<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) Annual Report Pursuant to Section 13 or 15(d)
[X] of the Securities Exchange Act of 1934 [Fee Required]
For Fiscal Year Ended June 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From to
----- -----
Registrant, State of Incorporation,
Address and Telephone Number
----------------------------
GRC INTERNATIONAL, INC.
Commission (a Delaware Corporation) I.R.S. Employer
File No. 1900 Gallows Road Identification No.
- ------------ Vienna, Virginia 22182 ------------------
1-7517 (703) 506-5000 95-2131929
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $.10 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of July 31, 1995, the aggregate market value of the Registrant's voting
common stock held by non-affiliates was $220,889,550. As of July 31, 1995,
there were 9,038,845 shares of the Registrant's $.10 par value common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1995 Annual Report to Stockholders for the
year ended June 30, 1995 are incorporated by reference into Parts I and II of
this report.
Portions of the Proxy Statement for the Corporation's 1995 Annual Meeting
of Shareholders are incorporated by reference into Part III of this report. The
Proxy Statement shall be filed in accordance with the rules of the Commission
within 120 days after the close of the fiscal year to which this report
pertains.
<PAGE>
PART I
ITEM 1. BUSINESS
--------
1. GENERAL DESCRIPTION OF BUSINESS
-------------------------------
GRC International, Inc. (the "Company") was organized in California in
1961. Since 1974, the Company has been a Delaware corporation. The Company,
headquartered in Vienna, Virginia, is an internationally recognized provider of
professional and technical services to military, civil and commercial clients.
As a leader in knowledge-based services and high-quality technical solutions,
the Company has gained prominence for innovation in complex information
technology, studies and analysis, modeling and simulation, testing and
evaluation, proprietary products and telecommunications.
2. NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
The majority of the Company's revenues are generated from professional and
technical services. The Company provides a wide variety of services under cost-
plus-fee, fixed price and time and materials contracts, primarily in the field
of defense and national security. In general, the contracts involve the
investigation and application of advanced technology and innovative management
techniques to help make critical decisions and increase productivity and
efficiency, primarily for defense-related agencies of the United States
Government. The Company's services capabilities involve systems research and
analysis, information systems, operations analysis, testing and evaluation,
systems engineering, economic modeling, cost estimating, applied physics, data
processing, software development, military system effectiveness, and personnel
management.
The Company has long been providing high-quality knowledge-based services
and technical solutions in numerous areas of national importance. These are:
Information technology: The Company is involved in creating large-scale
----------------------
decision-support systems and software engineering environments; applying
operations research and mathematical modeling to business and management
systems; and implementing advanced database technology.
The Company has expertise at creating pure open system computing
environments which employ diverse technology platforms and are accessible from
different security levels. These seamless information systems let customers
draw useful information from virtually any type of electronic data to help them
make critical decisions.
The Company has capabilities in data collection, information management and
presentation that support automated government acquisition, financial management
and personnel functions. Our contract work has led to automating administrative
functions to make certain documentation activities more efficient.
The Company's extensive involvement in technology transfer and related
export control issues has led to the development of DecisionVue(R) - a
collection of specialized decision-support tools. Through hyper-texting and
other functions, DecisionVue(R) breaks down complex technologies, such as
satellites, into individual components so that the details of suitable
replacement parts can be determined. DecisionVue(R) has also been used in
evaluating technology transfer issues, such as whether exporting satellite or
radar technologies will compromise national security; summary and comparison of
research and development facilities; and analysis of space qualified components.
2
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Studies and analysis: The Company provides studies and analysis
--------------------
capabilities to help customers solve complex multidisciplinary problems involved
in policy development and planning of state-of-the-art high-technology systems.
The Company's technical staff has extensive experience in radar, optics,
communication networks, electronics, navigation, guidance and control systems,
and space and surveillance systems. In addition, we provide independent,
unbiased evaluation verification, and solutions that support a cost-conscious
military evaluating high technology policy development and system acquisition.
As our cost and operational effectiveness analysis and micro/macro simulations
define a problem, the Company works to identify the tools which will best help
customers quantify, assess and mitigate risks or highlight available options.
Modeling and simulation: The Company has expertise in developing
-----------------------
responsive, cost-effective driver hardware and software used in real-time
testing of sensor, weapon and battlefield management command, control and
communication (BM/C/3/) systems. In addition, our computer-based solutions are
becoming valuable training tools. We have worked to build an interactive
multimedia training module to teach pilots about different types of electronic
warfare and radar systems and optical evasive tactics. Our additional high-
performance, computer-aided training solutions include interactive video disk
with touch screen, multiple language treatment, insitu training and workforce
retraining.
Testing and evaluation: Intertwined with the Company's modeling and
----------------------
simulation capabilities are its professionals' testing and evaluation skills.
The Company has an established 20-year record of working with the United States
Government in conducting laboratory and field tests and evaluations of nuclear
and kinetic energy weapons, hypervelocity impact effects, advanced armor and
anti-armor performance and effects of space debris on operational satellites.
In parallel with the governmental testing and evaluation support, the
Company designs, manufactures and markets a line of electronically instrumented
impact testing equipment for dynamic materials testing under the Dynatup(R)
trademark and markets several software products. The materials testing product
line, sold to industrial users for materials evaluation, includes instrumental
drop tower systems and microprocessor-based automated test systems which are
used to determine failure points in a wide variety of structures and materials.
The Company also develops and markets hardware/software systems which utilize
adaptive learning networks to perform non-destructive materials testing.
Proprietary products: The Company's Flow Gemini(TM) software product is a
--------------------
comprehensive and flexible data management system with applications for
occupational health information, environmental information and personnel
assurance. This system is designed to manage health, environmental and
personnel related data to facilitate compliance with federal and state
recordkeeping and to help organizations deal effectively with problems in these
areas. In addition, the Company offers two software/hardware library data
systems using CD-ROM and personal computers. These are the LASERQUEST(R)
system, which contains a bibliographic database and software that facilitates
library cataloging, and the LASERGUIDE(R) system, which is a library patron
access catalog system.
The Company markets an AASP(TM) security product (Automated Assessment
Signal Processor), which is a neural network signal processor that can be
integrated into existing perimeter security systems to enhance their real-time
intrusion detection capabilities. The AASP(TM) can be "trained to distinguish
between perimeter sensor signals that are nuisances", such as wildlife and other
environmental factors, and actual intruders penetrating a security system. The
product is particularly effective at large high security installations, such as
military bases, nuclear power plants, petrochemical facilities and prisons, as
well as commercial and smaller installations.
Telecommunications: The Company has entered the fiber optics
------------------
telecommunications market with the introduction of its OSU(TM) Network
Interface, which solves problems of network isolation, security and
3
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interoperability in the emerging new world of wide-band communications. Once
integrated into a fiber optic network, the OSU(TM) will help interexchange
carriers (IECs) and Regional Bell Operating companies (RBOCs) detect performance
anomolies in a network rapidly and allow networks to operate securely with
reduced risk of disruptions.
In addition, a new application for the Company's technology was identifieid
when an agreement was signed for the use of an OSU-derivative product in the
video distribution market. This product will enable video, previously available
only on cable networks, to be distributed through RBOCs. The Company believes
that as fiber optic telecommunications mature, new network boundaries where the
OSU(TM) can provide standard demarcation, security and interoperability features
will emerge.
As part of the Company's strategy of exporting its government products to
commercial markets, it has begun the development of NetworkVUE(TM), a
telecommunications network configuration and optimization analysis management
system. NetworkVUE(TM), an integration of several of the Company's leading-edge
technology tools for modeling, simulation and visualization, artificial
intelligence and database management is designed to serve a niche market of
telecommunications and Fortune 500 network operations and outsourcing firms.
CONTRACTS
---------
Contract revenues from professional and technical services, either as prime
contractor or subcontractor, represented approximately 96%, 95% and 95% of the
Company's total revenues from the fiscal years ended June 30, 1995, 1994 and
1993, respectively. The Company's government contracts can fall into one of
three categories: (1) cost-plus-fee, (2) fixed price, or (3) time and materials.
Under a cost-plus-fee contract, the government reimburses the Company for its
allowable costs and expenses and pays a fee which is either negotiated and fixed
or awarded based on performance. Under a fixed price contract, the government
pays an agreed upon price for the Company's services or products and the Company
bears the risk that increased or unexpected costs may reduce its profits or
cause it to incur a loss. Conversely, to the extent the Company incurs actual
costs below anticipated costs on these contracts, the Company could realize
greater profits. Under a time and materials contract, the government pays the
Company a fixed hourly rate intended to cover salary costs and related indirect
expenses plus a certain profit margin. For fiscal years 1995 and 1994,
approximately 53% and 56% of the Company's professional and technical services
revenues were from cost-plus-fee contracts, while approximately 47% and 44% were
fixed price or time and materials type contracts, respectively.
During fiscal year 1995, the Company's contracts were performed for a
number of program offices within various defense agencies, including each of the
armed services. Customers outside the field of defense and national security
include other agencies of the federal government, agencies of state and local
governments and private industry. Any or all of the contracts with agencies of
the United States Government may be subject to termination for the convenience
of the government. If a contract were to be terminated, the Company would be
reimbursed for its allowable costs up to the date of the termination, and would
be paid a proportionate amount of the fees attributable to the work actually
performed. In addition to the normal risks found in any business, companies
conducting research and analysis services for the United States Government are
subject to changes in the defense budget, changing national priorities, the
potential of suspension or debarment from new government business, and
significant changes in contract scheduling and funding.
COMPETITION
-----------
The Company encounters substantial competition in the professional and
technical services area from a large number of entities, some of which are
significantly larger than it in size and financial resources.
4
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The management of the Company believes that it has a relatively small percentage
of the total market. Competition comes principally from other companies and
certain non-profit organizations engaged in similar aspects of research and
analysis.
Competition for the Company in the materials testing field is more limited
due to a confined market and the high degree of specialization involved.
Nevertheless, a number of other products used for materials testing are produced
by other corporations. Sales of the Company's testing machines account for a
relatively small percentage of all product sales associated with materials
testing. The software market in general is highly competitive and rapidly
changing, although the competition experienced by any one product or specialty
application may be limited.
RESEARCH AND DEVELOPMENT
------------------------
The Company concentrates its research and development efforts on projects
intended to result in technological enhancements to present products and the
development of new products compatible with existing product lines. This
approach reflects management's commitment to research and development activities
intended to produce additional revenues in the near term. Research and
development expenditures were approximately $1.1 million, $.4 million and $.7
million for 1995, 1994 and 1993, respectively.
PATENTS, TRADEMARKS, LICENSES, COPYRIGHTS
-----------------------------------------
While the Company and its subsidiaries hold a number of patents,
trademarks, licenses and copyrights, in the opinion of management no individual
patent, trademark, license or copyright is material to the present operations of
the Company as a whole.
EMPLOYEES
---------
As of June 30, 1995, the Company employed 1,290 full-time people.
ITEM 2. PROPERTIES
----------
All of the Company's operations are conducted in leased facilities.
The terms of Company leases range from monthly tenancies to fifteen years, and
many of these leases may be renewed for additional periods at the option of the
Company. Major leased facilities are at locations in California and Virginia.
Management believes that the Company's facilities and equipment are
generally well maintained, in good operating condition, and adequate for its
present operations. Management does not anticipate any material adverse effect
on the Company's financial position or results of operations in connection with
obtaining lease renewals or suitable alternative space for any of its
facilities.
ITEM 3. LEGAL PROCEEDINGS
-----------------
In October 1993, the Company was served with a lawsuit filed in the
Superior Court of Orange County, California by ICN Biomedicals, Inc. ("ICN") and
its parent company, ICN Pharmaceuticals, Inc. ("Pharmaceuticals"). The suit
alleged fraud, negligent misrepresentation, violations of state and federal
securities laws and other claims against the Company in connection with the sale
of its biomedical business to ICN in 1989, and sought to recover all monies paid
and damages for expenses and interest in the approximate amount of $100 million.
In December 1993, the court ordered ICN to arbitrate its claims, and
5
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ICN filed for arbitration in March 1994. In December 1994, the arbitration panel
dismissed ICN's claims and ordered ICN to pay the Company the remaining amounts
due under the 1989 agreement, approximately $2.7 million. In March 1995, the
court confirmed the arbitration award, and ICN paid the final amounts due to the
Company in April 1995. In May 1995, the court dismissed the remaining claims of
Pharmaceuticals, without prejudice to Pharmaceuticals filing an action in
federal court in Delaware pursuant to the forum selection clause in the 1989
agreement. In June 1995, the court denied Pharmaceuticals' motion for
reconsideration of the dismissal. In August 1995, Pharmaceuticals appealed the
dismissal. In September 1995, the Court of Appeal dismissed Pharmaceuticals'
appeal.
As a result of the various arbitration and court decisions, the
Company was able to reverse reserves during fiscal 1995 of approximately
$400,000 (credited to general, administrative, etc.) that were associated with
the various ICN matters.
In addition, during the course of the lawsuit and arbitration, ICN
informed the Company of three ongoing tax inquiries of the biomedical business
involving proposed tax deficiencies exceeding $1 million (including interest and
penalties), which includes periods of ownership by the Company.
Management believes that the proposed tax assessments are excessive
and that ICN is responsible for a significant portion of any liabilities
associated with these assessments. Management does not believe that the ultimate
outcome of these actions will have a material adverse effect on the consolidated
financial conditions or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matter was submitted to a vote of holders of the Company's stock in
the fourth quarter of fiscal year 1995.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------
Information as to the markets in which the Company's common stock is
traded, the high and low prices of such stock, stockholders of record and
dividend policy appears on page 11 of the Company's Annual Report to
Stockholders for 1995, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Selected financial data appears on page 6 of the Company's Annual
Report to Stockholders for 1995, and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
-----------------------------------------------------------------
FINANCIAL CONDITION
-------------------
Management's discussion and analysis of results of operations and
financial condition appears on pages 7 through 11 of the Company's Annual Report
to Stockholders for 1995, and is incorporated herein by reference.
6
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Consolidated balance sheets as of June 30, 1995 and 1994 and the
consolidated statements of income and cash flows for each of the three years in
the period ended June 30, 1995, together with the report of independent public
accountants contained on pages 12 through 27 of the Company's Annual Report to
Stockholders for 1995 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by this item is hereby incorporated by
reference to the Proxy Statement (to be filed).
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this item is hereby incorporated by
reference to the Proxy Statement (to be filed).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this item is hereby incorporated by
reference to the Proxy Statement (to be filed).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this item is hereby incorporated by
reference to the Proxy Statement (to be filed).
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(A) EXHIBITS
See "Index to Exhibits" hereinafter contained and incorporated
herein by reference.
7
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(B) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES
The following financial information is filed herewith on the
pages indicated:
<TABLE>
<CAPTION>
Page
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<S> <C>
Independent Auditors' Report on Supplemental
Financial Statement Schedules 10
Independent Auditors' Consent 10
Schedules Supporting the Financial Statements:
II Valuation and Qualifying Accounts for the
years ended June 30, 1995, 1994 and 1993 11
</TABLE>
All other schedules are omitted since they are not applicable, not required
or the required information is included in the financial statements or notes
thereto.
(C) REPORTS ON FORM 8-K
None.
8
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SIGNATURES
----------
Pursuant to the requirements of section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GRC INTERNATIONAL INC.
Date: September 21, 1995 By: /s/ JimRoth
------------------ -------------------------------
Jim Roth
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip R. Pietras his attorney-in-fact, with the
power of substitution, for him in any and all capacities, to sign any amendments
to this Report, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the Securities and Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Date: September 21, 1995 By: /s/ Jim Roth
------------------ -------------------------------
Jim Roth
President and Chief Executive
Officer
Date: September 21, 1995 By: /s/ Philip R. Pietras
------------------ -------------------------------
Philip R. Pietras
Vice President, Treasurer and
Chief Financial Officer
Date: September 21, 1995 By: /s/ H. Furlong Baldwin
------------------ -------------------------------
H. Furlong Baldwin, Director
Date: September 21, 1995 By: /s/ Leslie B. Disharoon
------------------ -------------------------------
Leslie B. Disharoon, Director
9
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Date: September 21, 1995 By: /s/ Charles H.P. Duell
------------------ -------------------------------
Charles H.P. Duell, Director
Date: September 21, 1995 By: /s/ Edward C. Meyer
------------------ -------------------------------
Edward C. Meyer, Chairman
of the Board
Date: September 21, 1995 By: /s/ George R. Packard
------------------ -------------------------------
George R. Packard, Director
Date: September 21, 1995 By: /s/ Herbert Rabin
------------------ -------------------------------
Herbert Rabin, Director
Date: September 21, 1995 By: /s/ Harris W. Seed
------------------ -------------------------------
Harris W. Seed, Director
and Assistant Secretary
Date: September 21, 1995 By: /s/Joseph R. Wright, Jr.
------------------ -------------------------------
Joseph R. Wright, Jr., Director
10
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INDEPENDENT AUDITORS' REPORT
----------------------------
ON
--
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE
------------------------------------------
To the Stockholders of GRC International, Inc.:
We have audited the consolidated financial statements of GRC International,
Inc. and subsidiaries as of June 30, 1995 and 1994, and for each of the three
years in the period ended June 30, 1995, and have issued our report thereon
dated August 11, 1995, except as to the fourth paragraph of Note 5, as to which
the date is September 14, 1995; such financial statements and report are
included in your 1995 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of GRC International, Inc. listed in Item 14. This consolidated
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
McLean, Virginia
August 11, 1995, except as to the fourth
paragraph of Note 5, as to which the date
is September 14, 1995
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration
Statements No. 33-1046, 33-39512, 33-39513, 33-52536, 33-52538, 33-87981 and
33-87982 of GRC International, Inc. on Form S-8 of our reports dated August 11,
1995, except as to the fourth paragraph of Note 5, as to which the date is
September 14, 1995, appearing in and incorporated by reference in this Annual
Report on Form 10-K of GRC International, Inc. for the year ended June 30, 1995.
DELOITTE & TOUCHE LLP
McLean, Virginia
September 21, 1995
11
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GRC INTERNATIONAL, INC. AND SUBSIDIARIES
----------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED DEDUCTIONS BALANCE
BEGINNING COSTS AND TO OTHER FROM AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVES PERIOD
- ----------- --------- -------- -------- -------- ------
/(A)/ /(B)/
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995
Reserves for uncollectible receivables -
Deducted from accounts receivable $ 64 $ 3 $ --- $ (51) $ 16
Deducted from unbilled reimbursable
costs and fees 3,606 1,051 (197) (639) 3,821
------ ------ ------- ------- ------
$3,670 $1,054 $ (197) $ (690) $3,837
====== ====== ======= ======= ======
YEAR ENDED JUNE 30, 1994
Reserves for uncollectible receivables -
Deducted from accounts receivable $ 75 $ 3 $ --- (14) $ 64
Deducted from unbilled reimbursable
costs and fees 4,509 794 (6) (1,691) 3,606
------ ------ ------- ------- ------
$4,584 $ 797 $ (6) $(1,705) $3,670
====== ====== ======= ======= ======
YEAR ENDED JUNE 30, 1993
Reserves for uncollectible receivables -
Deducted from accounts receivable $ 54 $ 57 $ --- $ (36) $ 75
Deducted from unbilled reimbursable
costs and fees 3,705 352 670 (218) 4,509
------ ------ ------- ------- ------
$3,759 $ 409 $ 670 $ (254) $4,584
====== ====== ======= ======= ======
</TABLE>
/(A)/ Reductions of revenue for potentially nonrecoverable costs.
/(B)/ Write off of uncollectible accounts and cost against reserves, net of
recoveries.
12
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INDEX TO EXHIBITS
(EXHIBIT NUMBERS CORRESPOND TO EXHIBIT TABLE,
REGULATION S-K, ITEM 601)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
- ------ ----
<S> <C> <C>
3.1 Restated Certificate of incorporation
(incorporated by reference to Exhibit 3.1 to the
1994 Form 10-K).
3.2 Bylaws. ___
10.1* 1985 Employee Stock Option
Plan. ___
10.2* 1994 Employee Option Plan. ___
10.3* Director's Fee Replacement Plan. ___
10.4* Cash Compensation Replacement Plan. ___
10.5* Directors Phantom Stock Plan. ___
10.6* Directors Retirement Plan. ___
10.7* Incentive Compensation Plan. ___
10.8 Revolving Credit and Term Loan Agreement, with
Exhibits, with Mercantile-Safe Deposit & Trust
Company, dated as of July 30, 1990 (incorporated
by reference to Exhibit 10.5 to the 1990 Form
10-K).
10.9 First Amendment dated May 28, 1992 to Revolving
Credit and Term Loan Agreement (incorporated by
reference to Exhibit 10.6 to the 1992 Form 10-K)
10.10 Lease Agreement dated as of June 30, 1989, with
Exhibits, between the Company and Centennial lll
Limited Partnership (incorporated by reference to
Exhibit 10.17 to the 1989 Form 10-K).
10.11 Lease Amendment No. 1, with Exhibits, to lease
between the Company and Richmond Land Corporation
(as successor to Centennial lll Limited
Partnership)(incorporated by reference to Exhibit
10.12 to the 1994 Form 10-K).
10.12 Lease Amendments Nos. 2, 3, 4 and 5 to Lease
between the Company and Centennial lll Limited
Partnership)(incorporated by referenced to Exhibit
10.12 to the 1994 Form 10-K).
10.13 Lease Amendment No. 6 to lease between the Company
and Richmond Land Corporation (as successor to
Centennial lll Limited Partnership). ___
10.14 Amended and restated Rights Agreement dated June
30, 1995 between the Company and the American
Stock Transfer & Trust Company. ___
</TABLE>
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<TABLE>
<S> <C> <C>
10.15* Employment Agreement dated as of July 23, 1992 between the
Company and Jim Roth, as amended (incorporated by reference to
Exhibit 10.14 to the 1994 form 10-k)
10.16* Form of Employment Agreement dated as July 1, 1995 between the
Company and Jim Roth. __
10.17* Note dated July 9, 1992, and Deed of Trust dated as of August 11,
1993, by and between the Company and Jim Roth (incorporated by
reference to Exhibit 10.25 t the 1994 Form 10-k)
10.18* Form of Employment Agreement between the Company and James P.
McCoy, Thomas E. Maultsby, Thomas E. McCabe and Joseph J. Eash
III __
10.19 Purchase and Sale Agreement and Joint Escrow Instructions between
General Research Corporation and Bermant Development Company. __
10.20 First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions between General Research Corporation and Bermant
Development company. __
10.21 Building Lease between GRC International, Inc. and Bermant
Development Company. __
10.22 Interim Lease between GRC International, Inc. and Bermant
Development Company. __
13 The Company's Annual Report to Shareholders for the year ended
June 30, 1995: __
</TABLE>
<TABLE>
<CAPTION>
Section
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<S> <C> <C>
Report Of Independent Public
Accountants on Financial Statements
Financial Statements
Consolidated -
Statements of Income
Balance Sheets
Statements of Cash Flows
Statements of Stockholders'
Equity
Notes to Financial Statements
Supplemental Data:
Quarterly Results of Operations
21 Subsidiaries of the Registrant.
23 Consent of Deloitte & Touche LLP (included on page 11
of Form 10-K) __
24 Powers of Attorney (included as a part of signature pages).
27 Financial Data Schedule
</TABLE>
* Indicates management contract or compensatory plan.
<PAGE>
EXHIBIT 3.2
BYLAWS OF GRC INTERNATIONAL, INC.
---------------------------------
ARTICLE I. OFFICES
------------------
Section 1. Registered Office
-----------------
The registered office of GRC International, Inc. in the State of Delaware shall
be located at 32 Loockerman Square, Suite L-100, City of Dover, County of Kent.
The name of its registered agent in charge thereof shall be the United States
Corporation Company.
Section 2. Other Offices
-------------
The Corporation shall maintain its principal and corporate offices in the State
of Virginia, and may also have an office at such other place or places, either
within or without the State of Delaware, as may be designated by the Board of
Directors.
ARTICLE II. SHAREHOLDERS' MEETINGS
-----------------------------------
Section 1. Place of Meeting
----------------
All meetings of the shareholders shall be held at the principal office of the
Corporation in the State of Virginia, or such other place as may be designated
from time to time by the Board of Directors.
Section 2. Annual Meeting
--------------
The annual meeting of shareholders shall be held on the first Thursday of
November each year, if not a legal holiday, and if a legal holiday, then on the
next succeeding business day, at the hour of 1:30 p.m. In the event the annual
meeting of shareholders is not held on the date above specified, the Board of
Directors shall cause a meeting in lieu thereof to be held as soon thereafter as
is convenient, and any business transacted or election held at such meeting
shall be as valid as if the meeting had been held on the date above specified.
Section 3. Special Meetings
----------------
Special meetings of the shareholders may be called by the Board of Directors, a
majority of the directors then in office, although less than a quorum, or the
sole remaining director. The call shall designate the place and the time of the
meeting.
Section 4. Notice of Meetings
------------------
Notice of meetings, annual or special, shall be given in writing to shareholders
entitled to vote by the Secretary or Assistant Secretary, or if there be no such
officers, or in the case of neglect or refusal, by any director or shareholder.
Such notices shall be sent to the shareholder's address appearing on the books
of the Corporation for the purpose of notice, not less than ten days before said
meeting.
<PAGE>
Notice of any meeting of shareholders shall specify the place, the day, and the
hour of meeting, and in case of a special meeting, the general nature of the
business to be transacted.
When a meeting is adjourned for 30 days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting. Save as aforesaid, it
shall not be necessary to give any notice of the adjournment or of the business
to be transacted at an adjourned meeting other than by announcement at the
meeting at which such adjournment is taken.
Section 5. Consent to Shareholders Meetings
--------------------------------
The transaction of any meeting of shareholders, however called and noticed,
shall be valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or proxy, signs a written waiver of notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents, or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 6. Quorum
------
The holders of a majority of the shares entitled to vote thereat, present in
person or represented by proxy, shall be requisite and shall constitute a quorum
at all meetings of the shareholders for the transaction of business, except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. If, however, such majority shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat, present
in person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 7. Voting Rights; Cumulative Voting
--------------------------------
Only persons in whose names shares entitled to vote stand on the stock records
of the Corporation on the day of any meeting of shareholders, and unless some
other day be fixed by the Board of Directors for the determination of
shareholders of record, then on such other day, shall be entitled to vote at
such meeting.
Every shareholder entitled to vote shall be entitled to one vote for each of
said shares. It is further provided, however, that at all elections of
directors of this Corporation, each holder of common stock shall be entitled to
as many votes as shall equal the number of votes which (except for this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of common stock multiplied by the number
of directors to be elected, and he may cast all of his votes for a single
nominee for director or may distribute them among the number to be voted for, or
for any two or more of them as he may see fit.
Section 8. Proxies
-------
Every shareholder entitled to vote may do so, either in person or by written
proxy, executed in accordance with the laws of the State of Delaware, and filed
with the Secretary or Assistant Secretary of the Corporation.
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<PAGE>
ARTICLE III. DIRECTORS; MANAGEMENT
-----------------------------------
Section 1. Powers
------
Subject to the limitations of the Certificate of Incorporation, of the Bylaws
and the laws of the State of Delaware, as to action to be authorized or approved
by the shareholders, all corporate powers shall be exercised by or under
authority of, and the business and affairs of this Corporation shall be
controlled by the Board of Directors.
Section 2. Number
------
The number of directors constituting the entire Board shall not be less than 7
or more than 14 as fixed from time-to-time by vote of a majority of the entire
Board; provided, however, that the number of directors shall not be reduced so
as to shorten the term of any director at the time in office; and provided
further, that the number of directors constituting the entire Board shall be 11
unless otherwise fixed by a majority of the entire Board.
Section 3. Classes of Directors
--------------------
The directors shall be divided into three classes. If the total number of
directors is not exactly divisible by three, one class, and if necessary, two
classes, shall each contain one more director than the remaining class or
classes.
Section 4. Nominations of Directors
------------------------
Nominations for the election of directors may be made by the Board of Directors
or by any shareholder entitled to vote for the election of directors. Such
nominations shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary of the Corporation
not less than ten (10) days and not more than one hundred twenty (120) days
prior to any meeting of the stockholders called for the election of directors,
including any annual meeting at which directors are to be elected; provided,
however, that if less than fourteen (14) days written notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of the
fourth day following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
Each such notice shall set forth (i) the name, age, business address, and, if
known, residence address of each nominee proposed in such notice; (ii) the
principal occupation or employment of each such nominee; (iii) the number of
shares of stock of the Corporation which are beneficially owned by each such
nominee; and (iv) the number of shares owned by any corporation or entity of
which such nominee is an officer, director, partner, employee or agent, directly
or indirectly.
The Chairman of the meeting may, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
-3-
<PAGE>
Section 5. Election of Directors
---------------------
The directors of one class shall be elected by a ballot at the annual meeting of
the shareholders, to serve for three years, and until their successors are
elected and have qualified. Their term of office shall begin immediately after
election.
Elections for directors in the first class shall be held at the first annual
meeting of the shareholders. Directors of the second class shall be elected at
the second annual meeting of shareholders, and directors of the third class
shall be elected at the third annual meeting of shareholders.
Section 6. Vacancies
---------
Any vacancy or vacancies in the Board of Directors for any reason, and any newly
created directorships, may be filled by the Board of Directors.
Vacancies in the Board of Directors may be filled by a majority of the remaining
directors though less than a quorum, or by a sole remaining director, and each
director so elected shall hold office for the remainder of the term and until
the next election of the class for which such director shall have been chosen
and until their successors shall be elected and qualified.
If any director tenders his resignation to the Board of Directors, to take
effect at a future time, the Board shall have the power to elect a successor to
take office at such time as the resignation shall become effective.
No reduction of the number of directors shall have the effect of removing any
director prior to the expiration of his term of office.
Section 7. Meetings
--------
Meetings of the Board of Directors shall be held at the principal office of the
Corporation in Vienna, Virginia, or as designated from time to time by the Board
of Directors. Any meeting shall be valid wherever held, if held by the written
consent of all the members of the Board of Directors, given either before or
after the meeting and filed with the Secretary or Assistant Secretary of the
Corporation.
Section 8. Organization Meetings
---------------------
The organization meetings of the Board of Directors shall be held immediately
following the adjournment of the annual meeting of the shareholders.
Section 9. Other Regular Meetings
----------------------
Regular meetings of the Board of Directors shall be held on the fourth Thursday
of every other month (except that the November meeting shall be held on the
first Thursday of November) at 10:00 a.m. or else at a date and time fixed by
the Board at its last regular meeting. If said day shall fall upon a holiday,
then such meeting shall be held upon the next succeeding business day
thereafter. No notice need be given of such regular meetings.
-4-
<PAGE>
Section 10. Special Meetings - Notices
--------------------------
Special meetings of the Board of Directors for any purpose or purposes shall be
called at any time by the President, or if he is absent, or unable or refuses to
act, by any Vice President or by any two directors.
Written notice of the time and place of special meetings shall be (i) hand-
delivered to each director, or (ii) sent to each director by mail, telegram or
express courier (such as Federal Express), charges prepaid, addressed to such
director at his or her address as it is shown upon the records of the
Corporation, or if it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of directors are regularly
held. In case such notice is delivered by mail, telegram or express courier, it
shall be deposited in the United States mail or delivered to the telegram
company or express courier in the place in which the principal office of the
Corporation is located at least forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is hand-delivered as above
provided, it shall be so delivered at least twenty-four (24) hours prior to the
time of the holding of the meeting. Delivery as above provided shall be due,
legal and personal notice to such director.
Section 11. Waiver of Notice
----------------
When all the directors are present at any directors' meeting however called or
noticed, and sign a written consent thereto on the records of such meeting, or
if a majority of the directors are present and if those not present sign in
writing a waiver of notice of such meeting, whether prior to or after the
holding of such meeting, which said waiver shall be filed with the Secretary or
Assistant Secretary of the Corporation, the transactions thereof are as valid as
if had at a meeting regularly called and noticed.
Section 12. Action of Directors Without a Meeting
-------------------------------------
Any action required or permitted to be taken by the Board of Directors under any
provision of the Delaware law, the Certificate of Incorporation, or these
Bylaws, may be taken without a meeting, if all members of the Board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
Section 13. Quorum
------
A majority of the number of directors as fixed by the Certificate or Bylaws
shall be necessary to constitute a quorum for the transaction of business, and
the action of a majority of the directors present at any meeting at which there
is a quorum, when duly assembled, is valid as a corporate act; provided that a
minority of the directors, in the absence of a quorum, may adjourn from time to
time, but may not transact any business.
Section 14. Indemnification and Insurance
-----------------------------
a) Right to Indemnification. Each person who is made a party or is threatened
------------------------
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or
-5-
<PAGE>
investigative, (hereinafter a "proceeding"), by reason of the fact that he, or a
person of whom he is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer in any subsidiary thereof, including any corporation,
partnership, joint venture, trust or any other enterprise in which the
Corporation has an interest of at least fifty (50) percent, shall be indemnified
and held harmless by the Corporation to the fullest extent required, permitted
or not prohibited by Delaware law, including (but not limited to) the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
awards and expenses (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement), reasonably
incurred or suffered by such person in connection therewith, and such
indemnification shall continue even if such person has ceased to be a director
or officer and shall inure to the benefit of his heirs, executors and
administrators; provided, however, except as provided in subsection 14(b)
-----------------
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section 14 shall
be a contract right and shall include the right to be paid by the Corporation
any expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
-----------------
requires, the payment of such expenses incurred by a director or officer in his
capacity as a director or officer in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such person is not
entitled to be indemnified under this Section 14 or otherwise. The Corporation
may, by action of its Board of Directors, provide indemnification and
advancement of expenses to employees and agents of the Corporation with the same
scope and effect as are provided to directors and officers herein.
b) Processing of Claims. A claim made by a person under this Section 14 shall
--------------------
be paid in full within thirty (30) days after such claim has been received in
writing by the Corporation, unless independent legal counsel has determined in a
letter to the Corporation, with a copy to such person, that indemnification of
such person would be prohibited, in whole or in part, under applicable law, or
that a claim for expenses shall not be paid, in whole or in part, on the grounds
that it is unreasonably high (with the amount by which such expenses are
unreasonably high stated therein). Any such determination letter given by
independent legal counsel within thirty (30) days of the filing of a claim shall
be conclusive and binding on the Corporation and on such person. If, within
thirty (30) days after the filing of such claim, the Corporation has not paid
such person the full amount of the claim or such lesser amount as determined by
independent legal counsel, such person shall have the right to commence legal
action for payment in any court having jurisdiction thereof, and in which venue
is proper.
c) Insurance.
---------
(1) Subject to the provisions of subsection (c)(2) hereof, the
Corporation hereby agrees to purchase and maintain in effect for the benefit of
the directors and officers one or more valid, binding and enforceable policies
of liability insurance providing, in all respects, coverage substantially
comparable to or superior to that presently in force.
-6-
<PAGE>
(2) The Corporation shall not be required either to obtain or maintain
such policy or policies of insurance in effect if said insurance is not
reasonably available or if, in the reasonable business judgment of the then
directors of the Corporation, either (i) the premium cost for such insurance is
substantially disproportionate to the amount of coverage; or (ii) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance.
d) Indemnification Agreements. The Board of Directors of the Corporation is
--------------------------
expressly authorized to enter into indemnification agreements, with such persons
as the Board deems appropriate, to effectuate the rights set forth in this
Section 14.
ARTICLE IV. OFFICERS
---------------------
Section 1. Officers
--------
The officers shall be: Chairman of the Board; President; one or more Vice
Presidents, one of whom may be designated Executive Vice President, one of whom
may be designated Chief Operating Officer, and one or more of whom may be
designated Senior Vice President; Secretary; one or more Assistant Secretaries;
General Counsel; Treasurer; and may include an Assistant Treasurer. Such
officers shall be elected by, and hold office at the pleasure of, the Board of
Directors.
Section 2. Election
--------
After their election, the directors shall meet and organize by electing a
Chairman of the Board from their own number; a President from their own number;
one or more Vice Presidents, one of whom may be designated Executive Vice
President, one of whom may be designated Chief Operating Officer, and one or
more of whom may be designated Senior Vice President; a Secretary; one or more
Assistant Secretaries; a General Counsel; a Treasurer; and, at their discretion,
an Assistant General Counsel and/or an Assistant Treasurer. The Chairman of the
Board and the President shall be members of the Board of Directors. Any two or
more of such offices, except those of the President and Secretary or Assistant
Secretary, may be held by the same person.
Section 3. Compensation and Tenure of Office
---------------------------------
The compensation and tenure of office of all the officers of the Corporation
shall be fixed by the Board of Directors.
Section 4. Removal and Resignation
-----------------------
Any officer may be removed, either with or without cause, by a majority of the
directors at the time in office, at any regular or special meeting of the Board,
or, except in case of an officer chosen by the Board of Directors, by any
officer upon whom such power of removal may be conferred by the Board of
Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the President, or to the Secretary or Assistant Secretary of the
Corporation. Any such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein; and,
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<PAGE>
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Vacancies
---------
A vacancy in any office because of death, resignation, removal, disqualification
or any other cause shall be filled in the manner prescribed in the Bylaws for
regular appointments to such office.
Section 6. Chairman of the Board
---------------------
The Chairman of the Board shall be a member of the Board of Directors. He shall
preside at all meetings of the shareholders and the Board of Directors and, in
the absence or disability of the President, he shall perform all functions of
the office of the President of the Corporation. He may be a regular member of
one or more of the standing committees (except the Audit Committee) and, in any
event, he shall be an ex-officio member of all the standing committees upon
which he does not serve as a regular standing member. He shall have such powers
and duties as may be prescribed by the Board of Directors or the Bylaws.
Section 7. President
---------
The President shall be the Chief Executive Officer of the Corporation and, if no
other Chief Operating Officer is named, the Chief Operating Officer of the
Corporation, and, subject to the control of the Board of Directors or the
Chairman of the Board, the President shall have general supervision, direction
and control of the day-to-day operations of the Corporation. In the absence of
the Chairman of the Board, he shall preside at all meetings of the shareholders
and Board of Directors. He may be a regular member of one or more of the
standing committees (except the Audit Committee) and, in any event, he shall be
ex-officio a member of the Executive committees. He shall have the general
powers and duties of management usually vested in the office of President of the
Corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors and the Bylaws.
Section 8. Chief Operating Officer
-----------------------
The Chief Operating Officer shall possess the power and may perform the duties
of the President in his absence or disability and shall perform such other
duties as may be prescribed from time to time by the Board of Directors.
Section 9. Vice Presidents
---------------
The Vice Presidents shall have such powers and perform such duties as may be
assigned to them by the Board of Directors or the President. In the absence or
disability of the President and the Chief Operating Officer, the Vice President
designated by the Board or the President shall perform the duties and exercise
the powers of the President.
Section 10. Secretary
---------
The Secretary shall keep, or cause to be kept, a book of minutes at the
principal office or such other place as the Board of Directors may order, of all
meetings of directors and shareholders,
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<PAGE>
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or at the
office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the names of the shareholders and their addresses; the
number and classes of shares held by each; the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Directors required by the Bylaws or Bylaw to be
given; he shall keep the seal of the Corporation and affix said seal to all
documents requiring a seal, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 11. Assistant Secretary
-------------------
The Assistant Secretary shall have the same rights, duties, powers and
privileges as the Secretary and may act in his place and stead whenever the same
shall be necessary or desirable.
Section 12. Treasurer
---------
Unless the Board of Directors determines otherwise, the Treasurer shall be the
Chief Financial Officer of the Corporation. The Treasurer shall have general
custody of all the funds and securities of the Company and have general
supervision of the collection and disbursement of funds of the Company. He
shall endorse on behalf of the Company for collection of checks, notes, and
other obligations, and shall deposit the same to the credit of the Company in
such bank or banks or depositories as the Board of Directors may designate. He
may sign, with the President, or such other person or persons as may be
designated for the purpose of the Board of Directors, all bills of exchange or
promissory notes of the Company. He shall enter or cause to be entered
regularly in the books of the Company full and accurate account of all moneys
received and paid by him on account of the Company; shall at all reasonable
times exhibit his books and accounts to any Director of the Company upon
application at the office of the Company during business hours; and, whenever
required by the Board of Directors or the President, shall render a statement of
his accounts. He shall perform such other duties as may be prescribed from time
to time by the Board of Directors or by the Bylaws.
Section 13. Assistant Treasurer
-------------------
The Assistant Treasurer shall have all the same rights, duties, powers and
privileges as the Treasurer and may act in his place and stead whenever the same
shall be necessary or desirable.
Section 14. General Counsel
---------------
The General Counsel shall advise and represent the Company generally in all
legal matters and proceedings and shall act as counsel to the Board of Directors
and its Committees. The
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<PAGE>
General Counsel may sign and execute pleadings, powers of attorney pertaining to
legal matters, and any other contracts and documents in the regular course of
his duties.
Section 15. Assistant General Counsel
-------------------------
The Assistant General Counsel shall have all the same rights, duties, powers and
privileges as the General Counsel and may act in his place and stead whenever
the same shall be necessary or desirable.
ARTICLE V. CORPORATE RECORDS AND REPORTS - INSPECTION
------------------------------------------------------
Section 1. Records
-------
The Corporation shall maintain adequate and correct accounts, books and records
of its business and properties. All such books, records and accounts shall be
kept at its principal office designated by the Bylaws, as from time to time
amended by the Board of Directors.
Section 2. Inspection
----------
All books and records provided for by the laws of the jurisdictions in which
this Corporation maintains offices shall be open to inspection of the directors
and shareholders from time to time and in the manner provided by the laws of
said states, as made applicable to foreign corporations keeping records in said
states.
ARTICLE VI. CERTIFICATES AND TRANSFER OF SHARES
------------------------------------------------
Section 1. Certificates for Shares
-----------------------
Certificates for shares shall be of such form and device as the Board of
Directors may designate and shall state: the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; the par value, if any, or a statement that such shares
are without par value; a statement of liens or restrictions upon transfer or
voting, if any; if the shares be assessable, or if assessments are collectible
by personal action, a plain statement of such facts. Certificates for preferred
shares shall contain, or have appended thereto, a statement of applicable
rights, privileges, preferences and restrictions.
Every certificate for shares must be signed by the Chief Executive Officer, or
by the President or a Vice President, and by the Secretary or Assistant
Secretary, which signatures shall be affixed manually or by facsimile signatures
of such of the foregoing officers as are required to execute such certificates
in accordance with this paragraph. Before it becomes effective, each
certificate for shares authenticated by the facsimile signature shall be (i)
countersigned by a transfer agent or transfer clerk and registered by an
incorporated bank or trust company, either domestic or foreign, as a registrar
of transfers, or (ii) countersigned by a facsimile of the signature of a
transfer agent or transfer clerk and registered by written signature by an
incorporated bank or trust company, either domestic or foreign, as registrar of
transfers.
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<PAGE>
EXHIBIT 10.1
GRC INTERNATIONAL, INC.
1985 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE
The purpose of the 1985 Employee Stock Option Plan is to enable GRC
INTERNATIONAL, INC. (the "Company") to attract and retain employees who are
expected to materially contribute to the prosperity of the Company and its
affiliates, by allowing them to acquire a proprietary interest (or increase
their proprietary interest) in the Company in accordance with the terms and
conditions of this Plan. It is intended that certain options granted under the
Plan shall constitute incentive stock options in accordance with the provisions
of Section 422 of the Internal Revenue Code of 1986.
2. DEFINITIONS
2.1 "Board of Directors" shall mean the Board of Directors of the Company.
------------------
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
2.3 "Committee" shall mean the Committee of the Board of Directors
---------
appointed pursuant to Section 4.3 hereof.
2.4 "Common Stock" shall mean shares of the Company's common stock (par
------------
value $.10 per share).
2.5 "Company" shall mean GRC International, Inc., a Delaware corporation,
-------
or any successor thereto by merger, consolidation or otherwise which may agree
to continue this Plan.
2.6 "Date of Exercise" shall mean the business day immediately preceding
----------------
the date on which written notice of exercise is delivered to the Company in
person or the date such notice is postmarked if delivered to the Company by
United States mail.
2.7 "Disability" shall mean the inability to engage in any substantial
----------
gainful activity by reason of any medically determined physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve months.
2.8 "Effective Date" shall mean March 18, 1985.
--------------
2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
2.10 "Fair Market Value" means the average of the high and low sale
-----------------
prices of the Stock quoted on the New York Stock Exchange Composite Transaction
Reporting System (or on the exchange or system where the Stock is principally
traded) on the date for which Fair Market Value is to be determined (or if
unavailable on such date, on the next preceding trading date). If the Fair
Market Value is not available on such date, the Committee shall determine the
Fair Market Value; provided, however, in the case of Incentive Stock Options
such determination shall conform to the Treasury Regulations under Section 422
of the Code.
FORM 2(e)(1)
<PAGE>
2.11 "Grant Date" shall mean the date as of which an Option is granted by
----------
the Committee pursuant to the Plan.
2.12 "Incentive Stock Option" shall mean an option that qualifies as an
----------------------
incentive stock option under Section 422 of the code.
2.13 "Key Employee" shall mean any employee of the Company or a Related
------------
Corporation who has or is expected to materially contribute to its prosperity.
The term "Key Employee" shall include officers but exclude directors in their
capacity as such.
2.14 "Nonqualified Stock Option" shall mean any Option granted under this
-------------------------
Plan which is not an Incentive Stock Option.
2.15 "Option" shall mean an Incentive Stock Option or Nonqualified Stock
------
Option granted pursuant to the terms of the Plan without distinction as to the
type.
