement, Seller shall provide all personnel,
equipment, material, and other costs to perform the MDOT ATMS/ATIS Initial
Two Year Warranty in accordance with the MDOT Prime Contract CM 849-37040A
Special Provision for Performance Warranty on Subsystem and System
Performance and Task 7 Warranty, Service, Maintenance and Training (See
Attachment 1) at an agreed Firm Fixed Price of $[*] quoted net, FOB
destination. Such services shall be performed by individuals as employees
of Seller, an independent contractor, and not as employees of Buyer.
Seller shall also complete development and delivery of the following items
within the fixed price Scope of Services described above:
. Display Activity Logs
. Data / Documentation
5.5 Software Design Description document
5.5 System Design Description Document
5.5 Commercial Off The Shelf (COTS) Software Purchased
. All project and support activity necessary to bring the project to
final acceptance. This includes any remaining punch list items,
field repair, technical support, deliverable documentation,
correction of deficiencies, finance support, etc.
2.0 TERM OF AGREEMENT
The project support, operational deployment, final acceptance, and warranty
services shall be performed over the period beginning October 17, 1998 and
continue through the end of the MDoT prime contract
__________
[*] Confidential Treatment Requested for Redacted Portion
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two-year warranty period. Fulfillment of obligation shall be completion
of the two-year warranty support period, unless extended pursuant to the
mutual agreement by Buyer and Seller.
3.0 BILLING AND PAYMENT
3.1 As compensation for services to be performed by Seller hereunder,
Seller will invoice on a monthly basis per the following payment
schedule.
Month 1 $[*] Month 13 $[*]
Month 2 $[*] Month 14 $[*]
Month 3 $[*] Month 15 $[*]
Month 4 $[*] Month 16 $[*]
Month 5 $[*] Month 17 $[*]
Month 6 $[*] Month 18 $[*]
Month 7 $[*] Month 19 $[*]
Month 8 $[*] Month 20 $[*]
Month 9 $[*] Month 21 $[*]
Month 10 $[*] Month 22 $[*]
Month 11 $[*] Month 23 $[*]
Month 12 $[*] Month 24 $[*]
Buyer shall not have any liability for any other expenses or costs
incurred by Seller hereunder, unless otherwise agreed to by Buyer in
advance in writing. All invoices submitted in accordance with this
Section 3 shall be paid by Buyer within 30 days of receipt by Buyer.
If final acceptance is not realized by 31 March 1999 due to
performance failure of Seller to complete closure of remaining punch
list items, subsequent payments due to Seller will be withheld until
punch list items are complete and final acceptance has occurred.
3.2 Seller shall bill Buyer at monthly intervals. Invoices shall be mailed
to Rockwell Collins, Inc., 350 Collins Rd., N.E., Cedar Rapids, Iowa
52498, to the attention of Charles Harmeyer, M/S 191-106,
3.3 Each invoice submitted by Seller will include a summary of monthly
activity, i.e. key accomplishments, key issue/action plans.
3.4 Seller shall not take, or be obligated to take, any action under this
Agreement which could cause the amount the Buyer would be obligated to
pay to Seller in connection with this Agreement to exceed $[*]
in the aggregate (the Contract Amount). Notwithstanding any other
provisions of this Agreement, Buyer shall not be obligated to pay to
Seller any amount in excess of the aforementioned sum, unless
otherwise expressly agreed to by Buyer in advance in writing.
3.5 The [*] defined in the Asset Sale Agreement, Section 8.o.(iv) -- (v)
shall be modified as described below:
__________
[*] Confidential Treatment Requested for Redacted Portion
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After reimbursement of claim [*], the [*] formulas will be:
. [*]% Rockwell / [*]% Odetics for the portion of claim recovery
between $[*] and $[*]
. [*]% Rockwell / [*]% Odetics for the portion of claim recovery
between $[*] and $[*].
. [*]% Rockwell / [*]% Odetics for the portion of claim recovery
greater than $[*].
[*] shall be entitled to all profits earned by [*] for [*]
and [*] related to the MDOT Contract.
3.6 Buyer will be responsible for its own costs in support of achieving
final acceptance. Buyer's participation is expected to be minimal and
limited to managerial oversight.
3.7 Buyer will maintain responsibility for closing out other contract
obligations put in place prior to the operational acceptance date of
17 October 1998 (i.e. close out of subcontracts that are not being
assigned to Seller, submittal of correspondence to subcontractors on
Buyer's behalf that document assignment of continuing warranty
obligations to Seller, handling of purchase orders/subcontracts and
coordination efforts by HRC to facilitate disposition of Node 3
residual equipment, final Buyer EAC, current subcontractor close outs
for work performed prior to operational acceptance, outstanding
authorized but unpaid contractor expenditures committed prior to
operational acceptance [e.g. specific Matrix 2070 repairs), relocation
of the Seller's project manager, and costs associated with support
of the claims).
4.0 PUBLICITY
Seller shall not, without the prior written consent of Buyer, in any manner
advertise or publish the fact that Buyer has entered into this Agreement
with Seller, which consent shall not be unreasonably withheld or delayed.
5.0 ASSIGNMENT AND SUBCONTRACTING
Buyer will assign it's rights, obligations, title and interest in the
initial two-year warranty in the same manner as stated for the four,
one-year warranty options in the Asset Sale Agreement dated 20 June 1997,
Section 8 Paragraph 0 Sub-Paragraph (vi), between Buyer and Seller. If MDOT
will not consent to the assignment, the alternative arrangements to
assignment described in the Asset Sale Agreement will apply. The following
subparagraph applies regardless of assignment.
5.1 Buyer will be responsible for any required performance or lien bonds.
Seller will indemnify Buyer for these performance and lien bonds.
5.2 Seller will perform the warranty obligations in accordance with
Buyer's stated proposal and interpretation of contract requirements as
agreed with MDOT and documented in letter dated June 3, 1998 (See
Attachment 2).
__________
[*] Confidential Treatment Requested for Redacted Portion
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5.3 Buyer will transfer or assign to Seller all unexpired manufacturer's
warranties including the existing Detection Systems and Engineering
(DSE) Warranty for CCTV Equipment and the Highway Services Company
(HSC) Warranty for CMS.
5.4 All residual material and spare/replacement parts remaining after MDOT
acceptance of the ATMS/ATIS will be provided as expendable material
for Seller's unconditional use without charge.
5.5 Buyer will transfer or assign to Seller all test equipment, test
software, vehicles, and tools developed or acquired for the ATMS/ATIS
project.
6.0 TERMINATION
Buyer shall have the right to terminate this Agreement or any part thereof
at any time:
6.1 For Cause--If Seller fails to perform it's obligations under Section 1
hereof following Seller's failure to cure such condition or to reach a
mutually acceptable solution after a period of 15 days after written
notice of such failure shall have been given to Seller by Buyer
hereunder. In the event of any termination for Cause, Buyer may, in
addition to any other right or remedy provided by this Agreement or by
law, terminate all or any part of this Agreement by written notice to
Seller pursuant to Section 8 of this Agreement without any liability
by Buyer to Seller on account thereof and buyer may produce or
purchase or otherwise acquire warranty services elsewhere on such
terms or in such manner as Buyer may deem appropriate and Seller shall
be liable to Buyer for any excess cost or other expenses incurred by
Buyer in connection with obtaining such services.
6.2 Buyer shall have the right to terminate this Agreement or any part
thereof at any time following the termination by MDOT of, or the
release of Buyer (by settlement or otherwise, excluding assignment
of the MDOT Contract to Odetics ITS) from all of its' obligations
under, the MDOT Contract (in either case after 15 days notice to
Seller).
7.0 CHANGES
Buyer, within the general scope of this Agreement, may, at any time by
written notice to Seller, issue additional instructions, require additional
services or direct the omission of services covered by this Agreement. In
such event, there will be made an equitable adjustment in price and time of
performance, but any claim for such an adjustment must be made within
thirty (30) days of the receipt of said written notice. During the
performance of this Agreement, the Michigan Department of Transportation
(MDOT) may request Seller to perform non-warranty billable repair work or
billable new work (which for this Agreement is limited to non-warranty
maintenance and system studies) using the Buyer's prime contract as the
contracting vehicle. Subject to Buyer's prior concurrence, which allows for
Buyer to recover any direct costs plus an administrative fee of 6%, and a
binding subcontract commitment between Buyer and
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Seller in place, Seller shall be responsible for determining prices for
such work and negotiating the prices with MDOT. Seller shall be responsible
for performance of work and for the accuracy and submittal of invoices and
supporting data, on behalf of Buyer and per the Buyer's instructions adding
Buyer's direct costs, if appropriate, and a 6% administrative fee, with
copies to Buyer. Buyer shall have no obligation to pay Seller for any
billable repair work or billable new work except to pass through any
payments less the Buyer's direct costs, if appropriate, and the 6%
administrative fee made to Buyer by MDOT within 10 days of receipt from
MDOT. Seller shall indemnify Buyer for any liability related to such work
in accordance with Article 10, Insurance, Indemnity, and Liability herein.
Seller fully understands that Buyer has no obligation to add additional
work, requested by MDOT or any other party, to MDOT Contract CM 84909-
37040A, other than as defined in this paragraph.
8.0 NOTICES
Any notice or order provided for in this Agreement shall be considered as
having been given (i) to Buyer if mailed by certified mail, postage prepaid
to Rockwell Collins, Inc., 400 Collins Road N.E., Cedar Rapids, Iowa 52498,
to the attention of Charles Harmeyer, or (ii) to Seller if mailed by
certified mail, postage prepaid to Odetics ITS, Inc., 1515 South Manchester
Avenue, Anaheim, Ca. 92802-2907, to the attention of Jim Reams, or in
either case to such other address as hereafter shall be furnished as
provided in this Section 8 by either party to the other party.