2.16 "Option Agreement" shall mean the agreement executed between the
----------------
Company and the Optionee pursuant to Section 9 hereof.
2.17 "Option Price" shall mean the purchase price of shares of Common Stock
------------
subject to an Option.
2.18 "Option Term" shall mean the period beginning on the Grant Date and
-----------
ending on the day an Option expires under the terms of the Option Agreement or
the Plan.
2.19 "Optionee" shall mean any Key Employee who is granted an Option
--------
pursuant to the Plan.
2.20 "Parent" shall have the meaning set forth in Section 424(e) of the
------
Code.
2.21 "Plan" shall mean the GRC International, Inc. 1985 Employee Stock
----
Option Plan.
2.22 "Related Corporation" shall mean any Parent or Subsidiary.
-------------------
2.23 "Section 16 Optionee" shall mean an Optionee who is a director,
-------------------
officer or ten percent beneficial owner of the Company, as those terms are used
under Section 16 of the Exchange Act.
2.24 "Subsidiary" shall have the meaning set forth in Section 424(f) of the
----------
Code.
2.25 "Substantial Stockholder" shall mean any Key Employee who,
-----------------------
immediately before an Incentive Stock Option is granted, owns (within the
meaning of Section 422(b)(6) of the Code, after the application of the
attribution rules contained in Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock either of the Company or any
Related Corporation thereof.
2.26 "Treasury Regulations" shall mean (i) any proposed or final
--------------------
regulations issued by the Internal Revenue Service with respect to incentive
stock options and any supplement or
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<PAGE>
modification thereof, and (ii) any rulings, procedures, releases or other
position statements published by the Internal Revenue Service with respect to
incentive stock options.
3. STOCK SUBJECT TO PLAN
The stock subject to Options to be granted under the Plan shall be shares
of the Company's authorized but unissued Common Stock, or shares of Common Stock
reacquired by the Company and held as treasury stock. The aggregate number of
shares which may be issued under Options under this Plan shall not exceed
1,305,000 shares of Common Stock, unless such number of shares is adjusted as
provided in Section 13 hereof. In the event that any outstanding Option under
the Plan expires or terminates for any reason without having been exercised in
full, the shares of Common Stock allocable to the unexercised portion of such
Option shall become available for other Options under the Plan.
4. ADMINISTRATION OF PLAN
4.1 Administration by Committee. The Plan shall be administered by the
---------------------------
Committee which shall be appointed pursuant to Section 4.3 hereof.
4.2 Powers of Committee. The Committee shall have full and final authority
-------------------
in its discretion to:
(i) determine Key Employees of the Company or any Related
Corporation thereof taking into account the nature of the services rendered by
the particular employee, the employee's potential contribution to the long-term
success of the Company or a Related Corporation thereof and such other factors
as the Committee in its discretion shall deem relevant;
(ii) allocate and grant Options from time to time to such Key
Employees;
(iii) determine the duration, terms and provisions of the Options and
of Option Agreements, including but not limited to, any vesting provisions;
(iv) condition the exercise of any Options granted hereunder on the
attainment of certain specified goals by the Key Employee or by the Company or a
Related Corporation thereof;
(v) restrict the sale or otherwise provide for the repurchase of
shares acquired pursuant to the terms of an Option granted under the Plan;
(vi) determine the time or times at which Options shall be granted;
(vii) determine the number of shares to be covered by, and the term
of, each option;
(viii) determine the Fair Market Value of the
Common Stock and the Option Price;
(ix) to approve or disapprove any election by an Optionee under
Section 8.1 or Section 19.1, at any time before or after such election;
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<PAGE>
(x) accelerate the exercisability of Options in the event of a
tender offer or change in control of the Company;
(xi) interpret the Plan;
(xii) prescribe, amend and rescind rules and regulations relating to
the Plan; and
(xiii) make all other determinations, orders and decisions necessary
or advisable for the administration of the Plan. All such determinations and
actions shall be conclusively binding for all purposes and upon all persons.
4.3 Committee.
---------
4.3.1 The Plan shall be administered by a Committee appointed or
designated by the Board of Directors. The Committee shall at all times contain
at least three members of the Board of Directors. Members of the Committee
shall not be eligible to receive Options and shall be "disinterested persons" as
defined in Rule 16b-3 of the Exchange Act.
4.3.2 The Board of Directors may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, however
caused, shall be filled by the Board of Directors. The Committee shall select
one of its members as Chairman, and shall hold meetings at such times and places
as it may determine. The acts of a majority of the Committee during a meeting,
at which at least 50% of the members of the Committee who are members of the
Board of Directors are present (or acts reduced to or approved in writing by a
majority of the members of the Committee who are members of the Board of
Directors without the necessity of holding such a meeting) shall be the valid
acts of the Committee.
4.3.3 The Committee shall keep minutes of its proceedings and shall
furnish the Board of Directors with copies thereof, and of all decisions,
actions, and determinations made by the Committee. The interpretation and
construction by the Committee of any provision of the Plan, or of any Option
granted under it, shall be final.
4.4 Liability Limited. To the maximum extent permitted by law, no
-----------------
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan and/or any Option
granted under it.
4.5 Indemnification. To the maximum extent permitted by law, the
---------------
members of the Board of Directors and Committees shall be indemnified by the
Company in respect of all their activities under this Plan.
5. GRANTING OF OPTIONS
5.1 Granting of Options to Key Employees.
------------------------------------
5.1.1 The Committee may grant Options under the Plan to Key Employees
for such number of shares as the Committee may determine.
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<PAGE>
5.1.2 The Committee shall designate any Option granted as either an
"Incentive Stock Option" or "Nonqualified Stock Option" or the Committee may
designate a portion of a grant as an "Incentive Stock Option" and the remaining
portion as a "Nonqualified Stock Option". Any portion of a grant that is not
designated as an "Incentive Stock Option" shall be a "Nonqualified Stock
Option". More than one Option may be granted to a Key Employee subject to the
terms and restrictions set forth herein.
5.1.3 An Option shall not be granted prior to the Effective Date or
on or after the tenth anniversary of the Effective Date.
5.2 Limitation on Grant of Incentive Stock Options. The aggregate Fair
----------------------------------------------
Market Value (determined as of the time an Incentive Stock Option is granted) of
shares of Common Stock for which an Optionee's Incentive Stock Options are first
exercisable during any calendar year after 1986 under this Plan and any other
qualified Stock Option Plan of the Company or any Related Corporation thereof or
a predecessor corporation (within the meaning of the applicable Treasury
Regulations) of any such corporation, may not exceed $100,000.
6. OPTION PRICE
6.1 Committee to Determine Option Price. The Committee shall determine the
-----------------------------------
Option Price of shares of Common Stock for which Options are granted under the
Plan. The Option Price per share of Common Stock shall be at least equal to the
Fair Market Value of a share of Common Stock on the Grant Date.
6.2 Incentive Stock Option Price Where Optionee is Substantial
----------------------------------------------------------
Stockholder. If any Optionee is a Substantial Stockholder, the Option Price
- -----------
determined by the Committee for an Incentive Stock Option shall not be less than
110% of the Fair Market Value of the Common Stock on the Grant Date.
7. TERM OF OPTIONS
7.1 In General. The term of each Option granted under this Plan shall be
----------
for such period as the Committee shall determine, not to exceed 10 years, and
shall be subject to earlier termination as hereinafter provided. An Option shall
not be exercisable after the expiration of the Option Term.
7.2 Term of Incentive Stock Option Where Optionee is Substantial
------------------------------------------------------------
Stockholder. Notwithstanding Section 7.1, if any Optionee is a Substantial
- -----------
Stockholder, the term of an Incentive Stock Option shall not exceed 5 years from
the Grant Date.
8. EXERCISE OF OPTIONS
8.1 Manner of Exercise. To exercise an Option in whole or in part, an
------------------
Optionee shall give written notice of exercise to the Committee specifying the
number of shares as to which the Option is being exercised, accompanied by
payment in full of the Option Price for such shares either in cash or in such
other consideration as approved by the Committee in its sole discretion
including, but not limited to, (i) shares of previously owned Stock held by the
Optionee for at least 6 months, or (ii) in the event of hardship and with the
advance approval of the Committee, the Company's retention of shares of Stock
otherwise issuable to the Optionee upon exercise. Shares of Stock used to make
payments under (i) and (ii) shall be valued at
-5-
<PAGE>
Fair Market Value as of the date such notice is received by the Company's Stock
Option Administrator, and the number of shares to be required for payments under
(i) or (ii) shall be rounded to the nearest whole share so that no cash payment
shall be required by reason of any fractional amount. Not less than 10 shares
may be purchased at any one time unless the number purchased is the total number
purchasable under the Option.
8.2 No Rights of Stockholder. The holder of an Option shall not have any
------------------------
of the rights of a stockholder with respect to the shares covered by his Option
until such shares have been issued to him upon due exercise of the Option. The
granting of an Option shall impose no obligation upon the Optionee to exercise
such Option.
8.3 Additional Restrictions on Exercise.
-----------------------------------
8.3.1 An Option shall not be exercisable if such exercise would
create a right of recovery for "short swing profits" under Section 16(b) of the
Exchange Act.
8.3.2 The exercise of each Option shall also be subject to any
restrictions, terms or conditions contained in the rules and regulations of the
Committee or in the Option Agreement.
9. OPTION AGREEMENT
Promptly after the grant of an Option under the Plan, and before the
exercise of any part thereof, the Company and the Optionee shall execute an
Option Agreement incorporating the terms of this Plan and specifying the Option
Price, the number of shares of Common Stock subject to the Option, the terms and
conditions of the Option, and such other matters, as the Committee in its sole
discretion may determine. In the case of an Incentive Stock Option the Option
Agreement shall contain (i) such provisions as are required of incentive stock
options under the Code and applicable Treasury Regulations, and (ii) a provision
that the Option is not transferable by the Optionee other than by will or the
laws of descent and distribution, and is exercisable, during his lifetime, only
by him. The Option Agreement may also contain any other provision restricting
exercise or otherwise as the Committee shall deem appropriate; provided that in
the case of an Incentive Stock Option such provision is not inconsistent with
Section 422 of the Code.
10. TERMINATION OF EMPLOYMENT
10.1 Prior to Death.
--------------
10.1.1 The unexercised portion of any Option or Options shall be
cancelled on the date an Optionee's employment terminates for any reason (other
than by reason of death) except that the Committee may, in its absolute
discretion, extend the privilege to exercise all or any part of the Option in
accordance with its terms for any period of time within the Option Term. If the
Company or a Related Corporation thereof, as the case may be, terminates an
Optionee's employment without cause, the Option shall automatically remain in
effect until the earlier of the end of the Option Term or the expiration of
thirty days after the Optionee's termination. Notwithstanding anything herein
to the contrary, in the event of termination for cause, all Options shall lapse
forthwith. For purposes of this section, "cause" shall be defined in the
context of executive employment and shall include, but not be limited to, any
material violation by an Optionee of any written employment agreement, any act
of dishonesty with
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<PAGE>
respect to the Company or a Related Corporation thereof, insubordination, or the
commission of any act reflecting unfavorably on the Company or a Related
Corporation thereof. Options granted under the Plan shall not be affected by any
change of duties or position so long as the Optionee continues to be an employee
of the Company or any Related Corporation.
10.1.2 In the event of any change in corporate ownership or structure
which renders the employees of any Related Corporation ineligible for further
grants of Options by the Company under Section 422 of the Code, then all Options
held by such employees shall be cancelled upon the earlier of the end of the
Option Term or the expiration of thirty days after such change in corporate
ownership or structure.
10.2 Death. If an Optionee ceases to be an employee of the Company or a
-----
Related Corporation thereof by reason of death, then the person to whom the
Option shall have been transferred by will or the laws of the descent and
distribution may exercise all or any part of the option in accordance with its
terms, provided such exercise occurs within the earlier of the end of the Option
Term or six months after the date the Optionee died.
11. NON-GUARANTEE OF EMPLOYMENT
Nothing in the Plan or in any Option granted pursuant to the Plan shall be
construed as a contract of employment between the Company or a Related
Corporation thereof and the Optionee, or as a contractual right to continue in
the employ of the Company or a Related Corporation thereof or as a limitation of
the right of the Company or a Related Corporation thereof to discharge the
Optionee at any time.
12. NON-TRANSFERABILITY OF OPTIONS
An Option shall not be transferable otherwise than by will or the laws of
descent and distribution. During the lifetime of the Optionee, an Option may be
exercised only by him.
13. STOCK ADJUSTMENT
13.1 Changes in Capital Structure. In the event that the outstanding
----------------------------
shares of Common Stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number or kind of shares other than
securities of the Company or of another corporation by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividend payable in capital stock, appropriate
adjustment shall be made by the Committee in the number and kind of shares for
the purchase of which Options may be granted under the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares as
to which outstanding Options, or portions thereof then unexercised, shall be
exercisable to the end that the Optionee's proportionate interest shall be
maintained as before the occurrence of the event. The adjustment in outstanding
Options shall be made without change in the total price applicable to the
unexercised portion of the Option and with the corresponding adjustment in the
Option Price; provided that no outstanding Incentive Stock Option shall be
adjusted in a manner which would disqualify the Incentive Stock Option as an
incentive stock option under Section 422 of the Code. Any such adjustment made
by the Committee shall be conclusive.
13.2 Liquidation or Dissolution. If the Company dissolves and
--------------------------
liquidates, then notwithstanding any restrictions on exercise set forth in this
Plan or any Option, each Optionee
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<PAGE>
shall have the right to exercise his Option at any time on or before the tenth
(10th) day prior to the effective date of such liquidation and dissolution. The
Committee may establish a different period for exercise by notice to the
Optionee, and it may establish limitations on exercise to avoid subjecting the
Optionee to liability under Section 16(b) of the Exchange Act. Any Option not so
exercised shall terminate on the last day for exercise prior to such effective
date.
13.3 Limitation on Rights of Optionee. Except as expressly provided in
--------------------------------
Section 13.1 or 13.2 hereof, an Optionee shall have no rights by reason of the
issuance of (i) shares of Common Stock of the Company pursuant to this Plan,
(ii) additional shares of Common Stock, (iii) any other security or debenture
convertible into Common Stock, (iv) or any other equity security, including
issuance pursuant to a plan of merger, consolidation, or statutory share
exchange, and no adjustment by reason thereof shall be made with respect to the
number of shares of Common Stock subject to an Option or the Option Price.
13.4 Rights of the Company. The grant of an Option pursuant to the
---------------------
Plan shall not affect in any way the right or power of the Company to issue
additional shares of stock; to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure; to participate
in a merger, consolidation, or share exchange with another corporation; or to
dissolve, liquidate, or sell or transfer all or any part of its business or
assets.
14. LEGAL RESTRICTIONS
The Company will not be obligated to issue shares of Common Stock if
counsel to the Company determines that such issuance would violate any law or
regulation of any governmental authority or any agreement between the Company
and any national securities exchange upon which the Common Stock is listed. In
connection with any stock issuance or transfer, the person acquiring the shares
shall, if requested by the Company, give assurances satisfactory to counsel by
the Company regarding such matters as the Company may deem desirable to assure
compliance with all legal requirements. The Company shall in no event be obliged
to take any action in order to cause the exercise of any option.
15. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of 10 years from the effective date. The Plan will terminate on March 17,
1995.
16. AMENDMENT OF THE PLAN
The Board of Directors may at any time terminate, suspend or amend the
Plan, provided that no such amendment shall, without the approval of the
--------
stockholders of the Company:
(i) increase the aggregate number of shares which may be issued in
connection with Options with the exception of the adjustment provisions in
Section 13.1;
(ii) change the provisions for establishing the Option Price;
(iii) increase the maximum period during which Options may be exercised;
(iv) extend the term of the Plan;
-8-
<PAGE>
(v) materially modify the requirements as to eligibility for
participation in the Plan; or
(vi) materially increase the benefits accruing to participants under the
Plan;
and provided further, that any Plan provision that specifies the employees who
----------------
may receive Options, the amount of Options, or exercise price thereof, awarded
to such employees, and the timing of Option grants, or is otherwise a "plan
provision" within the meaning of Rule 16b-3(c)(2)(ii)(B) under the Exchange Act,
shall not be amended more than once every six months, other than to comport with
changes in the Code, or the rules thereunder.
17. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Subject to the terms and conditions of the Plan and any Option Agreement,
the Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options, to the extent not
previously exercised, and authorize the granting of new Options in substitution
therefor. The Committee may not change the terms or conditions of any
outstanding Option in a manner that would adversely affect the rights of the
Optionee without the express written consent of the Optionee (or the person
entitled to exercise the Option if the Optionee is deceased) unless permitted by
the terms of the Option Agreement.
18. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock pursuant
to the exercise of the Optionee shall be used for its general corporate
purposes.
19. WITHHOLDING TAXES
19.1 Elections to Pay Withholding Taxes. Any Optionee may pay the
----------------------------------
amount of any federal, state or local taxes required by law to be withheld in
connection with the exercise of an Option, as well as any additional taxes on
the exercise up to Optionee's marginal rate, either in cash or in such other
consideration as approved by the Committee in its sole discretion including, but
not limited to (i) shares of previously owned Stock held by the Optionee for at
least six months (valued at Fair Market Value), or (ii) the Company's retention
of shares of Stock otherwise issuable to the Optionee upon exercise (valued at
Fair Market Value); provided that only the amount of taxes required to be
--------
withheld by law may be paid pursuant to (ii). Shares of Stock used to make
payments under (i) and (ii) shall be valued as of the date such notice is
received by the Company's Stock Option Administrator, and the number of shares
to be required for payments under (i) or (ii) shall be rounded to the nearest
whole share so that no cash payment shall be required by reason of any
fractional amount.
19.2 Compulsory Payment of Tax Withholding Obligations. In the event
-------------------------------------------------
an Optionee does not satisfy his tax withholding obligations pursuant to Section
19.1, the Company or a Related Corporation thereof shall have the right to
deduct from any compensation or any other payment of any kind due Optionee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of an Option or the disposition (as that term is
defined in Section 424(c) of the Code) of shares acquired pursuant to the
exercise of an Incentive Stock Option. In lieu of such deduction, the Company
may require the Optionee to make a cash payment to the Company or a Related
Corporation thereof equal to the amount required to be withheld. In the event
the Optionee does not make such payment when requested, the Company may refuse
to issue any stock certificate pursuant to the exercise of
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<PAGE>
any Option until arrangements satisfactory to the Committee for such payment
have been made.
20. MISCELLANEOUS
20.1 Exclusion from Retirement and Fringe Benefit Computation. The
--------------------------------------------------------
award and exercise of Options pursuant to the Plan shall not be taken into
account as "wages," "salary," or "compensation" in determining eligibility,
benefits or otherwise under (i) any pension, retirement, profit-sharing or other
qualified or non-qualified plan or deferred compensation; (ii) any employee
welfare or fringe benefit plan including, but not limited to, group life or
disability insurance; or (iii) any form of extraordinary pay including, but not
limited to, bonuses, sick pay and vacation pay.
20.2 Notice of Disqualifying Disposition. In the event an Optionee
-----------------------------------
makes a disposition (as that term is defined in Section 424(c) of the Code) of
any shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option within two years from the date the Incentive Stock Option is
granted or within one year after the shares are transferred, the Optionee shall
notify the Committee of such disposition in writing.
20.3 Gender. As used herein the masculine gender shall include the
------
feminine as the identity of an Optionee may require.
20.4 Governing Law. The validity, interpretation and administration of
-------------
the Plan and of any rules, regulations, determinations or decisions made
thereunder, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with the laws of the State of Delaware, without regard to its conflict of laws,
rules and principles. Without limiting the generality of the foregoing, the
period within which any action in connection with the Plan must be commenced
shall be governed by the laws of the State of Delaware without regard to the
place where the act or omission complained of took place, the residence of any
party to such action or the place where the action may be brought.
20.5 Headings. The headings in this Plan are for reference purposes only
--------
and shall not affect the meaning or interpretation of the Plan.
20.6 Notices. All notice and other communications made or given pursuant
-------
to this Plan shall be in writing and shall be sufficiently made or given if hand
delivered or mailed by certified mail, addressed to the Optionee at the address
contained in the records of the Company, or to the Company at its principal
office.
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<PAGE>
EXHIBITS 10.2
GRC INTERNATIONAL, INC.
1994 EMPLOYEE OPTION PLAN
1. PURPOSE
The purpose of the 1994 Employee Option Plan is to enable the Company to
attract and retain key employees who are expected to materially contribute to
the prosperity of the Company and its affiliates, by enabling such employees to
acquire a proprietary interest (or increase their proprietary interest) in the
Company in accordance with the terms and conditions of this Plan. It is intended
that certain options granted under the Plan shall constitute incentive stock
options in accordance with the provisions of Section 422 of the Internal Revenue
Code of 1986.
2. DEFINITIONS
2.1. "Board " means the Board of Directors of the Company.
-----
2.2. "Cause", in the context of termination of employment, shall be
-----
defined in the context of executive employment and shall include, but not be
limited to, any material violation by an Optionee of any written employment
agreement, any act of dishonesty with respect to the Company or a Related
Corporation thereof, or the commission of any act reflecting unfavorably on the
Company or a Related Corporation thereof.
2.3. "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
2.4. "Committee" means the Committee of the Board appointed pursuant to
---------
Section 4.3 hereof.
2.5. "Company" means GRC International, Inc., a Delaware corporation, or
-------
any successor thereto by merger, consolidation or otherwise which may agree to
continue this Plan.
2.6. "Director" means a director of the Company.
--------
2.7. "Disability" means the inability to engage in any substantial
----------
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve months.
2.8. "Effective Date" means November 4, 1994.
--------------
2.9. "Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time.
2.10. "Fair Market Value" means the average of the high and low sale
-----------------
prices of the Stock quoted on the New York Stock Exchange Composite Transaction
Reporting System (or on the exchange or system where the Stock is principally
traded) on the date for which Fair Market Value is to be determined (or if
unavailable on such date, on the next preceding trading date). If the Fair
Market Value is not available on such date, the Committee shall determine the
FORM 2(e)(4)
<PAGE>
Fair Market Value; provided, however, in the case of Incentive Stock Options
such determination shall conform to the Treasury Regulations under Section 422
of the Code.
2.11. "Grant Date" means the date as of which an Option is granted by the
----------
Committee pursuant to the Plan.
2.12. "Incentive Stock Option" means an option that qualifies as an
----------------------
incentive stock option under Section 422 of the Code.
2.13. "Key Employee" means any employee of the Company or a Related
------------
Corporation who has or is expected to materially contribute to the prosperity of
the Company and or a Subsidiary. The term "Key Employee" shall include officers
but exclude non-employee directors.
2.14. "Nonqualified Stock Option" means any Option granted under this Plan
-------------------------
which is not an Incentive Stock Option.
2.15. "Option" means an Incentive Stock Option or Nonqualified Stock
------
Option granted pursuant to the terms of the Plan without distinction as to the
type.
2.16. "Option Agreement" means the agreement executed between the Company
----------------
and the Optionee pursuant to Section 9 hereof.
2.17. "Option Price" means the purchase price of shares of Stock subject
------------
to an Option.
2.18. "Option Term" means the period beginning on the Grant Date and
-----------
ending on the day an Option expires under the terms of the Option Agreement or
the Plan.
2.19. "Optionee" means any Key Employee who is granted an Option pursuant
--------
to the Plan.
2.20. "Parent" has the meaning set forth in Section 424(e) of the Code.
------
2.21. "Plan" means the GRC International, Inc. 1994 Employee Option Plan.
----
2.22. "Related Corporation" means any Parent or Subsidiary.
-------------------
2.23. "Section 16 Optionee" means an Optionee who is a director, officer
-------------------
or ten percent beneficial owner of the Company, as those terms are used under
Section 16 of the Exchange Act.
2.24. "Stock" means shares of the Company's $0.10 par value common stock.
-----
2.25. "Subsidiary" has the meaning set forth in Section 424(f) of the
----------
Code.
2.26. "Substantial Stockholder" means any Key Employee who, immediately
-----------------------
before an Incentive Stock Option is granted, owns (within the meaning of Section
422(b)(6) of the Code, after the application of the attribution rules contained
in Section 424(d) of the Code) more than
-2-
<PAGE>
10% of the total combined voting power of all classes of stock either of the
Company or any Related Corporation thereof.
2.27. "Treasury Regulations" means (i) any proposed or final regulations
--------------------
issued by the Internal Revenue Service with respect to incentive stock options
and any supplement or modification thereof, and (ii) any rulings, procedures,
releases or other position statements published by the Internal Revenue Service
with respect to incentive stock options.
3. STOCK SUBJECT TO PLAN
The Stock subject to Options to be granted under the Plan may be shares
authorized but unissued Stock, or shares of Stock reacquired by the Company and
held as treasury stock. The aggregate number of shares which may be issued under
Options under this Plan shall not exceed 500,000 shares of Stock, unless such
number of shares is adjusted as provided in Section 13. In the event that any
outstanding Option under the Plan expires or terminates for any reason without
having been exercised in full, the shares of Stock allocable to the unexercised
portion of such Option shall become available for other Options under the Plan.
4. ADMINISTRATION OF PLAN
4.1 Administration by Committee. The Plan shall be administered by the
---------------------------
Committee which shall be appointed pursuant to Section 4.3 hereof.
4.2. Powers of Committee. The Committee has full and final authority
-------------------
in its discretion to:
(i) determine Key Employees, taking into account the nature of
the services rendered by the particular employee to the Company or a Subsidiary,
the employee's potential contribution to the long-term success of the Company or
a Subsidiary and such other factors as the Committee in its discretion shall
deem relevant;
(ii) grant Options from time to time to Key Employees;
(iii) determine the duration, terms and provisions of the Options
and of Option Agreements, including but not limited to, any vesting provisions;
(iv) condition the exercise of any Options granted hereunder on
the attainment of certain specified goals by the Key Employee or by the Company
or a Related Corporation thereof;
(v) restrict the sale or otherwise provide for the repurchase of
shares acquired pursuant to the terms of an Option;
(vi) determine the time or times at which Options shall be
granted;
(vii) determine the number of shares to be covered by each option;
(viii) determine the Fair Market Value and the Option Price;
-3-
<PAGE>
(ix) interpret the Plan;
(x) prescribe, amend and rescind rules and regulations relating
to the Plan; and
(xi) make all other determinations, orders and decisions
necessary or advisable for the administration of the Plan. All such
determinations and actions shall be conclusive and binding for all purposes and
upon all persons.
4.3. Committee.
---------
4.3.1. The Plan shall be administered by a Committee appointed or
designated by the Board. The Committee shall at all times contain at least 2
members, each of which is a Director. Members of the Committee shall not be
eligible to receive Options and shall be "disinterested persons" as defined in
Rule 16b-3 under the Exchange Act.
4.3.2. The Board may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused, shall be
filled by the Board.
4.3.3. The interpretation and construction by the Committee of any
provision of the Plan, or of any Option granted under it, shall be final.
5. GRANTING OF OPTIONS
5.1. Granting of Options to Key Employees.
------------------------------------
5.1.1. The Committee may grant Options under the Plan to Key
Employees for such number of shares as the Committee may determine, except that
no Key Employee may be granted in any fiscal year Options to purchase more than
100,000 shares of Stock.
5.1.2. The Committee shall designate any Option granted as either
an "Incentive Stock Option" or "Nonqualified Stock Option" or the Committee may
designate a portion of a grant as an "Incentive Stock Option" and the remaining
portion as a "Nonqualified Stock Option". Any grant or portion of a grant shall
be a "Nonqualified Stock Option if it (i) is not designated as an "Incentive
Stock Option" or (ii) even if designated as an "Incentive Stock Option" shall
fail to meet the applicable requirements of Code Section 422. More than one
Option may be granted to a Key Employee subject to the terms and restrictions
set forth herein.
5.1.3. An Option shall not be granted prior to the Effective Date.
5.2. Limitation on Grant of Incentive Stock Options. Incentive Stock
----------------------------------------------
Options shall comply with the requirements of Code Section 422.
6. OPTION PRICE
6.1. Committee to Determine Option Price. The Committee shall determine
-----------------------------------
the Option Price of shares of Stock for which Options are granted under the
Plan, provided that the
-4-
<PAGE>
Option Price per share of Stock shall be at least equal to the Fair Market Value
on the Grant Date.
6.2. Incentive Stock Option Price Where Optionee is Substantial
----------------------------------------------------------
Stockholder. If any Optionee is a Substantial Stockholder at the Grant Date,
- -----------
the Option Price determined by the Committee for an Incentive Stock Option shall
not be less than 110% of the Fair Market Value of the Stock on the Grant Date.
7. TERM OF OPTIONS
7.1. In General. The term of each Option shall be for such period as the
----------
Committee shall determine, not to exceed 10 years from the Grant Date, and shall
be subject to earlier termination as hereinafter provided. An Option shall not
be exercisable after the expiration of the Option Term.
7.2. Term of Incentive Stock Option Where Optionee is Substantial
------------------------------------------------------------
Stockholder. Notwithstanding Section 7.1, if any Optionee is a Substantial
- -----------
Stockholder at the Grant Date, the term of an Incentive Stock Option shall not
exceed 5 years from the Grant Date.
8. EXERCISE OF OPTIONS
8.1. Time of Exercise. Each Option shall be exercisable in accordance
----------------
with the terms of the applicable Option Agreement, except that Options shall
become immediately exercisable in full, notwithstanding any delayed
exercisability provisions in the Option Agreement, upon the death or Disability
of the Optionee.
8.2. Manner of Exercise. To exercise an Option in whole or in part, an
------------------
Optionee shall give written notice of exercise to the Committee specifying the
number of shares as to which the Option is being exercised, accompanied by
payment in full of the Option Price for such shares either in cash or in such
other consideration as approved by the Committee in its sole discretion
including, but not limited to, (i) shares of previously owned Stock held by the
Optionee for at least 6 months (valued at Fair Market Value), or (ii) in the
event of hardship and with the advance approval of the Committee, the Company's
retention of shares of Stock otherwise issuable to the Optionee upon exercise
(valued at Fair Market Value). Shares of Stock used to make payments under (i)
and (ii) shall be valued as of the date such notice is received by the Company's
Stock Option Administrator, and the number of shares to be required for payments
under (i) or (ii) shall be rounded to the nearest whole share so that no cash
payment shall be required by reason of any fractional amount. Not less than 10
shares may be purchased at any one time unless the number purchased is the total
number purchasable under the Option.
8.3. No Rights of Stockholder. The holder of an Option shall not have any
------------------------
of the rights of a stockholder with respect to the shares covered by his Option
until the Option is duly exercised.
8.4. Additional Restrictions on Exercise. The exercise of each Option
-----------------------------------
shall also be subject to any restrictions, terms or conditions contained in the
rules and regulations of the Committee or in the Option Agreement.
-5-
<PAGE>
9. OPTION AGREEMENT
Promptly after the grant of an Option under the Plan, and before the
exercise of any part thereof, the Company and the Optionee shall execute an
Option Agreement incorporating the terms of this Plan and specifying the Option
Price, the number of shares of Stock subject to the Option, the terms and
conditions of the Option, and such other matters, as the Committee in its sole
discretion may determine. In the case of an Incentive Stock Option the Option
Agreement shall contain such provisions as are required of Incentive Stock
Options under the Code and applicable Treasury Regulations. The Option
Agreement may also contain any other provision restricting exercise or otherwise
as the Committee shall deem appropriate; provided that in the case of an
Incentive Stock Option such provision is not inconsistent with Section 422 of
the Code.
10. TERMINATION OF EMPLOYMENT
10.1. Termination For Any Reason Other Than Death Or Disability.
---------------------------------------------------------
10.1.1. If an Optionee's employment ceases for any reason other than
death or Disability or termination for Cause, his or her Option(s) shall remain
in effect until the earlier of the end of the Option Term or the expiration of 3
months after the Optionee's termination.
10.1.2. Any change in corporate ownership or structure which renders
the employees of any Related Corporation ineligible for further grants of
Incentive Stock Options by the Company under Section 422 of the Code shall be
considered a termination for reasons other than death or Disability. Options
held by such employees (whether Incentive Stock Options or Non-Qualified Stock
Options) shall be governed by the provisions of Section 10.1.1.
10.2. Termination For Cause. If an Optionee's employment is terminated
---------------------
for Cause, his or her Options shall lapse forthwith.
10.3. Disability. If an Optionee's employment ceases by reason of such
----------
Optionee's Disability, his or her Options shall remain in effect until the
earlier of the end of the Option Term or the expiration of 1 year after the
Optionee's termination.
10.4. Death. If an Optionee's employment ceases by reason of Optionee's
-----
death, his or her Options shall remain in effect until the earlier of the end of
the Option Term or the expiration of 1 year after the Optionee's death, and may
be exercised by the person to whom the Option has been transferred by will or
the laws of the descent and distribution.
10.5 Committee's Discretion. Notwithstanding the foregoing provisions of
----------------------
this Section 10, the Committee may, in its absolute discretion, extend the
privilege to exercise all or any part of the Option in accordance with its terms
for any period of time within the Option Term.
11. NON-GUARANTEE OF EMPLOYMENT
Nothing in the Plan or in any Option granted pursuant to the Plan shall be
construed as a contract of employment between the Company or a Related
-6-
<PAGE>
Corporation thereof or as a limitation of the right of the Company or a Related
Corporation thereof to discharge the Optionee at any time.
12. NON-TRANSFERABILITY OF OPTIONS
Except as may be expressly permitted by the Committee with respect to any
Nonqualified Stock Option, Options shall not be transferable otherwise than by
will or the laws of descent and distribution and, during the lifetime of the
Optionee, an Option may be exercised only by him or her.
13. STOCK ADJUSTMENT
13.1. Changes in Capital Structure. In the event that the outstanding
----------------------------
shares of Stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, combination
of shares, or dividend payable in capital stock, appropriate adjustment shall be
made by the Committee in the number and kind of shares for the purchase of which
Options may be granted under the Plan and to the annual limitation set forth in
Section 5.1. In addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding Options, or portions
thereof then unexercised, shall be exercisable to the end that the Optionee's
proportionate interest shall be maintained as before the occurrence of the
event. No outstanding Incentive Stock Option shall be adjusted in a manner
which would disqualify the Incentive Stock Option as an incentive stock option
under Section 422 of the Code. Any adjustment made by the Committee shall be
conclusive.
13.2. Liquidation or Dissolution. If the Company dissolves and
--------------------------
liquidates, then notwithstanding any restrictions on exercise set forth in this
Plan or any Option, each Optionee shall have the right to exercise his Option at
any time on or before the tenth day prior to the effective date of such
liquidation and dissolution. The Committee may establish a different period for
exercise by notice to the Optionee, and it may establish limitations on exercise
to avoid subjecting the Optionee to liability under Section 16(b) of the
Exchange Act. Any Option not so exercised shall terminate on the last day for
exercise prior to such effective date.
13.3. Limitation on Rights of Optionee. Except as expressly provided in
--------------------------------
Section 13.1 or 13.2 hereof, an Optionee shall have no rights by reason of the
issuance of (i) shares of Stock of the Company pursuant to this Plan, (ii)
additional shares of Stock, (iii) any other security or debenture convertible
into Stock, (iv) or any other equity security, including issuance pursuant to a
plan of merger, consolidation, or statutory share exchange, and no adjustment by
reason thereof shall be made with respect to the number of shares of Stock
subject to an Option or the Option Price.
13.4. Rights of the Company. The grant of an Option pursuant to the Plan
---------------------
shall not affect in any way the right or power of the Company to engage in
corporate transactions, including but not limited to issuing additional shares
of stock; making adjustments, reclassifications, reorganizations or changes in
its capital or business structure; participating in mergers, consolidations, or
share exchanges with one or more other corporations or entities; or dissolving,
liquidating, or selling or transferring all or any part of its business or
assets.
-7-
<PAGE>
14. LEGAL RESTRICTIONS
The Company will not be obligated to issue or deliver shares of Stock upon
exercise of an Option if counsel to the Company determines that such issuance
would violate any law or regulation of any governmental authority or any
agreement between the Company and any securities exchange or system upon which
the Stock is then listed or quoted. In connection with any stock issuance or
delivery, the person acquiring the shares shall, if requested by the Company,
give assurances satisfactory to counsel by the Company regarding such matters as
the Company may deem desirable, and other restrictions may apply to the shares,
to assure compliance with all legal requirements. The Company shall in no event
be obliged to take any action in order to cause the exercise of any option.
15. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time at any time
after the Effective Date, except that Incentive Stock Options may not be granted
more than 10 years after the Effective Date.
16. AMENDMENT OF THE PLAN
The Board may at any time terminate, suspend or amend the Plan, provided
--------
that no such amendment shall be made without shareholder approval if such
shareholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or system on which the Stock may then be listed
or quoted.
17. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Subject to the terms and conditions of the Plan and any Option Agreement,
the Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options, to the extent not
previously exercised, and authorize the granting of new Options in substitution
therefor. The Committee may not change the terms or conditions of any
outstanding Option in a manner that would adversely affect the rights of the
Optionee without the express written consent of the Optionee (or the person
entitled to exercise the Option if the Optionee is deceased) unless permitted by
the terms of the Option Agreement.
18. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant to the
exercise of the Optionee shall be used for its general corporate purposes.
19. WITHHOLDING TAXES
19.1. Elections to Pay Withholding Taxes. Any Optionee may pay the amount
----------------------------------
of any federal, state or local taxes required by law to be withheld in
connection with the exercise of an Option, as well as any additional taxes on
the exercise up to Optionee's marginal rate, either in cash or in such other
consideration as approved by the Committee in its sole discretion including, but
not limited to (i) shares of previously owned Stock held by the Optionee for at
least six months (valued at Fair Market Value), or (ii) the Company's retention
of shares of Stock otherwise issuable to the Optionee upon exercise (valued at
Fair Market Value); provided
--------
-8-
<PAGE>
that only the amount of taxes required to be withheld by law may be paid
pursuant to (ii). Shares of Stock used to make payments under (i) and (ii) shall
be valued as of the date such notice is received by the Company's Stock Option
Administrator, and the number of shares to be required for payments under (i) or
(ii) shall be rounded to the nearest whole share so that no cash payment shall
be required by reason of any fractional amount.
19.2. Compulsory Payment of Tax Withholding Obligations. In the event an
-------------------------------------------------
Optionee does not satisfy his tax withholding obligations pursuant to Section
19.1, the Company or a Related Corporation thereof shall have the right to
deduct from any compensation or any other payment of any kind due Optionee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of an Option or the disposition (as that term is
defined in Section 424(c) of the Code) of shares acquired pursuant to the
exercise of an Incentive Stock Option. In lieu of such deduction, the Company
may require the Optionee to make a cash payment to the Company or a Related
Corporation thereof equal to the amount required to be withheld. In the event
the Optionee does not make such payment when requested, the Company may refuse
to issue any stock certificate pursuant to the exercise of any Option until
arrangements satisfactory to the Committee for such payment have been made.
20. MISCELLANEOUS
20.1. Exclusion from Retirement and Fringe Benefit Computation. The award
--------------------------------------------------------
and exercise of Options pursuant to the Plan shall not be taken into account as
"wages," "salary," or "compensation" in determining eligibility, benefits or
otherwise under (i) any pension, retirement, profit-sharing or other qualified
or non-qualified plan or deferred compensation; (ii) any employee welfare or
fringe benefit plan including, but not limited to, group life or disability
insurance; or (iii) any form of extraordinary pay including, but not limited to,
bonuses, sick pay and vacation pay.
20.2. Notice of Disqualifying Disposition. In the event an Optionee makes
-----------------------------------
a disposition (as that term is defined in Section 424(c) of the Code) of any
shares of Stock acquired pursuant to the exercise of an Incentive Stock Option
within 2 years from the date the Incentive Stock Option is granted or within 1
year after the shares are issued and delivered upon exercise, the Optionee shall
notify the Committee of such disposition in writing.
20.3. Gender. As used herein the masculine gender shall include the
------
feminine as the identity of an Optionee may require.
20.4. Governing Law. The validity, interpretation and administration of
-------------
the Plan and of any rules, regulations, determinations or decisions made
thereunder, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with the laws of the State of Delaware, and applicable federal law, without
regard to principles of conflicts of law. Without limiting the generality of the
foregoing, the period within which any action in connection with the Plan must
be commenced shall be governed by the laws of the State of Delaware without
regard to the place where the act or omission complained of took place, the
residence of any party to such action or the place where the action may be
brought.
-9-
<PAGE>
20.5. Headings. The headings in this Plan are for reference purposes only
--------
and shall not affect the meaning or interpretation of the Plan.
20.6. Notices. All notice and other communications made or given pursuant
-------
to this Plan shall be in writing and shall be sufficiently made or given if hand
delivered or mailed by certified mail, addressed to the Optionee at the address
contained in the records of the Company, or to the Company at its principal
office.
-10-
<PAGE>
EXHIBIT 10.3
GRC INTERNATIONAL, INC.
DIRECTORS FEE REPLACEMENT PLAN
1. PURPOSE
The loyal and dedicated service of "outside" directors is essential to the
growth and progress of any public company. Accordingly, the Directors Fee
Replacement Plan (the "Plan") of GRC International, Inc. (the "Company") has
been adopted to better enable the Company to retain and attract qualified
outside directors to serve on the Company's Board of Directors, while reducing
the Company's cash outlay of director's fees. The Plan is also designed to
provide a stronger nexus between the contributions made to the Company by its
outside directors and the value of the compensation they receive.
2. ADMINISTRATION
The Plan will be administered on a calendar quarter basis. The Plan will be
administered by a committee of three or more persons (the "Committee"). Such
persons shall not be eligible to participate in the Plan, and will be appointed
by the Board of Directors of the Company. Awards of the Company's Common Stock,
par value $.10 per share ("Stock"), and options to purchase the Stock
("Options"), and the amount and nature of the Stock and Options so awarded, will
be automatic, as provided in Sections 5 and 6 of the Plan. All questions of
interpretation of the Plan will be determined by the Committee. Such
determinations will be final and binding upon all persons having an interest in
the Plan.
3. PARTICIPATION IN THE PLAN
Directors who are not employees of the Company or any subsidiary of the
Company are eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
4.1. Total Shares Available. Up to one hundred fifty thousand (150,000)
----------------------
shares (subject to adjustment under Section 11 of the Plan) of Stock are
authorized for issuance under the Plan. Such shares of Stock may be issued (i)
outright, or (ii) upon the exercise of Options. The total number of shares of
Stock awarded under (i) and (ii) shall not exceed 150,000. The Company may issue
authorized but unissued shares of its Stock, may repurchase shares in the open
market or in private transactions, or may otherwise make a sufficient number of
shares available under the Plan. The Company shall not be required to reserve or
otherwise set aside funds or shares of Stock for the payment of its obligations
hereunder. The Company shall make available as and when required a sufficient
number of shares of Stock to meet the needs of the Plan.
4.2. Unexercised or Expired Options. Upon the expiration or termination
------------------------------
of any Option under the Plan, the Stock allocable to the unexercised or
surrendered portion of such Option will revert to the Plan's pool of Stock, and
may thereupon become subject to Stock and Options subsequently awarded under the
Plan.
5. AWARDS OF STOCK
5.1. Fair Market Value of Stock. For purposes of determining the number
--------------------------
of shares of Stock to be awarded with respect to any calendar quarter, the Fair
Market Value of the Stock shall be the average of the high and low sale prices
of the Stock quoted on the New York Stock Exchange Composite Transaction
Reporting System for the Fridays of such quarter. If such sale prices are not
available for any such Friday, then the average of the high and low sale prices
on the next preceding day on which such sale prices are available shall be used
in lieu thereof.
<PAGE>
5.2. Election. Quarterly awards of Stock will be made to each eligible
--------
director who has submitted to the Committee at least six (6) months prior to the
end of the calendar quarter in question a written election to receive Stock in
lieu of all or any part of the compensation which is not being deferred under
any other plan and which otherwise would have been payable currently for
services rendered as a director (including the director's retainer and meeting
fees) and, where applicable, as Chairman. Each such election shall be effective
until revoked by a later written election, but no such later election shall
become effective until the first calendar quarter to end at least six (6) months
after the later election is received by the Company.
5.3. Stock Awards and Formula. Shortly after the end of each calendar
------------------------
quarter, a director who has previously submitted an appropriate election to
receive Stock in accordance with Section 5.2 above shall receive a combination
of Stock and cash. One-half (1/2) of the director's compensation for the
quarter shall be payable in cash, and one-half (1/2) shall be payable in Stock.
The number of shares of Stock to be awarded shall be the nearest whole number
which most closely approximates the director's compensation for the quarter in
accordance with the following formula:
One-Half (1/2) of Director's Number
Applicable Compensation for the Quarter = of Shares
---------------------------------------
Fair Market Value of Stock of Stock
6. AWARDS OF OPTIONS
All Options awarded under the Plan will be "non-statutory options," and
therefore are not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"). Each Option awarded under the Plan will be evidenced by a written
agreement in such form as the Committee may from time to time approve,
consistent with and subject to the following terms and conditions:
6.1. Fair Market Value of Stock. For purposes of determining the number
--------------------------
of Options to be awarded with respect to any calendar quarter, the Fair Market
Value of the Stock for such quarter shall be the average of the high and low
sale prices of the Stock quoted on the New York Stock Exchange Composite
Transaction Reporting System for the Fridays of such quarter. If such sale
prices are not available for any such Friday, then the average of the high and
low sale prices on the next preceding day on which such sale prices are
available shall be used in lieu thereof.