9.0 COMPLIANCE WITH LAWS
To the extent applicable hereto, Seller shall in the performance of this
Agreement comply with: The Fair Labor Standards Act of 1938 (29 U.S.C. 201-
219); the Walsh-Healey Public Contracts Act (41 U.S.C.35-45); the Contract
Work Hours and Safety Standards Act - (40 U.S.C. 327-333); laws prohibiting
the use of convict labor; and all applicable federal, state and local laws;
and all regulations and orders issued under any applicable law. Seller will
notify Buyer immediately if Seller's work for Buyer becomes the subject of
a government audit or investigation. Seller will promptly notify Buyer if
Seller is indicated, suspended or debarred. Seller represents that seller
has not been convicted of fraud or any other felony arising out of a
contract with the Department of Defense, as described in more detail in
10U.S.C. 2408.
Seller is aware of the requirements of the Byrd Amendment, Section 319 of
P.L. 101-121. In carrying out the work required hereunder Seller agrees not
to make any communication to or appearance before any person in the
Executive or Legislative branches of the Federal government for the purpose
of influencing or attempting to influence any such persons in connection
with the award, extension, continuation, renewal, amendment or modification
of any Federal contract for the benefit of the Buyer. Seller may perform
professional or technical services that are rendered directly in the
preparation, submission or negotiation activities preceding award to Buyer
of a Federal contract or to meet requirements imposed by law as a condition
for receiving the award but only to the extent specifically detailed in the
Statement of Work. Professional and technical services are limited to
advice and analysis directly applying Seller's professional or technical
discipline.
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10.0 INSURANCE, INDEMNITY AND LIABILITY
Seller shall carry Worker's Compensation and Comprehensive General
Liability Insurance (including Products, Contractual, and Automobile
Liability) in such form as to protect Seller and Buyer, its' directors and
officers, and the agents and employees of Buyer as additional insured from
any claims or damages for bodily injury, including death, and any damage to
property which may arise from acts or omissions of Seller under this
Agreement. Seller shall furnish Buyer with a certificate of insurance
evidencing limits of liability not less than $1 million combined single
limit per occurrence for bodily injury (including death) and property
damage. Such insurance shall be primary and non-contributing to any
insurance maintained or obtained by Buyer and shall not be canceled or
materially reduced without thirty (30) days prior notice to Buyer. Seller
agrees to waive any rights of subrogation Seller or Seller's insurers may
have against Buyer under the applicable Worker's Compensation Law.
Seller shall indemnify, defend and hold harmless Buyer, and Buyer's
officers, directors, employees, agents and contractors (each an
"Indemnitee") from and against any and all damages, claims, actions or
demands against Buyer, its' directors, officers, agents and employees and
against any and all damages, liabilities or expenses, including counsel
fees, for injury to or death of any person and for loss of or damage to any
and all property, arising out of the acts or omissions of Seller under this
Agreement.
(i) An Indemnitee hereunder shall promptly notify Seller of any claim,
action or demand for which recovery may be sought against Seller
because of the indemnity set forth in this Section, provided,
however, that no delay on the part of such Indemnitee in notifying
Seller shall relieve Seller from any obligations hereunder unless
(and then solely to the extent) Seller is prejudiced thereby.
Seller shall have the right to control the defense of any such
Claim with counsel of its choice so long as (a) Seller notifies the
Indemnitee in writing within twenty (20) days after the Indemnitee
has given notice of the Claim that Seller will indemify the
Indemnitee from and against any and all damages which the
Indemnitee may suffer arising out of or in connection with such
Claim; (b) such Claim involves only money damages and does not seek
an injunction or other equitable relief; (c) settlement of, or an
adverse judgment with respect to, such Claim is not, in the
reasonable judgment of the Indemnitee, likely to establish a
precedential custom or practice materially adverse to the
continuing business interests of the Indemnitee; and (d) Seller
conducts the defense of such Claim actively and diligently.
(ii) So long as Seller is conducting the defense of such Claim in
accordance with Clause (i) above, (a) the Indemnitee may retain
separate counsel and participate in the defense of such Claim at
the Indemnitee's cost; (b) the Indemnitee will not consent to the
entry of any judgment or enter into any settlement with respect to
such Claim without the prior written consent of Seller (not to be
withheld or delayed unreasonably), (c) Seller will not consent to
the entry of any judgment or enter into any settlement with respect
to such Claim without the prior written consent of the Indemnitee
(not to be withheld or delayed unreasonably, provided that such
consent shall not be deemed to be withheld unreasonably if any such
judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnitee of a release from all liability in respect of the Claim
giving rise thereto) and (d) the Indemnitee shall cooperate with
all reasonable requests of Seller in connection with the defense of
such Claim.
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(iii) In the event any of the conditions in Clause (ii) above is or
becomes unsatisfied: (a) the Indemnitee may defend against, and
consent to the entry of any judgment or enter into any settlement
with respect to the Claim in any manner it reasonably may deem
appropriate; (b) Seller will reimburse the Indemnitee promptly and
periodically for the costs of defending against the Claim
(including reasonable attorney's fees and expenses); and (c) Seller
will remain responsible for any and all damages the Indemnitee may
incur arising out of or in connection with the Claim.
11.0 STANDARDS
All services hereunder shall be performed by employees or agents of Seller
who are experienced and highly skilled in their profession and in
accordance with the highest standards of workmanship in their professions.
In the event that the employment of any such identified employee with
Seller is terminated, such service will be performed by employees or agents
of Seller who are experienced and highly skilled in their profession and in
accordance with the prevailing standards of workmanship in their
professions.
12.0 RECORDS
Buyer and its' employees and agents shall, until the expiration of three
(3) years after final payment under this Agreement, have access during
regular business hours to and the right to examine any directly pertinent
financial records and supporting documents and records of Seller involving
transactions related to this Agreement; provided, however, that such access
shall not unreasonably interfere with the normal operations of Seller and
the reasonable out-of-pocket expenses of Seller incurred in connection
therewith shall be paid by Buyer.
13.0 INTELLECTUAL PROPERTY RIGHTS
13.1 Buyer acknowledges and agrees that any intellectual property rights
of Buyer (i) presently in existence and developed or which may be
developed exclusively in conjunction with the MDOT Contract,
including, without limitation, any of Buyer's rights with respect to
proprietary software (including source code) being developed pursuant
to the MDOT Contract and (ii) which may be developed by or on
behalf of Seller during the course of, as a result of or otherwise in
connection of Seller's providing services pursuant to this Agreement
(collectively, "MDOT Contract Intellectual Property") are or shall
become the sole and exclusive property of Seller and Buyer hereby
waives for itself and its' affiliates, successors and assigns all
right, title and interest in and to any MDOT Intellectual Property.
Seller's right, title and interest in and to the MDOT Contract
Intellectual Property shall survive the termination of this Agreement
for any reason, including, without limitation, any termination of
this Agreement by Buyer for Cause pursuant to Section 6.2.
13.2 The parties recognize and understand that governmental participants,
defined as all federal, state and local agencies, including, without
limitation, MDOT, have or may obtain certain rights in
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MDOT Intellectual Property, as set forth in the MDOT Contract and
certain other instruments by which such Government funding has or
will be made available to Buyer ("Governmental Rights").
14.0 U.S. EXPORT CONTROL LAWS AND REGULATIONS
Seller, for itself and any of its' employees and agents who may be given
access by Seller to technical information of Buyer or who may be provided
access to Buyer's premises in carrying out the services to be provided by
Seller under this Agreement, acknowledges its' obligations to control
access to such technical information and to ensure that such access does
not result in a violation of the U.S. Export Control Laws and Regulations.
15.0 CONFIDENTIAL INFORMATION EXCHANGE
During the term of this Agreement, the parties agree to exchange non-
proprietary Data. Further, the parties may exchange proprietary data if the
disclosing party determines it to be essential for the accomplishment of
the objectives of the work to be performed in accordance with this
Agreement.
Notwithstanding that the term of this Agreement shall have expired, each
party agrees to keep in confidence and prevent the use (except for purposes
of this Agreement) or the disclosure to any person or persons outside the
receiving party's organization, and limit the disclosure inside its
organization to employees having a need-to-know, of all Data received under
this Agreement which is designated in writing, or marked by an appropriate
stamp or legend, by the disclosing party to be of proprietary or
confidential nature. In order to be protected hereunder, Data which is
first disclosed orally or by demonstration must be identified as
proprietary or confidential at the time of disclosure and shall be reduced
to writing or other tangible form, marked as proprietary and a copy
delivered to the receiving party by the disclosing party within thirty (30)
days after such disclosure or demonstration of any such Data. All
protections and restrictions as to use and disclosure shall apply during
such (30) day period. Any markings, stamps, or legends identifying
proprietary or confidential information hereunder shall not impose any
obligations on either party inconsistent with this Agreement.
The above restrictions on use and disclosure shall not apply to such Data
(other than any of the MDOT Contract Intellectual Property) if the same:
a) Is in the public domain or in the possession of the receiving party
without restriction at the time of receipt under this Agreement.
b) Is used or disclosed with prior written approval of the disclosing
party.
c) Is used or disclosed after five (5) years from the date of first
receipt under this agreement.
d) Is independently developed by the receiving party.
e) Becomes known to the receiving party from a source other than the
disclosing party without breach of this Agreement by the receiving
party.
f) Is made available by the disclosing party to a third party on an
unrestricted, non-confidential basis.