6.2. Exercise Price of Options. The Exercise Price of Options to be
-------------------------
awarded with respect to any calendar quarter shall be twenty five percent (25%)
of the Fair Market Value of the Stock for such quarter.
6.3. Election. Quarterly awards of Options will be made to each eligible
--------
director who has submitted to the Committee at least six (6) months prior to the
end of the calendar quarter in question a written election to receive Options in
lieu of all or any part of the compensation which is not being deferred under
any other plan and which otherwise would have been payable currently for
services rendered as a director (including the director's retainer and meeting
fees) and, where applicable, as Chairman. Each such election shall be effective
until revoked by a later written election, but no such later election shall
become effective until the first calendar quarter to end at least six (6) months
after the later election is received by the Company.
6.4. Option Awards and Formula. As of the end of each calendar quarter,
-------------------------
there shall be awarded to each director who has previously submitted an
appropriate election in accordance with Section 5.2 above the nearest whole
number of Options which most closely approximates the director's compensation
for the quarter in accordance with the following formula:
-2-
<PAGE>
Director's Applicable Compensation for the Quarter = Number
- ---------------------------------------------------------
(Fair Market Value of Stock) Minus (Exercise Price of Options) of Options
6.5. Exercise of Options. Options may be exercised at any time after
-------------------
their grant, by written notice submitted to the Company at its corporate
headquarters, accompanied by payment of the exercise price: (i) in cash or cash
equivalents; (ii) by tendering to the Company previously owned shares of Stock
held by the optionholder for at least six (6) months; or (iii) in the event of
hardship and with the advance approval of the Committee, by the Company's
retention of shares from those shares of Stock otherwise issuable to the
optionholder; provided, in the event of payment under subsection (ii) or (iii),
--------
(x) the optionholder has elected such method of payment, and (y) such election
is subject to approval or disapproval by the Committee in its discretion at any
time before or after such election. Shares of Stock used to make payments under
subsections (ii) and (iii) shall be valued at the average of the high and low
sale prices of the Stock quoted on the New York Stock Exchange Composite
Transaction Reporting System on the date such notice is received by the
Company's Stock Option Administrator (or if unavailable on such date, on the
next preceding trading date), and the number of shares to be required for
payments under (Ii) or (iii) shall be rounded to the nearest whole share so that
no cash payment shall be required by reason of any fractional amount.
6.6. Termination of Options.
----------------------
(a) Options awarded pursuant to the Plan may not be exercised after
the third anniversary of a director's termination as a director for any reason,
including, but not limited to, such director's resignation or cessation of
service following a decision not to stand for reelection, or his termination as
a director due to removal, death, disability or retirement. Any Options which
have not been exercised on or before such third anniversary shall thereupon
expire.
(b) Any Option awarded a director under the Plan and unexercised,
in whole or in part, on the date of his death may be exercised by the personal
representative of the deceased director's estate, or by any heir, devisee, or
other taker who, by will or operation of law, is entitled to said Option or any
portion thereof. In each such case, such Option(s) may be exercised at any time
on or before the third anniversary of the director's death, as provided in
Section 6.6(a).
6.7. No Shareholder Rights By Reason of Options. A director does not have
------------------------------------------
any rights whatsoever as a shareholder with respect to any unexercised Option
until the date of the issuance to that director of a stock certificate(s) for
shares to be issued upon the proper exercise of said Option. No adjustment will
be made for dividends or other rights with respect to which the record date
occurs prior to the date such certificate is issued.
6.8. Options Not Assignable Or Transferable. Options awarded under the
--------------------------------------
Plan are not assignable or transferable other than by will or by the laws of
intestate succession. During the lifetime of a director, Options awarded under
the Plan will be exercisable only by that director.
7. TIME FOR AWARDS
No Stock or Options may be awarded under the Plan with respect to outside
director's compensation for services performed after December 31, 1997.
8. LIMITATION OF RIGHTS
-3-
<PAGE>
8.1. No Right to Continue as a Director. Neither the Plan, the awarding
----------------------------------
of any Stock or Option, nor any other action taken pursuant to the Plan
constitutes or is evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time or at
any particular rate of compensation.
8.2. No Rights to Receive Stock or Options After Eligibility Ceases. A
--------------------------------------------------------------
director has no rights to receive Stock or Options under the Plan, and will not
receive any Stock or Options for any calendar quarter, or part thereof, once he
or she: (i) becomes an employee of the Company or any subsidiary of the
Company; or (ii) ceases to be a director.
8.3. Limitation on Rights of Optionee. Except as expressly provided in
--------------------------------
Section 9, an Optionee shall have no rights by reason of the issuance of (i)
shares of Stock pursuant to this Plan, (ii) additional shares of Stock, (iii)
any other security or debenture convertible into Stock, (iv) or any other equity
security, including issuance pursuant to a plan of merger, consolidation, or
statutory share exchange, and no adjustment by reason thereof shall be made with
respect to the number of shares of Stock subject to an Option or the Exercise
Price.
8.4. Rights of the Company. The grant of an Option pursuant to the Plan
---------------------
shall not affect in any way the right or power of the Company to issue
additional shares of stock; to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure; to participate
in a merger, consolidation, or share exchange with another corporation; or to
dissolve, liquidate, or sell or transfer all or any part of its business or
assets.
9. ADJUSTMENTS
In the event any change is made to the Stock by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, including but not limited to any change whereby the Stock is
converted into or exchanged for another class of shares or shares of another
entity, appropriate and comparable adjustments will be made to the number and
kind of shares subject to the Plan, and to the number and kind of shares and
price per share of Stock subject to outstanding Options issued pursuant to the
Plan, and the prices of Stock used in calculating the Fair Market Value of the
Stock under Sections 5.1 and 6.1. All such adjustments will be made in such a
manner as avoids dilution or enlargement of the rights of directors under the
Plan.
10. AMENDMENT OF THE PLAN
The Board of Directors of the Company may suspend or terminate the Plan or
revise or amend it in any respect whatsoever; provided that, without approval of
--------
the shareholders of the Company, no revision or amendment may change the number
of shares subject to the Plan (except as provided in Section 9 of the Plan) or
materially increase the benefits accruing to participants under the Plan, and
provided further that no revision or amendment or termination shall, without the
- ----------------
consent of the affected director(s), impair the rights of any director under any
Option previously awarded; and provided further that, if and to the extent
-------- -------
required in order that Plan transactions be exempt under Rule 16b-3 under the
Securities Exchange Act of 1934, any Plan provision that specifies the directors
who may receive Stock or Options, the amount of Stock or Options, or exercise
price of Options, awarded to such directors, and the timing of Stock or Option
awards, or is otherwise a "plan provision" within the meaning of Rule 16b-
3(c)(2)(ii)(B) as it may be amended from time to time, shall not be amended more
than once every six (6) months, other than to comport with changes in the Code,
or the rules thereunder.
11. LEGAL RESTRICTIONS
-4-
<PAGE>
The Company will not be obligated to issue shares of Stock if counsel to
the Company determines that such issuance would violate any law or regulation of
any governmental authority or any agreement between the Company and any national
securities exchange upon which the Stock is listed. In connection with any
stock issuance or transfer, the person acquiring the shares shall, if requested
by the Company, give assurances satisfactory to counsel by the Company regarding
such matters as the Company may deem desirable to assure compliance with all
legal requirements. The Company shall in no event be obliged to take any action
in order to cause the exercise of any option.
12. GOVERNING LAW
The Plan will be governed, and its provisions construed, in accordance with
the laws of the State of Delaware and applicable federal law, without regard to
conflicts of law.
-5-
<PAGE>
Exhibit 10.4
GRC INTERNATIONAL, INC.
CASH COMPENSATION REPLACEMENT PLAN
1. PURPOSE
The loyal and dedicated service of key executives is essential to the
growth and progress of the company. Accordingly, the Cash Compensation
Replacement Plan (the "Plan") of GRC International, Inc. (the "Company") has
been adopted to better enable the Company to retain and attract qualified key
executives, while reducing the Company's cash outlay for executive compensation.
The Plan is also designed to provide a stronger nexus between the contributions
made to the Company by its key executives and the value of the compensation they
receive.
2. ADMINISTRATION
The Plan will be administered on a calendar quarter basis. The Plan will be
administered by a committee of three or more persons (the "Committee"). Such
persons shall not be eligible to participate in the Plan, and will be appointed
by the Board of Directors of the Company. Options awarded under the Plan
("Options"), and the amount and nature of the Options so awarded, will be
automatic, as provided in Section 5 of the Plan. All questions of
interpretation of the Plan will be determined by the Committee. Such
determinations will be final and binding upon all persons having an interest in
the Plan.
3. PARTICIPATION IN THE PLAN
Employees of the Company (or subsidiaries thereof) who are determined by
the Committee to be "key executives" for the purposes of this Plan, whether or
not such employees are officers of the Company or any subsidiary thereof, will
be eligible to participate in the Plan. A list of such eligible executives will
be established by majority vote of the Committee, with such list to be revised
as necessary. In determining which executives may participate in the Plan, the
Committee may take into account the nature of the services rendered by such
executives, their present and potential contributions to the Company's success,
and such other factors as the Committee in its discretion deems relevant.
Options available under the Plan may be granted to key executives who have
received options under other plans and/or may be eligible to do so in the
future.
4. STOCK SUBJECT TO THE PLAN
4.1 Total Shares Available. Options for the purchase of up to four
----------------------
hundred forty thousand (440,000) shares (subject to adjustment under Section 8
of the Plan) of the Company's Common Stock, par value $0.10 per share ("Stock"),
may be granted under the Plan. The Company may issue authorized but unissued
shares of its Stock, may repurchase shares in the open market or in private
transactions, or may otherwise make a sufficient number of shares available
under the Plan.
4.2 Unexercised or Expired Options. Upon the expiration or termination of
------------------------------
any Option under the Plan, the Stock allocable to the unexercised or surrendered
portion of such Option will revert to the Plan's pool of Stock, and may
thereupon become subject to Options subsequently awarded under the Plan.
5. AWARDS OF OPTIONS
All Options awarded under the Plan will be "non-statutory options," and
therefore are not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"). Each Option awarded under the Plan will be
FORM 2(e)(3)
<PAGE>
evidenced by a written agreement in such form as the Committee may from time to
time approve, consistent with and subject to the following terms and conditions:
5.1. Fair Market Value of Stock. For purposes of determining the number
--------------------------
of Options to be awarded with respect to any calendar quarter, the Fair Market
Value of the Stock for such quarter shall be the average of the high and low
sale prices of the Stock quoted on the New York Stock Exchange Composite
Transaction Reporting System for the Fridays of such quarter. If such sale
prices are not available for any such Friday, then the average of the high and
low sale prices on the next preceding day on which such sale prices are
available shall be used in lieu thereof.
5.2. Exercise Price of Options. The Exercise Price of Options to be
-------------------------
awarded with respect to any calendar quarter shall be twenty five percent (25%)
of the Fair Market Value of the Stock for such quarter.
5.3. Election. Quarterly awards of Options will be made to each eligible
--------
key executive who has submitted to the Committee at least six (6) months prior
to the end of the calendar quarter in question a written election to receive
Options in lieu of up to twenty five percent (25%) of salary and up to one
hundred percent (100%) of bonus payable during such quarter. Each such election
shall be effective until revoked by a later written election, but no such later
election shall become effective until the first calendar quarter to end at least
six (6) months after the later election is received by the Company.
5.4. Option Awards and Formula. As of the end of each calendar quarter,
-------------------------
there shall be awarded to each key executive who has previously submitted an
appropriate election in accordance with Section 5.2 above, the number of Options
determined by the following formula, rounded to the nearest whole number of
Options:
[1.25] X [Key Executive's Applicable Compensation for the Quarter] = Number
- ------------------------------------------------------------------
(Fair Market Value of Stock) Minus (Exercise Price of Options) of Options
5.5. Period of Option. Options awarded under the Plan become exercisable
----------------
in increments. Eighty percent (80%) of each Option is exercisable immediately;
ten percent (10%) of each Option shall become exercisable on or after the second
anniversary of the date on which it was awarded; five percent (5%) of each
Option shall become exercisable on or after the third anniversary of such date;
and five percent (5%) of each Option shall become exercisable on or after the
fourth anniversary of such date; provided, however, that any Option awarded
-------- -------
pursuant to the Plan will become exercisable in full upon the death or
disability of the key executive.
5.6. Exercise of Options.
-------------------
(a) Options may be exercised only by written notice submitted to the
Company at its corporate headquarters, accompanied by payment of the exercise
price: (i) in cash or cash equivalents; (ii) by tendering to the Company
previously owned shares of Stock held by the key executive for at least six (6)
months; or (iii) in the event of hardship and with the advance approval of the
Committee, by the Company's retention of shares from those shares of Stock
otherwise issuable to the key executive; provided, in the event of payment under
--------
subsection (ii) or (iii), (x) the key executive has elected such method of
payment, and (y) such election is subject to approval or disapproval by the
Committee in its discretion at any time before or after such election. Shares
of Stock used to make payments under subsections (ii) and (iii) shall be valued
at the average of the high and low sale prices of the Stock quoted on the New
York Stock Exchange Composite Transaction Reporting System on the date such
-2-
<PAGE>
notice is received by the Company's Stock Option Administrator (or if
unavailable on such date, on the next preceding trading date), and the number of
shares to be required for payments under (Ii) or (iii) shall be rounded to the
nearest whole share so that no cash payment shall be required by reason of any
fractional amount.
(b) Notwithstanding any other provision in this Plan to the contrary,
no Option may be exercised at a time or in a manner which would result in the
loss of any tax deduction for the Company under Section 162(m) of the Code.
5.7. Payment of Tax Withholding Obligations. Any key executive may pay
--------------------------------------
the amount required to be withheld under applicable income tax laws in
connection with any exercise of Options under the Plan, as well as any
additional taxes on exercise up to the key executive's marginal rate, by (i)
paying cash; (ii) tendering to the Company on the Date of Exercise previously
owned shares of Stock; or (iii) the Company's retention of shares from those
shares of Stock otherwise issuable upon exercise, provided that only the amount
--------
of taxes required to be withheld by law may be paid pursuant to (iii); and
provided further that for a key executive who is an officer or director as those
- -------- -------
terms are used under the Securities Exchange Act of 1934 (the "Exchange Act")
(a) only the amount of taxes required to be withheld by law may be paid pursuant
to (ii) or (iii), (b) the election to satisfy tax withholding obligations
pursuant to (ii) or (iii) must be irrevocable and must be made during the period
beginning on the third business day following announcement of the Company's
quarterly or annual financial information and ending on the twelfth business day
thereafter, and (c) the Option being exercised must have been held for at least
six (6) months. The foregoing election is subject to approval or disapproval by
the Committee, in its discretion, at any time before or after such election.
Shares of Stock used to make payments under subsection (ii) and (iii) shall be
valued at the average of the high and low sale prices of the Stock quoted on the
New York Stock Exchange Composite Transaction Reporting System on the Date of
Exercise (or if unavailable on such date, on the next preceding trading date) ),
and the number of shares to be required for payments under (Ii) or (iii) shall
be rounded to the nearest whole share so that no cash payment shall be required
by reason of any fractional amount.
5.8. Termination of Options.
----------------------
(a) Options granted pursuant to the Plan may not be exercised after
the third anniversary of a key executive's termination as an employee for any
reason, including, but not limited to, such key executive's resignation or
voluntary departure from the Company, involuntary termination by the Company of
such key executive's employment, or termination of employment by reason of
death, disability or retirement. Any Options which have not been exercised on
or before such third anniversary shall thereupon expire.
(b) Any Option granted a key executive under the Plan and
unexercised, in whole or in part, on the date of his death may be exercised by
the personal representative of the deceased key executive's estate, or by any
heir, devisee, or other taker who, by will or operation of law, is entitled to
said Option or any portion thereof. In each such case, such Option(s) may be
exercised at any time on or before the third anniversary of the key executive's
death, as provided in Section 6.6(a).
5.9. No Shareholder Rights By Reason of Options. A key executive does not
------------------------------------------
have any rights whatsoever as a shareholder with respect to any unexercised
Option until the date of the issuance to that key executive of a stock
certificate(s) for shares to be issued upon the proper exercise of said Option.
No adjustment will be made for dividends or other rights with respect to which
the record date occurs prior to the date such certificate is issued.
-3-
<PAGE>
5.10. Options Not Assignable Or Transferable. Options awarded under the
--------------------------------------
Plan are not assignable or transferable other than by will or by the laws of
intestate succession. During the lifetime of a key executive, Options awarded
under the Plan will be exercisable only by that key executive.
6. TIME FOR AWARDS
No Options may be awarded under the Plan with respect to a key executive's
compensation for services performed after June 30, 1998.
7. LIMITATION OF RIGHTS
7.1. No Right to Continue as an Employee. Neither the Plan, the awarding
------------------------------------
of any Option, nor any other action taken pursuant to the Plan constitutes or is
evidence of any agreement or understanding, express or implied, that the Company
will retain a key executive for any period of time or at any particular rate of
compensation.
7.2. No Rights to Receive Options For Periods of Non-Eligibility. No
-----------------------------------------------------------
employee may continue to receive Options with respect to any calendar quarter,
or part thereof, in which he or she is no longer considered by the Committee to
be a "key executive".
7.3. Limitation on Rights of Optionee. Except as expressly provided in
--------------------------------
Section 9, an Optionee shall have no rights by reason of the issuance of (i)
shares of Stock pursuant to this Plan, (ii) additional shares of Stock, (iii)
any other security or debenture convertible into Stock, (iv) or any other equity
security, including issuance pursuant to a plan of merger, consolidation, or
statutory share exchange, and no adjustment by reason thereof shall be made with
respect to the number of shares of Stock subject to an Option or to the Exercise
Price.
7.4. Rights of the Company. The grant of an Option pursuant to the Plan
---------------------
shall not affect in any way the right or power of the Company to issue
additional shares of stock; to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure; to participate
in a merger, consolidation, or share exchange with another corporation; or to
dissolve, liquidate, or sell or transfer all or any part of its business or
assets.
8. ADJUSTMENTS
In the event any change is made to the Stock by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, including but not limited to any change whereby the Stock is
converted into or exchanged for another class of shares or shares of another
entity, appropriate and comparable adjustments will be made to the number and
kind of shares subject to the Plan, and to the number and kind of shares and
price per share of Stock subject to outstanding Options issued pursuant to the
Plan, and the prices of Stock used in calculating the Fair Market Value of the
Stock under Section 5.1. All such adjustments will be made in such a manner as
avoids dilution or enlargement of the rights of key executives under the Plan.
9. AMENDMENT OF THE PLAN
The Board of Directors of the Company may suspend or terminate the Plan or
revise or amend it in any respect whatsoever; provided that, without approval of
--------
the shareholders of the Company, no revision or amendment may change the number
of shares subject to the Plan (except as provided in Section 9 of the Plan) or
materially increase the benefits accruing to participants under the Plan, and
provided further that no revision or amendment or termination shall, without the
- ----------------
consent of the affected key executive(s), impair the rights of any key executive
under any Option previously awarded; and provided further that, if and to the
-------- -------
extent
-4-
<PAGE>
required in order that Plan transactions be exempt under Exchange Act Rule 16b-
3, any Plan provision that specifies the key executives who may receive Options,
the amount of Options, or exercise price of Options, awarded to such key
executives, and the timing of Option awards, or is otherwise a "plan provision"
within the meaning of Rule 16b-3(c)(2)(ii)(B) under the Exchange Act, as it may
be amended from time to time, shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, or the rules thereunder.
10. LEGAL RESTRICTIONS
The Company will not be obligated to issue shares of Stock if counsel to
the Company determines that such issuance would violate any law or regulation of
any governmental authority or any agreement between the Company and any national
securities exchange upon which the Stock is listed. In connection with any
stock issuance or transfer, the person acquiring the shares shall, if requested
by the Company, give assurances satisfactory to counsel by the Company regarding
such matters as the Company may deem desirable to assure compliance with all
legal requirements. The Company shall in no event be obliged to take any action
in order to cause the exercise of any Option.
11. GOVERNING LAW
The Plan will be governed, and its provisions construed, in accordance with
the laws of the State of Delaware and applicable federal law, without regard to
conflicts of law.
-5-
<PAGE>
EXHIBIT 10.5
GRC INTERNATIONAL, INC.
DIRECTORS PHANTOM STOCK PLAN
1. PURPOSE
(a) General Purpose. The loyal and dedicated service of "outside"
---------------
Directors is essential to the growth and progress of any public company.
Accordingly, the Directors Phantom Stock Plan (the "Plan") of GRC
International, Inc. (the "Company") has been adopted to better enable the
Company to retain and attract qualified outside Directors to serve on the
Company's Board of Directors, while providing to such Directors the opportunity
to defer receipt of their compensation. The Program is also intended to provide
a stronger nexus between the contributions made to the Company by its outside
Directors and the value of the compensation they receive, by permitting such
Directors to receive their compensation in the form of phantom stock units
("Units") which are determined by reference to the Company's $.10 par value
Common Stock (the "Stock") as hereinafter set forth.
(b) Nonqualified Plan. It is intended that this Plan be maintained as an
-----------------
unfunded, unsecured, nonqualified deferred compensation arrangement, not subject
to the provisions of the Employee Retirement Income Security Act of 1974 and not
eligible for the insurance protection provided by the Pension Benefit Guaranty
Corporation.
2. ADMINISTRATION
The Plan will be administered by a committee of three or more persons (the
"Committee"). Such persons may not be eligible to participate in the Program,
and will be appointed by the Board of Directors of the Company. Awards of the
Company's Common Stock, par value $.10 per share ("Stock"), and options to
purchase the Stock ("Options"), and the amount and nature of the Stock and
Options so awarded, will be automatic, as provided in Sections 5 and 6 of the
Program. All questions of interpretation of the Program will be determined by
the Committee. Such determinations will be final and binding upon all persons
having an interest in the Program.
3. PARTICIPATION
3.1. Eligibility. Each member of the Board of Directors of the Company
-----------
who is not an employee of the Company or any of its subsidiaries is eligible to
participate in the Plan.
3.2. Time of Election. Prior to the beginning of a calendar year, each
----------------
eligible Director may elect to participate in the Plan by directing that all or
any part of the compensation which is not being deferred under any other plan
and which otherwise would have been payable currently for services rendered as a
Director (including the annual Director's retainer and meeting fees) and, where
applicable, as Chairman, during such calendar year and succeeding calendar years
shall be credited to a phantom stock account (the "Director's Phantom Stock
Account"). Any person who shall become a Director during any calendar year, and
who was not a Director of the Company prior to the beginning of such calendar
year, may elect, within 30 days after the Director's term begins, to defer
payment of all or any part of the Director's compensation earned during the
remainder of such calendar year and for succeeding calendar years.
Notwithstanding the foregoing, each eligible Director may elect on or before
September 30, 1994 to defer the Director's compensation for services rendered as
a Director during the fourth calendar quarter of 1994.
3.3. Form and Duration of Election. An election to participate in the
-----------------------------
Plan shall be made by completing a Deferral Election Form in the form attached
to this Plan (as such Form may be modified by the Company from time to time) and
filing such Form with the Secretary of the Company. Such election shall continue
until the Director terminates or changes such election by filing a new Deferral
Election Form with the Secretary of the Company. Any new Deferral Election Form
shall become effective as of the end of the calendar year in which such notice
is given and shall be effective only with respect to fees payable for services
rendered as a Director thereafter.
<PAGE>
Amounts credited to the Director's Phantom Stock Account prior to the effective
date of the new Deferral Election Form shall not be affected by such new Form
and shall be distributed only in accordance with the terms of the previously
filed Form applicable to the previously credited amounts. The time or times at
which amounts credited to a Director's Phantom Stock Account may be redeemed
shall be subject to the additional restrictions contained in Section 5.
3.4. Renewal. A Director who has terminated his election to participate
-------
may thereafter file another Deferral Election Form to participate for the
calendar year subsequent to the filing of such election and succeeding calendar
years.
4. THE DIRECTOR'S PHANTOM STOCK ACCOUNT
All compensation which a Director has elected to defer under the Plan and
which is not deferred under any other plan shall be credited to the Director's
Phantom Stock Account as follows:
4.1. Fair Market Value. For purposes of this Section 4, the "Fair Market
-----------------
Value" of the Stock shall be the average of the high and low sale prices of the
Stock quoted on the New York Stock Exchange Composite Transaction Reporting
System for the Fridays of the applicable calendar quarter. If such sale prices
are not available for any such Friday, then the average of the high and low sale
prices on the next preceding day on which such sale prices are available shall
be used in lieu thereof.
4.2. Phantom Stock Units. As of the end of each calendar quarter, there
-------------------
shall be credited to the a participating Director's Phantom Stock Account the
nearest whole number of Units which most closely approximates the Director's
compensation for the quarter in accordance with the following formula:
Applicable Director's Number
Compensation for the Quarter = of Units
--------------------------------------
Fair Market Value of Stock of Phantom Stock
4.3. Dividends. In accordance with the formula set forth below, there
---------
shall also be credited to each Director's Phantom Stock Account the nearest
whole number of Units which most closely approximates the amount of any
dividends to which such Director would have been entitled if the number of Units
already credited to the Director's Phantom Stock Account as of the dividend
record date had been shares of issued and outstanding Stock on such date. Any
such dividend amounts shall be credited to each Director's Phantom Stock Account
as the end of each calendar quarter in which the dividends were paid.
Dividend Amount = Number
--------------------------
Fair Market Value of Stock of Units
of Phantom Stock
4.4. No Fractional Shares. No fractional Units shall be credited to a
--------------------
Director's Phantom Stock Account. The compensation and dividends to be applied
to a Director's Phantom Stock Account each quarter shall be credited as the
nearest number of whole Units in accordance with the above formulas.
4.5. No Interest to Be Paid. No Director shall be entitled to interest on
----------------------
any compensation or dividends to be credited in the form of Units into the
applicable Director's Phantom Stock Account at the end of each calendar quarter.
5. DISTRIBUTION FROM ACCOUNTS
5.1. Date and Form of Distribution. Distribution from the Director's
-----------------------------
Phantom Stock Account shall be made in the form of cash on the date(s) elected
by the Director in the applicable Deferral Election Form(s) previously filed by
the Director under the Plan. The amount of cash paid
2
<PAGE>
on account of each Unit shall be equal to the average of the high and low sale
prices of the Stock quoted on the New York Stock Exchange Composite Transaction
Reporting System for the Fridays of the calendar quarter immediately preceding
the distribution. If such sale prices are not available for any such Friday,
then the average of the high and low sale prices on the next preceding day on
which such sale prices are available shall be used in lieu thereof. Distribution
shall be in the form of a lump-sum payment or in annual installments, as
previously elected by the Director in the applicable Deferral Election Form(s)
previously filed by the Director under the Plan. In the case of installment
payments, the Company shall pay the applicable Director (or such Director's
beneficiary or estate) interest on unpaid installments after the first
installment. Such interest shall be paid annually on the subsequent installment
payment dates, at an interest rate equal to the prime rate of interest as
published in the Wall Street Journal on the date of the previous installment
payment.
5.2. Six-Month Limitation. Other provisions of the Plan and the Deferral
--------------------
Election Form notwithstanding, amounts credited to a Director's Phantom Stock
Account as Units may be distributed or otherwise redeemed only upon a fixed date
or dates at least six (6) months after the crediting of such amounts as Units,
or incident to death, retirement, disability or termination or employment, to
the extent necessary to comply with Rule 16a-1(c)(3)(ii) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Units shall be deemed to
be distributed in the order in which they were credited to a Director's Phantom
Stock Account, so that earlier-credited Units shall be distributed before later-
credited Units. In addition, if any distribution is to be made under this
Section 5 with respect to a Unit credited (i) less than six (6) months before
the date of distribution and (ii) at a time when the Director is subject to
reporting under Section 16(a) of the Exchange Act, such distribution shall be
delayed until the first business say that is more than six (6) months after the
date such Unit was credited under the Plan. This six (6) month holding
requirement shall apply to Units credited with respect to cash dividends and
other dividends, as well as to Units credited with respect to Directors'
compensation.
5.3. Additional Limitation on Modifications. No Director then subject to
--------------------------------------
reporting under Section 16(a) of the Exchange Act may modify the time or manner
of payment under the Plan with respect to Units already credited to such
Director's Phantom Stock Account. In addition, no modification of the time or
manner of payment under the Plan shall be authorized if and to the extent that
such authorization or the making of such modification would constitute
"constructive receipt" on the part of a Director of amounts credited to a
Director's Phantom Stock Account under the federal income tax laws.
6. DISTRIBUTION ON DEATH
If a Director should die before all amounts credited to the Director's
Phantom Stock Account shall have been paid, the remaining balance shall be paid
to the Director's designated beneficiary in the manner and on the date(s)
previously elected by the Director in the applicable Deferral Election Form(s).
Such balance shall be paid to the Director's estate if (a) no such designation
has been made or (b) the designated beneficiary shall have predeceased the
Director and no further designation has been made by the Director. Payments
under this Section 6 shall be determined in the same manner as under Section 5.
7. MISCELLANEOUS
7.1. Account Not Transferable or Assignable. The right of a Director to
--------------------------------------
receive any amount credited to the Director's Phantom Stock Account shall not be
transferable or assignable by the Director, except by will or by the laws of
descent and distribution (or to a designated beneficiary), and no part of such
amount shall be subject to attachment or other legal process.
7.2. No Advance Funding Required. The Company shall not be required to
---------------------------
reserve or otherwise set aside funds or Stock for the payment of its obligations
hereunder.
3
<PAGE>
7.3. Limitation of Rights. The establishment and maintenance of, or
--------------------
allocation and credits to the Director's Phantom Stock Account shall not vest in
any Director or beneficiary any right, title or interest in and to any specific
assets of the Company, including any Units credited to the Director's Phantom
Stock Account, and a Director shall not have any interest in the Units credited
to the Phantom Stock Account until distributed in accordance with the terms of
the Plan.. A Director shall not have any dividend or voting rights or any other
rights of a stockholder (for this purpose, the rights provided in Section 4.3
with respect to the crediting of amounts equivalent to dividends and in Section
7.6 with respect to adjustments shall not be deemed "rights of a stockholder").
The right of a Director to receive payments under this Plan shall be no greater
than the right of an unsecured general creditor of the Company.
7.4. No Right to Continue as a Director. Neither the Program, the
----------------------------------
awarding of any Stock or Option, nor any other action taken pursuant to the
Program constitutes or is evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time or at
any particular rate of compensation.
7.5. Amendment or Termination. The Board of Directors may at any time
------------------------
amend or terminate the Plan. No amendment or termination shall impair the rights
of a Director with respect to amounts then credited to the Director's Phantom
Stock Account.
7.6. Adjustments. Upon the occurrence of any event affecting the
-----------
outstanding Stock, including stock dividends, extraordinary non-cash dividends,
forward or reverse stock splits, recapitalizations, mergers, consolidations and
the like, an appropriate adjustment will also be made in the number of Units
credited to the Director's Phantom Stock Account, including, where appropriate,
an adjustment in the nature of the Stock by which Units are valued under
Sections 4 and 5 hereof. All such adjustments shall be made so as to prevent
dilution or enlargement of the rights of Directors participating in the Plan.
7.7. Intent. It is the intent of the Company that Units and related
------
rights under the Plan credited to Directors who are then subject to Section 16
of the Exchange Act shall not constitute "derivative securities" under Rule 16a-
1(c) under the Exchange Act by virtue of Rule 16a-1(c)(3)(ii), and that
Directors participating in the Plan shall not, for that reason, fail to qualify
as "disinterested persons" under Rule 16b-3(c)(2)(i). Accordingly, the Plan
shall be construed in a manner consistent with the requirements of Rule 16a-
1(c)(3)(ii) and Rule 16b-3(c)(2)(i)(C), and if any Plan provision does not
comply with the requirements of Rule 16a-1(c)(3)(ii) as then applicable to any
transaction by such a Director or the requirements of Rule 16b-3(c)(2)(i)(C)
(permitting disinterested person to elect to receive fees in either cash or an
equivalent amount of securities), such provision shall be deemed amended to the
extent necessary to conform to the applicable requirements of such Rules so that
such a Director shall avoid liability under Section 16(b) and, if then a
Director, shall continue to qualify as a "disinterested person" under Rule 16b-
3.
7.8. Applicable Law. The Plan shall be construed under the laws of the
--------------
State of Virginia and applicable federal law, without regard to conflicts of
law.
7.9. Effective Date. The Plan shall be effective with respect to any
--------------
compensation earned by a Director after September 30, 1994.
4
<PAGE>
GRC INTERNATIONAL, INC.
DIRECTORS PHANTOM STOCK PLAN
DEFERRAL ELECTION FORM
----------------------
This deferral election is made in accordance with and subject to the terms of
the GRC International, Inc. (the "Company") Directors Phantom Stock Plan (the
"Plan").
1. Compensation to be Deferred. (please check appropriate box and fill in
---------------------------
applicable blanks).
(a)___ Effective January 1, ____, or as soon thereafter as legally
permissible, I hereby elect to defer the following
compensation into my Phantom Stock Account at the Company
(check all boxes that apply):
[__] Annual Retainer
[__] Meeting Fees
[__] Chairman's Fee
(b)___ Effective January 1, ____, I hereby elect to discontinue all
-----------
deferrals into my Phantom Stock Account.
2. Date of Payment. I hereby elect to receive payment from my Phantom Stock
---------------
Account on (in the case of installments, commencing on) the date indicated below
(please check appropriate box and fill in applicable blanks).
(a)___ The first day of the calendar quarter next following
termination of my service as a Director.
(b)___ The earlier of January 1, _____ or the first day of the
calendar quarter next following termination of my service as
a Director.
(c)___ The first day of the calendar quarter next following my
death.
(d)___ The earlier of January 1, _____, or the first day of the
calendar quarter next following my death.
3. Form of Distribution. I hereby elect to receive my Phantom Stock Account in
--------------------
the form of:
(a)___ A lump sum payment.
(b)___ Annual installments over ____ years (not to exceed 15).
4. Designation of Beneficiary. I hereby designate the following beneficiary to
--------------------------
receive any amount credited to my Phantom Stock Account under the Plan which has
not been paid to me prior to my death (please print beneficiary's name, address
and social security number).
Beneficiary's Name: ________________________________
5
<PAGE>
Beneficiary's Address: ________________________________
________________________________
Beneficiary's Social
Security Number: ________________________________
5. Effect of Election. The above election will continue to be effective for
-------------------
future calendar years unless prior to the beginning of any future calendar year
I file with the Secretary of the Company a new Deferral Election Form with
respect to such calendar year. I understand that a new Deferral Election Form
will only affect compensation with respect to years commencing after the date
such new Deferral Election Form is filed with the Company, and that no new
Deferral Election Form for any future year may change the time or form of
distribution of amounts deferred pursuant to the Deferral Election Form which I
am filing today.
Signature: ______________________________________
Printed Name: ___________________________________
Date: ___________________________________________
CONSENT OF SPOUSE
-----------------
(must be competed and notarized if the Director is married and the spouse is not
the beneficiary)
I consent to and approve designation of the above named beneficiary to receive
proceeds of my spouse's GRCI Phantom Stock Account in the event of my spouse's
death.
___________________________________
(spouse's signature)
___________________________________
(date)
STATE OF )
COUNTY OF )
Before me, the undersigned Notary Public in and for said County and said
State, personally appeared this date,______________________, whose name is
signed to the foregoing release and who is known to me.
This the___day of___________________,_____________.
_________________________
Notary Public
My Commission Expires:
6
<PAGE>
EXHIBIT 10.6
GRC INTERNATIONAL, INC.
DIRECTORS RETIREMENT PLAN
Article 1. PURPOSE OF PLAN.
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(a) General Purpose. GRC International, Inc. (the "Company"), hereby
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establishes this Directors Retirement Plan (the "Plan") as of the 1st day of
July, 1991 to provide supplementary retirement income for its eligible
Directors. The Company believes that the interests of its shareholders will
best be served by being able to attract and retain well qualified individuals to
serve as Directors and that this Plan is consistent with those objectives.
(b) Nonqualified Plan. It is intended that this Plan be maintained as
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an unfunded, unsecured, nonqualified deferred compensation arrangement, not
subject to the substantive provisions of the Employee Retirement Income Security
Act of 1974 and not eligible for the insurance protection provided by the
Pension Benefit Guaranty Corporation, provided, however, that if a Change of
Control occurs, all benefits payable hereunder will be paid in accordance with
Article 5.
Article 2. DEFINITIONS.
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For purposes of this Plan and any explanatory material associated with it,
the following terms shall have the following meanings unless stated otherwise:
(a) "Board" means the board of directors of the Company.
(b) "Change of Control" means the occurrence of any one of the following
events without the approval of a majority of the Continuing Directors:
(i) any Person, other than the Company or a Related Party,
acquires directly or indirectly the Beneficial Ownership of any voting security
of the Company and immediately after such acquisition such Person is, directly
or indirectly, the Beneficial Owner of voting securities representing twenty-
five percent (25%) or more of the total voting power of all the then outstanding
voting securities; or
(ii) the Continuing Directors cease for any reason to constitute a
majority of the members of the Board; or
(iii) the shareholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company, a reverse
stock split of outstanding voting securities, or an acquisition of voting
securities or assets by the Company, or consummation of any such transaction if
shareholder approval is not obtained, other than (A) any such transaction which
would result in at least eighty percent (80%) of the total voting power
represented by the voting securities of the Company or the voting securities of
such surviving entity outstanding immediately after such transaction being
Beneficially Owned by at least eighty percent (80%) of the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative to
other such continuing holders not substantially altered in the transaction, or
(B) any such transaction in which all of the voting securities of the Company or
voting securities of the surviving entity are Beneficially Owned by Related
Parties; or
<PAGE>
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets other than any such
transaction which would result in Related Parties owning or acquiring more than
fifty percent (50%) of the assets owned by the Company immediately prior to the
transaction.
For purposes of this Article 2(b):
(i) the terms "Person," "Beneficial Owner," "Beneficially Owns,"
and "Beneficial Ownership" shall have the meanings ascribed to such terms for
purposes of Section 13(d) of the Securities Exchange Act of 1934 and the rules
thereunder;
(ii) "Related Party" means (A) a majority-owned subsidiary of the
Company; or (B) an employee or group of employees of the Company or any
majority-owned subsidiary of the Company; or (C) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
majority-owned subsidiary of the Company; or (D) a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportion as their ownership of voting securities; or (E) a Person Beneficially
Owning more than ten percent (10%) of any outstanding class of voting security
of the Company who would be required to report such ownership on a Schedule 13D
or an amendment thereto, if, prior to any acquisition of a voting security which
resulted in such Person Beneficially Owning more than ten percent (10%) of such
class, the Board approved the transaction giving rise to the increase in
Beneficial Ownership, provided that such Person has not, prior to obtaining
Board approval of any such transaction, publicly announced an intention to take
actions which, if consummated or successful (at a time such Person has not been
deemed a "Related Party"), would constitute a Change of Control; and
(iii) "Continuing Directors" means the individuals who constituted
the Board as of July 1, 1991, or who constitute the Board at any time thereafter
if their election or nomination for election to the Board was approved by a vote
of a majority of the Directors then in office who either were Directors as of
July 1, 1991 or whose election or nomination for election was previously so
approved.
(c) "Change of Control Annuity" means the benefit described in Article
5.
(d) "Committee" means those Directors appointed by the Board to
administer the Plan.
(e) "Death Benefit" means that benefit described in Article 6.
(f) "Designated Beneficiary" means the beneficiary designated in
accordance with Article 6.
(g) "Director" means a member of the Board who occupied such position on
or after the Effective Date.
(h) "Distribution Event" means a Director's termination of service as a
Director for any reason.
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<PAGE>
(i) "Effective Date" means July 1, 1991.
(j) "Plan Year" means the "short year" commencing with the Effective
Date of this Plan and ending December 31, 1991 and each subsequent calendar
year.
(k) "Retirement Benefit" means either the "Standard Retirement Benefit"
or the "Alternate Retirement Benefit". "Standard Retirement Benefit" means a
monthly benefit payable in accordance with the applicable terms of Article 4.
"Alternate Retirement Benefit" shall mean the alternate form of Retirement
Benefit described in Article 4(d).
(l) "Service" means service performed on behalf of the Company as a
Director.
(m) "Year of Service" means the twelve (12) month period commencing
with the date on which the individual became a Director, and each such 12 month
period thereafter; provided, however, that a Director will not be given credit
for a Year of Service for any such 12 month period in which the Director's fees,
wages, salary or bonuses paid to him by the Company exceed $150,000 in the
aggregate.
Article 3. ELIGIBILITY.
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(a) Each Director who has completed five (5) or more Years of Service
shall be eligible to participate in the Plan. If a Change of Control occurs,
however, a Director shall be entitled to a Change of Control Annuity without
regard to whether he has completed five (5) Years of Service.
(b) Notwithstanding any provision of this Plan to the contrary, if any
Director, while still serving on the Board, engages in any conduct specifically
intended by such Director to cause significant harm or damage to the Company
(excluding any conduct required to comply with a legal obligation), then such
Director shall forfeit any Retirement Benefit (and the corresponding Death
Benefit) otherwise payable hereunder; provided, however, that in the event of a
Change of Control while such Director is still serving on the Board, such
conduct shall not result in the forfeiture of such Director's Change of Control
Annuity (nor of the corresponding Death Benefit).
Article 4. RETIREMENT BENEFIT.
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(a) Grant. Upon a Director's Distribution Event, such Director shall
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become entitled to an irrevocable Standard Retirement Benefit as hereinafter
provided, unless the Director requests and the Board approves an Alternate
Retirement Benefit pursuant to Article 4(d).
(b) Amount and Service Requirement. No Director with less than five
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(5) Years of Service shall be eligible for any Retirement Benefit, provided,
however, that such Director shall nevertheless be entitled to a Change of
Control Annuity under the circumstances described in Article 5. Any Director
who has completed more than five (5) Years of Service shall receive a Standard
Retirement Benefit consisting of monthly payments equal to one-twelfth (1/12) of
the Director's annual retainer in effect at the time of such Director's
Distribution Event multiplied by the applicable percentage set forth in the
following table:
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<PAGE>
<TABLE>
<CAPTION>
Years of Service Applicable
As a Director Percentage
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<S> <C>
Less than 5 0%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
</TABLE>
It is recognized and acknowledged that the following named Directors have
completed ten (10) or more Years of Service and are eligible for a Standard
Retirement Benefit calculated using a 100% applicable percentage under the
foregoing table: H. Furlong Baldwin and Harris W. Seed. It is further
recognized and acknowledged that as of November 4, 1994, (i) Director Herbert
Rabin has completed six (6) Years of Service.
(c) Form and Duration of Standard Retirement Benefit. The Standard
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Retirement Benefit shall be payable to the Director monthly (commencing with the
first business day of the Plan Year following the Director's Distribution Event)
for a period of (i) 180 months, or (ii) the Director's life, whichever period is
shorter.
(d) Alternate Retirement Benefit. At the written request of the
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Director, the Board may, in its absolute discretion, approve or disapprove any
Alternate Retirement Benefit, including but not limited to a lump sum, provided,
however, that such Alternate Retirement Benefit is the actuarial equivalent (as
determined by the Board) of the Standard Retirement Benefit, and provided,
further, that such Alternate Retirement Benefit shall be payable on or
commencing with the first business day of the Plan Year following the Director's
Distribution Event. Any Director requesting an Alternate Retirement Benefit
shall do so at the time and in the manner prescribed by the Board.
Article 5. CHANGE OF CONTROL ANNUITY.
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(a) Notwithstanding any other provision of this Plan to the contrary,
upon the occurrence of a Change of Control, each serving Director (who has not
received and is not yet receiving a Retirement Benefit) and each former Director
(who has received or is receiving a Retirement Benefit) shall become entitled to
an irrevocable Change of Control Annuity instead of a Retirement Benefit.
(b) In the event of a Change of Control, the Company shall purchase a
Change of Control Annuity for each Director from an insurance company with a
Best's rating of at least "AAA". Each Change of Control Annuity shall provide
for a monthly payment equal to one-twelfth (1/12) of (i) the then current annual
Director retainer fee, or (ii) the annual Director retainer fee in effect just
prior to the Change of Control, whichever amount is higher. With respect to a
serving Director, such monthly payment shall commence on the first business day
of the month following the Director's Distribution Event and continue for a
period of (i) 180 months, or (ii) the Director's life, whichever is shorter.
With respect to a former Director, such monthly payment shall commence on the
first business day of the month following the Change of Control and continue for
a period of (i) 180 months (less the number of whole months elapsed since the
first business day of the Plan Year following the Director's Distribution
Event),
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<PAGE>
or (ii) the Director's life, whichever is shorter. Each Change of Control
Annuity shall also include a cash surrender feature entitling the recipient to
redeem the contract for its present value, based on the actuarial life
expectancy of the Director at the time of the Company's purchase of the Change
of Control Annuity without regard to the health, medical condition or other
circumstances of the Director. In addition, such Change in Control Benefit shall
be actuarially adjusted, if and to the extent appropriate, to reflect any prior
payment to a Director in the form of an Alternate Retirement Benefit. As an
example of such actuarial adjustment, if a Director retires at a time when the
annual retainer is $12,000, and the Director receives a lump sum settlement as
an Alternate Retirement Benefit rather than the Standard Retirement Benefit, and
subsequently a Change of Control occurs when the annual retainer is $18,000,
then such Director's Change of Control Annuity shall be a monthly payment equal
to $500, or $6,000 per year, which is the amount by which the retainer was
increased.