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Neither party shall be liable for inadvertent, accidental or mistaken use
or disclosure of Data obtained under this Agreement if that party
exercised the same reasonable precautions as the receiving party takes to
safeguard its' own proprietary information. Any copies of the Data made by
the receiving party shall reproduce the proprietary markings and any other
legends contained thereon.
16.0 DISPUTES
All disputes relating to, or arising out of, any provision of this
Agreement shall be resolved pursuant to procedures set forth in Attachment
3 hereto.
17.0 UTILIZATION OF SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS,
WOMEN-OWNED SMALL BUSINESS AND LABOR SURPLUS AREA CONCERNS
To support Government policy as declared by the Congress, and all
consistent with the efficient performance of this Agreement, Seller agrees
to accomplish a maximum amount of subcontracting to small business, small
disadvantaged business and women-owned small business concerns, and to use
its' best efforts to place subcontracts hereunder with subcontractors who
will perform such subcontracts substantially in areas of persistent or
substantial labor surplus when it can be done at prices no higher than are
obtainable elsewhere observing exemptions and preferential order
established by applicable Government regulations.
18.0 NOTICE TO BUYER OF LABOR DISPUTES
(a) Whenever Seller has knowledge that any actual or potential labor
dispute is delaying or threatens to delay the timely performance
of this Agreement, Seller shall immediately give notice thereof,
including all relevant information with respect thereto, to Buyer.
(b) Seller agrees to insert the substance of this clause, including this
paragraph (b), in any subcontract hereunder as to which a labor
dispute may delay the timely performance of this Agreement; except
that each such subcontract shall provide that in the event its'
timely performance is delayed or threatened by delay by any actual or
potential labor dispute, the subcontractor shall immediately notify
the Seller of all relevant information with respect to such dispute.
19.0 EVIDENCE OF CITIZENSHIP OR IMMIGRANT STATUS
Buyer may be required to obtain information concerning citizenship or
immigrant status of subcontractor personnel entering the premises of
Buyer. Seller agrees to furnish this information before commencement of
work and at any time thereafter before substituting or adding new
personnel to work on Buyer's premises. Information submitted by Seller
shall be certified by an authorized representative of Seller as being true
and correct.
9
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20.0 ALTERATIONS
None
THE PARTIES ACKNOWLEDGE THAT EACH HAS READ THIS AGREEMENT, UNDERSTANDS IT, AND
AGREES TO BE BOUND BY ITS' TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
AGREED TO: AGREED TO:
ODETICS ITS, Inc. ROCKWELL COLLINS, INC.
By: /s/ Jack Johnson By: /s/ General Manager - NBI
--------------------------- --------------------------------
Title: PRESIDENT Title: GENERAL MANAGER - NBI
------------------------ -----------------------------
Employer ID No.* 95-2954623
----------
* This is the identifying number required to be used in Federal Income Tax and
Employment tax returns.
10
<PAGE>
EXHIBIT 10.15
COMMONWEALTH OF VIRGINIA
Contract for ITS On-Call Technical Services Consultant
Contract Number 699-WB
THIS CONTRACT entered into this 15th day of December 1998, by Odetics ITS
hereinafter called the "Contractor" and Commonwealth of Virginia, Department of
Transportation (VDOT) called the "Purchasing Agency" is for ITS technical
services consultant support on an "on-call" basis. No work shall be done by the
Contractor prior to receipt of a written notice to proceed in the form of a
signed Task Order from the VDOT Project Manager. The Purchasing Agency will not
be responsible for payment for work done in advance of such notice.
WITNESSETH that the Contractor and the Purchasing Agency in consideration of
mutual covenants, promises, and agreements herein contained, agree as follows:
SCOPE OF WORK: The Contractor shall provide the services to the Virginia
Department of Transportation as set forth in the contract documents.
PERIOD OF PERFORMANCE: This contract covers the period of December 15, 1998
through December 31, 2001, with the option to renew for two additional years in
one year intervals if mutually agreeable.
The contract documents shall consist of:
1. The signed contract
2. The following sections of the Request for Proposals dated July 20, 1998
(a) The Statement of Needs (Attachment A)
(b) General Terms and Conditions (Attachment B)
(c) Special Terms and Conditions (Attachment C)
3. The Contractor's proposal dated August 31, 1998, (Attachment D) and the
negotiated modifications to the proposal contained in the Contractor's Best
and Final Offer dated November 19, 1998. (Attachment E)
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4. The following additional terms and conditions:
(a) Audit and inspection of records:
The Contractor shall permit the authorized representative of the
Purchasing Agency, the U.S. Department of Transportation, and the
Comptroller General of the United States to inspect and audit all data
and records of the Contractor relating to its performance under this
agreement.
(b) Ownership of Documents:
It is understood and agreed to by and between the parties hereto, that
all reports, drawings, studies, specifications, memoranda, estimates,
computations, etc., secured by and for the Contractor in the
prosecution of this agreement shall become and remain the property
of the Purchasing Agency upon termination or completion of the work.
(c) Awarding agency rights pertaining to copyrights and rights in data:
VDOT and FHWA reserve a royalty-free, non-exclusive license to
reproduce, publish or otherwise use, for state or federal government
purposes, any work developed under this contract or any rights
of copyright purchased under this contract.
(d) Intellectual property rights:
The Contractor reserves all rights in its intellectual property
developed prior to this contract. For purposes of this contract,
intellectual property shall mean copyrights, patents and any other form
of intellectual property rights covering any data, data bases,
software, inventions, training manuals, systems design or other
proprietary information in any form or medium.
(i) Intellectual property developed exclusively with public funds
shall be owned by VDOT. "Developed exclusively with public funds"
means development was not accomplished exclusively or partially
at private expense. "Developed" means that the intellectual
property has been successfully operated and tested to the extent
sufficient to demonstrate to reasonable persons skilled in the
area that it can be reasonably expected to perform its intended
purpose.
(ii) Purchasing Agency hereby grants to the Contractor a royalty-free,
non exclusive license to use or modify software developed under
the project. Purchasing Agency shall not be liable for any use or
modification made by the Contractor for purposes outside this
agreement.
(iii) Intellectual property developed exclusively at private expense
shall be owned by the Contractor (or Contractor's respective
subcontractors, as applicable). Developed at private expense
means development was
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accomplished entirely with costs charged to indirect cost pools,
cost not allocated to this contract, or any combination thereof.
(iv) Any intellectual property owned by the contractor that is in the
public domain and used in the performance of work under this
contract will be subject to all applicable laws and may be used
by the Purchasing Agency on this contract or any other contract
at no additional cost.
(e) Liability:
The Contractor shall be responsible for all damage and expense to
person or property caused by its negligent activities and those of its
subcontractors, agents or employees, in connection with the work and
services under this contract.
The Contractor shall be liable for all damages, costs and additional
expense incurred by the Purchasing Agency in the execution of this
contract including, but not limited to, damages, costs and expenses
resulting from claims brought against VDOT by contractor(s) caused by
the failure of the Contractor to perform the work and services with the
same degree and standard of care and skill normally expected of and
provided by consultants in the performance of the same work and
services, or work and services similar to the work and services to be
provided herein. Acceptance of the work and services by the Purchasing
Agency shall not waive any of the rights of VDOT contained in this
section nor release or absolve the Contractor from any liability,
responsibility or duty contained herein.
(f) Status Reports and Invoices:
The Contractor must submit monthly status reports for each active task
assignment with the monthly invoice.
Invoices should be sent to:
Mr. Joseph O. Hayes
ITS Division
Virginia Department of Transportation
1401 East Broad Street
Richmond, Virginia 23219
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(g) Acceptance of Work Products:
Tasks or subtasks will not be considered "complete" until the
designated work product is accepted as complete by the VDOT Task
Manager. Complete shall mean that the work product meets the
requirements or expectations of both parties for that work product as
outlined in the signed Task Assignment document.
(h) Payment:
For services performed in accordance with the provisions of this
contract, the Purchasing Agency agrees to pay the Contractor on a
fixed price/Level of Effort basis with the amount based upon the hours
established to complete work on specific tasks multiplied by the fixed
billable rates as indicated in the Contractor's Best and Final Offer,
which is incorporated herein, and the non-salary direct costs for the
specific tasks. Contractor shall receive monthly in-progress payments
for work performed for the previous month based on milestones
identified in the Task Assignment document.
Any changes in personnel or rates from those shown in the Contractor's
Best and Final Offer shall require a written request from the
Contractor followed by written approval by the Purchasing Agency.
Changes in personnel may include additions or deletions of personnel
from this contract as well as promotions. Rates for new personnel must
be approved by the Purchasing Agency.
Annual rate increases after Year 1 will be handled as specified in the
Contractor's Best and Final Offer. The Purchasing Agency and the
Contractor will jointly determine individuals to be included in the
wage pool.
Invoices will be paid in full within 30 days after the receipt of a
proper and acceptable invoice by the Contractor.
(h) Certification regarding lobbying:
The Contractor certifies that it is in compliance with 49CFR Part 20,
Certification Regarding Lobbying
(i) Precedence of Documents
- This document
- Contractor's Best and Final Offer dated November 19, 1998
- Contractor's Proposal dated August 31, 1998
- Request for Proposals dated July 20, 1998
4
<PAGE>
(4) Consideration
The total expenditures under this contract shall not exceed $6 million
for the three-year period of performance. Fees for specific task
assignments shall be in accordance with the Price/Cost Chart included
in the Best and Final Offer for the approved individuals assigned to
the task.