(c) If a Change of Control has occurred or appears to be imminent, the
Board or the Committee shall take any steps that may be necessary to implement
the provisions of this Plan, including the purchase of Change of Control
Annuities in accordance with this Article 5.
Article 6. DEATH BENEFIT.
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(a) Death While Serving as a Director. If a Director should die while
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serving as a Director, and such Director has not requested an Alternate
Retirement Benefit, then, the monthly amount that would have been payable to the
Director as his Standard Retirement Benefit shall be paid to the Designated
Beneficiary commencing with the first business day of the month following the
Director's death and continuing through the month which includes the first
anniversary of the Director's death.
(b) Death After Distribution Event. If a Director should die after
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his Distribution Event, and such Director has not requested an Alternate
Retirement Benefit, then the monthly amount that would have been payable to the
Director as his Standard Retirement Benefit for the next six (6) months or, if
longer, until the next anniversary of the commencement of the Director's
Standard Retirement Benefit, shall be paid to the Designated Beneficiary.
(c) Inapplicable to Alternate Retirement Benefit, Change of Control
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Annuity. The Death Benefit shall be payable only with respect to the Standard
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Retirement Benefit. No Death Benefit shall be payable with respect to any
Alternate Retirement Benefit or Change of Control Annuity.
(d) Beneficiary Designation. A Director shall make a beneficiary
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designation in writing on a form filed with the Committee and may change such
beneficiary designation at any time by written notice to the Committee. If no
beneficiary designation has been filed or if the Designated Beneficiary
predeceased the Director, any Death Benefit hereunder shall be paid to the
Director's estate.
Article 7. HARDSHIP.
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Upon receipt of a written request from a Director (or, if applicable, the
Designated Beneficiary), the Committee, in its sole discretion, may determine
that acceleration of any payments hereunder is necessary on account of a severe
financial hardship to the Director or Designated Beneficiary. In such case, the
Committee may accelerate payments as necessary
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<PAGE>
to relieve the hardship. If the Director dies after receiving a hardship
distribution, the Death Benefit payable pursuant to Article 6 shall be reduced
by the amount of any monthly payments which were previously accelerated and
which relate to the relevant period for which Death Benefits would otherwise be
payable. The Board shall determine the existence of a severe financial hardship
in a manner consistent with Internal Revenue Service rules and regulations
pertaining to the avoidance of constructive receipt of income.
Article 8. MISCELLANEOUS.
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(a) No person shall be entitled to anticipate any payment hereunder by
assignment, alienation, sale, pledge, encumbrance or transfer of such payments
in any form or manner prior to actual or constructive receipt thereof.
(b) Subject to the provisions of Article 5 regarding the Change of
Control Annuity, the Company's obligations hereunder shall be entirely unfunded
and unsecured, and upon the nonpayment of any obligation hereunder, a Director
or his Designated Beneficiary shall have the right only of an unsecured creditor
of the Company.
(c) The Board, either acting directly or through the Committee, shall
interpret the Plan and make all determinations necessary or desirable to
implement the Plan. The determination of either the Board or the Committee
shall be final and conclusive. The Board or the Committee may obtain such
advice or assistance as it deems appropriate from persons not serving on the
Board of Directors or the Committee.
(d) Any payment due hereunder shall be made on the first business day of
the applicable month.
(e) Whenever the Board or Committee exercises any discretion under this
Plan with respect to a Director, that Director shall not participate in the
voting on such matters.
(f) This Plan shall be subject to and governed by the laws of the
Commonwealth of Virginia without regard to the conflict of laws and principles
thereof.
(g) The Board may amend or terminate this Plan at any time and for any
reason, provided, however, that no such amendment or termination shall reduce or
impair the rights of any Director accrued prior to such action, and provided,
further, that this Plan shall not be amended or terminated following a Change of
Control without the consent of a majority of the Continuing Directors.
(as amended, September 21, 1995)
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<PAGE>
EXHIBIT 10.7
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POLICY AND PROCEDURE:
[LOGO OF GRCI
APPEARS HERE] INCENTIVE COMPENSATION III-7
PLAN
================================================================================
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EFFECTIVE DATE:
APPROVAL: PAGE: 1
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INTRODUCTION
The Board of Directors of GRC International, Inc. has approved an incentive
compensation plan for the purpose of motivating and incentivizing employees. It
aims to create and sustain interest in the health and efficiency of the
Corporation, and to give recognition to our high standard of quality in
performance and for meeting overall objectives. The rewards of this approach
are: Highly motivated employees who are effective in their areas of
responsibility; a staff that is efficient, productive, cooperative (low cost per
unit of output), and evidence of good management control (e.g., a consistent
record of highly controlled costs).
GUIDELINES
The total incentive compensation pool for the Corporation shall not exceed 6% of
its total salaries for each fiscal year. All payments under this plan will
require approval from at least two levels of management above the recipient.
Each entity is required to provide for payments resulting from this plan in
their budgets and/or operating plans. The accrual for the payments will be
determined by reference to the recipient's normal activities The President and
CEO of GRC International, Inc. may increase or decrease an entity's incentive
pool consistent with the cost structure and requirements of the entity.
The guidelines to be used for determining annual bonus areas follows:
1. KEY EXECUTIVES - as determined by the Board of Directors and Corporate
Management respectively and in compliance with our executive Compensation
Review of Total Compensation.
<PAGE>
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POLICY AND PROCEDURE:
[LOGO OF GRCI
APPEARS HERE] INCENTIVE COMPENSATION III-7
PLAN
================================================================================
Page 2
CRITERIA FOR AWARD: Improvement of business base, quality of service or
product, control of costs, quality of personnel selection and training,
conformity to GRCI policies and directives.
1. Revenue Growth
2. Earnings Contributions
3. Major Contract Award
4. Quarterly Management Objectives
5. Cooperation and Teamwork
6. Technical Excellence.
LIMITATION ON AMOUNTS: The actual amount will be determined by the
President of GRCI based on assessment of the performance of each eligible
individual to the above criteria, and review of total compensation.
TIMING: Paid annually after close of business for completed fiscal year.
2. SENIOR MANAGEMENT
ELIGIBLE: President and Vice Presidents OF ALL ENTITIES
CRITERIA FOR AWARD: Improvement of business base, quality of service or
product, control of costs, quality of personnel selection and training,
conformity to GRCI policies and directives.
1. Revenue Growth
2. Earnings Contributions
3. Major Contract Award
4. Quarterly Management Objectives
5. Cooperation and Teamwork
6. Technical Excellence.
<PAGE>
LIMITATION ON AMOUNTS: The actual amount will be determined by the
President of GRCI based on assessment of the
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POLICY AND PROCEDURE:
[LOGO OF GRCI
APPEARS HERE] INCENTIVE COMPENSATION III-7
PLAN
================================================================================
Page 3
performance of each eligible individual to the above criteria, and review
of total compensation.
TIMING: Paid annually after close of business for completed fiscal year.
3. LINE ENTITY MANAGERS
ELIGIBLE: DIRECTORS AND MANAGERS BELOW VICE PRESIDENTS
CRITERIA FOR AWARD: Same as for Senior Management payments.
LIMITATION ON AMOUNTS: The actual amount will be determined by Division
Directors or Vice Presidents on assessment of the performance of each
eligible individual to the above criteria.
TIMING: Paid annually after close of business for completed fiscal year.
4. STAFF
ELIGIBLE: All GRCI Personnel.
CRITERIA FOR AWARD: .Paid to selected individual staff members for
unusually high performance throughout the year (note that sustained
superior performances should not be compensated for by both a large
permanent salary increase and a large bonus payment).
LIMITATION ON AMOUNTS: The actual amount will be recommended by immediate
supervisor on assessment of each eligible individual to the above criteria
and approved by the next two levels of management.
<PAGE>
================================================================================
POLICY AND PROCEDURE:
[LOGO OF GRCI
APPEARS HERE] INCENTIVE COMPENSATION III-7
PLAN
================================================================================
Page 4
TIMING: Paid annually after close of business for completed fiscal year.
5. SPECIAL AWARD
ELIGIBLE: All GRCI PERSONNEL
CRITERIA FOR AWARD: An unusual personal contribution to the reputation and
business position of GRCI or one of its Entities. Examples of such
contributions include the successful pursuit of extraordinary, important or
difficult contracts, a successful product or cost savings idea, or the
achievement of high recognition for the Company.
LIMITATION ON AMOUNTS: The actual amount will be recommended by immediate
supervisor on assessment of each eligible individual to the above criteria
and approved by the next two levels of management. No award will exceed
$1,000 without approval from the President of GRCI.
TIMING: As appropriate for particular accomplishment being recognized.
<PAGE>
EX. 10.13
LEASE AMENDMENT NO. 6
This Lease Amendment No. 6 ("Sixth Amendment") is made as of the 1st day of
October, 1994 by and between RICHMOND LAND CORPORATION ("Landlord") and GRC
INTERNATIONAL, INC. ("Tenant").
W I T N E S S E T H:
WHEREAS, Centennial III Limited Partnership ("Centennial"), as the initial
landlord, and Flow General, Inc. ("FGI"), as the initial tenant, entered into
that certain Lease Agreement dated as of June 30, 1989, pursuant to which
Centennial leased to FGI certain space ("Premises") in the office building
located at 1900 Gallows Road, Vienna, Virginia ("Building") as more particularly
described in the Lease;
WHEREAS, Centennial and GRC International, Inc. (formerly FGI and
hereinafter referred to herein as the "Tenant"), amended the Lease under
Amendment No. 1 dated August 30, 1990;
WHEREAS, pursuant to certain assignments, RLC became the "Landlord"
under the Lease holding all right, title and interest in and to such Lease,
subleases and other occupancy agreements as of December 30, 1992; and
WHEREAS, Landlord and Tenant amended the Lease under Amendment No. 2
dated April 11, 1993 adding additional space to the "Premises" described in the
Lease; and
WHEREAS, Landlord and Tenant amended the Lease under Amendment No. 3 dated
October 1, 1993 to add further additional space to the "Premises" described in
the Lease; and
WHEREAS, Landlord and Tenant amended the lease pursuant to Lease Amendment
No. 4 dated as of March 1, 1994 to provide for the surrender of a certain
portion of the Premises;
WHEREAS, Landlord and Tenant further amended the lease pursuant to Lease
Amendment No. 5 dated as of May 4, 1994 to provide for certain additional
modifications to the Lease (the original Lease and the Amendments No. 1, 2, 3, 4
and 5 are hereinafter collectively referred to as the "Lease" and all of which
are incorporated herein by this reference and made a part hereof);
WHEREAS, Landlord and Tenant desire to modify the terms of the Lease and
Landlord is agreeable thereto on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the mutual receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. Recitals. The foregoing recitals are incorporated herein by this
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reference as if fully set forth at this point in the text of this Sixth
Amendment.
<PAGE>
2. Integration. The following terms and conditions shall constitute
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part of the Lease and be incorporated therein by reference and made a part
hereof.
3. Lease of Additional Space. Section 1.2 of the Lease is hereby
-------------------------
amended to provide that the term "Premises" shall also include an additional
1,634 rentable square feet on the first floor of the Building which space was
formally leased to Kelly Services as outlined on Exhibit A-1 attached hereto and
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made a part hereof. Upon delivery of the additional 1,634 rentable square feet
to Tenant, the total rentable square footage leased to the Tenant under the
terms of the Lease shall be 166,197 rentable square feet and this figure shall
be used for the purpose of calculating among other things, the Tenant's share of
Operating Costs and Real Estate Tax pass-throughs. As of the date hereof said
additional space shall become part of the Premises for all purposes under the
Lease including but not limited to the payment of Rent subject to all of the
terms and conditions of the Lease. The additional space shall be accepted by
Tenant in its "As-Is" condition.
4. Rental. Section 1.5 of the Lease is hereby amended to provide
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that the "Base Rent" shall be the amounts set forth on Exhibit A-2 attached
-----------
hereto and made a part hereof per annum and payable in monthly installments as
set forth in the Lease in advance on the first day of each month for the balance
of the term of the Lease.
5. Representations and Warranties. Tenant hereby represents and warrants
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to Landlord that:
(a) it has full right, power and authority to enter into the
transactions provided for in this Sixth Amendment;
(b) it has not, at any time, subleased, pledged, hypothecated,
assigned or encumbered the Lease or in any other manner encumbered the Premises;
(c) the Lease is in full force and effect and has not been modified,
amended, changed or otherwise altered in any manner, other than by Lease
Amendment No. 1 through and including this Lease Amendment No. 6.
(d) as of the date hereof, there is no default under the Lease and
the Tenant has no knowledge of any state of facts or events which with or
without the passage of time and or the giving of notice, would constitute any
default by the Landlord or the Tenant under the Lease.
(e) the Tenant has no credits, deductions or offsets of any kind
against the Landlord or any rentals due under the Lease.
6. Terms of Lease Ratified and Confirmed. Landlord and Tenant hereby
-------------------------------------
acknowledge that all of the terms, covenants and conditions of the Lease, as
hereby modified, amended or supplemented, are hereby ratified and confirmed and
shall continue to be and remain in full force and effect throughout the
remainder of the term of the Lease.
7. No Broker. Landlord and Tenant represent and warrant to each other
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that no broker has been involved with this Sixth Amendment or the additional
space related thereto and that no commission is payable in connection therewith.
2
<PAGE>
8. Binding Effect. It is understood and agreed that this Amendment
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shall not be binding upon Landlord until both Tenant and Landlord shall have
executed and delivered the same.
9. Successors and Assigns. This Amendment shall inure to the benefit of
----------------------
and bind the successors, assigns and respective representatives of the
respective parties.
10. Capitalized Terms. Capitalized terms used herein and not otherwise
-----------------
defined herein shall have the respective meanings ascribed thereto in the Lease.
Whenever there is a conflict between this Amendment and the Lease, the
provisions of this Amendment shall take precedence and the Lease shall be
construed accordingly.
IN WITNESS WHEREOF, the parties have executed this Lease Amendment No. 6 as
of the day and year first written above.
RICHMOND LAND CORPORATION GRC INTERNATIONAL, INC.
By:______________________ By:____________________
Name: ___________________ Name:__________________
Title:___________________ Title:_________________
3
<PAGE>
EXHIBIT 10.14
GRC INTERNATIONAL, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
AMENDED AND RESTATED
RIGHTS AGREEMENT
Dated as of June 30, 1995
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
----------------
This Agreement, originally dated as of December 2, 1985 and as subsequently
amended as of June 30, 1989, April 1, 1994 and June 30, 1995, between GRC
International, Inc., a Delaware corporation ("Company") (formerly Flow General
Inc.), and the Company's transfer agent, American Stock Transfer & Trust
Company, a New York trust company, ("Rights Agent") (as successor in this
Agreement to the Company's previous transfer agent, Philadelphia National Bank).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has authorized and declared a
dividend distribution ("Distribution") of one Right for each outstanding share
of Common Stock, $.10 par value, of the Company outstanding on December 6, 1985
and has authorized the issuance of one Right in respect to each share of Common
Stock of the Company issued between December 6, 1985 and the earlier of the
Distribution Date, the Expiration Date or the Final Expiration Date (as such
terms are hereinafter defined), and under certain other circumstances, each
Right representing the right to purchase one share of Common Stock of the
Company upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, in connection with the Distribution, the Company entered into a Rights
Agreement, originally dated as of December 2, 1985 and as subsequently amended
as of June 30, 1989 and April 1, 1994, with the Rights Agent; and
WHEREAS, the Board of Directors of the Company deems it to be in the best
interests of the Company and its stockholders to amend and restate such Rights
Agreement in its entirety, and to enter into this Agreement on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following
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terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of
securities of the Company constituting a Substantial Block (as such term is
hereinafter defined), but shall not include any employee benefit plan of the
Company.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, ("Exchange Act") as in effect
on June 30, 1995.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
<PAGE>
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise, provided,
--------
however, that a Person shall not be deemed the Beneficial Owner of, or to
- -------
beneficially own, (x) securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase, (y) securities issuable upon
exercise of Rights at any time prior to the occurrence of a Triggering Event, or
(z) securities issuable upon exercise of Rights from and after the occurrence of
a Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect to any Original
Rights; or (B) the right to vote or dispose of or has "beneficial ownership" of
(as determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act), including pursuant to any agreement, arrangement or
understanding, provided, however, that a Person shall not be deemed the
-------- -------
Beneficial Owner of, or to beneficially own, any security under this clause (B)
if the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act, and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (B) of subparagraph (ii) of this
paragraph (c)) or disposing of any securities of the Company, provided, however,
-------- -------
that nothing in this paragraph (c) shall cause a Person engaged in business as
an underwriter of securities to be the Beneficial Owner of, or to beneficially
own, any securities acquired through such Person's participation in good faith
in a firm commitment underwriting until the expiration of forty (40) days after
the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
2
<PAGE>
(f) "Common Stock" when used with reference to the Company shall mean the
Common Stock, $.10 par value, of the Company. "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock with
the greatest voting power of such Person or the equity securities or other
equity interest having power to control or direct the management of such Person.
(g) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
was a member of the Board on March 28, 1995, or (ii) any Person who subsequently
becomes a member of the Board, while such Person is a member of the Board, who
is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such Affiliate or
Associate, if such Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
(h) "Person" shall mean any individual, firm, corporation or other entity.
(i) "Qualifying Tender Offer" shall have the meaning set forth in Section
11(a)(ii) hereof.
(j) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(k) "Subsidiary" shall mean, with reference to any Person, any corporation
of which an amount of voting securities sufficient to elect at least a majority
of the directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(l) "Substantial Block" shall mean a number of shares of Common Stock
which equals or exceeds twenty-five percent (25%) of the number of shares of
Common Stock then outstanding.
(m) "Triggering Event" shall mean any event described in Section 11(a)(ii)
(a "Section 11(a)(ii) Event"), or in Section 13(a)(x), (y) or (z) (a "Section 13
Event"), hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights
- ---------------------------------------
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof shall, prior to the Distribution Date, also be
the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may,
from time to time, appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificate. (a) Until the earlier of (i) the Close
- ---------------------------------------
of Business on the tenth Business Day after the Shares Acquisition Date or (ii)
the Close of Business on the tenth Business Day (or such later date as the Board
shall determine) after the date that a tender or exchange offer by any Person
(other than the Company,
3
<PAGE>
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the beneficial owner of 25% or more of the shares
of Common Stock then outstanding (including any such date which is after the
date of this Agreement and prior to the issuance of the Rights; the earlier of
such dates being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section 3)
by the certificates for the Common Stock registered in the names of the holders
of the Common Stock (which certificates for the Common Stock shall be deemed
also to be Right Certificates) and not by separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable only in connection
with the transfer of the Common Stock. As soon as practicable after the
Distribution Date, the Rights Agent will send, by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit A hereto, evidencing one Right for each share of Common Stock so held.
As of the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On December 6, 1985, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to purchase Common Stock, in
substantially the form attached as Exhibit B ("Summary of Rights"), by first-
class, postage prepaid mail, to each record holder of the Common Stock as of the
Close of Business on December 6, 1985, at the address of such holder shown on
the records of the Company. With respect to certificates for the Common Stock
outstanding as of December 6, 1985, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock registered in the names
of the holders of the Common Stock with a copy of the Summary of Rights attached
thereto. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any of the certificates for the
Common Stock outstanding on December 6, 1985, even without a copy of the Summary
of Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
(c) Certificates for the shares of Common Stock issued after December 6,
1985, but prior to the earlier of the Distribution Date, the Expiration Date or
the Final Expiration Date (as such terms are defined in Section 7) shall, as
soon as practicable after such date, have impressed on, printed on, written on
or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof, to
certain Rights, as set forth in an Amended and Restated Rights
Agreement between GRC International, Inc. and American Stock
Transfer & Trust Company, dated as of June 30, 1995 ("Rights
Agreement"), the terms of
4
<PAGE>
which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of GRC
International, Inc. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
GRC International, Inc. will mail to the holder of this certificate
a copy of the Rights Agreement, without charge, within five days
after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an Acquiring Person
or any Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by, or on behalf of,
such Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented by
such certificate.
Section 4. Form of Right Certificates.
- --------------------------------------
(a) The Right Certificates (and the forms of election to purchase shares
and of assignment to be printed on the reverse thereof) shall be substantially
the same as Exhibit A hereto, and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon, as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may, from time to time, be listed or to
conform to usage. Subject to the provisions of Section 11 and Section 22
hereof, the Right Certificates, when issued, shall be dated as of December 6,
1985, and on their face shall entitle the holders thereof to purchase such
number of shares of Common Stock as shall be set forth therein at the price per
share set forth therein ("Purchase Price"), but the number and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof, shall be subject to adjustments, as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of
5
<PAGE>
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration. The Right Certificates shall be
- ---------------------------------------------
executed on behalf of the Company in the manner provided in the Bylaws of the
Company for Common Stock certificates. The Right Certificates shall be
countersigned by the Rights Agent, manually or by facsimile signature, and shall
not be valid for any purpose unless so countersigned. In case any officer of
the Company who shall have signed any of the Right Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent, issued and delivered with the same force
and effect as though the Person who signed such Right Certificates had not
ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any Person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such Person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be kept,
at one of its offices, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
- -------------------------------------------------------------------------------
Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the
- -------------------------------------------------------
provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the earlier of the Expiration Date or the Final Expiration
Date, any Right Certificate or Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of shares of Common
Stock (or, following a Triggering Event, other securities, cash or other assets,
as the case may be) as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any right Certificate shall make such
request in writing, delivered
6
<PAGE>
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the principal
office of the Rights Agent. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificates until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Right Certificates, and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof, as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto, a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction of indemnity or security
reasonably satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if mutilated, the Company
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
- -------------------------------------------------------------------------
(a) Subject to the provisions of Section 7(e) hereof, the registered
holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof), in whole or in part, at any time after the Distribution
Date, upon surrender of the Right Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to the
Rights Agent, together with payment of the Purchase Price for each share of
Common Stock (or other securities, cash or other assets, as the case may be) as
to which the Rights are exercised, at or prior to the Close of Business on the
earlier of (i) December 31, 2005 ("Final Expiration Date"), or (ii) the date on
which the Rights are redeemed, as provided in Section 23 (such earlier date
being herein referred to as the "Expiration Date").
(b) The Purchase Price for each share of the Common Stock pursuant to the
exercise of a Right shall initially be $30 until and through December 31, 1995
and thereafter shall be $100, shall be subject to adjustment, from time to time,
as provided in Sections 11 and 13 hereof, and shall be payable in lawful money
of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of the Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the shares (or other
securities, cash or other assets,
7
<PAGE>
as the case may be) to be purchased and an amount equal to any applicable
transfer tax in cash, or by certified check or bank draft payable to the order
of the Company, the Rights Agent shall (subject to Section 20(k) hereof)
thereupon promptly (i) requisition from any transfer agent of the Common Stock
of the Company certificates for the number of shares of Common Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14, (iii) promptly after receipt of such
certificates, cause the same to be delivered to, or upon the order of, the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, and (iv) when appropriate, after receipt,
promptly deliver such cash to, or upon the order of, the registered holder of
such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional
8
<PAGE>
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
- --------------------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof, except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Right Certificates, and in such
case shall deliver a certificate of destruction thereof, to the Company.
Section 9. Reservation and Availability of Shares of Common Stock.
- ------------------------------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Common Stock or its
authorized and issued shares of Common Stock held in its treasury, the number of
shares of Common Stock that will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the Common Stock issuable upon the exercise of Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Securities Act of 1933 ("Act"), with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the
9
<PAGE>
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction, if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to insure that all shares of Common Stock delivered upon
exercise of Rights shall, at the time of delivery of the certificates of such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay, when due
and payable, any and all federal and state transfer taxes and charges which may
be payable in respect to the issuance or delivery of the Right Certificates or
of any shares of Common Stock upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect to any transfer involved in the transfer or delivery of Right
Certificates or the issuance or delivery of certificates for Common Stock in a
name other than that of the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for shares of Common Stock upon the exercise of any Rights until
any such tax shall have been paid (any such tax being payable by the holder of
such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
Section 10. Common Stock Record Date. Each Person in whose name any
- -------------------------------------
certificate for Common Stock is issued upon the exercise of Rights shall, for
all purposes, be deemed to have become the holder of record of the shares of
Common Stock represented thereby on, and such certificate shall be dated the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
-------- -------
payment is a date upon which the Common Stock transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated the next succeeding Business Day
on which the Common Stock transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
10
<PAGE>
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.
- --------------------------------------------------------------------------------
The Purchase Price, the number of shares covered by each Right and the number of
Rights outstanding are subject to adjustment, from time to time, as provided in
this Section 11.
(a) (i) In the event the Company shall, at any time after the date of
this Agreement, (A) declare a dividend on the Common Stock payable in shares of
Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine
the outstanding shares of Common Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and in Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Common Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification provided,
however, that if the record date for any such dividend, subdivision, combination
or reclassification shall occur prior to the Distribution Date, the Company
shall make an appropriate adjustment to the Purchase Price (taking into account
any additional Rights which may be issued as a result of such dividend,
subdivision, combination or reclassification lieu of adjusting (as described
above) the number of shares of Common Stock (or other capital stock, as the case
may be) issuable upon exercise of the Rights. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall, at any time after the date of the
Distribution, become the Beneficial Owner of twenty-five percent (25%) or more
of the shares of Common Stock then outstanding, unless the event causing the 25%
threshold to be crossed is a transaction set forth in Section 13(a) hereof, or
is an acquisition of shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the members of the Board of Directors
who are not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person, after receiving advice from one
or more investment banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such members of the Board
deem relevant including, without limitation, prices which could reasonably be
achieved if
11
<PAGE>
the Company or its assets were sold on an orderly basis designed to realize
maximum value), and (b) otherwise in the best interests of the Company and its
stockholders (such tender offer, a "Qualifying Tender Offer"), then proper
provision shall be made so that each holder of a Right, except as provided below
and in Section 7(e), shall thereafter have a right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, such number of shares of Common Stock of the Company as shall equal
the result obtained by (x) multiplying the then-current Purchase Price by the
then number of shares of Common Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the current market price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation, but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall (a) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right ("Current Value") over (2) the Purchase
Price, and (B) with respect to each Right (subject to subparagraph (iii) of this
Section 11(a)), make adequate provision to substitute for the Adjustment Shares,
upon the exercise of a Right and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares or units of
shares, or preferred stock which the Board of Directors has deemed to have
essentially the same value or economic rights as shares of Common Stock (such
shares of preferred stock being referred to as "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has been
determined by the Board based upon the advice of a nationally recognized
investment banking firm selected by the Board; provided, however, that if the
-------- -------
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's
right of redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the Current
Value over (ii) the Purchase Price. If the Board determines in good faith that
it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the
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<PAGE>
Rights, the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences of this
Section 11(a)(iv), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval for such
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of each Adjustment Share shall be the current market price per share of
the Common Stock on the Section 11(a)(ii) Trigger Date, and the per share or per
unit value of any Common Stock Equivalent shall be deemed to equal the current
market price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights
or warrants to all holders of the Common Stock entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Common Stock (or securities convertible into Common Stock) at a price
per share of Common Stock (or having a conversion price per share of Common
Stock, if a security convertible into the Common Stock) less than the current
market price per share of Common Stock (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on such record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares of
Common Stock so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible). In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Common Stock owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
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<PAGE>
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than a
regular periodic cash dividend out of earnings or retained earnings or a
dividend payable in shares of Common Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, of which
the numerator shall be the current market price per share of Common Stock (as
defined in Section 11(d)) on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one share of the Common
Stock and of which the denominator shall be such current market price per share
of the Common Stock. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, the "current market
price" per share of the Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of the Common Stock for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date; provided, however, that in the event that the current market price
-------- -------
per share of the Common Stock is determined during a period following the
announcement by the issuer of the Common Stock of a dividend or distribution on
the Common Stock payable in shares of Common Stock, and prior to the expiration
of 30 Trading Days after the ex-dividend date for such dividend or distribution,
then, and in each such case, the current market price shall be appropriately
adjusted to reflect the current market price per common share equivalent. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market marker making a market in the Common Stock
selected by the Board of Directors of the
14
<PAGE>
Company. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereunder, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, thereafter the number of such other shares so receivable
upon exercise of any Right shall be subject to adjustment from time to time, in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in Section 11(a), (b), (c), (e), (g), (h), (i),
(j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the shares of Common Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable, from time to time, hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculation made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares (calculated to
the nearest ten-thousandth) obtained by (i) multiplying (x) the number of shares
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
15
<PAGE>
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of the number
of Rights shall be exercisable for the number of shares of Common Stock for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the option
of the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustments or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of shares which were expressed in the
initial Right Certificates issued thereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Common Stock issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
such adjusted Purchase Price.
(l) In any case in which the Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date the shares
of Common Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the shares of Common Stock and other
16
<PAGE>
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as to the
extent that, in its sole discretion, it shall determine to be advisable in order
that any consolidation or subdivision of the shares of Common Stock, issuance
wholly for cash of any shares of Common Stock at less than the current market
price, issuance wholly for cash of shares of Common Stock or securities which by
their terms are convertible into or exchangeable for shares of Common Stock,
stock dividends or issuance of rights, options or warrants referred to
hereinabove in this Section 11, hereafter made by the Company to holders of its
Common Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
- -----------------------------------------------------------------------
Whenever an adjustment is made, as provided in Section 11 and 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts
17
<PAGE>
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Stock a copy of such certificate, and (c)
mail a brief summary thereof, to each holder of a Right Certificate in
accordance with Section 25.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
- ---------------------------------------------------------------------------
Power. (a) In the event that, following the Shares Acquisition Date, directly
- -----
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), shall consolidate with the Company, or merge with and into the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
(z) the Company shall sell or otherwise transfer (or one or more of its
subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its subsidiaries (taken as a whole) to any Person (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof), then, and in each such case (except
as may be contemplated by Section 13(d) hereof), proper provision shall be made
so that (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then-current Purchase Price in accordance with the terms of this agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradable shares of Common Stock of the Principal Party not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then-current Purchase Price by the
number of shares of Common Stock for which a Right is then exercisable and
dividing that product by (2) 50% of the current market price per share of common
Stock of such other Person (determined pursuant to Section 11(d)) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
18
<PAGE>
(i) in case of any transaction described in clause (x) or (y) of the
first sentence of Section 13(a), the Person that is the issuer of any securities
into which shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any such case, (1) if
-------- -------
the Common Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing, and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of
19
<PAGE>
Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a Qualifying Tender Offer (or a
wholly owned Subsidiary of any such Person or Persons), (ii) the price per share
of Common Stock offered in such transaction is not less than the price per share
of Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such Qualifying Tender Offer, and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such Qualifying Tender Offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not
- ----------------------------------------------------
be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there
shall be paid to the registered holders of the Right Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right. For
the purposes of this Section 14(a), the current market value of a whole Right
shall be the closing price of the Rights for the Trading Day immediately prior
to the date on which such fractional Rights would have been otherwise issuable.
The closing price for any day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares upon
exercise of the Rights or to distribute certificates which evidence fractional
shares. In lieu of fractional shares, the Company may pay to the registered
holders of Right Certificates at the time such Right Certificates are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share of Common Stock. For purposes of this Section 14(b),
the current market value of a share of Common Stock shall be the closing price
of a shares of Common Stock (as determined pursuant to the second sentence of
Section 11(d)) for the Trading Day immediately prior to the date of such
exercise.
20
<PAGE>
(c) The holder of a Right by the acceptance of the Rights expressly waive
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect to this
- -----------------------------
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect to, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by accepting
- ---------------------------------------
the same consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
officer of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer;
(c) subject to Section 6 and Section 7(f), the Company and the Rights
Agent may deem and treat the Person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Stock certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent, subject to Section 7(e), shall be affected by any notice to
the contrary;
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use
-------- -------
21
<PAGE>
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as
- --------------------------------------------------------------
such, of any Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of Common Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
- ----------------------------------------
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for or in
respect to any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
- ----------------------------------------------------------------------
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Right Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
22
<PAGE>
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at such
time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and
- -----------------------------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Right Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect to
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect to the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any
23
<PAGE>
breach by the Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or 13 or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Right Certificate
or as to whether any shares of Common Stock will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, the Secretary or the Treasurer
of the Company, unless such officer shall be deemed to be an Acquiring Person
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents for or any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) In the event that any Person becomes an Acquiring Person, the Company
shall notify the Rights Agent of such event and of the identity of such Person.
The Rights Agent thereupon shall undertake a reasonable investigation to
ascertain which shares are held beneficially by such Acquiring Person, including
shares held by nominees of such Acquiring Person. If the Rights Agent
undertakes such reasonable investigation on a continuing basis after
notification by the Company as provided herein, the Rights Agent shall not be
liable for its failure in good faith to insert the
24
<PAGE>
legend provided for in Section 11(a)(iii) of this Agreement into Right
Certificates owned by or transferred to such Acquiring Person or its nominees.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights
- -----------------------------------
Agent may resign and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company and to each transfer agent of the
Common Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Company may remove the Rights Agent or
any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of any state thereof, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $10 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
- -----------------------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company, may,
at its option,
25
<PAGE>
issue new Right Certificates evidencing Rights in such form as may be approved
by its Board of Directors to reflect any adjustment or change in the Purchase
Price per share and the number or kind of class of shares or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. in addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Right Certificate
-------- -------
shall be issued if, and to the extend that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Right Certificate
would be issued, and (ii) no such Right Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption.
- -----------------------
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (x) the Close of Business on the tenth day following the
Shares Acquisition Date, or (y) the Close of Business on the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.05 per Right appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price"),
provided, however, if the Board of Directors of the Company authorizes
- --------
redemption of the Rights in either of the circumstances set forth in clauses (i)
and (ii) below, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors: (i) such authorization occurs on or after the time a Person becomes
an Acquiring Person, or (ii) such authorization occurs on or after the date of a
change (resulting from a proxy or consent solicitation) in a majority of the
directors in office at the commencement of such solicitation if any Person who
is a participant in such solicitation has stated (or, if upon the commencement
of such solicitation, a majority of the Board of Directors of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking, any action which would
result in such Person becoming an Acquiring Person or which would cause the
occurrence of a Trigging Event unless, concurrent with such solicitation, such
Person (or one or more of its Affiliates or Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Securities and Exchange Commission for all outstanding shares of Common Stock
not beneficially owned by such Person (or by its Affiliates or Associates).
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of
26
<PAGE>
redemption hereunder has expired. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the "current market
price", as defined in Section 11(d) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. Within 10 days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last address as they appear upon the registry books of the
Rights Agent, or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of
its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23, and other than in connection with the repurchase of Common Stock
prior to the Distribution Date.
Section 24. Notice of Certain Events. In case the Company shall propose (a) to
- -------------------------------------
pay any dividend payable in stock of any class to the holders of its Common
Stock or to make any other distribution to the holders of its Common Stock
(other than a regular periodic cash dividend out of earnings or retained
earnings), (b) to offer to the holders of its Common Stock rights or warrants to
subscribe for or to purchase any additional shares of Common Stock or shares of
stock of any class or any other securities, rights or options, (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision of outstanding shares of Common Stock, (d) to effect any
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its subsidiaries to effect any sale or other
transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person (other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o) hereof), or (e) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Right, in accordance with
Section 25, a notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, distribution of rights or Rights,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Stock, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (a) or (b) above at least twenty (20) days prior to the record date
for determining holders of the Common Stock for purposes of such action, and in
the case of any such other action, at least twenty (20) days prior to the date
of the taking of such proposed action
27
<PAGE>
or the date of participation therein by the holders of the Common Stock,
whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of this Agreement shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to each holder of a Right, in accordance with Section 25, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii).
Section 25. Notices. Notices or demands authorized by this Agreement to be
- --------------------
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address it filed in writing with
the Rights Agent) as follows:
GRC International, Inc.
Plaza 1900
1900 Gallows Road
Vienna, Virginia 22182
Attention: Corporate Secretary
with a copy to the General Counsel at the same address. Subject to the
provisions of Section 21, any notice or demand authorized by this Agreement to
be given or made by the Company or by the holder of any Right Certificate to or
on the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
American Stock Transfer & Trust Company
99 Wall Street
New York, New York 10005
Notices of demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. The Company and the Rights Agent may,
- ---------------------------------------
from time to time, supplement or amend this Agreement without the approval of
any holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, to extend the period of redemption provided
for in Section 23 of this Agreement, or to make any other provisions in regard
to matters or questions arising hereunder which the Company and the Rights Agent
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates; provided, however, that this
-------- -------
Agreement may not be supplemented or amended in any way unless the Company's
Board of Directors consists of a majority of Continuing Directors at the time of
such amendment or supplement.
28
<PAGE>
Section 27. Successors. All the covenants and provisions of this Agreement by
- -----------------------
or for the benefit of the Company or the Rights Agent shall bind an inure to the
benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors, etc. For all
- ----------------------------------------------------------------------
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company (with, where specifically
provided for herein, the concurrence of the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board (with, where specifically provided for
herein, the concurrence of the Continuing Directors) in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board or the
Continuing Directors to any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
- ---------------------------------------
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates.
Section 30. Governing Law. This Agreement and each Right Certificate issued
- --------------------------
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
Section 31. Counterparts. This Agreement may be executed in any number of
- -------------------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the several Sections
- ---------------------------------
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
29
<PAGE>
Section 33. Severability. If any portion or provision of this Agreement shall
- -------------------------
be held void, illegal, unenforceable or in conflict with any applicable law or
regulation then in effect, the validity or enforceability of the remaining
portions or provisions shall not be affected thereby; provided, however, that
-------- -------
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held to be invalid, void or unenforceable
and the Board of Directors of the Company determines in its good faith judgment
that severing the invalid language form this Agreement would adversely affect
the purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the Close of
Business on the tenth day following the date of such determination by the Board
of Directors; and provided, further, that if any provision of this Agreement
-------- -------
requiring that a determination be made by the Continuing Directors or by
independent directors is held to be invalid, void or unenforceable, then this
Agreement shall be construed as providing that such determination shall be made
by the entire Board of Directors.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: GRC INTERNATIONAL, INC.
By:________________________________ By:_____________________________________
Thomas E. McCabe Jim Roth
Vice President, General Counsel President and Chief Executive Officer
& Secretary
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:________________________________ By:_____________________________________
Printed Name:______________________ Printed Name:___________________________
Title:_____________________________ Title:__________________________________
30
<PAGE>
Exhibit A
---------
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2005 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED
TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.]/1/
Right Certificate
This certifies that_____________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement dated as of June 30, 1995 ("Rights
Agreement") between GRC International, Inc., a Delaware corporation ("Company"),
and American Stock Transfer & Trust Company, a New York trust company ("Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New
York City time) on December 31, 2005 at the principal office of the Rights
Agent, or its successors as Rights Agent, one fully paid nonassessable share of
Common Stock, $.10 par value ("Common Stock"), of the Company, at a purchase
price of $30 per share until and through December 31, 1995 and thereafter shall
be $100 ("Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of shares which may
be purchase upon exercise thereof) set forth above, are the number as of
December 6, 1985, based on the shares of Common Stock of the Company as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of shares of Common Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as
_____________________
/1/ The portion of the legend in brackets shall be inserted only if applicable.
<PAGE>
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
This Right Certificate is subject to all of the terms, provisions and conditions
of the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon surrender
at the principal office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificate of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Common Stock as the Rights evidenced by the Right
Certificate or Right Certificate surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.05 per Right at any time prior to the earlier of the close of business on
(i) the tenth day following the Shares Acquisition Date (as such time period may
be extended pursuant to the Rights Agreement), and (ii) the Final Expiration
Date. In addition, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of preferred stock of the Company having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
Under certain circumstances set forth in the Rights Agreement, the decision to
redeem the Rights shall require the concurrence of a majority of the Continuing
Directors.
No fractional shares of Common Stock will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of Common Stock or of any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder
2
<PAGE>
hereof, as such, any of the rights of a shareholder of the company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or, to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its
corporate seal. Dated as of______________________________.
Attest: GRC INTERNATIONAL, INC.
By:_________________________________ By:_____________________________
Thomas E. McCabe Jim Roth
Vice President, General Counsel President and Chief Executive
& Secretary Officer
Countersigned:
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:______________________________ By:____________________________
Printed Name:____________________ Printed Name:__________________
Title:___________________________ Title:_________________________
3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(to be executed by the registered holder if such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED____________________________________________sells,
assigns and transfers unto____________________________________.
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint________________________________
as Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Date:___________________________
________________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associates of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Date:___________________________
________________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment must correspond to the name as written
upon the face of this Right Certificate in every particular, without alteration
on enlargement or any change whatsoever.
4
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To GRC International, Inc.
The undersigned hereby irrevocably elects to exercise_____ Rights represented by
this Right Certificate to purchase the shares of Common Stock issuable upon the
exercise of such Rights and requests that certifies for such shares be issued in
the name of:
Please insert social security
or other identifying number
_________________________________
(Please print name and address)
_________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_________________________________
(Please print name and address)
_________________________________
Dated:___________________________
_________________________________
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Right Certificate)
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated:___________________________
_________________________________
Signature
Signature Guaranteed:
2
<PAGE>
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On November 25, 1985, the Board of Directors ("Board") of GRC International,
Inc. ("Company") declared a dividend distribution of one Right for each share of
Common Stock, $.10 par value, of the Company ("Common Stock") which was then
outstanding or would later be issued. The distribution was originally payable
to the holders of record of the Common Stock on December 6, 1985. As of June
30, 1989, April 1, 1994 and June 30, 1995, the Rights were amended by the Board.
As amended, each Right entitles the registered holder to purchase from the
Company one share of Common Stock at a price of $30 per share until and through
December 31, 1995 and thereafter shall be $100 ("Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement ("Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent ("Rights Agent").
Until the earlier to occur of (i) ten business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") acquired, or obtained the right to acquire, beneficial
ownership of twenty-five percent (25%) or more of the outstanding Common Stock,
or (ii) ten business days following the commencement or announcement of an
intention to make a tender offer or exchange offer for twenty-five percent (25%)
or more of such outstanding Common Stock (the earlier of such dates being called
the "Distribution Date"), the Rights will be evidenced, with respect to any of
the Common Stock certificates outstanding as of December 6, 1985, by such Common
Stock certificate with a copy of this Summary of Rights attached thereto. The
Rights Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Common Stock. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after December 6, 1985 upon transfer of new issuance of the
Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any Common Stock certificates
outstanding as of December 6, 1985, even without a copy of this Summary of
Rights attached thereto, will also constitute the transfer of the Rights
associates with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificate evidencing the
Rights ("Right Certificates") will be mailed to holders of record of the Common
Stock as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on December 31, 2005, unless earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of shares of the Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment, from time to time, to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of the
Common Stock, (ii) upon the grant to
<PAGE>
holders of the Common Stock of certain rights or warrants to subscribe for
Common Stock or convertible securities at less than the current market price of
the Common Stock, or (iii) upon the distribution to holders of the Common Stock
of evidences of indebtedness or assets (excluding regular periodic cash
dividends out of earnings or retained earnings or dividends payable in the
Common Stock) or of subscription rights or warrants (other than those referred
to above).
In the event that, at any time following the Distribution, a person becomes the
beneficial owner of twenty-five percent (25%) or more of the then outstanding
shares of Common Stock (except pursuant to an offer for all outstanding shares
of Common Stock which the independent directors determine to be fair to and
otherwise in the best interests of the Company and its shareholders), each
holder of a Right will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its assets or earning power are sold,
proper provision shall be made so that each holder of a Right (except Rights
which have been previously voided as set forth above) shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value of two times the
exercise price of the Right.
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price. No fractional shares will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) the tenth business day
following the public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of twenty-five percent
(25%) or more of the outstanding Common Stock or (ii) December 31, 2005, the
Company may redeem the Rights in whole, but not in part, at a price of $.05 per
Right, payable in cash, Common Stock or other consideration deemed appropriate
by the Board of Directors ("Redemption Price"). Immediately upon the action of
the Board of Directors of the Company electing to redeem the Rights, the Company
shall make announcements thereof, and upon such election, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
2
<PAGE>
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends.
A copy of the Rights Agreement will be filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is hereby incorporated
herein by reference.
3
<PAGE>
EXHIBIT 10.16
CEO EMPLOYMENT AGREEMENT
------------------------
This EMPLOYMENT AGREEMENT is made and entered into, in duplicate, as of the date
hereinafter set forth, at Vienna, Virginia, by and between the undersigned
employee ("Employee"), and GRC International, Inc., a Delaware corporation
("Company"). In consideration of the mutual premises, promises, covenants, and
agreements herein contained, Employee and Company hereby agree as follows:
1. Duties
------
(a) The Company shall employ Employee in the capacity set forth in Item 1(a) on
Exhibit A, attached hereto and made a part hereof. Employee accepts such
employment and agrees to perform the duties of such office(s). Employee's duties
will include all of those generally associated with said position, subject to
the direction and assignment of the Company's Board of Directors. Employee shall
devote substantially all his working time and energies to the foregoing duties.
The duties assigned to Employee shall be performed at the place of employment
specified in Item 1(b) of Exhibit A.
(b) This Agreement supersedes and replaces in their entirety all previous
Employment Agreements between the parties hereto.
2. Term of Employment
------------------
(a) Except as provided in Section 2(b) hereof, the term of the employment
relationship provided for herein shall commence as of the Effective Date of this
Agreement and end on the Termination Date of this Agreement, both as specified
in Exhibit A, Item 2.
(b) Section 2(a) of the Agreement and Item 2 of Exhibit A notwithstanding, if a
Change of Control (as defined below) shall have occurred during the term of this
Agreement, this Agreement shall continue in effect for a period of not less than
twelve (12) months beyond the month in which such Change of Control occurred.
For purposes of this Agreement, a "Change of Control" shall mean the
satisfaction of the conditions set forth in any one of the following paragraphs:
(i) any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as modified and used in
Sections 13(d) and 14(d) thereof, except that neither (A) the Company or any of
-------
its subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, nor (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company shall be included in such term) (a "Person")
is or becomes the "beneficial owner" as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
(ii) during any period of up to two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute
<PAGE>
the Board of Directors of the Company (the "Board") and any new director (other
than a director designated by a Person who has entered into an agreement with
the Company to effect a transaction described in clause (i), (iii) or (iv) of
this paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least 75%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person acquires more than 50% of
the combined voting power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
3. Salary. During the term of Employee's employment hereunder, the Company
------
shall pay Employee the annual salary set forth in Exhibit A, Item 3(a) ("Gross
Annual Salary").
4. Bonus.
-----
(a) The Company shall pay Employee an annual bonus in the amount calculated
according to the formula set forth in Exhibit A, Item 3(b) ("Annual Bonus
Amount").
(b) Within 30 days of the Company's receipt from its auditors of their report
on the Company's consolidated financial statements for the applicable fiscal
year most recently ended, the Company shall deliver to Employee a lump sum equal
to the Annual Bonus Amount.
(c) If Employee's employment with the Company pursuant to this Agreement shall
be terminated for cause prior to the end of any fiscal year of the Company,
Employee shall not be entitled to any portion of the Annual Bonus Amount for
such fiscal year.
5. Lifetime Medical and Dental Coverage for Employee and Spouse.
------------------------------------------------------------
(a) If Employee has not breached this Employment Agreement, Employee shall be
entitled to coverage for Employee and his spouse under the Company's standard
medical and dental insurance policy after Employee's retirement, for Employee's
lifetime (this benefit is hereinafter referred to as "Lifetime Coverage").
(b) (i) If for any policy year beginning after Employee's retirement,
Quantity X (defined as the Company's per employee cost for the type of insurance
provided to Employee in that policy year) is less than Quantity Y (defined as
the Company's per employee cost provided to Employee as of the date of
Employee's retirement, plus cumulative annual increases of 5%),
2
<PAGE>
then, subject to the provisions of paragraph (ii) of this Section 5(b), the
Company shall also pay Employee in cash, within 90 days after the end of each
such policy year, an amount equal to the difference between Quantity X, and
Quantity Y, so that Employee receives an annual benefit equivalent to the
greater of Quantity X or Quantity Y. If Quantity X is greater than Quantity Y,
Employee shall not be obligated to reimburse the Company for such excess. If, in
any policy year, the Company is unable to include Employee in its employee
family coverage for any reason, its only obligation to Employee under this
provision shall be to pay him the equivalent of Quantity Y for such year.
(ii) Regarding the Lifetime Coverage, it is the intent of the parties
that the Company's cost for the Lifetime Coverage in any policy year shall in no
event exceed the greater of Quantity X or Quantity Y, and that the Lifetime
Coverage not result in a windfall to Employee, but simply to provide him, after
his retirement, with roughly the level of insurance coverage he had while
employed by the Company (the current Company cost of which is estimated to be
$5,000), with a limit on the Company's financial obligation should it be unable
to arrange for such coverage. With that being the intent, by way of example, if
the government came to provide universal health care with essentially the
equivalent benefits now provided by the Company, the Company would no longer be
obligated to provide Employee with the Lifetime Coverage. Also, to the fullest
extent permitted by law, the Company's coverage would only be supplemental to
Medicare or any other government or other arrangement which might be in force
now or at a later date.
(c) The provisions of this Section 5 shall survive any termination of this
Agreement.
6. Relocation.
----------
(a) If Employee relocates his principal residence back to California within 1
year after the expiration of this Agreement, the Company shall reimburse
Employee for his reasonable moving expenses incurred as a result of such
relocation (subject to the limits of the then-current standard Company policy
covering such relocations and subject to an aggregate limitation of $100,000,
except as provided in Section 6(b)).
(b) Notwithstanding the limitations contained in Section 6(a), if Employee
relocates his principal residence back to California within 1 year after the
expiration of this Agreement, the Company shall purchase (or cause to be
purchased) Employee's Virginia residence ("Virginia Residence") from Employee,
upon the following terms and conditions:
(i) Employee must list the Virginia Residence on the Multiple Listing
Service and in good faith hold the same open for sale, and engage in his behalf
and at his expense a qualified real estate agent who is a principal or associate
broker of a reputable, established real estate brokerage firm in the Washington,
D.C. metropolitan area, and otherwise exercise his best efforts to sell the
Virginia Residence including, without limitation, making such minor, cosmetic or
structural repairs and improvements as may be suggested by his real estate agent
or which otherwise will improve the marketability of the Virginia Residence
(hereinafter, any reasonable, documented payments by Employee to effect said
repairs are referred to as "fix-up expenses");
(ii) (A) If Employee receives an offer from a qualified purchaser for
the purchase of the Virginia Residence at a purchase price which will at least
return Employee's Cost to Employee, and Employee desires to accept without
recourse against the Company, he may do so. (Employee's Cost is defined as
Employee's purchase price plus any other charges paid by
3
<PAGE>
Employee in connection with his purchase of the Virginia Residence, plus the
cost of improvements to the Virginia Residence made at Employee's expense at any
time during his ownership of the Virginia Residence, plus fix-up expenses, plus
any charges which would be listed on page 2 of the HUD-1 Settlement Statement
and paid by Employee.) All offers which Employee does not desire to accept shall
be submitted to the Company for its approval or disapproval. The Company may
instruct Employee to accept any offer which the Company deems appropriate, even
if such offer does not constitute an Acceptable Offer. (An Acceptable Officer is
defined as one which would at least return Employee's Cost to Employee.) If the
Company instructs Employee to accept an offer which does not constitute an
Acceptable Offer, then the Company shall, at settlement, pay to Employee or the
settlement agent an amount which, when added to the amount actually paid to
Employee at settlement, will return Employee's Cost to Employee.
(B) If, after a three-month period of actively seeking a purchaser
for the Virginia Residence, Employee has not received an Acceptable Offer and
the Company has not instructed Employee to accept an offer which does not
constitute an Acceptable Offer, then, upon the Company's receipt from Employee
of written notice of such fact, the Company shall, within 45 days thereafter,
itself make (or cause to be made) an Acceptable Offer to Employee; provided,
--------
however, that Employee shall keep the Virginia Residence on the market during
- -------
such 45 day period and notify the Company in writing of any offers received
during such period, and the Company may instruct Employee to accept any such
offer which the Company deems appropriate, even if such offer does not
constitute an Acceptable Offer. During such 45 day period, if the Company
instructs Employee to accept an offer which does not constitute an Acceptable
Offer, then the Company shall, at settlement, pay to Employee or the settlement
agent an amount which, when added to the amount actually paid to Employee at
settlement, will return Employee's Cost to Employee, and the Company shall no
longer be obligated to make (or cause to be made) an Acceptable Offer.
7. Estate Planning. The Company will pay up to $10,000 during each fiscal
---------------
year of this Agreement to legal, accounting and other professionals of
Employee's choice who provide estate planning, tax planning and related services
to Employee. Employee shall submit such invoices to the Company together with a
written request that the Company pay such invoices to the applicable
professional(s). Such professionals shall be selected by Employee in his sole
discretion and the Company shall have no liability whatsoever with respect to
the selection of such professionals.
8. Competition. Employee agrees that until termination or expiration of this
-----------
Employment Agreement, absent the expressed, prior written authorization of the
Company's Board of Directors, Employee shall not, directly or indirectly, engage
in any activity competitive with or adverse to the Company's business or
welfare, whether alone, as a partner of any partnership or joint venture, or as
an officer, director, employee, or holder of 5% or more of any class of stock,
of any corporation.
9. Business Disclosures. Employee agrees that during the term of his
--------------------
employment with the Company and thereafter, he will not, without the express,
prior written consent of the Company's Board of Directors, disclose, other than
to an authorized employee, officer or director of the Company, any confidential
information of, regarding or relating to the Company. For purposes of the
preceding sentence, the phrase "confidential information" shall include, but not
be limited to, any information relating to the Company's businesses, customers,
trade practices, or trade secrets and know-how. Upon the termination of
Employee's employment for
4
<PAGE>
whatever reason, Employee, without the prior express written consent of the
Board of Directors, shall not remove from the premises or possession of the
Company or retain, publish or disseminate, any figures, calculations, letters,
customer lists, documents, written instruments or any other material of a
confidential nature, whether originals, photocopies or other facsimile or
reproductions thereof, or other confidential information of any type or
description in connection with or in any way pertaining to the Company or its
affairs.
10. Development of Inventions and Improvements
------------------------------------------
(a) Employee agrees that he will keep the Company informed of any inventions,
discoveries, improvements, trade secrets, and secret processes made by him, in
whole or in part, or conceived by him, alone or with others (herein collectively
referred to as "Intellectual Property"), if such Intellectual Property results
from any work he may do for or on behalf of the Company or at the request or
upon the premises of the Company or which work relates to the activities,
investigations or obligations of the Company or its affiliates (such
Intellectual Property hereinafter referred to as "Employer Work Product"). For
purposes of the preceding sentence, the term "affiliates" shall include, without
limitation, any entity with which the Company is carrying on a joint enterprise
or in which the Company has a substantial interest.
(b) At the expense of the Company, Employee shall assist the Company, its
agents, employees or nominees, in making application for and obtaining patents
with respect to any and all Employer Work Product in such countries throughout
the world as the Company shall designate. Employee agrees to and shall execute
any and all papers necessary to secure on behalf of the Company such United
States or foreign patents covering Employer Work Product which the Company deems
necessary or appropriate. In addition, Employee shall give the Company any and
all information in his possession or known to him respecting any Employer Work
Product or any patents or applications relating thereto.
(c) Such Employer Work Product shall be the property of the Company, or its
nominees, whether patented or not, and Employee shall, without charge to the
Company, assign to the Company all of his right, title, and interest, if any, in
such Employer Work Product and Employee shall execute, acknowledge and deliver
any instrument confirming the complete ownership by the Company of such Employer
Work Product.
(d) Employee agrees to deliver to the Company upon its request therefor, any
and all sketches, drawings, models, figures, and other materials and information
created or acquired by Employee during the term of the employment relationship
with respect to any Intellectual Property covered by this Section 10 and to
execute and deliver to the Company any applications, assignments or other
written instruments reasonably necessary or appropriate to the Company's
securing such patents, or the renewal or continuation thereof, or in any
litigation or other proceedings connected therewith.
(e) Descriptions of all Intellectual Property, whether patented or not, which
Employee has made or conceived prior to his employment by the Company, are
described in Exhibit B hereto, and such Intellectual Property shall be excluded
from this Agreement. Employee represents, warrants, and covenants that the
absence of a description of any Intellectual Property on Exhibit B shall
indicate conclusively that Employee neither owned prior to his employment by the
Company nor has any claim to, any such Intellectual Property.
5
<PAGE>
(f) Employee shall not at any time, except as required in the proper conduct of
the business of the Company or as authorized in writing by the Company, publish,
disclose or authorize, assist or permit anyone else to publish or disclose any
secret or confidential matter relating to any aspect of any of the businesses of
the Company with which Employee's service may in any way acquaint him.
(g) This Agreement will further incorporate any and all provisions with respect
to patents, inventions, discoveries, improvements, trade secrets, secret
processes, and data to which the Company may be required to cause its employees
to agree under the terms and provisions of any contract entered into by the
Company with the United States Government or any agency thereof or any foreign
government or agency thereof or any supranational agency, or under the terms of
any subcontract to which the Company under a prime contract issued by any of the
above-mentioned governments or agencies, whether the same be in any contracts to
which the Company is presently or may in the future become a party.
(h) Employee agrees that upon the termination of his employment he will execute
and comply with the Termination Statement attached hereto as Exhibit C.
11. Termination of Contract Prior to Expiration of Term
---------------------------------------------------
(a) Subject to the provisions of Sections 11(b) and 11(c) of this Agreement,
this Agreement may be terminated immediately by the Company for cause upon
written notice to Employee. The Company shall have cause to terminate Employee
under any of the following circumstances:
(i) Failure on the part of the Employee to exert his best efforts in
performing the functions assigned to him by the Company, which failure can
reasonably be expected to have a material adverse effect on the Company,
provided that the functions assigned to Employee shall at all times be in
keeping with the position for which Employee was hired, as described in Section
1 of this Agreement; or
(ii) Employee is in breach of the terms of Sections 8, 9 or 10 hereof,
is guilty of dishonesty or chronic absenteeism, or is convicted of a felony or
of a misdemeanor involving moral turpitude.
(b) Notwithstanding anything to the contrary in this Agreement, at any time
during the 12-month period following the Change of Control specified in Section
2(b), Employee's employment may be terminated for any reason by the Company or
by Employee by delivering to the other party written notice of termination at
least ninety (90) days prior to the effective date of such termination;
provided, however, that upon such termination of employment during the twelve-
- -------- -------
month period following the Change of Control, Employee shall receive (i) a lump-
sum severance payment in an amount equal to 2 times the Gross Annual Salary
specified in Item 3(a) of Exhibit A, less any income, employment, excise or
other tax withholdings which the Company is required by law to deduct therefrom,
(ii) any unpaid Annual Bonus Amount(s), less any income, excise or other
employment tax withholdings which the Company is required by law to deduct
therefrom. If Employee's employment is terminated by either party under this
Section 11(b) prior to the end of any fiscal year of the Company, Employee shall
be entitled to the Annual Bonus Amount for such fiscal year on a pro rata basis,
--- ----
determined according to the percentage of such fiscal year for which Employee
shall have been employed pursuant to this Agreement.
6
<PAGE>
(c) Termination of this Agreement will not relieve Employee from any liability
pursuant to Sections 9 or 10 which, by their respective terms, continue beyond
the termination of this Agreement.
12. Disability. If Employee is unable to fulfill the duties of his position
----------
by reason of any illness, incapacity or disability, Employee's salary shall be
payable for only 90 days following the onset of such illness, incapacity or
disability, provided, however, that if Employee (i) has applied for insurance
benefits under the Company's long-term disability policy during said 90 day
period, and (ii) has not yet begun to receive payments under said policy during
said 90 day period, then Employee's salary shall continue to be payable for up
to 180 days following the onset of such illness, incapacity or disability until
the Employee begins to receive such payments. During the foregoing 90 day
period (or 180 day period, if applicable), Employee's salary, to the extent not
covered by the Company's short-term disability benefits, shall be paid through
the use of Employee's sick leave, if any, accumulated prior to January 1, 1994,
but if such sick leave is or becomes exhausted, Employee's salary shall
nevertheless be paid for the 90 day period (or 180 day period, if applicable).
If Employee shall return to full employment and full discharge of his or her
duties during the term of this Agreement, full compensation shall be
prospectively reinstated for any remaining term of this Agreement.
13. Notice
------
(a) Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and sent by (i) registered or certified mail,
return receipt requested, (ii) express courier, or (iii) hand-delivery, to the
party entitled to receive such notice, at an address specified in this Agreement
or in the Exhibits hereto or at such other address of which written notice has
been given to the other party by any of the foregoing means.
(b) Any notice required to be given to the Company shall be given to the Vice
President, General Counsel and Secretary, GRC International, Inc., 1900 Gallows
Road, Vienna, Virginia 22182 and to the Personnel Department to which Employee
normally reports. Any notice required hereunder to be given by the Company shall
be given by or at the direction of the Board of Directors of the Company.
14. Disputes.
--------
(a) This Agreement has been executed in and shall be governed by the laws of
the Commonwealth of Virginia.
(b) All disputes arising in connection with this Agreement shall be finally
settled under the rules of arbitration of the American Arbitration Association
by one (1) arbitrator appointed in accordance with its rules. The place of
arbitration shall be Tysons Corner, Virginia and the proceedings shall be
conducted in the English language. The arbitrators award shall, in addition to
dealing with the merits of the case, fix the costs of the arbitration and decide
which of the parties shall bear the costs and reasonable legal fees and expenses
of the parties, or in what proportions the said costs, fees and expenses shall
be borne by the parties. If enforcement of the arbitrators' award is required,
the cost of enforcement shall be borne by the party against which enforcement is
sought.
7
<PAGE>
(c) It is agreed that in the event of any breach, violation or evasion of the
terms of this Employment Agreement, such breach, violation or evasion will
result in immediate and irreparable injury to the Company and will authorize the
Company to seek injunctive relief, including, but not limited to, any order of
specific performance, as well as all other legal or equitable remedies to which
the Company may be entitled.
15. Waiver of Breach. The waiver by the Company of a breach of any provision
----------------
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No such waiver shall be valid unless set
forth in writing signed by an authorized officer of the Company.
16. Assignment. Employee acknowledges that the services to be rendered by him
----------
are unique and personal. Accordingly, Employee may not assign any of his rights
or delegate any of his duties or obligations under this Agreement. The rights
and obligations of the Company under this Agreement shall inure to the benefit
of and shall be binding upon the successors and assigns of the Company.
17. Severability. Any provision of this Agreement which may be determined to
------------
be unenforceable or invalid as a matter of law shall be deemed stricken from
this Agreement and all remaining provisions shall continue in full force and
effect.
18. Entire Agreement. This Agreement supersedes all previous Employment
----------------
Agreements between Employee and the Company and contains the entire
understanding of the parties and may not be modified, amended or terminated
unless the provisions of such modification, amendment or termination are set
forth in writing signed by all of the parties to this Agreement. This
Agreement, and any modification, amendment or termination thereof, shall be
approved by and executed on behalf or at the direction of the Company's Board of
Directors.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of_____,
1995.
ATTEST: GRC INTERNATIONAL, INC.
__________________________________ By:_________________________________
Thomas E. McCabe Edward C. Meyer
Vice President, General Counsel Chairman of the Board
& Secretary
WITNESS EMPLOYEE
__________________________________ ____________________________________
James Roth
9
<PAGE>
EXHIBIT A
---------
DETAILS OF EMPLOYMENT
---------------------
EMPLOYEE: James Roth
----------
ITEM 1(a) Title(s): President & Chief Executive Officer
-----------------------------------
ITEM 1(b) Place of Employment: Vienna, Virginia
----------------
ITEM 2 Effective Date (of Employment Agreement): July 1, 1995
------------
Termination Date: June 30, 1998
-------------
Effective Date of this Exhibit: July 1, 1995
------------
ITEM 3(a) Gross Annual Salary:
Three Hundred Thousand Dollars ($300,000)
-----------------------------------------
ITEM 3(b) Annual Bonus Amount:
Equal to 2% of the Company's annual net income, determined without
-------------------------------------------------------------------
regard to any extraordinary items of income or loss, as reported by
-------------------------------------------------------------------
the Company in its audited consolidated financial statements
-------------------------------------------------------------------
ITEM 4Notice to Employee:
James Roth James Roth
------------------------ ------------------------
President & CEO and/ 2140 Owls Cove Lane
------------------------ ------------------------
GRC International, Inc. or Reston, Virginia 22091
------------------------ ------------------------
1900 Gallows Road
------------------------
Vienna, Virginia 22182
------------------------
EMPLOYEE: GRC INTERNATIONAL, INC.
____________________________________ By:________________________________
Edward C. Meyer
Chairman of the Board
Date:_______________________________ Date:______________________________
10
<PAGE>
EXHIBIT B
---------
SCHEDULE OF INTELLECTUAL PROPERTY
---------------------------------
Employee developed or conceived prior to his employment by the Company the
following Intellectual Property, as that term is defined in the Employment
Agreement to which this Exhibit is attached and made a part of, whether or not
such Intellectual Property is the subject of a patent or patent application:
Date: July 1, 1995 EMPLOYEE
______________________________________
Jim Roth
11
<PAGE>
EXHIBIT C
---------
TERMINATION STATEMENT
---------------------
In connection with the termination of my employment with the Company pursuant to
the above-referenced Employment Agreement, I hereby represent, warrant and
covenant that:
1. Upon termination of my employment relationship with the Company I did not
have in my possession and do not now have in my possession any confidential or
business property of the Company including, but not limited to, any confidential
information described in Section 9 of the aforementioned Employment Agreement,
and Company Work Product described in Section 10 of the Employment Agreement or
any testing equipment, materials, components, sub-assemblies, drawings or
blueprints.
2. I have returned or left in the possession of the Company all notebooks which
I used during my employment relationship with the Company.
3. I have returned to the Company any and all identification cards and credit
cards issued to me as an employee of the Company and any and all keys to
property of the Company, including, without limitation, offices of the Company,
Company cars, and the like.
4. I am not aware of any action or situation involving any violation of the
Company's Corporate Standards of Conduct by any employee, director, consultant
of the Company, except as follows:
4. My forwarding addresses are as follows:
HOME ADDRESS BUSINESS ADDRESS
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
EMPLOYEE:
_____________________________
Jim Roth
_____________________________
(Date)
12
<PAGE>
EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This EMPLOYMENT AGREEMENT is made as of the date hereinafter set forth, in
Vienna, Virginia, by and between the undersigned employee ("Employee"), and GRC
International, Inc., a Delaware corporation ("Company"). In consideration of
the mutual premises, promises, covenants and agreements herein contained,
Employee and the Company agree as follows:
1. Duties.
------
(a) The Company hereby employs Employee in the capacity set forth in Item 1(a)
of Exhibit A attached hereto and made a part hereof. Employee hereby accepts
such employment and agrees to perform the duties of such office(s). Employee's
duties will include all of those generally associated with said position,
subject to the direction and assignment of the Company's Board of Directors.
Substantially all of employee's working time and energies shall be devoted to
the foregoing duties. The duties assigned to Employee shall be performed at the
place of employment specified in Item 1(b) of Exhibit A or at such other
location as the Board of Directors may determine is in the best interest of the
Company.
(b) This Agreement cancels and replaces in their entirety any and all previous
employment agreements entered into between Employee and the Company or any of
its subsidiaries.
2. Term of Employment. The employment relationship provided for herein shall
------------------
commence as of the Effective Date of this Agreement as specified in Exhibit A,
Item 2, and remain in effect until such time as the Agreement shall be
terminated pursuant to Section 7 below.
3. Compensation.
------------
(a) During the term of Employee's employment hereunder, the Company shall pay
Employee the annual salary set forth in Exhibit A, Item 3(a) ("Gross Annual
Salary").
(b) In addition to the Gross Annual Salary, Employee shall be entitled to
receive the additional compensation, if any, specified in Exhibit A, Item 3(b)
("Additional Compensation").
(c) Employee shall be entitled to receive such fringe benefits as the Company
normally confers upon its employees holding similar or equivalent positions.
(d) In the event of Employee's death, this Agreement will be terminated and all
accrued and unpaid compensation and expenses will be payable to the Employee's
estate.
(e) If the Company, with or without cause, terminates Employee's employment or
gives Employee notice of termination, or if the Employee terminates his
employment by reason of a material breach by the Company of the terms of this
Agreement (including but not limited to the terms set forth on Exhibit A
hereto), at any time during the twelve-month period following a Change of
Control (as hereinafter defined), then Employee shall receive, in addition to
any other compensation provided for in this Agreement, a lump-sum severance
payment in an amount equal to the Gross Annual Salary, less any income, excise,
employment or other tax withholdings which the Company is required by law to
deduct therefrom.
(f) For purposes of this Agreement, a Change in Control shall mean the
satisfaction of the conditions set forth in any one of the following paragraphs:
<PAGE>
(i) any person (as defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") as modified and used in Sections
13(d) and 14(d) thereof, except that neither (A) the Company or any of its
------
subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, nor (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company shall be included in such term) (a "Person")
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 25% or more
of the combined voting power of the Company's then outstanding securities; or
(ii) during any period of up to two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the Company (the
"Board") and any new director (other than a director designated by a Person who
has entered into an agreement with the Company to effect a transaction described
in clause (i), (iii) or (iv) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
4. Competition. Until termination or expiration of this Employment Agreement,
-----------
absent the expressed, prior written authorization of the Company's Board of
Directors, Employee shall not, directly or indirectly, engage in any activity
competitive with or adverse to the Company's business or welfare, whether alone,
as a partner of any partnership or joint venture or as an officer, director,
employee, or holder of 5% or more of any class of stock, of any corporation.
5. Business Disclosures. During the term of employment with the Company and
--------------------
thereafter, Employee will not, without the express, prior written consent of the
Company's Board of Directors, disclose, other than to an authorized employee,
officer or director of the Company, any confidential information of, regarding
or relating to the Company. For purposes of the preceding sentence, the phrase
"confidential information" shall include, but not be limited to, any information
relating to the Company's businesses, customers, trade practices, or trade
secrets and know-how. Upon the termination of Employee's employment for
whatever reason,
2
<PAGE>
Employee, without the prior, express written consent of the Board of Directors,
shall not remove from the premises or possession of the Company or retain,
publish or disseminate, any figures, calculations, letters, customer lists,
documents, written instruments or any other material of a confidential nature,
whether originals, photocopies or other facsimile or reproductions thereof, or
other confidential information of any type or description in connection with or
in any way pertaining to the Company or its affairs.
6. Development of Inventions and Improvements.
------------------------------------------
(a) Employee will keep the Company informed of any inventions, discoveries,
improvements, trade secrets, and secret processes made by Employee, in whole or
in part, or conceived by Employee, alone or with others (herein collectively
referred to as "Intellectual Property"), if such Intellectual Property results
from any work Employee may do for or on behalf of the Company or at the request
or upon the premises of the Company or which work relates to the activities,
investigations or obligations of the Company or its affiliates (such
Intellectual Property hereinafter referred to as "Company Work Product"). For
purposes of the preceding sentence, the term "affiliates" shall include, without
limitation, any entity with which the Company is carrying on a joint enterprise
or in which the Company has a substantial interest.
(b) At the expense of the Company, Employee shall assist the Company, its
agents, employees or nominees, in making application for and obtaining patents
with respect to any and all Company Work Product in such countries throughout
the world as the Company shall designate. Employee agrees to and shall execute
any and all papers necessary to secure on behalf of the Company such United
States or foreign patents covering Company Work Product which the Company deems
necessary or appropriate. In addition, Employee shall give the Company any and
all information in Employee's possession or known to Employee respecting any
Company Work Product or any patents or applications relating thereto.
(c) Such Company Work Product shall be the property of the Company, or its
nominees, whether patented or not, and Employee shall, without charge to the
Company, assign to the Company all of Employee's right, title, and interest, if
any, in such Company Work Product and Employee shall execute, acknowledge and
deliver any instrument confirming the complete ownership by the Company of such
Company Work Product.
(d) Employee shall deliver to the Company upon its request therefor, any and
all sketches, drawings, models, figures, and other materials and information
created or acquired by Employee during the term of employment with respect to
any Intellectual Property covered by this Section 6 and to execute and deliver
to the Company any applications, assignments or other written instruments
reasonably necessary or appropriate to the Company's securing such patents, or
the renewal or continuation thereof, or in any litigation or other proceedings
connected therewith.
(e) Descriptions of all Intellectual Property, whether patented or not, which
Employee has made or conceived prior to his employment by the Company, are
described in Exhibit B hereto, and such Intellectual Property shall be excluded
from this Agreement. Employee represents, warrants, and covenants that the
absence of a description of any Intellectual Property on Exhibit B shall
indicate conclusively that Employee neither owned prior to his employment by the
Company nor has any claim to any such Intellectual Property.
(f) Employee shall not, at any time, except as required in the proper conduct
of the business of the Company or as authorized in writing by the Company,
publish, disclose or authorize, assist
3
<PAGE>
or permit anyone else to publish or disclose any secret or confidential matter
relating to any aspect of any of the businesses of the Company.
(g) This Agreement will further incorporate any and all provisions with respect
to patents, inventions, discoveries, improvements, trade secrets, secret
processes, and data to which the Company may be required to cause its employees
to agree under the terms and provisions of any contract entered into by the
Company with the United States Government or any agency thereof or any foreign
government or agency thereof or any supranational agency, or under the terms of
any subcontract to which the Company under a prime contract issued by any of the
above-mentioned governments or agencies, whether the same be in any contracts to
which the Company is presently or may in the future become a party.
(h) Upon termination of employment, Employee will execute and comply with the
Termination Statement attached hereto as Exhibit C.
7. Termination of Contract.
-----------------------
(a) Except as provided in Section 7(c) below, and subject to Section 2(e)
hereof, this Agreement may be terminated at any time by the Company upon ______
(___) months written notice to Employee, except that this Agreement may not be
terminated prior to the first anniversary of the Effective Date of Employment
Agreement set forth in Item 2 of Exhibit A attached hereto.
(b) This Agreement may be terminated at any time by Employee upon ______ (___)
months written notice to the Company, except that this Agreement may not be
terminated prior to the first anniversary of the Effective Date of Employment
Agreement set forth in Item 2 of Exhibit A attached hereto unless the Company
commits a material breach of the terms of this Agreement including, but not
limited to, the terms set forth on Exhibit A hereto attached.
(c) For cause, the Company may terminate this Agreement immediately upon
written notice to Employee. For purposes of this Section 7(c), the Company
shall have cause for termination under any of the following circumstances:
(i) Failure on the part of the Employee to exert best efforts in
performing the functions assigned to Employee by the Company, which failure can
reasonably be expected to have a material adverse effect on the Company,
provided that the functions assigned to Employee shall at all times be in
keeping with the position for which Employee was hired, as described in Section
1 of this Agreement; or
(ii) Employee is in breach of the terms of Sections 4, 5 or 6 hereof, is
guilty of dishonesty or chronic absenteeism, or is convicted of a felony, or is
convicted of a misdemeanor involving moral turpitude.
(d) Termination of this Agreement will not relieve Employee from any liability
pursuant to Sections 4, 5 or 6 which, by their respective terms, continue beyond
the termination of this Agreement.
8. Disability. If Employee is unable to fulfill the duties of his or her
----------
position by reason of any illness, incapacity or disability, Employee's salary
shall be payable for only 90 days following the onset of such illness,
incapacity or disability, provided, however, that if Employee (i) has applied
for insurance benefits under the Company's long-term disability policy during
said 90 day
4
<PAGE>
period, and (ii) has not yet begun to receive payments under said policy during
said 90 day period, then Employee's salary shall continue to be payable for up
to 180 days following the onset of such illness, incapacity or disability until
the Employee begins to receive such payments. During the foregoing 90 day period
(or 180 day period, if applicable), Employee's salary, to the extent not covered
by the Company's short-term disability benefits, shall be paid through the use
of Employee's sick leave, if any, accumulated prior to January 1, 1994, but if
such sick leave is or becomes exhausted, Employee's salary shall nevertheless be
paid for the 90 day period (or 180 day period, if applicable). If Employee shall
return to full employment and full discharge of his or her duties during the
term of this Agreement, full compensation shall be prospectively reinstated for
any remaining term of this Agreement.
9. Notice.
------
(a) Any notice to be given to Employee under this Agreement shall be in writing
and delivered by (i) registered or certified mail, return receipt requested;
(ii) express courier; or (iii) hand-delivery, at an address specified for
Employee in this Agreement or in any Exhibit hereto or at such other address of
which written notice has been given to the Company by Employee by any of the
foregoing means.
(b) Any notice to be given to the Company under this Agreement shall be in
writing and delivered by any of the means specified in Section 10(a) above, to
the President, with a copy to the Vice President, General Counsel and Secretary,
GRC International, Inc., 1900 Gallows Road, Vienna, Virginia 22182.
10. Disputes.
--------
(a) This Agreement has been executed in and shall be governed by the laws of
the Commonwealth of Virginia.
(b) Any controversy or claim arising out of or relating to Employee's
employment or this Agreement shall be resolved in the courts of Fairfax County,
Virginia, and Employee hereby submits to the jurisdiction of such courts, and
agrees to accept service of process from such courts.
(c) It is agreed that in the event of any breach, violation or evasion of the
terms of this Employment Agreement, such breach, violation or evasion will
result in immediate and irreparable injury to the Company and will authorize the
Company to seek injunctive relief, including, but not limited to, any order of
specific performance, as well as all other legal or equitable remedies to which
the Company may be entitled.
11. Waiver of Breach. The waiver by the Company of a breach of any provision
----------------
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No such waiver shall be valid unless set
forth in writing signed by an authorized officer of the Company.
12. Assignment. Employee's services are unique and personal. Accordingly,
----------
Employee may not assign any rights or delegate any duties or obligations under
this Agreement. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company.
5
<PAGE>
13. Severability. Any provision of this Agreement which may be determined to
------------
be unenforceable, invalid or illegal shall be deemed stricken from this
Agreement and all remaining provisions shall continue in full force and effect.
14. Entire Agreement. This Agreement supersedes all previous Employment
----------------
Agreements between Employee and the Company and contains the entire
understanding of the parties and may not be modified, amended or terminated
unless the provisions of such modification, amendment or termination are set
forth in writing signed by all of the parties to this Agreement. This
Agreement, and any modification, amendment or termination thereof, shall be
approved by and executed on behalf or at the direction of the Company's Board of
Directors.
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of this_______day of_________________________, 19__.
ATTEST: GRC INTERNATIONAL, INC.
__________________________________ By:____________________________________
Thomas E. McCabe Jim Roth
Vice President, General Counsel President & Chief Executive Officer
& Secretary
WITNESS EMPLOYEE
__________________________________ _______________________________________
(Signature)
_______________________________________
(Please print name)
APPROVED AND RATIFIED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
GRC INTERNATIONAL, INC.
By:___________________________________________
Leslie B. Disharoon, Committee Chairman
6
<PAGE>
EXHIBIT A
---------
DETAILS OF EMPLOYMENT
---------------------
EMPLOYEE:
ITEM 1(a) Position:
ITEM 1(b) Place of Employment:
ITEM 2 Effective Date of Employment Agreement:
Effective Date of this Exhibit:
ITEM 3(a) Gross Annual Salary:
ITEM 3(b) Additional Compensation (if any):
ITEM 4 Notice to Employee:
_____________________________ _____________________________
and/
_____________________________ or _____________________________
_____________________________ _____________________________
EMPLOYEE: GRC INTERNATIONAL, INC.
_____________________________ By:__________________________
Jim Roth
President & Chief Executive
Officer
APPROVED AND RATIFIED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
GRC INTERNATIONAL, INC.
By:________________________________________
Leslie B. Disharoon, Committee Chairman
7
<PAGE>
EXHIBIT B
---------
SCHEDULE OF INTELLECTUAL PROPERTY
---------------------------------
Employee developed or conceived prior to employment with the Company the
following Intellectual Property, as that term is defined in Section 6 of the
Employment Agreement to which this Exhibit is attached, whether or not such
Intellectual Property is the subject of a patent or patent application:
EMPLOYEE
_________________________________
(Signature)
_________________________________
(Please print name)
_________________________________
(Date)
8
<PAGE>
EXHIBIT C
---------
TERMINATION STATEMENT
---------------------
In connection with the termination of my employment with the Company pursuant to
the above-referenced Employment Agreement, I hereby represent, warrant and
covenant that:
1. Upon termination of my employment relationship with the Company I did not
have in my possession and do not now have in my possession any confidential or
business property of the Company including, but not limited to, any confidential
information described in Section 5 of the aforementioned Employment Agreement,
and Company Work Product described in Section 6 of the Employment Agreement or
any testing equipment, materials, components, sub-assemblies, drawings or
blueprints.
2. I have returned or left in the possession of the Company all notebooks which
I used during my employment relationship with the Company.
3. I have returned to the Company any and all identification cards and credit
cards issued to me as an employee of the Company and any and all keys to
property of the Company, including, without limitation, offices of the Company,
Company cars, and the like.
4. I am not aware of any action or situation involving any violation of the
Company's Corporate Standards of Conduct by any employee, director, consultant
or representative of the Company, except as follows:
4. My forwarding addresses are as follows:
HOME ADDRESS BUSINESS ADDRESS
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
EMPLOYEE:
_____________________________
(Signature)
_____________________________
(Please print name)
_____________________________
(Date)
9
<PAGE>
EX 10.19
PURCHASE AND SALE AGREEMENT
AND
JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (herein, the
"Agreement") is dated for reference April 25, 1995, by and between GENERAL
RESEARCH CORPORATION, a Virginia corporation ("Seller") and BERMANT DEVELOPMENT
COMPANY, a sole proprietorship of Jeffrey C. Bermant, or assignee ("Buyer").
1. PURCHASE AND SALE OF PROPERTY.
-----------------------------
Seller agrees to sell and Buyer agrees to purchase, on the terms and
conditions described herein, all of Seller's right, title and interest in and to
the following (collectively, the "Property"):
1.1. Real Property.
-------------
That certain real property consisting of approximately 13.102 acres
located in the County of Santa Barbara, State of California, commonly known as
5383 Hollister Avenue, which is more particularly described on Exhibit A,
attached hereto, together with all rights, privileges, easements and
appurtenances benefiting the real property, all mineral and water rights,
development rights, and all easements, rights-of-way and other appurtenances
used or connected with the beneficial use and enjoyment of such real property
(the "Real Property").
1.2. Improvements.
------------
All buildings, structures, parking areas and other improvements
located on the Real Property (the "Improvements").
1.3. Personal Property.
-----------------
All fixtures, licenses, development applications, plans, approvals,
permits, specifications and all of the rights and privileges owned by Seller
which are used in connection with the Real Property, a schedule of which is
attached hereto as Exhibit B (the "Personal Property").
- 1 -
<PAGE>
2. TERMS OF PURCHASE
-----------------
2.1. Purchase Price.
--------------
The total purchase price for the Property is FOUR MILLION THREE
HUNDRED THOUSAND DOLLARS ($4,300,000) (the "Purchase Price"), payable upon the
terms described herein.
2.2. Payment of Purchase Price.
-------------------------
The purchase price shall be paid by cash or on a terms basis as
follows:
1.1.1. Deposit. Provided that Buyer approves and/or releases all
-------
contingencies to Buyer's obligation to purchase the Property, on the day
following the expiration of the Contingency Period described in Section 8
hereof, Buyer shall deliver to Escrow Holder (defined below) the sum of FIFTY
THOUSAND DOLLARS ($50,000) (the "Deposit"). The Deposit shall be placed in an
interest-bearing account by Escrow Holder with all interest thereon credited to
Buyer. Buyer shall pay any income taxes on interest earned on the Deposit. The
Deposit shall be applied to the Purchase Price. In the event of a default by
Buyer, the Deposit shall be liquidated damages as provided in Section 12 hereof.
1.1.2. Cash Purchase. Provided that on or before June 1, 1995,
-------------
Buyer has received (i) building permits and other necessary permits and
approvals from the County of Santa Barbara, or other cognizant governmental
authority, for the construction of the New Building, as described in the
Development and Construction Agreement attached hereto as Exhibit C and (ii) a
firm debt financing commitment for an acquisition and construction loan in an
amount and on terms satisfactory to Buyer, Buyer shall deliver or cause to be
delivered to Escrow Holder the sum of FOUR MILLION TWO HUNDRED FIFTY THOUSAND
DOLLARS ($4,250,000) plus funds sufficient to pay Buyer's share of escrow fees
and charges at least one day prior to the Close of Escrow.
1.1.3. Terms Purchase. If the conditions described in Section
--------------
2.2.2(i) and (ii) have not been satisfied on or before June 1, 1995, the
purchase price shall be paid as follows:
- 2 -
<PAGE>
2.2.3.1 Buyer shall deposit with Escrow Holder the sum of
EIGHT HUNDRED TEN THOUSAND DOLLARS ($810,000) plus funds sufficient to pay
Buyer's share of escrow fees and charges at least one day prior to the Close of
Escrow.
2.2.3.2 The balance of the purchase price in the amount of
THREE MILLION FOUR HUNDRED FORTY THOUSAND DOLLARS ($3,440,000) shall be
represented by a Promissory Note in the form attached hereto as Exhibit D (the
"Promissory Note"). The Promissory Note shall be secured by a Deed of Trust in
the form attached hereto as Exhibit E (the "Deed of Trust") and the UCC-1
Financing Statement in the form attached hereto as Exhibit E-1.
3. TENANT LEASE.
------------
Upon the Close of Escrow, Seller's affiliate, GRC International, Inc.
("GRCI") will lease from Buyer the buildings identified on Exhibit F as
Buildings A, N-1 - N-4 and S-1 - S-4, and certain adjacent land at the price and
on the terms and conditions described in the Interim Lease attached hereto as
Exhibit G.
4. CONSTRUCTION OF NEW BUILDING.
----------------------------
As provided in the Development and Construction Agreement, Buyer agrees to
design and construct the New Building, a portion of which shall be leased by
Seller in accordance with the terms and provisions set forth in that certain
Building Lease attached hereto as Exhibit H. Following the execution of this
Agreement, Buyer agrees to diligently prosecute the preparation of plans and
specifications for the New Building as well as obtaining all required permits
and approvals.
5. ESCROW.
------
5.1. Escrow; Opening of Escrow.
-------------------------
The parties agree to open an escrow (the "Escrow") with First
American Title Insurance Company, 3780 State Street, Santa Barbara, California
("Escrow Holder"). For purposes of this Agreement, Escrow shall be deemed opened
on the
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<PAGE>
date that Escrow Holder shall have received an executed counterpart of this
Agreement from both Buyer and Seller (the "Opening of Escrow"). Escrow Holder
shall notify Buyer and Seller, in writing, of the Opening of Escrow.
Buyer and Seller agree to execute, deliver and be bound by any
reasonable and customary additional provisions of Escrow Holder, a copy of which
are attached hereto as Exhibit I, or other instruments as may reasonably be
required by Escrow Holder in order to consummate the transaction contemplated by
this Agreement. Any such supplemental instructions shall not conflict, amend or
supersede any portion of this Agreement. If there is any inconsistency between
such supplemental instructions and this Agreement, as between Buyer and Seller
this Agreement shall control with respect to any such inconsistency.
5.2. Close of Escrow.
---------------
For purposes of this Agreement, the "Close of Escrow" shall be
defined as the date that the grant deed conveying title to the Real Property and
Improvements to Buyer is recorded in the Official Records of the County Recorder
for Santa Barbara County. The Close of Escrow shall occur the earlier of (i)
June 20, 1995 or (ii) upon 10 days after written notice from Buyer to Seller and
Escrow Holder that Buyer is prepared to close.
6. TITLE AND TITLE INSURANCE.
-------------------------
1.1. Preliminary Title Report. Buyer acknowledges receipt of Preliminary
------------------------
Title Report No. 1410332 dated as of February 7, 1995, and updated as of April
12, 1995, issued by First American Title Insurance Company (the "Title Company")
for the Property (the "Preliminary Title Report"), together with copies of the
documents relating to the title exceptions referred to in the Preliminary Title
Report (the "Underlying Exceptions Documentation"). The Preliminary Title Report
and the Underlying Exceptions Documentation shall hereinafter be collectively
referred to as the "Title Documentation". The Preliminary Title Report shall be
updated upon completion of the Survey, as defined below, to reflect any
exceptions shown on the Survey. Buyer shall approve or disapprove, in its
reasonable discretion, the Title
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<PAGE>
Documentation on or before the expiration of the Contingency Period as described
in Section 8. If Buyer has not expressly approved the Title Documentation within
such period, Buyer shall be deemed to have disapproved the Title Documentation,
and this Agreement and the Escrow created hereunder shall automatically
terminate and neither party shall have any further rights or obligations
hereunder.
1.2. Survey. Seller has obtained (at Seller's expense) and delivered to
------
Buyer and the Title Company a survey of the Property prepared in accordance with
the minimum standards necessary for Title Company to issue the ALTA Owners
Policy of Title Insurance (the "Survey"). Buyer shall approve or disapprove the
Survey in its reasonable discretion on or before the expiration of the
Contingency Period. In the event Buyer does not approve the Survey within such
period, Buyer shall be deemed to have disapproved the Survey and this Agreement
and the Escrow created hereunder shall automatically terminate and neither party
shall have any further rights or obligations hereunder.
1.3. Title Insurance Policy. At the Close of Escrow, Title Company shall
----------------------
issue an ALTA Owners Policy of Title Insurance, with liability not less than the
amount of the Purchase Price for the Property and insuring the title in the name
of Buyer and/or its designee. Such title policy will contain no title exceptions
other than the standard printed exceptions and the Schedule B exceptions
approved by Buyer. In the event that Buyer purchases the Property on a terms
basis as provided in Section 2.2.3, the Title Company shall issue an ALTA
Lender's Policy of Title Insurance or a joint protection policy, as may be
requested by Seller, insuring the Deed of Trust as a first lien and encumbrance
on the Property subject only to current property taxes, any supplemental
property taxes, easements, rights-of-way and covenants, conditions and
restrictions of record at the Close of Escrow.
2. DOCUMENTS AND INFORMATION TO BE DELIVERED BY SELLER.
---------------------------------------------------
Seller agrees to provide Buyer with copies of, or otherwise make available
to Buyer, the following documents and information (the "Documents and
Information") on or before April 21, 1995:
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<PAGE>
2.1. Plans, Drawings and Studies.
---------------------------
Any and all plans, drawings, specifications, reports and studies
relating to the Property, including "as-built" drawings for the Improvements, in
Seller's possession or under Seller's control.
2.2. Environmental Reports.
---------------------
A Phase I report on the Property obtained at Seller's expense
prepared by Dames & Moore (the "Phase I Report").