IN WITNESSETH WHEREOF, the parties have caused this contract to be
duly executed intending to be bound thereby.
Contractor: Va. Department of Transportation:
By: /s/ S. E. Rowe By: /s/ Leonard G. Lao
------------------------------- --------------------------------
S. E. Rowe
Title: Vice President and Director Title: Asst. Division Administrator
------------------------------- -----------------------------
Date: 12-15-98 Date: 12-22-98
--------------------------------- -----------------------------
5
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2.0 STATEMENT OF NEEDS
2.1 Potential Work Assignments
A broad range of project assignments are anticipated under this contract with
required ITS technical expertise. The Offeror selected under this solicitation
may be required to perform one or more of the following types of work
assignments:
. Development of statewide and regional frameworks in compliance with
the USDOT National Architecture
. Systems integration
. NTCIP-compliance testing
. Evaluation of ITS hardware/software alternatives
. Simulation modeling
. Traffic management
. National architecture compliance analysis
. ITS equipment specifications
. Review and evaluation of proposed ITS standards
. Development of functional requirements
. Review and critique of design documents
. Development arid evaluation of acceptance test plans
. Communication system evaluation and design
. Data extraction/interchange between disparate systems
. General ITS technical support to Central Office Divisions
. General ITS technical support to District offices
. Development of RFPs, RFIs and Statements of Work
Project assignments will not include engineering design level activity, although
conceptual and functional levels of detail may be required. This contract may
include software design and development activities. In some instances,
individual project assignments may not result in a formal report. In these
situations, the Consultant will work in cooperation with VDOT personnel to
recognize and solve individual problems as they arise.
Some assignments may include the development of requests for proposals for the
Department. The Consultant and/or any member of the team will not be considered
for subsequent work if any assignment clearly would give the Consultant or team
member a competitive advantage. The Department will consider these constraints
in scoping assignments, and the use of non-disclosure agreements, to minimize
such limitations. The Department's interest and the objectives of this project
shall take precedence, however, over the Consultant's interest. The duration
of assignments may range from a few days to several months, and it is likely
that multiple assignments will be concurrent. Progress meetings and/or reports
will be required as necessary to review the tasks undertaken and/or
accomplished.
2
<PAGE>
2.2 Term of Contract
This contract will be a 36-month task order contract. Individual task order
assignments will be negotiated as tasks are assigned by VDOT.
2.3 Staff Requirements
VDOT seeks a qualified team of consultants to perform work on an on-call basis.
Work assignments will be numerous and concurrent and will entail a comprehensive
knowledge of ITS, state DOTs, and the transportation technology industry. Over
the previous 21 months of this contract, the contractor worked approximately
25,000 hours. This figure is provided for information purposes only and should
not be construed to be a guarantee of a specific level of work under this
contract.
2.4 Project Manager Responsibilities
The Project Manager will be responsible for all aspects of the contract,
including:
. Overall contract management
. Subcontractor management
. Invoicing
. Progress reports
. Management of Task Managers
. Technical project work as appropriate
One of the primary evaluation criteria will be the proposed availability and
qualifications of the Project Manager. The Project Manager must be able to
provide an appropriate percentage of their time to this contract during the
contract period.
2.5 Task Managers
Because this is a task order-based contract, each task will be managed by a Task
Manager. The Task Managers, selected by the Project Manager and approved by
VDOT, will be responsible for delivering the work products of the individual
work assignment tasks. The Task Manager must be expert in the work assignment
area for which he/she is being assigned, and must be able to interact directly
with the VDOT project manager and other state/contractor personnel.
3
<PAGE>
5.0 GENERAL TERMS AND CONDITIONS
For the purposes of clarification, each firm receiving this Request for
Proposals is referred to as an "Offeror" and the Offeror awarded the
contract to supply goods or services is referred to as a "Contractor." This
Request for Proposals states the instructions for submitting proposals, the
procedure and criteria by which a contract may be awarded, and the
contractual terms which will exclusively govern the contract between VDOT
and the Contractor.
For a listing of the General Terms and Conditions, please see Attachment A.
If there is a conflict between the General Terms and Conditions and the
Special Terms and Conditions, the Special Terms and Conditions shall
govern.
6.0 SPECIAL TERMS AND CONDITIONS
By submitting their proposals, Offerors certify that they understand the
following prohibitions, and if awarded a contract as the result of this
solicitation, they will comply. They also understand that a violation of
these prohibitions is a breach of contract and can result in default
action.
6.1 Proposal Acceptance Period
The proposal shall be binding upon the Offeror for one hundred-twenty (120)
days following the proposal due date. If the proposal is not withdrawn at
that time, it remains in effect until an award is made or the solicitation
is canceled. It is anticipated that considerable time for review,
negotiations, and the pursuit of funding and other resource support may be
needed before a final decision can be made. Every effort will be made to
provide status information during this process.