2.3. Agreements, Contracts and Information.
-------------------------------------
Copies of all management and maintenance contracts, service
contracts, leases, licenses, and warranties for the Improvements or the Personal
Property that will survive the Close of Escrow, and other similar agreements or
information relating to the Property in Seller's possession or under Seller's
control, a schedule of which is attached hereto as Exhibit J, and any plans,
reports, studies or information relating to the subdivision of the Property or
the further improvement thereof.
2.4. Tax Statements.
--------------
Copies of the most recent bill for invoices for real and personal
property taxes payable with respect to the Property.
2.5. Schedule of Expenses.
--------------------
A schedule, attached hereto as Schedule 7.5, reflecting any and all
expenses for the ownership, operation, maintenance and repair of the Property
for the full calendar years 1992-1994 which schedule shall include, without
limitation, the following:
2.5.1. Annual insurance premiums (which may consist of an allocated
portion of Seller's blanket insurance policy);
2.5.2. Real property taxes and assessments;
2.5.3. Utility charges and management fees, if any;
2.5.4. Landscaping, gardening, janitorial, security system/patrol
costs and expenses;
2.5.5. Maintenance and repair costs;
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<PAGE>
2.5.6. Any and all other costs and expenses incurred in connection
with the ownership, operation, maintenance and repair of the
Property;
2.5.7. Any material, unusual, or periodic expenses, repairs or other
improvements which Seller anticipates will be incurred or
become necessary within 12 months following the Close of
Escrow in connection with the ownership, operation,
maintenance and repair of the Property.
3. BUYER'S CONTINGENCIES; ACCESS TO PROPERTY.
-----------------------------------------
Buyer shall have through and including May 15, 1995 (the "Contingency
Period") to review and approve or disapprove the Title Documentation, the
Survey, the Documents and Information, the Phase I report and to conduct such
inspections, investigations, and feasibility studies as Buyer may determine to
be appropriate in the exercise of Buyer's reasonable discretion. Feasibility
studies may include, without limitation, market surveys and studies, economic
analyses, the ability of Buyer to subdivide the Property, the nature, extent and
impact of any conditions that might be placed upon the subdivision, Buyer's
ability to construct the New Building and other improvements on the Property,
the likely availability of and terms of acquisition and construction financing,
and such other matters as Buyer may determine appropriate. During the
Contingency Period, Buyer, its agents, contractors, and subcontractors, shall
have the right to enter onto the Property at all reasonable times during
ordinary business hours to make any and all inspections, tests, and examinations
as Buyer may determine necessary or desirable so long as the same do not
materially interfere with the operations of Seller's business or conflict with
any of Seller's security procedures. Buyer shall indemnify and hold Seller
harmless from any and all damages arising out of or relating to the activities
of Buyer or Buyer's agents and, in the event that Buyer does not purchase the
Property, shall restore any damage to the Property caused by any such
investigations or inspections.
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<PAGE>
Notwithstanding the foregoing, in the event that the County of Santa
Barbara has not completed final action on the changes requested by Buyer to
Condition No. 18 on the letter of Albert McCurdy to Jim Jacobsen dated May 17,
1991, prior to May 15, 1995, Buyer shall have the right to terminate this
Agreement and its purchase of the Property (and have the Deposit, and all
interest thereon, returned), within ten (10) days subsequent to its receipt of a
final decision from the County of Santa Barbara disapproving the requested
changes.
7. MUTUAL CONTINGENCY.
------------------
Seller shall have no obligation to sell the Property and Buyer shall have
no obligation to purchase the Property unless Buyer has obtained and delivered
to Seller on or before May 15, 1995, evidence reasonably satisfactory to Seller
and Buyer that Buyer or its permitted assignee will have the necessary equity
capital at the Close of Escrow to close the sale on the terms basis described in
Section 2.2.3. Buyer shall have the right to satisfy this obligation by
delivering to Seller a firm commitment letter from an equity partner. Seller's
review and approval of such information shall not be unreasonably withheld.
8. REPRESENTATIONS AND WARRANTIES.
------------------------------
8.1. Of Seller.
---------
As a material inducement to Buyer to enter into this Agreement and
purchase the Property from Seller, Seller represents, warrants and covenants as
follows:
(i) Authorization. This Agreement has been duly and
-------------
validly authorized, executed and delivered by Seller and no other action or
consent is requisite to the execution and delivery of this Agreement by Seller.
Seller has the full power and authority to consummate the transactions described
herein.
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<PAGE>
(ii) Litigation. Except as may be disclosed in writing to
----------
Buyer during the Contingency Period, or with regard to claims arising
thereafter, prior to the Close of Escrow, there are no actions, suits or
proceedings pending against, or, to the best of Seller's knowledge after due
inquiry, threatened or affecting Seller or the Property, in law or equity,
including, but not limited to, judicial, municipal or administrative proceedings
in eminent domain, collection actions, alleged building code violations, health
and safety violations, federal, state or local agency actions regarding
environmental matters, zoning violations, personal injuries or property damages
alleged to have occurred at the Property or by reason of the condition or use of
or construction on the Property;
(iii) Agreements. There are no agreements or contracts
----------
(whether oral or written) that will survive the Close of Escrow affecting or
relating to use, enjoyment or occupancy of the Property or the maintenance,
improvement or operation of the Property which have not been disclosed in
writing to Buyer under Section 7;
(iv) Hazardous Material. During the time of Seller's
------------------
ownership of the Property, Seller has not knowingly used, generated, stored or
disposed of on, under or about the Property or transferred to or from the
Property any "Hazardous Materials" in a manner that was in violation of
applicable Hazardous Materials Laws. To the best of Seller's knowledge, no third
party has used, generated, stored or disposed of any Hazardous Materials on or
about the Property in a manner that was in violation of applicable Hazardous
Materials Laws. At the Close of Escrow there will be no Hazardous Materials on
the Property in violation of applicable Hazardous Materials Laws. For the
purpose of this Section 10.1(iv), Hazardous Materials shall include, but not be
limited to, substances defined as "hazardous substances" or "toxic substances"
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sec. 9061, et seq.; Hazardous Materials
-- ---
Transportation Act, 49 U.S.C. Sec. 1801; and
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<PAGE>
Resource Conversation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.; and other
-- ---
substances defined as hazardous waste and hazardous substances in Sec. 25117 of
the California Health and Safety Code and in the regulations and publications
promulgated pursuant to said laws. The representation contained herein is
qualified in its entirety by any matter described in the Phase I Report or in
any further environmental investigations conducted by Buyer prior to the end of
the Contingency Period.
(v) No Notices. To the best of Seller's knowledge after
----------
due inquiry, Seller has received no notice of violation of any laws, ordinances,
rules, requirements or regulations (including, but not limited to, judicial,
municipal or administrative proceedings in eminent domain, alleged building code
violations, health and safety violations, federal, state or local agency actions
regarding environmental matters, or zoning violations) nor of any action by
adjacent landowners, or natural or artificial conditions upon the Property which
would prevent, impede, limit, or render more costly Buyer's contemplated use and
development of the Property;
(vi) Documentation. Seller has delivered or made available
-------------
to Buyer all material documentation in its possession relating in any way to the
future development and improvement of the Property and the construction and
condition of the Improvements and the Personal Property, and all documents
delivered by Seller to Buyer pursuant to this Agreement are true, accurate,
correct and complete copies of originals; and
(vii) Defects. Except as disclosed in writing to Buyer on
-------
Schedule 10.1(vii) attached hereto, or, with regard to conditions arising
thereafter, prior to the Close of Escrow, to the best of Seller's knowledge
after due inquiry, there are no material physical or mechanical defects or
deficiencies in the condition of the Property, including, but not limited to,
(1) the roofs, exterior walls or structural components of the Improvements, (2)
the heating, air conditioning, plumbing,
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<PAGE>
ventilating, elevator, utility, sprinkler and other major mechanical and
electrical systems and equipment located on the Property or in the Improvements,
and (3) the soil, soil fill or drainage. The Improvements conform in all
material respects to the plans and specifications therefor. Seller has no actual
knowledge of the existence of soil instability, past soil repairs, soil
additions, concerns or problems with the condition of soil fill, or
susceptibility of the Property to landslides or insufficiency of any
undershoring or insufficiency of drainage.
(viii) Withholding of Information. As of the Close of
--------------------------
Escrow (1) no representations or warranties by Seller in this Agreement contain
or will contain any untrue statement of material fact or omit to state any
material fact and (2) no material information regarding the Property or the
prospects for developing the Property as contemplated by Buyer has been withheld
from Buyer by Seller.
8.2. Of Buyer.
--------
As a material inducement to Seller to enter into this Agreement,
Buyer represents, warrants and covenants as follows:
1.1.1. The named Buyer is a sole proprietorship owned entirely by
Jeffrey C. Bermant;
1.1.2. That Buyer will diligently conduct its own investigation of
the Project and will make all inquiries, inspections, tests, audits, studies,
and analyses that it deems necessary or desirable in connection with purchasing
the Real Property, the Improvements and the Personal Property and in pursuing
Buyer's proposed development of the Property (collectively, the "Project")
(including, but not limited to, engineering and structural tests, environmental
assessments and audits, economic feasibility studies, land use and development
entitlements and restrictions, soils and geological reports and tests, inquiries
of governmental authorities, reviews of financial statements, projections
relating to the operation of the Project and reviews of any permits or other
documents obtained or prepared by or for Buyer in connection with its review).
Buyer hereby acknowledges that it is relying and will rely solely on:
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<PAGE>
(a) the information and documents described herein to be delivered to Buyer by
Seller and the representations and warranties of Seller set forth in Section
10.1 of this Agreement (and on no other representation, warranty, statement, or
other assurance of Seller, express or implied), and (b) Buyer's own inspections,
tests, audits, studies, and investigations conducted in connection with, and
Buyer's own judgment with respect to, its purchase of the Project.
1.1.3. THAT BUYER IS BUYING THE PROJECT AS IS AND WITH ALL FAULTS
AND, EXCEPT AS EXPRESSLY SET FORTH IN SECTION 10.1, WITHOUT ANY REPRESENTATIONS
OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, OF ANY KIND WHATSOEVER, BY
SELLER, ITS AGENTS, BROKERS, FINDERS, CONSULTANTS, COUNSEL, EMPLOYEES, OFFICERS,
DIRECTORS, SHAREHOLDERS, OR ANY OTHER PERSON.
1.1.4. That Buyer shall at all times keep the Property free of any
mechanics' liens resulting from Buyer's activities. Buyer shall indemnify Seller
and hold Seller free and harmless from any and all such liens and from any and
all claims, losses, damages, or expenses (including reasonable attorneys' fees)
incurred by Seller as the result of Buyer's activities.
1.1.5. That during the term of this Agreement, Buyer shall seek
certain governmental approvals to develop a new building on the Property. All
applications for such approvals shall be undertaken in the name of the Seller
until the Close of Escrow at which time Seller shall execute and deliver an
Assignment and Assumption of Development Rights and Intangibles. Seller shall
cooperate with Buyer, shall take all actions and join in all applications, and
shall execute all documents reasonably necessary to allow Buyer to pursue
applications for and obtain such governmental permits subject to the following
terms and conditions:
A. Seller shall not bear or become obligated to pay any
expense or assume any liability in connection with any such governmental permit
activity. Buyer shall indemnify, defend, and hold harmless Seller from any cost,
liability, or expense (including reasonable attorneys' fees) arising from or in
connection with any such governmental permit activity.
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<PAGE>
B. Until such time as Buyer purchases the Property, all
governmental permits and legal entitlements shall be issued to Seller, but may
provide that they are assignable to Buyer if Buyer acquires the Project.
C. Without Seller's prior written consent, no governmental
permit or approval that shall impose or increase any lien, encumbrance, tax,
assessment, or other obligation on the Property, or change the status of the
Property in any manner that would increase Seller's financial or other burdens
or obligations of ownership of the Property, shall have any effect before the
Closing Date.
9. ESCROW PROVISIONS
-----------------
9.1. Joint Escrow Instructions.
-------------------------
This Agreement, when signed by Buyer and Seller, shall constitute
joint escrow instructions to Escrow Holder.
9.2. Seller's Deliveries to Escrow Holder.
------------------------------------
On or before one (1) day before the Close of Escrow, Seller shall
deliver to Escrow Holder all of the following:
1.1.1. Grant Deed. A fully executed and notarized grant deed
----------
conveying fee title to the Real Property to Buyer in a form acceptable to Buyer.
1.1.2. Seller's Certificate. A certificate of non-foreign status
--------------------
(the "Seller's Certificate") duly executed by Seller;
1.1.3. Contracts. Any and all original Contracts in Seller's
---------
possession pertaining to the Property;
1.1.4. Assignment of Contracts. An Assignment of Contracts duly
-----------------------
executed by Seller in a form acceptable to Buyer;
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<PAGE>
1.1.5. Bill of Sale. A Bill of Sale, duly executed by Seller, in a
------------
form acceptable to Buyer;
1.1.6. Memoranda of Leases. Memoranda of Lease for the Interim Lease
-------------------
and the Building Lease duly executed by Seller and notarized.
1.1.7. Assignment of Development Rights. An Assignment and
--------------------------------
Assumption of Development Rights and Intangibles, duly executed by Seller, in a
form acceptable to Buyer.
1.1.8. General. All other documents duly executed by Seller and sums
-------
required by Escrow Holder to carry out the terms and conditions of this
Agreement and escrow.
1.2. Buyer's Deliveries to Escrow Holder. On or before the Close of
-----------------------------------
Escrow, Buyer shall deliver to the Escrow Holder all of the following:
1.2.1. Cash. The cash portion of the Purchase Price and closing
----
funds pursuant to Section 2.2.1 or 2.2.2 hereof, as applicable;
1.2.2. Promissory Note, Deed of Trust, and Assignment of Rents and
-----------------------------------------------------------
Profits. If Buyer is purchasing the Property on a terms basis as provided in
- -------
Section 2.2.2 hereof, the executed Promissory Note, the executed and notarized
Deed of Trust and Assignment of Rents and Profits.
1.2.3. Preliminary Change of Ownership. A fully executed Preliminary
-------------------------------
Change of Ownership Report in accordance with Section 480.3 of the California
Revenue and Taxation Code;
1.2.4. Assignment of Contracts. A fully executed counterpart of the
-----------------------
Assignment of Contracts;
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<PAGE>
1.2.5. Memoranda of Leases. Memoranda of Lease for the Interim Lease
-------------------
and the Building Lease duly executed by Buyer and notarized.
1.2.6. Assignment of Development Rights. The Assignment and
--------------------------------
Assumption of Development Rights, duly executed by Buyer, in a form acceptable
to Seller.
1.2.7. General. All other documents executed by the Buyer and sums
-------
required by Escrow Holder to carry out the terms and conditions of this
Agreement and this escrow.
1.3. Conditions Precedent to Buyer's Obligation. The obligation of Buyer
------------------------------------------
to purchase the Property and close the Escrow shall be subject to the
satisfaction of the following conditions precedent:
1.3.1. Seller shall have deposited with the Escrow Holder all sums
and documents required by this Agreement;
1.3.2. Buyer shall have approved all items to be approved by Buyer
within the Contingency Period;
1.3.3. The Title Company shall be prepared to issue the Policy of
Title Insurance in the form described in Section 6.3 hereof;
1.3.4. Buyer shall have approved the contingency in favor of Buyer
described in Section 9; and
1.3.5. All of the representations and warranties of Seller shall be
true and correct as of the Closing.
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<PAGE>
1.4. Conditions Precedent to Seller's Obligation. The obligation of
-------------------------------------------
Seller to sell the Property and to close Escrow shall be subject to the
satisfaction of the following conditions precedent :
1.4.1. Buyer shall have deposited with Escrow Holder all sums and
documents required by this Agreement;
1.4.2. Seller shall have approved the contingency in favor of Seller
described in Section 9; and
1.4.3. All of the representations and warranties of Buyer shall be
true and correct as of the closing.
1.5. Closing Procedure. Upon receipt of all funds and instruments
-----------------
described in this Agreement, and upon satisfaction or waiver of all conditions
in this Agreement, Escrow Holder shall:
1.5.1. Grant Deed. Record the Grant Deed in the Official Records of
----------
Santa Barbara County, California, with the direction that the documentary
transfer stamps be attached and delivered to Buyer after recordation;
1.5.2. Financing Documents. If the purchase is being made on an all
-------------------
cash basis, comply with the instructions of any third party lender. If the
purchase is being made on a terms basis, deliver the Promissory Note to Seller
and record the Deed of Trust;
1.5.3. Memoranda of Leases. Record the Memoranda of the Interim
-------------------
Lease and the Building Lease.
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<PAGE>
1.5.4. Preliminary Change of Ownership. Deliver the Preliminary
-------------------------------
Change of Ownership Report to the County Recorder concurrently with recordation
of the Grant Deed;
1.5.5. Title Insurance. Cause the Title Company to issue to the
---------------
Buyer and, if the Property is purchased on a terms basis, to Buyer and Seller,
the policy of title insurance described in Section 6.3 hereof;
1.5.6. Assignment of Contracts. Deliver a counterpart of the
-----------------------
Assignment of Contracts, executed by Buyer to Seller, and a counterpart of the
Assignment of Contracts, executed by Seller to Buyer;
1.5.7. Bill of Sale. Deliver the Bill of Sale to Buyer duly executed
------------
by the Seller;
1.5.8. Assignment of Development Rights. Deliver a counterpart of
--------------------------------
the Assignment and Assumption of Development Rights and Intangibles executed by
Buyer to Seller and by Seller to Buyer;
1.5.9. Security Deposit. In the event Buyer has closed Escrow on an
----------------
all-cash basis as provided in Section 2.2.1, deliver to Buyer out of the monies
deposited by Buyer the sum of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) as
the security deposit under the Building Lease. (If Escrow is closed on a terms
basis, the security deposit shall be paid as provided in the Building Lease).
1.5.10. Proceeds of Sale. Deliver to Seller the remaining proceeds
----------------
of sale, less the Seller's share of prorations and costs, in accordance with
Seller's separate written instructions to the Escrow Holder.
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<PAGE>
1.6. Prorations and Credits.
----------------------
1.6.1. Property Taxes and Assessments. Escrow Holder shall prorate
------------------------------
general and special real property taxes and assessments based on the latest
available tax information as of the Close of Escrow. Such proration shall be
based on a 30-day month and a 360-day year. Escrow Holder shall prorate rents
and security deposits based on a rent roll provided by Seller and approved by
Buyer. In the event that as of the Close of Escrow the actual tax bills for the
year or years in question are not available and the amount of taxes to be
prorated as aforesaid cannot be ascertained, then rates and assessed valuation
of the previous year, with known charges, shall be used, and when the actual
amount of taxes and assessments for the year or years in question shall be
determinable, then such taxes and assessments will be re-prorated between the
parties to reflect the actual amount of such taxes and assessments.
1.6.2. Operating Costs. Seller shall terminate existing utility,
---------------
management and insurance arrangements as of the Close of Escrow unless otherwise
requested by Buyer. Seller shall use its best efforts to cause all utility bills
to be closed in its name as of the Close of Escrow so that Buyer may be
separately billed. Utility charges shall be prorated outside of escrow as of the
Close of Escrow, with the assumption that utility charges were uniformly
incurred during the billing period. All other expenses of operating the Property
shall be prorated between the parties outside of escrow as of the Close of
Escrow.
1.7. Costs of Escrow. Buyer shall pay one-half (1/2) of the cost of the
---------------
escrow fee, the difference in the premium cost for an ALTA and CLTA Owners
Policy and any of Buyer's other obligations under this Agreement. Seller shall
pay one-half (1/2) of the escrow fee; the premium for a CLTA Owner's Policy of
Title Insurance, the cost of the Survey, the cost of preparing, acknowledging
and recording the Grant Deed, the documentary transfer tax and monument survey
fee, if any, charged on the
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recording of the Grant Deed, and the cost of any of Seller's other obligations
under this Agreement.
2. LIQUIDATED DAMAGES
------------------
SELLER AND BUYER AGREE THAT THE AMOUNT OF SELLER'S DAMAGES IN THE EVENT OF
A DEFAULT BY BUYER WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO DETERMINE.
THEREFORE, BUYER AND SELLER AGREE THAT IF ESCROW FAILS TO CLOSE BY REASON OF A
DEFAULT BY BUYER, THE AMOUNT OF THE DEPOSIT AND ALL ACCRUED INTEREST THEREON IS
A REASONABLE ESTIMATE OF SELLER'S DAMAGES AND SUCH SUM SHALL CONSTITUTE
LIQUIDATED DAMAGES TO SELLER AND BE THE SOLE REMEDY OF SELLER IN THE EVENT OF
ANY DEFAULT BY BUYER.
_____________ ______________
Buyer's Seller's
Initials Initials
10. GENERAL PROVISIONS.
------------------
10.1. Commission.
----------
Buyer has not engaged a broker in connection with this transaction.
Seller shall pay any and all broker's, finder's, or similar fees in connection
with the purchase and sale of the Property and shall indemnify and hold harmless
Buyer from any claims, suits, actions, costs, fees (including attorneys' fees)
or expenses arising out of or relating to a claim for a commission or finder's
fee.
10.2. Ownership of Documents.
----------------------
All plans, specifications, reports, studies, analyses, and other
documentation prepared or obtained by Buyer from persons other than Seller or
Seller's agents which relate to the Property, or the purchase, development, and
improvement thereof, are the property of Buyer and until such time, if any, as
Seller purchases them as provided in Section 13.3, the same may not be provided
or delivered to any third party by Seller without the prior written consent of
Buyer.
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<PAGE>
10.3. Termination.
-----------
If Buyer or Seller terminate this Agreement and the Escrow pursuant
to Section 8 or Section 9, (a) neither party shall be entitled to damages, (b)
costs incurred through the Escrow shall be borne equally by Seller and Buyer,
and (c) except as expressly provided herein (including without limitation the
obligations of Buyer under the last sentence of Section 8 and Section 10.2.4)
the parties shall be relieved of all obligations hereunder. Should this
Agreement be terminated for any reason, Seller shall have the right to elect to
proceed with the construction of the New Building either on its own or with a
third party. If Seller elects to construct a new building on the Property,
whether or not similar or identical to the New Building, it shall notify Buyer
in writing. Upon receipt of such notification, Buyer shall assign and convey to
Seller all of Buyer's right, title and interest in and to the Property or the
Project (including, without limitation, any rights or approvals to construct new
improvements on the Property) and shall deliver to Seller all of Buyer's
original files and documents pertaining to the proposed development of the
Property and all surveys, reports, studies, books, records, documents and
agreements with third parties in any way related to the Property (excluding
plans, specifications or agreements relating to the New Building) upon Seller's
reimbursement to Buyer of Buyer's demonstrated out-of-pocket costs for (i) all
such items, (ii) all governmental and quasi-governmental fees, costs and charges
incurred in connection with the subdivision, development and improvement of the
Property and the construction of the New Building and (iii) fees of consultants
incurred by Buyer in obtaining entitlements. If Seller elects to construct the
New Building or a building that substantially conforms to the New Building under
Santa Barbara County Guidelines, Seller shall purchase Buyer's plans,
specifications and agreements therefor by reimbursing Buyer for all out-of-
pocket costs for such plans, specifications and agreements. Any such termination
shall not affect the Buyer's obligations under Section 8, or the parties' rights
and duties under Sections 13.1 and 13.14.
- 20 -
<PAGE>
10.4. Assignment.
----------
Buyer shall not assign, transfer or convey its rights and/or
obligations under this Agreement and/or with respect to the Property without the
prior written consent of Seller. Any attempted assignment without the prior
written consent of Seller shall be void and Buyer shall be deemed in default of
this Agreement. Notwithstanding the above, Buyer shall have the right to assign
this Agreement without the consent of Seller to any entity in which Buyer or an
affiliate of Buyer is a general partner or member and Buyer, or an entity
controlled by Jeffrey C. Bermant, retains development controls on the Project
until the date GRCI takes occupancy of the New Building. Upon such assignment,
the named Buyer, Bermant Development Company, shall be relieved of all liability
under this Agreement, except for any liability Buyer may have as a partner or
member of the assignee.
10.5. Construction.
------------
The provisions of this Agreement should be liberally construed to
effectuate its purposes. The language of all parts of this Agreement shall be
construed simply according to its plain meaning and shall not be construed for
or against either party, as each party has participated in the drafting of this
document and had the opportunity to have their counsel review it. Whenever the
context and construction so requires, all words used in the singular shall be
deemed to be used in the plural, all masculine shall include the feminine and
neuter, and vice versa.
10.6. Limitation of Remedies.
----------------------
Except for a claim for breach of the representation and warranty
contained in Section 10.1(iv), which may be brought at any time, any claim by
either party against the other arising from or connected with this Agreement,
including without limitation any claim resulting from a breach of a
representation, warranty, or covenant set forth in this Agreement shall be made
within 24 months following the Close of Escrow. Neither party shall have any
obligation or liability to the other arising from or connected with this
Agreement after such 24 month period has expired.
- 21 -
<PAGE>
10.7. Captions, Headings and Exhibits.
-------------------------------
The captions and headings of this Agreement are for convenience only
and have no force and effect in the interpretation or construction of this
Agreement. All exhibits attached hereto are by this reference incorporated
herein as though fully set forth in this Agreement.
10.8. Severability.
------------
If any term, provision, covenant or condition of this Agreement shall
be or become illegal, null, void or against public policy, or shall be held by
any court of competent jurisdiction to be illegal, null or void or against
public policy, the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected, impaired or invalidated thereby. The
term, provision, covenant or condition that is so invalidated, voided or held to
be unenforceable shall be modified or changed by the parties to the extent
possible to carry out the intentions and directives set forth in this Agreement.
10.9. Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
10.10. Successors and Assigns.
----------------------
Except as restricted herein, this Agreement shall be binding on and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors and assigns.
10.11. Waiver.
------
The waiver of any breach of any provision hereunder by any party to
this Agreement shall not be deemed to be a waiver of any preceding or subsequent
breach hereunder, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
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<PAGE>
10.12. Governing Law; Venue.
--------------------
The validity and interpretation of this Agreement shall be governed
by the laws of the State of California, with venue for all purposes to be proper
only in the County of Santa Barbara, State of California.
10.13. Notices
-------
All notices and demands of any kind which any party may be required
or desires to serve upon the other parties under the terms of this Agreement
shall be in writing, and shall be served upon the other parties at the addresses
set forth below. These addresses may be changed by a written notice given in
accordance with this Section 13.13:
SELLER: General Research Corporation
c/o GRC International, Inc.
1900 Gallows Road
Vienna, Virginia 22182
Attn:
General Counsel
Fax: (703) 448-6890
with copies to: Seed, Mackall & Cole
1332 Anacapa Street, Suite 200
Santa Barbara, CA 93101
Attn: Gregory Canova-Parker
Fax: (805) 962-1404
BUYER: Bermant Development Company
130 Cremona Drive, Suite D
Goleta, CA 93117-3075
Fax: (805) 961-8086
with copy to: Price,
Postel & Parma
200 E. Carrillo St., Suite 400
Santa Barbara, CA 93102-0099
Attn: Barton E. Clemens, Jr.
Fax: (805) 965-3978
Escrow Holder: First American Title Insurance Company
3780 State Street
Santa Barbara, CA 93105
- 23 -
<PAGE>
Notices may be sent only by the following means: personal delivery;
United States mail, registered or certified, return receipt requested;
telephonic facsimile process; or United States Postal Service Express Mail,
private courier, reputable overnight delivery service or private mail service.
Notices shall be effective only as follows: (i) if personally
delivered, upon actual delivery during normal working hours of the party to whom
notice is given, (ii) if delivered by United States mail, certified or
registered mail (return receipt requested), then upon actual delivery as is
shown by return receipt, (iii) if delivered by telephonic facsimile process then
upon actual receipt by the party to whom notice is given, (ii) if delivered by
United States Postal Service Express Mail, by private courier, overnight
delivery service or by private mail service, then upon actual receipt during
normal business hours of the party to whom notice is given. No notice shall be
effective except as delivered in a manner prescribed in this Section 13.13.
10.14. Attorneys Fees.
--------------
If any legal action, arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with this Agreement,
the successful or prevailing party shall be entitled to recover actual
attorneys' fees (including fees for paraprofessionals and similar personnel and
disbursements) and other costs it incurred in that action or proceeding, in
addition to any other relief to which it may be entitled. The parties agree that
actual attorneys' fees shall be based on the attorneys' fees actually incurred
(based on the attorneys' customary hourly billing rates) rather than the court
or arbitrator making an independent inquiry concerning reasonableness.
10.15. Time of the Essence.
-------------------
Time is strictly of the essence with respect to each and every
provision of this Agreement.
- 24 -
<PAGE>
10.16. Joint and Several.
-----------------
If either party consists of more than one (1) person, each
such person shall be jointly and severally liable for all warranties,
representations, covenants and other obligations contained in this Agreement.
10.17. Entire Agreement; Amendment.
---------------------------
This Agreement, its exhibits and the documents referred to
herein, contain the entire understanding and agreement of the parties. They
supersede all prior agreements. There have been no promises, representations,
agreements, warranties or undertakings by any of the parties, either oral or
written, of any character or nature hereafter binding except as set forth
herein. This Agreement may be altered, amended or modified only by an instrument
in writing, executed by the parties to this Agreement, and by no other means.
Each party waives their future right to claim, contest or assert that this
Agreement was modified, cancelled, superseded or changed by any oral agreement,
course of conduct, waiver or estoppel.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
on the dates written below.
SELLER: GENERAL RESEARCH CORPORATION,
a Virginia corporation
Dated_________________, 1995 By________________________________
BUYER: BERMANT DEVELOPMENT COMPANY
Dated_________________, 1995 By________________________________
Jeffrey C. Bermant
- 25 -
<PAGE>
EXHIBIT 10.20
FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT AND
JOINT ESCROW INSTRUCTIONS
This First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions ("First Amendment") is dated for reference June 12, 1995, by and
between GENERAL RESEARCH CORPORATION, a Virginia corporation ("Seller") and
BERMANT DEVELOPMENT COMPANY, a sole proprietorship of Jeffrey C. Bermant, or
assignee ("Buyer").
RECITALS:
A. Buyer and Seller entered into a Purchase and Sale Agreement and
Joint Escrow Instructions dated for reference April 25, 1995 (the "Agreement").
B. Seller and Buyer desire to amend and modify and the Agreement as
provided herein. Capitalized terms have the meanings ascribed to them in the
Agreement unless otherwise provided herein.
NOW, THEREFORE, the parties agree as follows:
1. TENANT LEASE.
Upon the Close of Escrow, Seller's affiliate, GRC International, Inc.
("GRCI") has agreed to lease from Buyer the buildings identified on Exhibit F to
the Agreement as Buildings A, N-1 - N-4 and S-1 - S-4 upon the terms and
provisions of an Interim Lease attached to the Agreement as Exhibit G.
Concurrently with the execution of this First Amendment, the parties have
executed a revised Interim Lease, a copy of which is attached hereto as Exhibit
A. The revised Interim Lease shall replace the Interim Lease attached to the
Agreement as Exhibit G.
- 1 -
<PAGE>
2. BUILDING LEASE
As provided in Section 4 of the Agreement, Buyer has agreed to design and
construct the New Building, a portion of which shall be leased by Seller.
Concurrently with the execution of this First Amendment, the parties have
executed a revised Building Lease, a copy of which is attached hereto as Exhibit
B. The revised Building Lease shall replace the Building Lease attached to the
Agreement as Exhibit H.
3. SATISFACTION OF BUYER'S CONTINGENCIES.
Except as expressly provided herein, Buyer acknowledges that it has
released all contingencies to its obligation to purchase the Property.
Buyer has previously disapproved Items 6 and 15 on Schedule B of the
Preliminary Title Report (3rd Amended) issued by First American Title Insurance
Company as of May 10, 1995. Buyer hereby approves the condition of title to the
Property, conditioned upon the execution by GRCI of the Interim Lease attached
hereto as Exhibit A.
Buyer has previously disapproved the environmental condition of the Real
Property as a result of the presence of asbestos within the Improvements
currently located on the Real Property. Buyer hereby approves the environmental
condition of the Real Property, contingent upon the execution by Seller of the
Asbestos Testing and Remediation Agreement attached hereto as Exhibit C.
4. PROMISSORY NOTE
The Promissory Note attached to the Agreement as Exhibit E shall be
replaced with the Promissory Note attached hereto as Exhibit D.
5. SATISFACTION OF MUTUAL CONTINGENCIES.
Seller and Buyer each acknowledges and agrees that it has released the
contingency in its favor described in Section 9 of the Agreement. Buyer and
Seller further agree that other than the execution of the documents attached as
Exhibits A,
- 2 -
<PAGE>
B and C, and the completion of the deliveries required to close Escrow, there
are no further conditions or contingencies to the close of the transaction
contemplated by the Agreement.
6. CLOSE OF ESCROW.
The Close of Escrow shall occur on or before June 27, 1995.
7. AMENDMENT OF SECTION 11.3.1
Section 11.3.1 of the Agreement is deleted in its entirety and replaced
with the following:
"11.3.1 Cash. An amount of cash or other immediately-available
----
funds sufficient to pay the cash downpayment of $810,000 plus Buyer's share
of escrow fees and charges. For purposes of calculating such cash
requirements, Buyer shall be credited with the amount of the Deposit plus
all accrued interest thereon, the sum of $150,000 (representing the
security deposit payable by GRCI under the Building Lease), the sum of
$34,000 (representing the security deposit payable by GRCI under the
Interim Lease) and the sum of $34,000 (representing the first month's rent
payable by GRCI under the Interim Lease)."
8. AMENDMENT OF SECTIONS 11.2.4, 11.3.4 AND 11.6.6
Sections 11.2.4, 11.3.4 and 11.6.6 are deleted in their entirety and
replaced with the following:
"11.2.4 Intentionally Left Blank."
"11.3.4 Intentionally Left Blank."
"11.6.6 Intentionally Left Blank."
9. AMENDMENT OF SECTION 11.6.9
Section 11.6.9 of the Agreement is deleted in its entirety and replaced
with the following:
- 3 -
<PAGE>
"11.6.9 Intentionally Left Blank."
10. NO FURTHER CHANGES.
Except as expressly modified and amended herein, all of the terms and
provisions of the Agreement are hereby ratified and approved.
IN WITNESS WHEREOF, this First Amendment has been executed by the parties
on the dates written below.
SELLER: GENERAL RESEARCH CORPORATION,
a Virginia corporation
Dated: June _____, 1995 By___________________________
BUYER: BERMANT DEVELOPMENT COMPANY
Dated: June _____, 1995 By___________________________
Jeffrey C. Bermant
ACKNOWLEDGMENT AND CONSENT BY ESCROW HOLDER
Escrow Holder hereby acknowledges receipt of this First Amendment and
agrees to be bound by, and conduct its Escrow in accordance with, the terms
hereof.
DATED: June _____, 1995.
FIRST AMERICAN TITLE INSURANCE
COMPANY
By_________________________________
- 4 -
<PAGE>
EXHIBIT 10.21
NET, NET, NET
BUILDING LEASE
THIS BUILDING LEASE dated April 25, 1995, for reference purposes only is
made between BERMANT DEVELOPMENT COMPANY, as Lessor, and GRC INTERNATIONAL,
INC., as Lessee.
BASIC LEASE PROVISIONS
----------------------
1. PREMISES: As depicted on Exhibit A.
BUILDING NAME: GRCI Building
PREMISES ADDRESS: 5383 Hollister Avenue
Santa Barbara, CA 93111
USE OF PREMISES: General and executive offices, research and
development
2. LEASED AREA: As depicted on Exhibit A
SQUARE FEET: See Addendum
3. LESSEE'S PERCENTAGES:
BUILDING: See Addendum
COMMON AREA: See Addendum
4. INITIAL ANNUAL RENT: See Addendum. ($1.32 per square foot per month)
RENTAL DEPOSIT: See Addendum
5. INITIAL MONTHLY RENTAL
INSTALLMENTS: See Addendum
<PAGE>
6. TERM: Fifteen (15) years. Two five (5) year renewal
options.
7. RENT COMMENCEMENT
DATE: Substantial completion of the Tenant Improvements
as provided in Paragraph 2.1. To be specified in
Addendum.
TERM COMMENCEMENT
DATE: First day of the month succeeding substantial
completion of Tenant Improvements. To be
specified in Addendum.
TERMINATION DATE: Fifteen (15) years after Term Commencement Date.
8. SECURITY DEPOSIT: $150,000, subject to adjustment as provided in
Paragraph 4.
9. BROKER(S): Julian J. Studley, Inc.
10. PARKING SPACES PROVIDED: Four (4) spaces for each 1,000 square feet of
rentable space leased, in common with other
tenants of the Building.
11. Submission of this instrument for examination or signature by the Lessee
does not constitute a reservation of or option for space and it is not
effective as a lease or otherwise until execution by both the Lessee and
the Lessor.
IN WITNESS WHEREOF, the parties hereto have executed this Building Lease,
consisting of the foregoing Basic Lease Provisions, Articles 1 through 21 which
follow, and any attached Exhibits or Addendums, as of the date first above
written.
LESSOR:
BERMANT DEVELOPMENT COMPANY
By_______________________________
Name and Title:__________________
Address:
-------
<PAGE>
130 Cremona Drive, Suite D
Goleta, CA 93117-3075
LESSEE:
GRC INTERNATIONAL, INC.,
A DELAWARE CORPORATION
By:______________________________
Name and Title:__________________
Address:
-------
1900 Gallows Road
Vienna, Virginia 22182
3
<PAGE>
- iii -
1. LEASE OF PREMISES
-----------------
Concurrently with the execution of this Lease, Lessor and Lessee have
entered into a Development and Construction Agreement ("the Development
Agreement") which provides for the construction by the Lessor of the Building, a
portion of which will be leased by Lessee. The portion of the Building to be
leased by Lessee (the "Premises") shall be not less than 50,000 rentable sq.ft.
Upon completion of the demising walls in the Building, the parties shall measure
the Premises using the American National Standard ANSI Z65.1-1980 as published
by the Building Owners and Managers Association International to determine the
precise square footage within the Premises. Within ten (10) days following the
completion of such measurements, Lessor and Lessee shall complete and initial
the Addendum attached hereto stating the total number of square feet in the
Premises, the total square footage of the Building and the Lessee's percentages
of the Building and Common Area, the Initial Monthly Rental Installments, and
the Initial Annual Rent.
The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor for the term, at the rental, and upon all of the conditions set forth in
this Lease, the Premises identified in Item 1 of the Basic Lease Provisions,
together with the non-exclusive use, in common, with the Lessor and other
tenants of the Building and their respective invitees, of common areas in or
about the Building and the parking garage (if any) or parking areas adjoining
the Building. The approximate anticipated configuration of the Project and the
location of the Building, Premises and associated common and parking areas is
indicated on Exhibit "B". The size, location and function of the buildings and
related structures depicted here are approximate. The configuration of the
development, the design, size, function and location of all other improvements,
and the identity and location of other tenants to the extent depicted are
subject to change without notice for any reason deemed sufficient by the owner.
The Lessor reserves the right to alter the configuration of the Project to
construct additional improvements thereon, to withdraw areas therefrom from time
to time and alter the configuration of the associated common and parking areas,
provided that the number of parking spaces intended for the Lessee's use shall
not thereby be materially diminished. The Lessee shall be allocated the number
of parking spaces set forth in item 10 of the Basic Lease Provisions and the
Lessee acknowledges that the Lessor shall have no responsibility to supervise or
police the usage of the parking lot by the tenants of the Building. Nothing in
this Lease shall cause the Lessor in any way to be construed as an employer,
employee, fiduciary, a partner, a joint venturer or otherwise associated in any
4
<PAGE>
way with the Lessee in the operation of the Premises, or to subject the Lessor
to any obligation, loss, charge or expense connection with or arising from the
Lessee's operation or use of the Premises.
The parties intend this Lease to be a net, net, net Lease with the
Lessee paying its proportionate share, as specified herein, of real property
taxes, insurance and certain operating costs for the Premises, the common areas
of the Building, the Building and the land on which it is situated. Lessee
shall have no right to reduce or offset the rent payable hereunder for any
reason.
2. TERM
----
2.1 COMMENCEMENT OF TERM
(A) The term of this Lease shall commence upon the Term
Commencement Date. Not less than ten (10) days prior to the date of scheduled
substantial completion of the Tenant Improvements, Lessor and Lessee shall
complete and initial the Addendum attached hereto specifying the term and rent
commencement dates. The Lessor shall deliver possession of the Premises upon
substantial completion of the Tenant Improvements. The Lease will end upon the
Termination Date as provided in item 7 of the Basic Lease Provisions unless
sooner terminated pursuant to any provision hereof.
2.2 DELAY IN COMMENCEMENT. If the Lessor cannot deliver possession
of the Premises to the Lessee on the Rent Commencement Date, the Lessor shall
not be subject to any liability therefor, nor shall such failure affect the
validity of this Lease or the obligations of the Lessee hereunder or extend the
term hereof provided, however, that the Lessee shall not be obligated to pay
rent until delivery of the Premises has occurred in accordance with the terms of
the Development Agreement.
2.3 OPTION TO RENEW. Provided that the Lessee then occupies not
less than 20,000 useable sq.ft. in the Building, the Lessor hereby grants to the
Lessee the right to renew this Lease, solely as to the space then occupied, for
two (2) successive periods of five (5) years each, upon the same terms,
covenants and conditions as are provided in this Lease, except as provided in
Paragraph 2.3.2.
2.3.1 EXERCISE OF OPTION. The Lessee shall give notice to the
Lessor in writing of the Lessee's election to exercise such option no less than
twelve (12) months prior to the expiration of the Term or of any previously
exercised option. However, the second five (5) year option shall be immediately
cancelled upon the Lessee's failure to exercise the first five (5) year option.
The Lessee shall not be entitled to exercise either the first or second five (5)
year option if, at the time of such exercise, the Lessee is in default of any
provision of this Lease as
2
<PAGE>
defined in Paragraph 12.1 and such default is not cured by the Lessee, either
before or after exercise of the option, within thirty (30) days after written
notice of said default from the Lessor to the Lessee, or if the Lessor has in
good faith delivered to the Lessee more than two (2) notices of default under
the Lease within the previous twelve (12) months which have not been cured
within any applicable cure period.
2.3.2 RENT DURING RENEWAL TERM. The annual rent for the first
and second option periods shall be determined as follows:
(I) Following delivery to the Lessor of the Lessee's
notice of exercise of the option to renew the Lease, the Lessor and the Lessee
shall endeavor to agree on the monthly fair market rental value of the Premises.
(II) If the monthly fair rental value of the Premises
as determined by the Lessor and the Lessee are not equal, and the parties cannot
otherwise agree, both parties shall submit their calculation of the monthly fair
rental value of the Premises to Hammock, Arnold & Smith or another local,
independent real estate appraisal company that is mutually agreeable. Hammock,
Arnold & Smith, or such other appraiser shall, within thirty (30) days of its
receipt of the monthly fair rental value calculations of the Lessor and the
Lessee, select either the calculation offered by the Lessor or the Lessee which,
in the exercise of its judgment using appraisal techniques generally accepted in
the local appraisal community, most closely approximates the monthly fair rental
value of the Premises as of the Commencement of the extension term. The
appraiser shall not average or blend the alternative calculations.
(III) The base rent for the first extension term shall
be ninety-five percent (95%) of the fair market rental rate determined pursuant
to subsections (i) and (ii) above, but in no event shall such base rent be less
than ninety percent (90%) of the base rent for the Premises during the preceding
lease year. The base rent for the first extension term shall be subject to
annual adjustment pursuant to Paragraph 3.5.
(IV) The base rent for the second extension term shall
be the fair market rental rate determined pursuant to subsections (i) and (ii)
above, but in no event shall such base rent be less than ninety percent (90%) of
the base rent for the Premises during the preceding lease year. The base rent
for the second extension term shall be subject to annual adjustment pursuant to
Paragraph 3.5.
3
<PAGE>
3. RENT
----
3.1 INITIAL ANNUAL RENT. Commencing on the Rent Commencement Date,
the Lessee shall pay to the Lessor as rent for the Premises an Initial Annual
Rent in equal monthly installments in the amount specified in the Addendum. The
rent shall be payable in advance on the first day of each month. In the event
that the Rent Commencement Date is other than the first day of a month the rent
shall be prorated.
In the event that a portion of the Tenant Improvement Allowance to be
provided by the Lessor, as described in the Development Agreement, remains
unused after completion of the Tenant Improvements and the payment of all of the
Tenant's Improvement Expenses, as defined in the Development Agreement, the rent
payable by Lessee under the terms of this Lease for the initial term shall be
reduced by the unused portion of the Tenant Improvement Allowance, multiplied by
twelve percent (12%), ratably spread over the initial term. By way of example,
if the unused portion of the Tenant Improvement Allowance was One Hundred
Thousand Dollars, the rent reduction would be calculated as follows:
Reduction in annual rent @ 12% (12,000.00)
Reduction in monthly rent (1,000.00)
Rent per the lease at $1.32 per sq.
foot assuming 50,000 sq. feet (monthly) 66,000.00 1.32 / sq.ft
Adjusted Rent if actual TI costs are 65,000.00 1.30 / sq.ft.
$100,000 less than the allowance
3.2 ADDITIONAL RENT. Throughout the initial and any renewal term of
the Lease, the Lessee shall reimburse the Lessor, as additional rent, in the
manner and at the times provided, for the Lessee's proportionate share of all
Building Operating Expenses and Common Area Operating Expenses (as hereinafter
defined) incurred by the Lessor. The Lessee's proportionate share of such
Building Operating Expenses and Common Area Operating Expenses shall be based
upon the Lessee's Building Percentage in the case of Building Operating
Expenses, and upon the Lessee's Common Area Percentage in the case of Common
Area Operating Expenses, all as defined herein.
3.3 NO REDUCTION OR OFFSET. All Rent due under this Lease shall be
payable without deduction, abatement or offset.
4
<PAGE>
3.4 DEFINITIONS: For purposes of this Article 3:
(A) The Lessee's Building Percentage is a percentage calculated
by dividing the Leased Area of the Premises by the leasable area of the
Building, as shown in the Addendum.
(B) Building Operating Expenses shall mean the sum of all
expenses incurred by the Lessor in connection with the operation, repair and
maintenance of the Building, including, but not limited to, heating and air
conditioning; all real property taxes (as hereinafter defined) imposed upon or
with respect to the Building and related improvements (exclusive of the land
underlying all such improvements); all fire and extended coverage, earthquake,
loss of rents, vandalism, malicious mischief and other insurance covering the
Building and losses suffered which fall below the insurance deductible (in
amounts that are commercially reasonable at the time); utilities; materials and
supplies; salaries, wages and other expenses incurred with respect to the
operation, repair and maintenance of the Building, the cost of repainting, wall
covering or recarpeting Common Areas of the Building; the cost of an on site
manager or office manager (but not an on site leasing agent or leasing office);
security and fire protection; amortization of capital investments for
improvements which are designed to reduce operating costs, improve operations or
comply with governmental conservation or safety programs over such reasonable
period as the Lessor shall determine (together with interest at five (5)
percentage points above the discount rate of the Federal Reserve Bank of San
Francisco on the unamortized amount excluding improvements that relate
exclusively to the roof structure, foundation or exterior and load-bearing
walls); and an amount equal to fifteen percent (15%) of all such expenses to
cover the Lessor's administrative and overhead expenses. Building Operating
Expenses attributable to the utilities and services furnished pursuant to
Article 10 shall be apportioned among the tenants of the Building receiving such
services (excluding those tenants furnishing or paying for their own utilities
and janitorial services) based on the respective leased areas occupied by such
tenants. Such allocation shall be initially based upon Lessee's estimated usage,
but shall be subject to periodic adjustment based upon Lessee's actual usage.
Notwithstanding anything to the contrary contained in the Lease,
Building Operating Expenses and Common Area Operating Expenses shall not include
(i) expenditures classified as capital improvements in accordance with generally
accepted accounting principles, (ii) leasing commissions and finder's fees,
(iii) the cost of capital and noncapital improvements for individual tenants of
the Building or dedicated solely for Lessor's use, (iv) costs directly
chargeable to or recoverable from any tenant under a lease of space in the
Building, (v) attorneys' fees incurred in the preparation or enforcement of any
lease of space in the Building by Lessor, its agents, contractors or employees,
(vi) any penalty or charge for late payment of
5
<PAGE>
any operating cost by Lessor, (vii) amounts expended to correct construction
defects in the Building or to correct faulty workmanship.
If the Lessor manages the Building itself, it shall manage the
Building in the most cost effective manner possible so as to minimize operating
expenses. Any management agreement with a third-party management company shall
provide that the managing agent shall operate the Building through an on-site
building manager in a first-class institutional quality manner and in the most
cost-effective manner possible so as to minimize operating expenses.
(C) Lessee's Common Area Percentage is a percentage figure
calculated by the project architect by dividing the Leased Area of the Premises
by the average leasable area in all improvements, including the Building and
other buildings shown on Exhibit "B" or otherwise constructed during the term of
the Lease, during such year and is initially stipulated to be as shown in the
Addendum. Should the Building and/or landscape area become a separate legal lot,
or should additional improvements or common area be added to or deleted from
Exhibit "B", the Lessor may, at its option, calculate the Lessee's Common Area
Percentage by comparing the common area attributable to the Premises with the
common area on such legal lot or otherwise within Exhibit "B" as so revised. The
leasable area of improvements shall be measured using the American National
Standard described in Article 1.
(D) Common Area Operating Expenses shall mean the sum of all
expenses incurred by the Lessor in connection with the operation and maintenance
(but not original construction) of driveways, landscaping, walkways, plazas,
parking facilities, and perimeter property including, but not limited to: all
items described in Section 6.1 hereof (except the last sentence of Paragraph
6.1); all real property taxes (as hereinafter defined) imposed upon or with
respect to the land included within Exhibit "B"; all public liability insurance
covering Exhibit "B", and losses suffered which fall below the insurance
deductible (in amounts commercially reasonable at the time); security and fire
protection; salaries, wages and other expenses incurred with respect to
maintenance of the common areas, gardening, landscaping, repaving, repainting
and trash removal; depreciation of equipment used in such maintenance;
amortization of capital investments for improvements which comply with
governmental conservation or safety programs over such reasonable period as the
Lessor shall determine (together with interest at five (5) percentage points
above the discount rate of the Federal Reserve Bank of San Francisco on the
unamortized amount excluding improvements that relate exclusively to the roof
structure, foundation or exterior and load-bearing walls); and an amount equal
to fifteen percent (15%) of all such expenses to cover the Lessor's
administrative and overhead expenses. General overhead and depreciation of
improvements shall not be included in the expenses except as specifically set
forth in the foregoing. Any governmental surcharge, fee or assessment imposed
with respect to the parking facilities within Exhibit "B" shall, to the extent
paid by the Lessor and not passed on to the users of said parking facilities, be
included in Common Area Operating Expenses.
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(E) Real Property Taxes shall mean all real and personal
property taxes and assessments incurred during any calendar year, including, but
not limited to: special and extraordinary assessments, meter and sewer rates and
charges, occupancy taxes or similar taxes imposed on or with respect to the real
property or personal property used in connection with the Common Area, whether
or not imposed on or measured by the rent payable by the Lessee, and other
governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and nature whatsoever
relating to the real or personal property, and any gross rental, license or
business tax measured by or levied on rent payable or space occupied. If, by
law, any property taxes are payable, or may at the option of the taxpayer be
paid, in installments (whether or not interest shall accrue on the unpaid
balance of such property taxes), the Lessor may, at the Lessor's option, pay the
same and, in such event, any such accrued interest on the unpaid balance of such
property taxes shall be deemed to be Real Property Taxes as defined herein. Real
Property Taxes shall also include all expenses reasonably incurred by the Lessor
in seeking a reduction by the taxing authorities of Real Property Taxes
applicable to the Project. Real Property Taxes shall not include any capital
levy, franchise, estate, inheritance, succession, gift or transfer tax of the
Lessor, or any income, profits or excess profits tax, assessment, charge or levy
upon the income of the Lessor; provided, however, that if at any time during the
term of this Lease under the laws of the United States or the State of
California, or any political subdivision of either, a tax or excise on rents,
space or other aspects of real property, is levied or assessed against the
Lessor, the same shall be deemed to be Real Property Taxes. Real Property Taxes
shall also not include (i) special district assessments for improvements to the
roof structure, foundation, exterior and load-bearing walls or (ii) assessments
from a Mello-Roos, or similar district, formed exclusively for the benefit of
the Project itself, or in connection with an immediately adjacent parcel under
affiliated ownership, for the purpose of financing improvements which do not
benefit all buildings within such district in a substantially equal manner. If
any such property taxes upon the income of the Lessor shall be imposed on a
graduated scale, based upon the Lessor's aggregate rental income, Real Property
Taxes shall include only such portion of such property taxes as would be payable
if the rent payable with respect to the Building and Common Areas were the only
rental income of the Lessor subject thereto.
(F) The Lessee shall have the right to review, copy and audit
all documents and information pertaining to operating expenses and real property
taxes of the Building (and the Project to the extent such expenses are passed
through to the Lessee). In the event such audit indicates the operating expenses
paid by the Lessee are greater than one hundred and five percent (105%) of the
actual operating expenses for the appropriate period, the Lessor will, within
thirty (30) days of its receipt of the audit, reimburse the Lessee for all costs
associated with the audit and the expenses that the Lessee paid in excess of the
audited expenses plus interest on such amounts.
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3.5 RENT ADJUSTMENT FOR CONSUMER PRICE INDEX. As specified in item 4
of the Basic Lease Provisions, the annual rent shall be increased as of the
expiration of each full or partial calendar year of the Lease term (the
"Adjustment Date") to reflect any increase in the United States Department of
Labor, Bureau of Labor Statistics, Consumer Price Index, "Urban Wage Earners and
Clerical Workers (Revised) Series) All Items - Los Angeles - Anaheim Riverside
Average (1982-1984=100)". The index for said subgroup applicable for the month
of December (or the month preceding the Rent Commencement Date for the first
partial calendar year of the lease term) preceding each Adjustment Date shall be
considered the "base", and the annual rent following each Adjustment Date shall
be computed by adjusting the annual rent payable for the preceding calendar year
thereof by the percentage change in the index as of the adjustment date over the
"base"; provided, however, in no event shall the rent payable for any year be
less than the rent payable for the preceding period on account of the adjustment
pursuant to this Paragraph 3.5, notwithstanding the fact that the index may, as
of some Adjustment Date, be less than the "base", and provided further that the
annual rent for any year shall not be increased by more than four percent (4%)
over the base rent payable in the preceding lease year. If as of any Adjustment
Date there shall not exist the Consumer Price Index in the same format as set
forth above, the parties shall substitute any official index published by the
Bureau of Labor Statistics or any successor or similar Governmental agency as
may then be in existence and shall be most nearly equivalent thereto. If the
parties shall be unable to agree upon a successor index, the parties shall refer
the choice to arbitration in accordance with the rules of the American
Arbitration Association. This provision shall not apply to the Building
Operating Expenses or Common Area Operating Expenses.
3.6 CALCULATION AND PAYMENT
(A) Annual rent shall be payable to the Lessor without
deduction or offset in lawful money of the United States at the Lessor's address
herein or to such other persons or at such other places as the Lessor designates
in writing. Rent payable for any period for less than one (1) month shall be
prorated based upon a thirty (30) day month.
Prior to the commencement of the lease term and on the earlier
of each December thereafter or the month following the date on which
construction was substantially completed in a manner that changed the leasable
area affecting the calculation thereof, the Lessor shall give the Lessee a
written estimate of the Lessee's share of Building and Common Area Operating
Expenses for the ensuing year or portion thereof. The Lessee shall pay such
estimated amount to the Lessor in equal monthly installments, in advance. Within
ninety (90) days after the end of each calendar year, the Lessor shall furnish
to the Lessee a statement showing in reasonable detail the actual Building and
Common Area Operating Expenses incurred by the
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Lessor during such period, and the parties shall within thirty (30) days make
any payment or allowance necessary to adjust the Lessee's estimated payment to
the Lessee's actual proportionate share as shown by such annual statement. Any
amount due the Lessee shall be credited against installments next coming due
under this paragraph.
(B) Within ninety (90) days after each Adjustment Date, the
Lessor shall furnish the Lessee with a written statement showing the percentage
change in the index for the period ending on the Adjustment Date and specifying
the increase, if any, in the annual rent subsequent to the Adjustment Date,
taking into account all prior adjustments to annual rent for the period
preceding the Adjustment Date pursuant to this paragraph above and applying any
percentage increase in the index to the annual rent as previously adjusted. At
the rental payment date next following the Lessee's receipt of such statement,
the Lessee shall pay to the Lessor an amount equal to one-twelfth (1/12th) of
the adjustment pursuant to this Paragraph (b) multiplied by the number of rent
payment dates (including the current one) since the relevant Adjustment Date.
Subsequent rental payments shall be increased by one-twelfth (1/12th) of the
adjustment pursuant to this Paragraph (b).
3.7 END OF TERM. Upon the expiration or earlier termination of this
Lease, the Lessee shall pay the Lessor, as additional rent, the aggregate rental
increase which would have been payable by the Lessee pursuant to this Article 3,
except for such expiration or termination, for the portion of the year in which
termination or expiration occurs through the Termination Date. The amount of
such payment shall be calculated by the Lessor based upon Paragraphs 3.2 and 3.5
(using the expiration or Termination Date as the Adjustment Date for Paragraph
3.5) and the best information then available to the Lessor, and shall give
effect to all prior adjustments and payments on account by Lessee pursuant to
this Article 3.
4. SECURITY DEPOSIT
----------------
The Lessee shall deposit with the Lessor the sum specified in item 8
of the Basic Lease Provisions as security for the faithful performance by the
Lessee of all covenants and conditions of this Lease concurrently with the close
of escrow for the purchase by the Lessor of the land on which the Building is
situated. On the commencement of the fifth (5th) lease year, provided that (i)
Lessee is not at that time in default under the Lease or cures within any
applicable cure period any default then existing, (ii) that Lessor has not
delivered more than two (2) default notices to Lessee under this Lease and (iii)
further that the balance of the security deposit remains One Hundred Fifty
Thousand Dollars ($150,000), Lessor shall refund the sum of Twenty-five Thousand
Dollars ($25,000) to Lessee. Additional Twenty-five Thousand Dollar ($25,000)
reductions shall be made at the commencement of each lease year thereafter
providing that conditions (i) and (ii) are satisfied and that the balance of the
security deposit then equals the
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sum of One Hundred Fifty Thousand Dollars ($150,000) less only the sums
previously released to Lessee, until such time as the balance of the security
deposit is Fifty Thousand Dollars ($50,000) which sum Lessor shall continue to
hold as the security deposit hereunder. If the Lessee shall breach or default in
the performance of any covenants or conditions of this Lease, including the
payment of rent, the Lessor may use, apply or retain the whole or any part of
such security deposit for the payment of any rent in default or for any other
sum which the Lessor may spend or be required to spend by reason of the Lessee's
default. If the Lessor so uses or applies all or any portion of said deposit,
the Lessee shall, within ten (10) days after written demand therefor, deposit
cash with the Lessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated and the Lessee's failure to do so shall be a material
breach of this Lease. Should the Lessee comply with all covenants and conditions
of this Lease, the security deposit or any balance thereof shall be returned to
the Lessee (or, if applicable, to the last assignee of the Lessee's interest in
this Lease) at the expiration of the term. Prior to obtaining building permits
for the New Building Lessor shall not be required to maintain the security
deposit in a separate account. However, interest shall accrue on the security
deposit at the rate payable on a standard interest-bearing account and be paid
semi-annually to Lessee. Following the issuance of building permits the security
deposit shall be maintained by Lessor in a separate interest-bearing account
with all interest paid to Lessee semi-annually. Should the Lessor sell its
interest in the Premises, the Lessor may transfer to the purchaser thereof the
then unexpended or unappropriated deposit and thereupon the Lessor shall be
discharged from any liability for such funds.
5. USE
---
5.1 USE. The Premises shall be used and occupied for the purposes
described in item 1 of the Basic Lease Provisions, permitted under applicable
ordinances and other Governmental requirements, the covenants, conditions and
restrictions affecting the Project in effect on the Term Commencement Date, as
the same may be amended from time to time, and the Rules and Regulations as the
Lessor may from time to time reasonably adopt for the safety, care and
cleanliness of the Building and the Project or the preservation of good order.
The Rules and Regulations presently in effect are attached hereto as Exhibit
"C". The Lessor shall not be responsible to the Lessee for the non-performance
of any of said Rules and Regulations, or non-compliance with said covenants,
conditions and restrictions, by any other tenant of the Building; provided,
however, that the Lessor shall use good faith efforts to enforce the same in an
equal, fair and equitable manner. The Rules and Regulations, as the same may be
amended from time to time, shall not materially diminish or change the rights of
the Lessee hereunder.
5.2 COMPLIANCE WITH LAW; NUISANCE. The Lessee, at the Lessee's
sole cost and expense, shall comply promptly and at all times with all laws,
requirements, ordinances, statutes, and regulations of all municipal, state or
federal authorities, or any board of fire
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insurance underwriters, or other similar bodies (collectively "regulations"),
now in force or which may hereafter be in force, pertaining to Lessee's use of
the Building and the Premises and the occupancy thereof, including any law that
requires alteration, maintenance or restoration of the Premises as the result of
the Lessee's use thereof, but excluding any regulations relating solely to the
physical condition or the occupancy of the Building without regard to the
Lessee's use thereof, which shall be complied with by the Lessor and treated as
Building Operating Expense or Common Area Operating Expense, if so provided in
Paragraph 3.4. The judgment of any court of competent jurisdiction, or the
admission of the Lessee in any action or proceeding against the Lessee, whether
the Lessor is a party thereto or not, that the Lessee violated any such
ordinances or statutes in the use of the Premises shall be conclusive of that
fact as between the Lessor and the Lessee. The Lessee, at its sole expense,
shall also comply with (i) all requirements for fire extinguishers or fire
extinguisher systems required in the Premises and (ii) all conditions imposed on
the use, occupancy or employment of the Premises and the Building by the County
of Santa Barbara or other governmental authority, excluding any regulations
relating to the roof structure, foundation, exterior and load-bearing walls,
which shall be complied with by the Lessor at its sole cost and expense.
The Lessee shall not commit, or suffer to be committed, any waste of
the Premises, or any nuisance, annoyance or other unreasonable annoyance which
may disturb the quiet enjoyment of adjoining premises or of the Building by the
owners or occupants thereof.
5.3 INSURANCE CANCELLATION. Notwithstanding the provisions of
Paragraph 5.1 above, the Lessee shall not do or permit anything to be done in or
about the Premises nor bring or keep anything therein, including all uses
permitted under Paragraph 5.1 above, which will in any way cause the
cancellation of any fire or other insurance upon the Building, or any other part
thereof, or any of its contents. If the Lessee's use of the Premises causes an
increase in said insurance rates, the Lessee shall pay as additional rent the
amount of such increase. The Lessee shall be in default under this Lease should
the Lessee cause the cancellation of fire or other insurance upon the Building
or Property or should the Lessee fail to pay any increased insurance rate
attributable to the Lessee's use of the Premises. In determining whether
increased premiums are a result of the Lessee's use or occupancy of the Premises
or Building, a schedule issued by the Lessor's insurer computing the insurance
rate on the Premises or Building, or the leasehold improvements showing the
various components of such rate, shall be conclusive evidence of the several
items and charges which make up such rate. The Lessee shall promptly comply
with all reasonable requirements of the insurance authority or of any insurer
now or hereafter in effect relating to the Premises.
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5.4 HAZARDOUS SUBSTANCES. Any corrosive, flammable, hazardous or
other special waste or materials shall be handled or disposed of as directed by
applicable state, Federal, County and City regulations. The Lessee shall
handle, store or dispose of such materials in a careful and prudent manner. At
the termination of the Lease, or any option period thereof, the Lessee shall
fully clean the Premises in such a manner that no residue of such materials or
waste shall remain on the Premises. If required by applicable law, the Lessee
shall notify the appropriate governmental authority of the presence and amount
of any such material or waste, and shall comply with all conditions imposed by
such authority. The Lessee shall contact the appropriate governmental authority
prior to occupancy to determine the existence of any records for the Building
and/or Premises. Specifically thirty (30) days prior to occupancy, the Lessee
shall submit a Hazardous Materials Management Plan (HMMP) and a Hazardous
Materials Floor Plan (HMF) to the Lessor and the appropriate governmental
authority for approval. These plans shall be attached in full to this Lease.
The HMMP shall include the following:
(A) The company name, address and contact person.
(B) General facility description with map showing location of
all buildings and structures.
(C) Facility hazardous material storage map showing the
location of each proposed hazardous material storage area and access to such
facilities. The map shall be updated annually by the occupant and submitted by
January 1 each year.
(D) A floor plan showing the location of each hazardous
material storage area, storage area access, and the location of emergency
equipment.
The HMF shall include the following:
(A) Hazardous Materials Handling Report describing the safe
handling of hazardous materials to prevent accidents.
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(B) Separation or Hazardous Material Report outlining the
methods to be utilized to insure separation and protection of hazardous
materials from such factors that could cause fire, explosion, spills, etc.
(C) Inspection and Record Keeping Plan indicating the
procedures for inspecting each storage facility. An authorized record of
inspection shall be maintained by the Lessee.
(D) Employee Training Program to insure that employees know how
to safety handle hazardous materials.
(E) Hazardous Materials Contingency Plan that clearly describes
appropriate response procedures and measures in case of an accident.
(F) A floor plan identifying the location and quantity of each
hazardous material, including the chemical name and quantity limit for each
class.
The Lessee shall pay inspection fees, based on the hourly inspection
rate, for an environmental audit to be conducted by the appropriate governmental
authority, or the Lessor, at the termination of the Lease and prior to
reoccupation of the Building and/or the Premises, if hazardous materials were in
use on the Building and/or Premises. The appropriate governmental authority
shall perform or the Lessee shall arrange for such an audit in a timely manner
to prevent economic hardship to the Lessor and shall certify that the Premises
are available for reoccupation, or shall specify clean-up measures that will
render the Premises safe for reoccupation. The Lessee shall be responsible for
any clean-up that may be required as a result of the audit.
Should the Lessee fail to comply with any duty set forth in this
Paragraph 5.4, the Lessor may, in addition to all other remedies now or
hereafter provided by this Lease, or by law, perform such duty or make good such
default, and any amounts which the Lessor shall advance pursuant thereto shall
be repaid by the Lessee to the Lessor on demand.
5.5 ENVIRONMENTAL LAWS.
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(A) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Lessee, in its
conduct of business on or in any activity, work, thing done, permitted or
suffered by the Lessee, its agents, contractors, employees or invitees on the
Premises, shall at all times and in all respects comply with all federal, state
and county laws, ordinances and regulations (the "Hazardous Materials Laws")
relating to industrial hygiene, environmental protection or the use, analysis,
generation, manufacture, storage, disposal or transportation of any oil,
flammable explosives, asbestos, radioactive materials or waste, or other
hazardous, toxic, contaminated or polluting materials, substances, or wastes,
including, without limitation, any "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under any such laws, ordinances or
regulations (collectively, the "Hazardous Materials"). Such laws, ordinances or
regulations shall include, but not be limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq; the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Section 6901 et seq; the Clean Water Act, 33 U.S.C. Section 466, et
seq; the Safe Drinking Water Act, 14 U.S.C. Section 1401, et seq; the Superfund
Amendment and Reauthorization Act of 1986; Public Law 99-499, 100 Stat. 1613;
the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq, as amended;
those substances defined as "hazardous waste", "extremely hazardous waste",
"restricted hazardous waste" or "hazardous substance" in the Hazardous Waste
Control Act, Section 25100 et seq of the California Health & Safety Code; and
those materials and substances similarly described in the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136, et seq., as amended; the
Atomic Energy Act of 1954, 42 U.S.C. Section 2011, et seq., as amended; the
Porter Cologne Water Quality Control Act, Section 1300 et seq. of the California
Health & Safety Code; and any regulations adopted and publications promulgated
pursuant to said Laws.
(B) HAZARDOUS MATERIALS HANDLING. The Lessee shall, at its own
expense, procure, maintain in effect and comply with all conditions of any and
all permits, licenses and other governmental and regulatory approvals required
for the Lessee's use of the Premises, including, without limitation, discharge
of (appropriately treated) materials or wastes into or through any sanitary
sewer serving the Premises. Except as discharged into the sanitary sewer in
strict accordance and conformity with all applicable Hazardous Materials Laws,
the Lessee shall cause any and all Hazardous Materials removed from the Premises
to be removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. The Lessee shall in
all respects handle, treat, deal with and manage any and all Hazardous Materials
in, on, under or about the Premises in total conformity with all applicable
Hazardous Materials Laws and prudent industry practices regarding management of
such Hazardous Materials. Upon expiration or earlier termination of the term of
the Lease, the Lessee shall cause all Hazardous Materials to be removed from the
Premises and transported for use, storage or disposal in accordance and
compliance with all applicable Hazardous Materials
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Laws. The Lessee shall not take any remedial action in response to the presence
of any Hazardous Materials in or about the Premises or the Building, nor enter
into any settlement agreement, consent, decree or other compromise in respect to
any claims relating to any Hazardous Materials in any way connected with the
Premises or the Building, without first notifying the Lessor of the Lessee's
intention to do so and affording the Lessor ample opportunity to appear,
intervene or otherwise appropriately assert and protect the Lessor's interest
with respect thereto.
(C) NOTICES. The Lessee shall immediately notify the Lessor in
writing of any of the following activities relating to the Lessee's operations
on the Premises: (i) any enforcement, clean-up, removal or other governmental
or regulatory action instituted, completed or threatened pursuant to any
Hazardous Materials Laws; (ii) any claim made or threatened by any person
against the Lessee, the Premises or the Building relating to damage,
contribution, cost recovery compensation, loss or injury resulting from or
claimed to result from any Hazardous Materials in, on or removed from the
Premises or the Building; and (iii) any reports made to any environmental agency
arising out of or in connection with any Hazardous Materials in or removed from
the Premises or the Building, including any complaints, notices, warnings or
asserted violations in connection therewith. The Lessee shall also supply to
the Lessor as promptly as possible, and in any event within five (5) business
days after the Lessee first receives or sends the same, with copies of all
claims, reports, complaints, notices, warnings or asserted violations relating
in any way to the Premises, the Building or the Lessee's use thereof. The
Lessee shall promptly deliver to the Lessor copies of hazardous waste manifests
reflecting the legal and proper disposal of all Hazardous Materials removed from
the Premises.
(D) INDEMNIFICATION OF LESSOR. The Lessee shall indemnify,
defend, protect, and hold the Lessor, and each of the Lessor's partners,
employees, agents, attorneys, successors and assigns, free and harmless from and
against any and all claims, liabilities, penalties, forfeitures, losses or
expenses (including attorneys' fees) for death of or injury to any person or
damage to any property whatsoever arising from or caused in whole or in part,
directly or indirectly, by (A) the presence in, on, under or about the Premises
or the Building, or discharge in or from the Premises or the Building of any
Hazardous Materials resulting from the Lessee or the Lessee's use, analysis,
storage, transportation, disposal, release, threatened release, discharge or
generation of Hazardous Materials to, in, on, under, about or from the Premises
or the Building, but only to the extent such Hazardous Materials are present as
a result of actions of the Lessee, its officers, employees, invitees, assignees,
contractors, or agents, or (B) the Lessee's failure to comply with any Hazardous
Materials Law. The Lessee's obligations hereunder shall include, without
limitation, and whether foreseeable or unforeseeable, all costs of any required
or necessary repair, clean-up or detoxification or decontamination of the
Premises or the Building, and the preparation and implementation of any closure,
remedial action or other
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required plans in connection therewith, and shall survive the expiration or
earlier termination of the term of the Lease. For purposes of the release and
indemnity provisions hereof, any acts or omissions of the Lessee, or by
officers, invitees, employees, agents, assignees, contractors or subcontractors
of the Lessee or others acting for or on behalf of the Lessee (to the extent any
such individual is acting within the scope of his relationship with the Lessee),
whether or not such acts or omissions are negligent, intentional, willful or
unlawful, shall be strictly attributable to the Lessee.
6. MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
6.1 LESSOR'S OBLIGATIONS. The Lessor shall cause to be maintained,
in good order, condition and repair, the roof membrane, and common windows and
doors of the Building (excluding the interior surface thereof), heating, venting
and air conditioning systems, and any public and common areas in the Building,
the exterior Building paint as well as all parking areas, driveways, sidewalks,
private roads or streets, landscaping and all other areas located within the
Project other than areas occupied by other buildings (such non-building areas
being herein referred to as "Common Areas"). The costs of such maintenance are
chargeable to the Lessee pursuant to Paragraph 3.2 hereof. The Lessor shall
maintain, at its sole cost and expense and without reimbursement by Lessee, the
roof structure, foundation, exterior and load-bearing walls.
6.2 LESSEE'S OBLIGATIONS. The Lessee shall, during the term of this
Lease, keep in good order, condition and repair, the interior of the Premises
and every part thereof, including, but not limited to, all interior windows and
doors in and to the Premises. Except as expressly provided in Paragraphs 3.4
and 6.1, the Lessor shall incur no expense nor have any obligation of any kind
whatsoever in connection with the maintenance of the interior of the Premises
and the Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford the Lessee the right to make repairs at the
Lessor's expense or to terminate this Lease because of any failure to keep the
interior of the Premises in good order, condition and repair. Notwithstanding
the foregoing, the Lessor shall be liable for maintenance or repairs which are
caused by the Lessor's gross negligence. The Lessee shall be responsible for
interior janitorial services.
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6.3 ALTERATIONS AND ADDITIONS.
(A) The Lessee shall not, without the Lessor's prior written
consent, make any alterations, improvements, additions or utility installations
in, on or about the Premises unless such work is limited to patching, painting,
redecorating and carpeting or is nonstructural in nature and its cost does not
exceed one-half of the monthly rent then payable. For all work, the Lessee will
provide the Lessor with as-built drawings reflecting any changes to the
Premises. As used in this Paragraph 6.3, the term "utility installations" shall
include bus ducting, power panels, fluorescent fixtures, space heaters, conduits
and wiring. As a condition to giving such consent, the Lessor may require that
the Lessee (i) agree to remove any such alterations, improvements, additions or
utility installations at the expiration or sooner termination of the term, and
to restore the Premises to their prior condition and (ii) unless, there has been
no monetary default by the Lessee hereunder in the prior thirty-six (36) months,
provide the Lessor, at the Lessee's sole cost and expenses, a lien and
completion bond in an amount equal to one and one-half (1 1/2) times the
estimated cost of such improvements, to insure the Lessor against any liability
for mechanics' and materialmen's liens and to insure completion of work.
(B) All alterations, improvements and additions to the Premises
shall be performed by the Lessor's contractor for the Project or other licensed
contractor approved by the Lessor, which approval shall not be unreasonably
withheld. The Lessee shall pay, when due, all claims for labor or materials
furnished to or for the Lessee at or for use in the Premises, which claims are
or may be secured by any mechanics' or materialmen's lien against the Premises
or any interest therein, and the Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.
6.4 SURRENDER. On the last day of the term hereof, or on any sooner
termination, the Lessee shall surrender to the Lessor the Premises and, subject
to the provisions of Paragraph 6.3(a) hereof, all alterations, additions and
improvements thereto, in the same condition as when received or made, ordinary
wear and tear excepted; provided, however, that the Lessee's machinery,
equipment and trade fixtures (including utility installations) which may be
removed without irreparable or material damage to the Premises, shall remain the
property of the Lessee and be removed by the Lessee. The Lessee shall repair
any damage to the Premises occasioned by the removal of the Lessee's
furnishings, machinery, equipment and trade fixtures, which repair shall include
the patching and filing of holes and repair of structural damage.
6.5 LESSOR'S RIGHTS. If the Lessee fails to perform the Lessee's
obligations under this Article 6, the Lessor may, at its option (but shall not
be required to), and with a five (5) day written notice to the Lessee, perform
such obligations on behalf of the Lessee, and the cost thereof, together with
interest thereon at the rate specified in Paragraph 12.2(a) hereof, shall
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become due and payable as additional rent to the Lessor within ten (10) days
following written demand therefor.
7. INSURANCE
---------
The Lessee, at its sole cost and expense, shall, commencing on the
date the Lessee is given access to the Premises for any purpose, and during the
entire term hereof, procure, pay for and keep in full force and effect:
7.1 LESSEE'S LIABILITY INSURANCE. Comprehensive general liability
insurance with respect to the Premises and the operations of or on behalf of the
Lessee in, on or about the Premises, including, but not limited to, personal
injury, product liability (if applicable), blanket contractual, owner's
protective, broad form property damage liability coverage, host liquor liability
and owned and non-owned automobile liability in an amount not less than TWO
MILLION DOLLARS ($2,000,000) Combined Single Limit. Such policy shall contain
(i) severability of interest, (ii) cross liability, and (iii) an endorsement
stating in substance that "such insurance as is afforded by this policy for the
benefit of the Lessor shall be primary as respects any liability or claims
arising out of the occupancy of the Premises by the Lessee, or out of the
Lessee's operations, and any insurance carried by the Lessor shall be excess and
non-contributory."
7.2 LESSEE'S WORKER'S COMPENSATION INSURANCE. Worker's Compensation
coverage as required by law, together with Employer Liability coverage.
7.3 LESSEE'S FIRE AND EXTENDED COVERAGE INSURANCE. Commencing on
the Rent Commencement Date, insurance against fire, vandalism, malicious
mischief and such other additional perils as now are or hereafter may be
included in a standard "All Risks" coverage, insuring all improvements and
betterments made to the Premises (excluding Tenant Improvements made by Lessor
or its contractor, all of which shall be insured by the Lessor's casualty
insurance), the Lessee's trade fixtures, furnishings, equipment, stock, loss of
income or extra expense, and other items of personal property in an amount not
less than 100% of replacement value. Such insurance shall contain (i) no
coinsurance or contribution clauses, (ii) a Replacement Cost Endorsement, and
(iii) deductible amounts acceptable to the Lessor.
7.4 POLICY REQUIREMENTS. All policies of insurance required to be
carried by the Lessee pursuant to these requirements shall be written by
responsible insurance companies
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authorized to do business in the State of California. Any such insurance
required by the Lessee hereunder may be furnished by the Lessee under any
blanket policy carried by it or under a separate policy therefor. A true and
exact copy of each paid up policy evidencing such insurance or a certificate of
the insurer, certifying that such policy has been issued, providing the coverage
required and containing the provisions specified herein, shall be delivered to
the Lessor prior to the date the Lessee is given the right to possession of the
Premises, and upon renewals, not less than thirty (30) days prior to the
expiration of such coverage. The Lessor may, at any time, and from time to time,
inspect and/or copy any and all insurance policies required hereunder. In no
event shall the then limits of any policy be considered as limiting the
liability of the Lessee under this Lease.
Each policy evidencing insurance required to be carried by the Lessee
pursuant to these requirements shall contain, in form and substance satisfactory
to the Lessor: (i) a provision including the Lessor and any other parties in
interest designated by the Lessor as an additional insured; (ii) a waiver by the
Lessee's insurer of any right to subrogation against the Lessor, its agents,
employees and representatives which arise or might arise by reason of any
payment under such policy or by reason of any act or omission of the Lessor, its
agents, employees or representatives, and (iii) a provision that the insurer
will not cancel or materially change the coverage provided by such policy
without first giving the Lessor thirty (30) days' prior written notice.
7.5 LESSOR'S RIGHTS. If the Lessee fails to procure, maintain
and/or pay for at the times and for the durations specified in this Lease, the
insurance required hereunder, or fails to carry insurance required by any
governmental requirement, the Lessor may (but without obligation to do so), and
with twenty-four (24) hours advance notice to the Lessee, perform such
obligations on behalf of the Lessee, and the cost thereof, together with
interest thereon at the rate specified in Paragraph 12.2(a) hereof, shall
immediately become due and payable as additional rent to the Lessor.
7.6 LESSOR'S INSURANCE. The Lessor shall maintain during the term
of this Lease such insurance against physical damage to the Building and the
Tenant Improvements made by the Lessor or its contractors, comprehensive
liability insurance and other insurance as the Lessor may, from time to time,
determine. The Lessor shall reasonably determine the limits of coverage,
deductibles and specific perils insured against provided, however, that the
Lessor's casualty insurance shall be a so-called All-Risk policy, insuring the
full replacement value of the Building and such Tenant Improvements. The Lessor
may, but shall not be obliged to, take out and carry any other form or forms of
insurance as it or the mortgagees of the Lessor may reasonably determine
advisable. Notwithstanding any contributions by the Lessee to the cost of
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insurance premiums, with respect to the Building or any alterations of the
Premises as may be provided herein, the Lessee acknowledges that it has no right
to receive any proceeds from any such insurance policies carried by the Lessor.
7.7 INDEMNIFICATION. To the fullest extent permitted by law, the
Lessee shall defend, indemnify and hold harmless the Lessor from and against any
and all claims arising from the Lessee's use of the Premises or the conduct of
its business or from any activity, work or thing done, permitted or suffered by
the Lessee, its agents, contractors, employees or invitees in or about the
Premises or elsewhere, and shall further indemnify and hold harmless the Lessor
from and against any and all claims arising from any breach or default in the
performance of any obligation on the Lessee's part to be performed hereunder, or
arising from any act, neglect, fault or omission of the Lessee, or of its
agents, employees, or invitees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in or about such claim or any action or
proceeding brought thereon. In case any action or proceeding be brought against
the Lessor by reason of any such claim, the Lessee, upon notice from the Lessor,
shall defend the same at the Lessee's expense by counsel approved in writing by
the Lessor, which approval shall not be unreasonably withheld. Except for that
which is caused by the gross negligence or willful misconduct of Lessor, the
Lessee, as a material part of the consideration to the Lessor hereunder, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises from any cause whatsoever, and the Lessee hereby waives all of its
claims in respect thereof against the Lessor
7.8 EXEMPTION OF LESSOR FROM LIABILITY. Except in the case of gross
negligence or willful misconduct, the Lessor shall not be liable for injury to
the Lessee's business or any loss of income therefrom or for damage to the
property of the Lessee, the Lessee's employees, invitees, customers or any other
person in or about the Premises, nor shall the Lessor be liable for injury to
the person of the Lessee, the Lessee's employees, agents or contractors, whether
such damage or injury is caused by or results from fire, explosion, falling
plaster, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether such
damage or injury results form conditions arising upon the Premises or upon other
portions of the Building, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible. The Lessor shall not be liable for incorporeal hereditaments
including interference or obstruction of light, air or view. The Lessor shall
not be liable for any damages arising from any act or neglect of any other
tenant of the Building or the other portions of the Project except in the case
of the gross negligence or willful misconduct of the Lessor.
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8. DAMAGE OR DESTRUCTION
---------------------
8.1 PARTIAL DAMAGE. If the Premises, or so much of the Building as
to cause a material interference with the conduct of the Lessee's business in
the Premises as a whole, are damaged by any casualty, and the damage (exclusive
of any property or improvements installed by the Lessee in the Premises) can be
repaired within ninety (90) days without the payment of overtime, the Lessor
shall, at the Lessor's expense, repair such damage (exclusive of any property of
the Lessee or improvements installed by the Lessee in the Premises) as soon as
practicable and this Lease shall continue in full force and effect. If the
Premises, or so much of the Building as to cause a material interference with
the conduct of the Lessee's business in the Premises as a whole, are damaged by
any casualty, and the damage (exclusive of any property of the Lessee or
improvements installed by the Lessee in the Premises) cannot be repaired within
ninety (90) days without the payment of overtime or other premiums, the Lessor
may, at the Lessor's option, either (i) repair such damage as soon as
practicable at the Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessor within thirty (30)
days after the date of the occurrence of such damage of the Lessor's intention
to terminate this Lease, in which event this Lease shall terminate as of the
date of the occurrence of such damage.
8.2 DAMAGE NEAR END OF TERM. If the Premises, or so much of the
Building as to cause a material interference with the conduct of the Lessee's
business in the Premises as a whole, are damaged during the last six (6) months
of the term of this Lease, or any renewal thereof, the Lessor or the Lessee may,
at its option, terminate this Lease as of the date of occurrence of such damage
by giving written notice to the other party of the election to do so within
thirty (30) days after the date of occurrence of such damage; provided, however,
that if the term of this Lease has been extended for any reason whatsoever, the
right to terminate this Lease shall only apply during the last six (6) months of
the then current term of this Lease.
8.3 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(A) If the Lessor is obligated or elects to repair the Premises
as provided above, the rent payable for the period during which such repair
continues shall be abated, in proportion to the degree to which the Lessee's use
of the Premises is impaired. Except for such abatement, if any, the Lessee shall
have no claim against the Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
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(B) If the Lessor is obligated or elects to repair the Premises
as provided above, but does not commence such repair within one hundred twenty
(120) days after the date of the casualty or does not complete such repair
within one hundred eighty (180) days subject to any extension of up to another
sixty (60) days for delays beyond the reasonable control of the Lessor, the
Lessee may, at the Lessee's option, terminate this Lease by giving the Lessor
written notice of the Lessee's election to do so at any time prior to the
commencement of such repair or restoration or after such one hundred eighty
(180) day period, in which event this Lease shall terminate thirty (30) days'
thereafter.
8.4 INSURANCE PROCEEDS UPON TERMINATION. If this Lease is
terminated pursuant to any right given the Lessee or the Lessor to do so under
this Article 8, all insurance proceeds payable under Section 7.6 with respect to
the damage giving rise to such right of termination shall be paid to the Lessor
and any encumbrancers of the Premises, as their interests may appear.
8.5 RESTORATION. The Lessor's obligation to restore shall not
include the restoration or replacement of the Lessee's furnishings, machinery,
equipment, trade fixtures or other personal property or any improvements or
alterations made by the Lessee to the Premises, other than Tenant Improvements
constructed by the Lessor or its contractor.
9. PERSONAL PROPERTY TAXES
-----------------------
The Lessee shall pay prior to delinquency all Real Property Taxes and
other taxes assessed against, levied upon or attributable to its furnishings,
machinery, equipment, trade fixtures or other personal property contained in the
Premises or elsewhere and, if required, all improvements to the Premises in
excess of the Lessor's "building standard" improvements. When practicable, the
Lessee shall cause said furnishings, machinery, equipment, trade fixtures and
all other personal property to be assessed and billed separately from the real
property of the Lessor.
10. UTILITIES
---------
The Lessor, as an operating expense of the Building, shall furnish
heating, ventilation and air conditioning Monday through Friday from 6:00 a.m.
to 8:00 p.m. and on Saturday from 8:00 a.m. to 6:00 p.m. except for New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
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The Lessee shall pay for all water, gas, heat, light, power,
janitorial services and other utilities and services supplied to the Premises,
together with any taxes thereon. The Lessor shall install a separate meter or
submeter for the delivery of electricity to the Premises. If any other services
are not separately metered or charged to the Lessee, the Lessee shall pay a pro
rata proportion, as part of operating expenses, based on leasable area, of all
charges jointly metered or charged with other premises. The Lessor shall not be
liable in damages or otherwise unless due to the Lessor's gross negligence or
failure to comply with its obligations hereunder for any failure or interruption
of any utility services being furnished to the building and no such failure or
interruption shall entitle the Lessee to terminate this Lease. In no event
shall the Lessor be liable for any such failure or interruption caused by the
exercise of governmental authority, strikes, riots, acts of God, war, adverse
weather conditions, fire, flood or casualties or acts of third parties beyond
the Lessor's control. The operation and control of utilities, air conditioning
and any other energy system is subject to compliance with any government
authority governing the regulation and use of energy systems within the
commercial office or industrial building structure. The Lessee shall not
subject any of the mechanical, electrical, plumbing, sewer or other utility or
service systems or equipment to exercise or use which causes damage to said
systems or equipment. Any such damages to equipment caused by the Lessee
overloading such equipment shall be rectified by the Lessee, or may, at the
Lessor's option, be rectified by the Lessor, at the Lessee's sole cost and
expense.
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11. ASSIGNMENT AND SUBLETTING
-------------------------
11.1 The Lessee shall not voluntarily or by operation of law sublet,
assign, transfer, mortgage or otherwise encumber, or grant concessions, licenses
or franchises with respect to all or any part of the Lessee's interest in this
Lease or the Premises without the prior written consent of the Lessor, which
shall not be unreasonably withheld. If the Lessee desires at any time to assign
this Lease or to sublet the Premises or any portion thereof, it shall first
notify the Lessor of its desire to do so and shall submit in writing to the
Lessor (i) the name of the proposed sublessee or assignee; (ii) the nature of
the proposed sublessee or assignee; (iii) the nature of the proposed sublessee's
or assignee's business to be carried on in the Premises; (iv) the terms and
provisions of the proposed sublease or assignment; (v) such reasonable financial
information as the Lessor may request concerning the proposed sublessee or
assignee, including, but not limited to, a balance sheet as of a date within
ninety (90) days of the request for the Lessor's consent, statements of income
or profit and loss for the two (2) year period preceding the request for the
Lessor's consent, and, in the case of a company that is not publicly traded, a
written statement in reasonable details as to the business experience of the
proposed sublessee or assignee during the five (5) years preceding the request
for the Lessor's consent; and (vi) the name and address of sublessee's or
assignee's present or previous landlord. Any sublease, license, concession,
franchise or other permission to use the Premises shall be expressly subject and
subordinate to all applicable terms and conditions of this Lease. Any purported
or attempted assignment, transfer, mortgage, encumbrance, subletting, license,
concession, franchise or other permission to use the Premises contrary to the
provisions of this paragraph shall be void.
11.2 If the Lessee is a non-publicly traded corporation, any transfer
of its stock, or any dissolution, merger or consolidation which results in a
change in the control of the Lessee from the person or persons owning a majority
of its voting stock immediately prior thereto, or the sale or other transfer of
all or substantially all of the assets of the Lessee shall constitute an
assignment of the Lessee's interest in this Lease within the meaning of this
Article 11 and the provisions requiring consent contained herein. If any such
transfer affects the financial condition of the Lessee, the Lessor may require,
as a condition to giving such consent, that the new controlling person(s)
execute a guaranty of this Lease.
11.3 No subletting, assignment, license, concession, franchise or
other permission to use the Premises shall relieve the Lessee of its obligations
to pay the rent or to perform all of the other obligations to be performed by
the Lessee hereunder unless such release is expressly stated in writing and
consented to by the Lessor. The acceptance of rent by the Lessor from any other
person shall not be deemed to be a waiver by the Lessor of any provisions of
this Lease.
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11.4 Within ten (10) days after the Lessor's receipt of the
information specified in Paragraph 11.1 above, the Lessor may by written notice
to the Lessee approve or disapprove such assignment or subletting. If the
Lessor does not act within the ten (10) days, such failure to act is deemed a
disapproval of such request for assignment or subletting. The Lessor shall
advise the Lessee in writing of the basis for any disapproval within ten (10)
days after the approval/disapproval period described above.