6.2 Prime Contractor Responsibilities
No portion of this contract may be subcontracted without the written
--------------------------------------------------------------------
permission of VDOT. Subcontractors shall be fully qualified to perform the
------------------
work and shall adhere to all provisions of this contract. The Contractor
shall be fully responsible for the performance of all subcontracted work.
The Contractor shall be responsible for completely supervising and
directing the work under this contract and all subcontractors that it may
utilize, using its best skill and attention. Subcontractors who perform
work under this contract shall be responsible to the prime Contractor. The
Contractor agrees that it is as fully responsible for the acts and
omissions of its subcontractors and of persons employed by it as it is for
the acts and omissions of its own employees.
11
<PAGE>
6.3 Joint Work
Due to the nature of VDOT's program, it will be necessary for the
Contractor to work in conjunction with other VDOT consultants, contractors,
universities and/or the Virginia Transportation Research Council. VDOT, at
its own discretion, may also direct the Contractor to reach out to acquire
the services of other qualified individuals not initially proposed in order
to perform certain project work.
6.4 D.B.E. Participation
It is the policy of the Commonwealth of Virginia to contribute to the
establishment, preservation, and strengthening of small businesses and
businesses owned by women and minorities and to encourage their
participation in State procurement activities. The Commonwealth of Virginia
encourages Offerors to provide for the participation for small and
businesses owned by women and minorities through partnerships, joint
ventures, subcontracts and other contractual opportunities. Submission of a
report for utilizing the goods and services of such businesses and plans
for involvement on this contract is required. By submitting a proposal,
Offerors certify that all information provided in response to this RFP is
true and accurate.
6.5 Proposed Individuals
All individuals proposed to work under this contract must continue to work
on this contract for its duration so long as they continue to be employed
by the Contractor unless removed from work on the contract with the consent
of VDOT. Any change in key personnel assigned to this project must be
submitted in writing to VDOT.
6.6 Insurance
The Contractor shall furnish a Certificate of Insurance showing the
following insurance coverages are in force at the time the work commences,
and will maintain these insurance coverages during the entire term of the
contract. Additionally, all insurance must be provided by insurance
companies authorized to sell insurance in Virginia by the Virginia State
Corporation Commission. This certificate shall be furnished to VDOT within
ten (10) calendar days after request. A thirty (30) day written notice of
cancellation or non-renewal shall be furnished to the Buyer identified in
the solicitation at the address indicated. If the Contractor fails to
maintain the insurance required, VDOT may cancel the contract. The right is
reserved to approve or reject the insurance provider, and notice
of acceptance will be given in writing.
Insurance coverages and limits required:
1. Worker's Compensation - Statutory requirements and benefits.
2. Employer's Liability - $100,000.
3. General Liability - $500,000 combined single limit. The Commonwealth
of Virginia is to be named as an additional insured with respect to
the services being procured. The
12
<PAGE>
coverage is to include Premises/Operations Liability, Property Damage,
Products and Completed Operations Coverage, Independent Contractor
Liability, Owner's and Contractor's Protective Liability and Personal
Injury Liability.
4. Automobile Liability - $500,000.
5. Property Damage - $500,000. The Commonwealth of Virginia is to be named as
an additional insured. VDOT reserves the right to approve or reject the
insurance provider and will give notice of acceptance to the Contractor via
Notice of Award.
6.7 Drug Free Work Place
The following acts are prohibited by the Contractor's employees performing
services under the terms of this contract.
1. Unlawful or unauthorized manufacture, distribution, dispensing, possession
or consumption of alcohol or other drugs at the work place.
2. Impairment or incapacitation in the work place from the consumption of
alcohol or other drugs.
13
<PAGE>
EXHIBIT 21.1
State of
Subsidiary Incorporation
- ---------- -------------
Meyer Mohaddes Associates, Inc California
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our reports dated
December 3, 1999 except Note 7, as to which the date is December ___, 1999,
with regard to the financial statements and schedule of Iteris, Inc. as of and
for each of the three years in the period ended March 31, 1999, and our report
dated July 2, 1998 with regard to the financial statements of Meyer, Mohaddes
Associates, Inc. as of and for the year ended December 31, 1997, in the
Registration Statement (Form S-1) and related Prospectus of Iteris, Inc. for the
registration of XXX,000 shares of its common stock.
Ernst & Young LLP
Orange County, California
The foregoing consent is in the form that will be signed upon the
reincorporation of the Company in Delaware and the transfer of net assets of the
ITS division of Odetics, Inc. to Iteris, Inc. that is expected to occur prior to
the effectiveness of the Company's initial registration statement on Form S-1 as
described in Note 7 to the consolidated financial statements.
/s/ Ernst & Young LLP
Orange County, California
December 17, 1999
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