11.5 Each assignee or transferee, other than the Lessor, shall assume
all obligations of the Lessee under this Lease to the extent transferred and
shall be and remain liable jointly and severally with the Lessee for the payment
of the rent, and for the due performance of all the terms, covenants, conditions
and agreements to be performed by the Lessee hereunder to the extent
transferred; provided, however, that a transferee other than an assignee shall
be liable to the Lessor for rent only in the amount set forth in the assignment
or transfer. No assignment shall be binding on the Lessor unless such assignee
or Lessee shall deliver to the Lessor a counterpart of such assignment and an
instrument in recordable form which contains a covenant of assumption by such
assignee satisfactory in substance and form to the Lessor, consistent with the
requirements of this Paragraph 11.5, but the failure or refusal of such assignee
to execute such instrument of assumption shall not release or discharge such
assignee from its liability as set forth above.
11.6 Consent by the Lessor to any subletting or assignment shall be
conditioned upon payment by the Lessee to Lessor of the "Transfer Consideration"
(as hereafter defined) received or to be received, directly or indirectly, by
the Lessee on account of such assignment or subletting as provided below:
(i) In the case of an assignment of the entire lease or
a sublease by the Lessee of the entire initial Premises to a third party, the
Lessee shall pay one-half of all Transfer Consideration;
(ii) In the case of an assignment of this Lease as to or
a sublease of any Additional Space that has been leased by the Lessee pursuant
to the right of first refusal contained in Paragraph 19 hereof but not occupied
by the Lessee, the Lessee shall pay the entire Transfer Consideration with
respect to such space.
(iii) In the case of an assignment or a sublease of only a
portion of the initial Premises, the Lessee may retain the entire Transfer
Consideration.
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Transfer Consideration shall be paid to the Lessor at the same time or
times as the same is due to the Lessee. Failure to pay the Lessor the Transfer
Consideration, or any portion or installment thereof, shall be deemed a default
under this Lease, entitling the Lessor to exercise all remedies available to it
under law including, but not limited to, those specified in Article 12 of this
Lease. "Transfer Consideration" shall mean a) in the case of a subletting, any
consideration paid or given, directly or indirectly, by the sublessee to the
Lessee pursuant to the sublease for the use of the Premises, or any portion
thereof, over and above the rent and any additional rent, however denominated,
in this Lease, payable by the Lessee to the Lessor for the use of the Premises
(or portion thereof), prorating as appropriate the amount payable by the Lessee
to the Lessor under this Lease, if less than all of the Premises is sublet, and
(b) in the case of an assignment or a sublease, any consideration paid or given,
directly or indirectly, by the sublessee or assignee to the Lessee in exchange
for entering into the sublease or assignment, but shall not include
reimbursement for any security deposit, reimbursement of any improvements,
fixtures or furnishings installed in the Premises by the Lessee or any payment
for personal property of the Lessee not in excess of the Lessee's book value
thereof. As used herein, consideration shall include consideration in any form,
including, but not limited to, money, property, assumption of liabilities other
than those arising under this Lease, discounts, services, credits or any other
item or thing of value. Irrespective of the form of such consideration, the
Lessor shall be entitled to be paid in cash in an amount equivalent to the
aggregate of the cash portion of the Transfer Consideration and the value of any
non-cash portion of the Transfer Consideration. If any Transfer Consideration
is to be paid or given in installments, the Lessee shall pay each such
installment at the time the same is to be paid or given.
11.7 The Lessee shall reimburse the Lessor for the Lessor's
reasonable costs and attorneys' fees incurred in conjunction with the processing
and documentation of any assignment, subletting, transfer, change of ownership
or hypothecation of this Lease or the Lessee's interest in the Premises.
11.8 TRANSFER TO AFFILIATE. Notwithstanding any of the provisions in
this Lease to the contrary, the original Lessee shall have the right, without
the Lessor's consent, to assign this Lease to a corporation or other entity with
which the Lessee may merge or consolidate, to any parent or subsidiary of the
Lessee, or a subsidiary of the Lessee's parent, provided that within fifteen
(15) days of such assignment, such assignee delivers to the Lessor a written
agreement pursuant to which such assignee agrees to assume all of the
obligations of the Lessee under this Lease and be bound by all of the terms
hereof. In the event of any such assignment to a parent, affiliate or successor
by merger or consolidation, no Transfer Consideration or other consideration
paid to the Lessee by the assignee shall be payable to the Lessor, and none of
the other provisions of this Section 11 shall be applicable to such transfer.
Notwithstanding the
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preceding, in no event shall any such assignment relieve the original Lessee of
any liability whatsoever under this Lease.
12. DEFAULTS; REMEDIES
------------------
12.1 DEFAULT BY LESSEE. The occurrence of any one or more of the
following events shall constitute a default of this Lease by the Lessee:
(A) The vacating or abandonment of the Premises by the Lessee
combined with the failure to pay rent;
(B) The failure of the Lessee to make any payment of rent or
any other payment required to be made by the Lessee hereunder, as and when due,
where such failure shall continue for a period of ten (10) days after written
notice thereof from the Lessor to the Lessee; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161. In the event that the Lessor
has given a ten (10) day notice hereunder twice in any twelve (12) month period,
any subsequent notice hereunder during such period shall allow a cure within
three (3) days of such notice, which three (3) day notice shall also be in lieu
of any notice required under Section 1161;
(C) The failure by the Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease (or the covenants, conditions
and restrictions governing the Project) to be observed or performed by the
Lessee, other than described in Paragraph 12.1(b) hereof, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from the Lessor to the Lessee. Any such notice shall not be in lieu of any
notice required under California Code of Civil Procedure Section 1161. If the
nature of the Lessee's default is such that more than thirty (30) days are
reasonably required for its cure, then the Lessee shall not be deemed to be in
default if the Lessee commences such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion; or
(D) The making by the Lessee of any general assignment or
general arrangement for the benefit of creditors; the filing by or against the
Lessee of a petition to have the Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against the Lessee, the same is dismissed within
sixty (60) days); the appointment of a trustee or receiver to take possession of
substantially all of the Lessee's assets located at the Premises, or of the
Lessee's interest in this
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Lease, where possession is not restored to the Lessee within thirty (30) days;
or the attachment, execution or other judicial seizure of substantially all of
the Lessee's assets located at the Premises or of the Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days.
12.2 REMEDIES FOR DEFAULT BY LESSEE. In the event of any such
default, the Lessor may at any time thereafter, upon notice and demand and
without limiting the Lessor in the exercise of any other right or remedy which
the Lessor may have by reason of such default or breach:
(A) Terminate the Lessee's right to possession of the Premises
by any lawful means, in which case this Lease shall terminate and the Lessee
shall immediately surrender possession of the Premises to the Lessor. In such
event, the Lessor shall be entitled to recover from the Lessee:
(1) The worth at the time of award of the unpaid rent
which has been earned at the time of termination;
(2) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided;
(3) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that the Lessee proves could be reasonably avoided;
and
(4) Any other amount necessary to compensate the Lessor
for all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to: the cost of
recovering possession of the Premises, expenses of releasing including necessary
renovation and alteration of the Premises, reasonable attorneys' fees and any
other reasonable cost. The "worth at the time of award" of the amounts referred
to above shall be computed by allowing interest at ten percent (10%) per annum.
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(B) Pursue any other remedy now or hereafter available to the
Lessor under the laws or judicial decisions of the Sate of California,
including, but not limited to, the remedy provided in California Civil Code
Section 1951.4 to continue this Lease in effect.
(C) The Lessor, in addition to the rights hereinbefore given in
the case of the Lessee's breach or default, may pursue any other remedy
available to the Lessor at law or in equity.
(E) In addition to the rights hereinbefore given in the case of
the Lessee's breach or default, Lessor may offset any delinquent rent or other
payment due hereunder against payments due to the Lessee under any promissory
note, option agreement or other instrument or agreement between the Lessor and
the Lessee. The Lessor shall deliver written notice to the Lessee of the
Lessor's intent to exercise such right identifying the delinquent payment and
amount that the Lessor intends to offset.
12.3 DEFAULT BY LESSOR. The Lessor shall not be in default of any of
the obligations of the Lessor under the Lease, unless the Lessor fails to
perform such obligations within a reasonable time, but in no event less than
thirty (30) days after written notice by the Lessee to the Lessor specifying
wherein the Lessor has failed to perform such obligations; provided, however,
that if the nature of the Lessor's default is such that more than thirty (30)
days are required for its cure, the Lessor shall not be in default if the Lessor
commences such cure within such thirty (30) day period and thereafter diligently
prosecutes the same to completion. In the event of any such default by the
Lessor, the Lessee may pursue any remedy now or hereafter available to the
Lessee under the laws of judicial decisions of the State of California, except
that the Lessee shall not have the right to terminate this Lease except as
expressly provided herein nor to set off against any payments due under this
Lease. The Lessee waives any right to deduct the expenses of repairs done by
the Lessor on the Lessor's behalf from the rent.
12.4 LATE CHARGES. The Lessee acknowledges that the late payment by
the Lessee to the Lessor of rent and other sums due hereunder will cause the
Lessor to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges and late charges which may be
imposed on the Lessor by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from the
Lessee shall not be received by the Lessor, or the Lessor's designee, within ten
(10) days after the same is due, the Lessee shall pay to the Lessor a late
charge equal to five percent (5%) of such overdue amount, monthly, until such
overdue amount is paid. The Lessee acknowledges that such late charge
represents a fair and reasonable estimate of the cost that the Lessor will incur
by reason of a late payment by the Lessee. Acceptance of such late charge by
the Lessor
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shall in no event constitute a waiver of the Lessee's default with respect to
such overdue amounts nor prevent the Lessor from exercising any of the other
rights and remedies granted hereunder.
13. CONDEMNATION OR RESTRICTION ON USE
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13.1 EMINENT DOMAIN. If the whole of the Premises or the Common
Area, or so much thereof as to cause a material interference with the conduct of
the Lessee's business in the Premises as a whole shall be taken under power of
eminent domain, this Lease shall automatically terminate as of the date of such
condemnation, or as of the date possession is taken by the condemning authority,
whichever is earlier. No award for any partial or entire taking shall be
apportioned, and the Lessee hereby assigns to the Lessor any award which may be
made in such taking or condemnation, together with any and all rights of the
Lessee now or hereafter arising in or to the same or any part thereof; provided,
however, that nothing contained herein shall be deemed to give the Lessor any
interest in or to require the Lessee to assign to the Lessor any award made to
the Lessee for its relocation expenses, any bonus value of the leasehold estate,
the taking of personal property and fixtures belonging to the Lessee, the
interruption of or damage to the Lessee's business and/or for the Lessee's
unamortized cost of leasehold improvements. The unamortized portion of the
Lessee's expenditures for improving the Premises shall be determined by
multiplying such expenditures by a fraction, the numerator of which shall be the
number of years of the term of this Lease which shall not have expired at the
time of such appropriation or taking and the denominator of which shall be the
number of years of the term of this Lease which shall not have expired at the
time of improving the Premises. The Lessee's right to receive compensation or
damages for its fixtures and personal property shall not be affected in any
manner thereby.
13.2 ABATEMENT OF RENT. In the event of a partial taking which does
not result in a termination of this Lease, rent shall be abated in proportion to
that part of the Premises so made unusable by the Lessee.
13.3 TEMPORARY TAKING. No temporary taking of the Premises and/or of
the Lessee's rights therein or under this Lease shall terminate this Lease; and
any award made to the Lessee by reason of any such temporary taking shall belong
entirely to the Lessee and the Lessor shall not be entitled to share therein.
13.4 VOLUNTARY SALE AS TAKING. A voluntary sale by the Lessor to any
public body or agency having the power of eminent domain, either under threat of
condemnation while condemnation proceedings are pending, shall be deemed to be a
taking under the power of eminent domain for the purpose of this Article 13.
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14. BROKERS
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The Lessor acknowledges its obligation to pay a commission to the
broker(s) specified in Item 9 of the Basic Lease Provisions, pursuant to a
separate agreement between Lessor and Lessee. Except for the broker specified
in Item 9, the Lessee represents and warrants that it has neither incurred nor
is aware of any other broker's, finder's, or similar fee payable as a result of
a claim of any person representing the Lessee in connection with the origin,
negotiation, execution or performance of this Lease and agrees to indemnify and
hold harmless the Lessor from any loss, liability, damage, cost or expense
incurred by reason of a breach of this representation.
15. LESSOR'S LIABILITY
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15.1 The term "Lessor" as used herein shall mean only the owner or
owners at the time in question of the fee title or a lessee's interest in a
ground lease of the Building. In the event of any transfer of such title or
interest, the Lessor herein named (and in case of any subsequent transfers, the
then grantor) shall be relieved from, and after the date of such transfers of
all liability for the Lessor's obligations thereafter to be performed; provided,
however, that any funds in the hands of the Lessor or the then grantor at the
time of such transfer in which the Lessee has an interest shall be delivered to
the grantee. The obligations contained in this Lease to be performed by the
Lessor shall, subject as aforesaid, be binding on the Lessor's successors and
assigns only during their respective periods of ownership.
15.2 The initial Lessor hereunder is a joint venture, corporation,
limited liability company, partnership or sole partnership ("Owner"). In
consideration of the benefits accruing hereunder, the Lessee, its successors and
assigns, agree that, in the event of any actual or alleged failure, breach or
default hereunder by the initial Lessor:
(A) The sole and exclusive remedy shall be against the Project
and the Owner's interest in the Project. There shall be no recourse against the
Owner personally or any other assets of the Owner;
(B) No joint venturer, shareholder, member, partner or sole
proprietor of the Owner ("Member") shall be sued or named a party in any suit or
action (except as may be necessary to secure jurisdiction of the Owner);
(C) No service of process shall be made against any Member
(except as may be necessary to secure jurisdiction of the Owner);
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(D) No Member shall be required to answer or otherwise plead to
any service of process unless such Member is the Owner;
(E) No judgment will be taken against any Member unless such
Member is the Owner;
(F) Any judgment taken against any Member may be vacated and
set aside at any time nunc pro tunc unless such Member is the Owner;
(G) No writ of execution will ever be levied against the assets
of any Member (other than the Project); and
(H) These covenants and agreements are enforceable by the Owner
and also by any Member thereof.
16. PARKING
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During the term of this Lease, the Lessee shall have ten (10) reserved
spaces and the right in common with other tenants of the Building (if any) and
any adjacent buildings, to use the parking area available to tenants of the
Building. The Lessee's use of such parking facilities or that of its invitees
shall be limited to a maximum of the number of parking spaces shown in item 10
of the Basic Lease Provisions (but the Lessor shall have no obligation to
monitor the use of such parking facility), and shall be subject to such rules
and regulations as may be established, from time to time, by the Lessor for the
effective use of such parking facilities. Such rules and regulations may
include, but shall not be limited to, designation of specific areas for use by
invitees of the Lessee and the Lessor; hours during which parking shall be
available for use; parking attendants; a parking validation or other control
system to prevent parking abuse; and such other matters affecting the parking
operation to the end that said facilities shall be utilized to maximum
efficiency and in the best interest of the Lessor, the Lessee and their
respective invitees. Unless prohibited by law, ordinance or project conditions,
the Lessee may designate the location of its ten (10) reserved parking spaces,
each of which may be marked as being reserved for the Lessee; provided, however,
the Lessor shall have no obligation to monitor the use of such reserved spaces.
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The Lessor may temporarily close any part of the Common Area for such
periods of time as may be necessary to prevent the public from obtaining
prescriptive rights or to make repairs, alterations or in connection with the
construction of improvements on the property. During any such construction the
Lessor shall provide alternative parking. The Lessor shall not have any express
or implied obligation to enforce or police the parking lot usage. The Lessee's
right to use any area for parking purposes shall be subject to restrictions or
other limitations resulting from any laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be in
force, and no such event shall in any way affect this Lease, abate rent, relieve
the Lessee of any liabilities or obligations under this Lease, or give rise to
any claim whatsoever against the Lessor; specifically, the Lessee's right to use
any area for parking purposes shall be subject to any preferential parking
program for participants in any ridesharing program established by the Lessor.
If the Lessor reasonably determines that the Lessee is regularly using in excess
of the number of parking spaces specified in item 10 of the Basic Lease
Provisions, the Lessor may, in addition to any other remedy, impose a reasonable
charge for such excess usage, payable by the Lessee upon the same terms as the
rent is payable hereunder.
17. GENERAL PROVISIONS
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17.1 ESTOPPEL CERTIFICATE
(A) The Lessee and the Lessor shall at any time, and from time
to time, upon not less than ten (10) days' prior written notice from the other
party, execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are no, to such party's knowledge, uncured defaults on
the part of the requesting party hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises or any assignee or
sublessee of the Lease.
(B) The Lessee's or the Lessor's failure to deliver such
statement within such time shall be conclusive upon such party that (i) this
Lease is in full force and effect without modification except as may be
represented by the requesting party, (ii) there are no uncured defaults in the
requesting party's performance, and (iii) not more than one (1) month's rent has
been paid in advance.
(C) If the Lessor desires to finance or refinance the Premises,
or any part thereof, the Lessee shall deliver to any lender designated by the
Lessor such financial
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statements of the Lessee as may be reasonably required by such lender. If the
Lessee is a publicly traded corporation, the financial statements may be the
most recent publicly available statements. All such financial statements shall
be received by the Lessor in confidence and shall be used only for the purposes
herein set forth.
17.2 SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
17.3 TIME OF ESSENCE. Time is of the essence in the performance of
all terms and conditions of this Lease in which time is an element.
17.4 CAPTIONS. Article and paragraph captions have been inserted
solely as a matter of convenience and such captions in no way define or limit
the scope or intent of any provision of this Lease.
17.5 NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be served personally or by regular or overnight
mail, addressed to the Lessor and the Lessee respectively at the addresses set
forth before their signatures in item 11 of the Basic Lease Provisions, or to
such other or additional persons or at such other addresses as may, from time to
time, be designated in writing by the Lessor or the Lessee by notice pursuant
hereto.
17.6 WAIVERS. No waiver of any provision hereof shall be deemed a
waiver of any other provision hereof. Consent to or approval of any act by one
of the parties hereto shall not be deemed to render unnecessary the obtaining of
such party's consent to or approval of any subsequent act. The acceptance of
rent hereunder by the Lessor shall not be a waiver of any preceding breach by
the Lessee of any provision hereof, other than the failure of the Lessee to pay
the particular rent so accepted, regardless of the Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
17.7 HOLDING OVER. If the Lessee holds over after the expiration or
earlier termination of the term hereof without the express written consent of
the Lessor, the Lessee shall become a tenant at sufferance only at one hundred
twenty-five percent (125%) of the monthly rent for the Premises then in effect
for the space, in effect upon the date of such expiration or earlier termination
(subject to adjustment as provided in Article 3 hereof and prorated on a daily
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basis), and otherwise upon the terms, covenants and conditions herein specified,
so far as applicable. Acceptance by the Lessor of rent after such expiration or
earlier termination shall not constitute a consent to a holdover hereunder or
result in a renewal. The foregoing provisions of this paragraph are in addition
to and do not affect the Lessor's right of re-entry or any other rights of the
Lessor hereunder or as otherwise provided by law.
17.8 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
17.9 INUREMENT. Subject to any provisions hereof restricting
assignment or subletting by the Lessee and subject to the provisions of Article
15 hereof, the terms and conditions contained in this Lease shall bind the
parties, their personal representatives, successors and assigns.
17.10 CHOICE OF LAW. This Lease shall be governed by the laws of
the State of California.
17.11 SUBORDINATION. This Lease shall, at the Lessor's option, be
either superior or subordinate to mortgages or deeds of trust on the Premises,
whether now existing or hereinafter created. The Lessee shall, upon written
demand by the Lessor, execute such instruments as may be required, from time to
time, to subordinate the rights and interest of the Lessee under this Lease to
the lien of any mortgage or deed of trust on the Building. Notwithstanding any
such subordination, so long as the Lessee is not in default hereunder, this
Lease shall not be terminated or the Lessee's quiet enjoyment of the Premises
disturbed in the event such mortgage or deed of trust is foreclosed. In the
event of such foreclosure, the Lessee shall thereupon become a Lessee of, and
attorn to, the successor in interest to the Lessor on the same terms and
conditions as are contained in this Lease. The Lessee may condition any
subordination upon the Lessor's and any lender's agreement to execute a
Nondisturbance, Subordination and Attornment Agreement reasonably approved by
the Lessee. The Lessee agrees that a Nondisturbance, Subordination and
Attornment Agreement that provides that the lender or transferee of the Building
and/or the Project is (i) not responsible for any defaults of the Lessor prior
to the date of transfer and (ii) not liable for the security deposit unless it
is actually received from Lessor are reasonable provisions.
The Lessee agrees to execute subordination agreements from time
to time at the request of the Lessor subordinating this Lease and any Memorandum
of this Lease, to easements, rights of way, development agreements, covenants,
conditions and restrictions, or
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other instruments and documents necessary or appropriate to the development of
the Project and the Building as determined by the Lessor; provided, however,
that no term or provision of any such instrument or document shall materially
diminish or change the rights of the Lessee hereunder.
17.12 ATTORNEYS' FEES. If any action at law or equity, including an
action for declaratory relief, is brought to enforce the provisions of this
Lease, the prevailing party shall be entitled to recover actual attorneys' fees
incurred in bringing such action and/or enforcing any judgment granted therein,
all of which shall be paid whether or not such action is prosecuted to judgment.
The attorneys' fees to be awarded the prevailing party may be determined by the
court in the same action or in a separate action brought for that purpose. Any
judgment or order entered in such action shall contain a specific provision
providing for the recovery of actual attorneys' fees and costs incurred in
enforcing such judgment. The award of attorneys' fees shall not be computed in
accordance with any court schedule, but shall be made so as to fully reimburse
the prevailing party for all attorneys' fees, paralegal fees, costs and expenses
actually incurred in good faith, regardless of the size of the judgment, it
being the intention of the parties to fully compensate the prevailing party for
all attorneys' fees, paralegal fees, costs and expenses paid or incurred in good
faith. For purposes of this section, attorneys' fees shall include, without
limitation, attorneys' fees, paralegal fees, costs and expenses incurred in
relation to any of the following: post-judgment motions; contempt proceedings,
garnishment, levy and debtor or third party examinations; discovery; and
bankruptcy litigation.
17.13 LESSOR'S ACCESS. Subject to compliance with the Lessee's
reasonable security procedures, the Lessor and the Lessor's agents shall have
the right to enter the Premises at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers, lessees, or
lenders, and making such alterations, repairs, improvements or additions to the
Premises or to the Building as the Lessor may deem necessary or desirable. The
Lessor may at any time place on or about the Building any ordinary "For Sale"
signs and the Lessor may, at any time during the last one hundred eighty (180)
days of the term hereof (or during any period in which the Lessee is in default
under this Lease), place on or about the Building any ordinary "For Sale", "For
Lease" or similar signs, all without rebate of rent or liability to the Lessee.
17.14 CORPORATE AUTHORITY. If the Lessee is a corporation, the
Lessee shall, at the Lessor's request, require that each individual executing
this Lease on behalf of said corporation represent and warrant that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the Bylaws of said corporation, and that this
Lease is
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binding upon said corporation in accordance with its terms. The Lessee shall
also, at the Lessor's request, within thirty (30) days after execution of this
Lease, deliver to the Lessor a certified copy of a resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.
17.15 SURRENDER OR CANCELLATION. The voluntary or other surrender of
this Lease by the Lessee, or a mutual cancellation thereof, shall not work a
merger, and shall terminate all or any existing subleases, unless the Lessor
elects to treat such surrender or cancellation as an assignment to the Lessor of
any or all of such subleases.
17.16 ENTIRE AGREEMENT. This Lease, the exhibits and other documents
referred to herein hereto which by this reference are incorporated herein as
though set forth in full herein, covers in full each and every agreement of
every kind or nature whatsoever between the parties hereto concerning the
Premises and the Building, and all preliminary negotiations and agreements of
whatsoever kind or nature are merged herein. The Lessor has made no
representations or promises whatsoever with respect to the Premises or the
Building, or the design configuration of the Project, except those contained
herein or therein, and no other person, form or corporation has at any time had
any authority from the Lessor to make any representations or promises on behalf
of the Lessor. If any such representations or promises have been made by
others, the Lessee hereby waives all right to rely thereon. No verbal agreement
or implied covenant shall be held to vary the provisions hereof, any statute,
law or custom to the contrary notwithstanding.
Except as otherwise provided herein, nothing expressed or implied
herein is intended or shall be construed to confer upon or grant any person any
rights or remedies under or by reason of any term or condition contained in this
Lease.
17.17 SIGNS. The parties agree that the name of the Building shall
be the "GRCI Building". As provided in the Development Agreement, the Lessee
shall submit drawings to the Lessor for the installation of one (1) sign on the
exterior of the Building to be placed in a location agreed to by the parties.
The drawings shall designate the requested size, materials, color and style of
the signage. The Lessor shall have the right to approve or disapprove the
proposed signage. The Lessee shall maintain the signs in good condition and
repair at its expense.
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The Lessee shall not be permitted to change the name of the
Building without the prior written consent of the Lessor, which may be given or
withheld by the Lessor in the exercise of its reasonable discretion.
The Lessor may cause a multi-tenant monument sign to be
installed at the Project as so permitted by applicable governmental authorities.
In the event that the Lessor elects to install such a monument sign, the Lessee
shall receive the most prominent billing on the sign. The cost of any monument
sign shall be borne by the Lessor.
No other sign, placard, picture, advertisement, name or notice
shall be inscribed, displayed, printed or affixed to or near any part of the
outside or inside of the Building without the written consent of the Lessor
first had and obtained and without full compliance with all governmental
requirements and with the Project Signage Plan and any other required consents.
The Lessor shall have the right to remove any unapproved sign, placard, picture,
advertisement, name or notice without notice to and at the expense of the
Lessee. All approved signs shall be installed at the Lessee's sole cost and
expense. The Lessee further agrees to maintain any such approved signs, as may
be approved by the Lessor, in good condition and repair at all times. The Lessee
shall not place any sign on a vehicle or movable or non-movable object in or on
the street adjacent to the Project.
17.18 BUILDING SECURITY. The Building shall be constructed utilizing
a computerized card key access system for security purposes. The common
security/access system shall be installed at the expense of the Lessor. Subject
to the reasonable approval of the Lessor, the Lessee may install additional
internal security systems on the Premises at the sole cost and expense of the
Lessee.
17.19 INTEREST ON PAST DUE OBLIGATIONS. Any amount due from the
Lessee to the Lessor hereunder which is not paid when due shall bear interest at
five (5) percentage points above the discount rate of the Federal Reserve Bank
of San Francisco at the time of the award or the maximum allowable under the
law, whichever is greater, from the date due until paid, but the payment of such
interest shall not excuse or cure any default by the Lessee.
17.20 GENDER; NUMBER. Whenever the context of this Lease requires,
the masculine gender includes the feminine or neuter, and the singular number
includes the plural.
17.21 RECORDING OF LEASE. The Lessee and the Lessor shall execute
and record a Memorandum of Lease upon the acquisition of title to the Project by
the Lessor. At the expiration or sooner termination of this Lease, the Lessee
shall execute, acknowledge and deliver
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to the Lessor, within ten (10) days after written demand from the Lessor, any
quitclaim deed or other document reasonably required by any reputable title
company to remove the cloud of this Lease from the title of the real property
subject to the Lease.
17.22 WAIVER OF SUBROGATION. The Lessor and the Lessee each hereby
waive any and all rights of recovery against the other, or against the officers,
employees and agents and representatives of the other, for loss of or any damage
to such waiving party or its property, or the property of others under its
control, to the extent that such loss or damage is insured against under any
valid and collectible insurance policy in force at the time of such loss or
damages. The Lessee shall, upon obtaining the policies of insurance required
hereunder, give notice to the insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.
17.23 CONFIDENTIALITY OF LEASE. The Lessee acknowledges and agrees
that the terms of this Lease are confidential and constitute proprietary
information of the Lessor. Disclosure of the terms hereof could adversely
affect the ability of the Lessor to negotiate other leases with respect to the
Building and impair the Lessor's relationship with other tenants of the
Building. The Lessee agrees that it, its partners, officers, directors,
employees and attorneys, shall not disclose the terms and conditions of this
Lease to any other person without the prior written consent of the Lessor. It
is understood and agreed that damages would be an inadequate remedy for the
breach of this provision by the Lessee, and the Lessor shall have the right to
specific performance of this provision and to injunctive relief to prevent its
breach or continued breach.
17.24 QUIET ENJOYMENT. Provided the Lessee has performed all of the
terms, covenants, agreements and conditions of this Lease, including the payment
for rent and all other sums due hereunder, the Lessee shall peaceably and
quietly hold and enjoy the Premises for the term hereof, but subject to the
provisions and conditions of this Lease against the Lessor and all persons
claiming by, through or under the Lessor. The Lessee's right to use the
Premises and the Common Area as herein provided shall be subject to restrictions
or other limitations or prohibitions resulting from any laws, statutes,
ordinances and governmental rules, regulations or requirements now in force or
which may hereafter be in force and no such event shall in any way affect this
Lease, abate rent, relieve the Lessee of any liabilities or obligations under
this Lease or give rise to any claim whatsoever against the Lessor.
17.25 WINDOW COVERAGE. The Lessor shall select a standard mini-blind
type and color fall windows to be covered by the Lessee. No window covering,
including, but not
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limited to, coatings or draperies, shall be used by the Lessor without the
Lessor's written approval.
17.26 MATERIALS STORAGE RESTRICTIONS. The Lessee agrees to conduct
its business so as not to violate or exceed the design standards of the fire
protection system or any insurance policies maintained by the Lessor pursuant to
Article 7.
17.27 NO AGENCY. Neither party is the agent or partner of the other,
and the legal relationship between the parties hereto shall be governed solely
by the terms of this Lease and the other instruments and documents referred to
herein when duly executed by both parties with respect to the transactions
contemplated hereby.
17.28 FORCE MAJEURE. Notwithstanding any of the items set forth
above, the Lessor shall bear no liability of whatever kind to the Lessee if,
despite the Lessor's exercise of due diligence, the Lessor's carrying out of its
obligations, as defined herein, prevented or delayed by legal action, nor by the
exercise of governmental authority, whether Federal, State of County, or other
or by force majeure, strikes, riots, acts of God, war, adverse weather
conditions, fire, unavoidable casualties, or acts of third parties beyond the
Lessor's control.
17.29 ACCORD AND SATISFACTION. No payment by the Lessee or receipt
by the Lessor of a lesser amount than the rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Lessor may accept
such check or payment without prejudice to the Lessor's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.
17.30 FINANCIAL STATEMENTS. The Lessee shall deliver to the Lessor,
prior to the execution of this Lease, its financial statement, and the annual
financial statements of the Lessee within ninety (90) days after the end of the
Lessee's fiscal year, which shall be certified by the Lessee as true and
correct. If the Lessee is a publicly traded corporation, the financial
statements may be the most recent publicly available statements. The Lessee
shall also provide financial statements of any guarantor of this Lease, which
shall be certified as true and correct by such guarantor. Such financial
statements shall be based upon generally accepted accounting principles applied
on a consistent basis. The financial statements shall clearly show sufficient
information to accurately depict the financial condition of the Lessee as of the
date thereof. If the Lessee is a partnership or joint venture, such financial
statements shall, upon the Lessor's
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request, be accompanied by similar financial statements of each general partner
or joint venturer of the Lessee. Such similar statements shall be certified to
be true and correct by the subject thereof. Within five (5) days following
written request by the Lessor delivered after any default by the Lessee in the
payment of any sums owing under this Lease, whether or not any time period
allowed for the cure of such default has expired, the Lessee shall provide the
Lessor with copies of the Lessee's financial statement for the end of the most
recent quarter of the Lessee's fiscal year, and the Lessee's financial statement
(including year to date information) for the end of the month preceding such
default. In each case, such financial statement shall meet all of the preceding
requirements for annual financial statements. The Lessee's failure to deliver
the financial statements contemplated hereby within the time specified shall
constitute a material default by the Lessee under this Lease.
17.31 SUPERSEDES PROPOSAL TO LEASE. This Lease supersedes any
proposals regarding the leasing of the Premises, whether written or oral, and
any such proposals will be terminated, and of no force or effect, effective upon
the execution of this Lease.
17.32 CONSTRUCTION. The provisions of this Lease should be liberally
construed to effectuate its purposes. The language of all parts of this Lease
shall be construed simply according to its plain meaning and shall not be
construed for or against either party, as each party has participated in the
drafting of this Lease and had the opportunity to have their counsel review it.
Whenever the context and construction so requires, all words used in the
singular shall be deemed to be used in the plural, all masculine shall include
the feminine and neuter, and vice versa.
17.33 CONSENT. Except as otherwise provided, in all cases where the
consent or approval shall be requested of the Lessor or the Lessee pursuant to
the Lease, the giving of such consent shall not be unreasonably withheld,
conditioned or delayed by the party from whom such consent or approval is
required.
Whenever the Lease grants the Lessor or the Lessee the right to
take action, exercise discretion, establish rules and regulations or make
allocations or other determinations, the Lessor or the Lessee shall act
reasonably and in good faith and take no action which might result in the
frustration of the reasonable expectations of a sophisticated landlord and/or a
sophisticated tenant concerning the benefits to be enjoyed under the Lease. In
all cases where any party is required to express its denial of consent, such
denial shall be in writing and state all the reasons for such denial.
Furthermore, where consent is required, consent will be deemed to have been
granted unless a written denial of consent is received by the requesting party
within ten (10) business days of when the request for consent has been made.
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17.34 ARBITRATION. In addition to all of the legal rights and
remedies that are available to the Lessee at law or in equity, in the event that
any dispute or disagreement between the Lessor and the Lessee arises under the
Lease or any related document, the matter may, at the Lessee's election, be
heard by judicial reference conducted in accordance with the California Code of
Civil Procedure and California Evidence Code, or by arbitration in accordance
with the provisions and rules of the American Arbitration Association conducted
with all applicable rights of discovery under the California Evidence Code and
the rules of the California Evidence Code. Either of the above procedures shall
be binding and non-appealable.
18. CONSTRUCTION OF TENANT IMPROVEMENTS.
The Lessor agrees to construct the Tenant Improvements for the
Premises described in the Development Agreement between the parties. The
timing, manner and means of construction of the Tenant Improvements, and the
amount and use of the allowance provided by the Lessor for the construction of
the Tenant Improvements are described in the Development Agreement.
19. RIGHT OF FIRST REFUSAL FOR ADDITIONAL SPACE.
19.1 UPON TERM COMMENCEMENT DATE. Upon the Term Commencement Date,
the Lessor shall give written notice to the Lessee describing all space in the
Building then available for rent. The Lessee shall have fifteen (15) days from
receipt of such notice to give written notice to the Lessor of the Lessee's
desire to lease all or a portion of such additional space, which notice shall
describe the portion of the additional space desired to be leased by the Lessee,
and the proposed commencement date for such lease (which shall be not later than
60 days from the Term Commencement Date), and the length of the term therefor.
Any lease for additional space shall be on all of the terms and provisions
contained in this Lease, except for the description of the Premises,
commencement date, and term which shall be agreed upon by the parties.
19.2 DURING TERM OF LEASE. If, during the term of this Lease, space
leased to another tenant within the Building shall become available (excluding
space being offered for sublease by another tenant), the Lessor shall use its
best efforts to provide at least six (6) months' advance written notice to the
Lessee of the anticipated availability of such space. Provided the Lessee then
occupies the entire Premises, including any additional space taken pursuant to
Paragraph 19.1, the Lessee shall have the right, for a period of thirty (30)
days after its receipt of such notice, to give written notice to the Lessor of
its desire to lease such space. The notice shall contain the same information
as described in Paragraph 19.1 above. If the Lessee does not
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give timely notice of its desire to lease additional space, the Lessor shall
have no further obligation to the Lessee with respect to the lease of such
additional space.
19.3 TENANT IMPROVEMENT ALLOWANCE FOR ADDITIONAL SPACE. In the event
that the Lessee exercises its right of first refusal for additional space under
Paragraphs 19.1 or 19.2 hereunder, the Lessee shall receive an allowance for
tenant improvements (the "Tenant Improvement Allowance") as provided herein. In
the event that the right of first refusal is exercised with respect to space in
the Building which has not been previously built out with tenant improvements,
the Tenant Improvement Allowance shall be Thirty Dollars ($30.00) per useable
square foot. Any unused portion of the Tenant Improvement Allowance for such
unimproved space shall be applied to reduce the rent for such additional space
in the manner provided in Paragraph 3.1 hereof. In the event that the right of
first refusal is exercised with respect to space that has been previously
improved with basic tenant improvements, the Tenant Improvement Allowance shall
be Ten Dollars ($10.00) per useable square foot. Any unused portion of the Ten
Dollar ($10.00) per useable square foot allowance may not be used to reduce the
rent. Tenant improvements shall include all improvements serving or located
within the additional space, including without limitation, interior partitions
and demising walls, flooring and carpeting, interior doors and glass, cabinets,
built-in fixtures and furnishings, electrical or other utilities, VAV-HVAC
mixing boxes, distribution ducting, vents and outlets, surface mounted
electrical and plumbing fixtures and outlets, acoustical tile and drop ceilings.
The Tenant Improvement Allowance for any space not previously built out with
tenant improvements shall also be used to pay for a pro-rata share of the common
VAV-HVAC system and ducting for the Building.
20. FIRST RIGHT TO PURCHASE
Provided that the Lessee then occupies not less than fifty percent
(50%) of the total rentable area of the Building, in the event that the Lessor
desires to sell the Building, the Project and the other improvements on the
property of which the Building is a part (the "Property"), the Lessor shall give
written notice to the Lessee of its intention to offer the Building and the
Project specifying the price and terms to be offered by the Lessor. The Lessee
shall have thirty (30) days from receipt of such notice to negotiate and execute
a purchase agreement to purchase the Property on the offered terms or on other
terms acceptable to the Lessor, which purchase shall close within one hundred
eighty (180) days from the date of the Lessor's notice to the Lessee.
In the event that a purchase agreement is not executed within such
thirty (30) day period, the Lessor may market the Property for sale to any third
party; provided, however, that the Lessor shall not be entitled to sell the
Property to any third party for a price more than ten percent (10%) less than
the price offered to the Lessee without again offering to the Lessee the
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right to purchase the Property in the manner described above, but at the reduced
price that the Lessor desires to accept.
21. FURTHER CONSTRUCTION
--------------------
The Lessee acknowledges that, in addition to constructing the GRC
Building, the Lessor intends to pursue plans to construct additional
improvements on the Property. The Lessee acknowledges and agrees that the
development and construction of additional improvements will inevitably result
in dislocation, inconvenience, dust, noise and disruption. The Lessee further
acknowledges that access to the Premises could be affected during the
construction process. The Lessor shall take reasonable steps to minimize any
dislocation and inconvenience or diminution in access. Provided that the
Premises and the agreed number of parking spaces remain available to the Lessee
(which parking spaces may be subject to temporary relocation), the Lessee agrees
that it shall have no claim for reduction or abatement in the rent payable
hereunder or for damages as a result of any loss of quiet enjoyment except as
may result from the gross negligence or willful misconduct of the Lessor, its
agents, contractors and employees.
44
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IN WITNESS WHEREOF, the parties have executed this Building Lease as of the
date first written above.
Date: ____________________, 1995 BERMANT DEVELOPMENT COMPANY
By________________________________________
Name and Title:___________________________
Address:
-------
130 Cremona Drive, Suite D
Goleta, CA 93117-3075
LESSEE:
Date: ____________________, 1995 GRC INTERNATIONAL, INC.,
A DELAWARE CORPORATION
By:_______________________________________
Name and Title:___________________________
Address:
-------
1900 Gallows Road
Vienna, Virginia 22182
45
<PAGE>
EXHIBIT 10.22
NET, NET, NET
INTERIM LEASE
THIS INTERIM LEASE dated April 25, 1995, for reference purposes only
is made between BERMANT DEVELOPMENT COMPANY, as Lessor, and GRC INTERNATIONAL
INC., a Delaware corporation, as Lessee.
BASIC LEASE PROVISIONS
----------------------
1. PREMISES
INITIAL PREMISES: Buildings A, N-1 - N-4, S-1 - S-4 as shown
on Exhibit A, attached hereto, and the property
cross-hatched on Exhibit B, attached hereto,
("Parcel C").
INTERMEDIATE
PREMISES: Buildings A, N-1, N-2 (including Rooms N250, N261
and N267) S-1 - S-4 and Parcel C.
OPTION PREMISES: Parcel C
BUILDING: So much of Buildings A, N-1 - N-4, S-1 - S-4 and
Parcel C existing from time to time.
PREMISES ADDRESS: 5383 Hollister Avenue
Goleta, California 93117
USE OF PREMISES: General and executive offices, research and
development and, except as provided in Paragraph
5.1, any lawful use for Parcel C.
2. LEASED AREA:
INITIAL PREMISES 83,235 rentable square feet
INTERMEDIATE
PREMISES 71,784 rentable square feet
OPTION PREMISES N/A
i
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3. LESSEE'S PERCENTAGES:
INITIAL PREMISES 100% of Building and Common Area
INTERMEDIATE
PREMISES 100% of Building and Common Area
OPTION PREMISES 24.42% of Real Property taxes attributable
to land in the Project and liability insurance
premiums.
4. INITIAL ANNUAL RENT: $408,000 (Initial and Intermediate Premises)
RENTAL DEPOSIT: $34,000 (First full month's rent)
5. INITIAL MONTHLY RENTAL
INSTALLMENTS: $34,000 (Initial and Intermediate Premises)
6. RENT FOR OPTION
PREMISES: $10.00 (for entire term of lease of Option
Premises)
7. TERM:
INITIAL AND Commencing on the close of First American Title
Co. INTERMEDIATE PREMISES Escrow 1410332-LAR,
Santa Barbara, California, and continuing for a
period of one year, subject to Paragraph 2.
OPTION PREMISES See Paragraph 1.3.
8. COMMENCEMENT
DATE: Close of First American Title Co. Escrow
9. TERMINATION DATE: See Paragraph 1.
10. SECURITY DEPOSIT: $34,000
11. BROKER(S): None.
ii
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12. PARKING SPACES PROVIDED:
INITIAL AND
INTERMEDIATE
PREMISES 4 spaces per 1000 rentable square feet leased
during the particular term.
OPTION PREMISES 0 spaces.
13. Submission of this instrument for examination or signature by the Lessee
does not constitute a reservation of or option for space and it is not
effective as a lease or otherwise until execution by both the Lessee and
the Lessor.
IN WITNESS WHEREOF, the parties hereto have executed this Interim Lease,
consisting of the foregoing Basic Lease Provisions, Articles 1 through 20 which
follow, and any attached Exhibits or Addendums, as of the date first above
written.
LESSOR:
BERMANT DEVELOPMENT COMPANY
By:__________________________________
Name and Title:______________________
Address: 130 Cremona Drive, Suite D
-------
Goleta, CA 93117-3075
GRC INTERNATIONAL, INC.,
A DELAWARE CORPORATION
By:__________________________________
Name and Title:______________________
iii
<PAGE>
Address: 1900 Gallows Road
Vienna, Virginia 22182
iv
<PAGE>
01. LEASE OF PREMISES
-----------------
The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor for the term, at the rental, and upon all of the conditions set forth in
this Lease, the Premises identified in Item 1 of the Basic Lease Provisions,
together with the non-exclusive use, in common, with the Lessor and other
tenants of the Building and their respective invitees, of common areas in or
about the Building and the parking garage (if any) or parking areas adjoining
the Building. The Premises are leased strictly on an "AS-IS" basis. The Lessee
acknowledges that its wholly-owned subsidiary has owned the Premises for many
years and it is fully familiar with their condition. For purposes of this
Lease, the "Premises" shall be, as applicable, the "Initial Premises," the
"Intermediate Premises" and the "Option Premises" as the same are defined
herein. The "Building" is defined to be all or such portion of Buildings A, N-1
- - N-4 and S-1 - S-4, as shown on Exhibit A, attached hereto, as are then
existing. The "Project" is the entire property on which the Buildings are
located. The size, location and function of the buildings and related
structures depicted here are approximate. The configuration of the development,
the design, size, function and location of all other improvements, and the
identity and location of other tenants to the extent depicted are subject to
change without notice for any reason deemed sufficient by the owner. The
Lessor reserves the right to alter the configuration of the Project (other than
Parcel C so long as the Lessee has the option to acquire the same), to construct
additional improvements thereon (other than Parcel C so long as the Lessee has
the option to acquire the same), to withdraw areas therefrom from time to time
and alter the configuration of the associated common and parking areas, provided
that the number of parking spaces intended for the Lessee's use shall not
thereby be materially diminished. The Lessee shall be allocated the number of
parking spaces set forth in item 10 of the Basic Lease Provisions and the Lessee
acknowledges that the Lessor shall have no responsibility to supervise or police
the usage of the parking lot by the tenants of the Building.
01.1. INITIAL PREMISES
Commencing on the Commencement Date, as provided in the
Basic Lease Provisions, the Lessor shall lease to the Lessee and the Lessee
shall lease from the Lessor all of Buildings A, N-1 - N-4 and S-1 - S-4 (the
"Initial Premises") which the parties agree contain eighty-three thousand two
hundred thirty-three (83,233) rentable square feet. The lease of the Initial
Premises shall continue until the commencement of construction of the New
Building described in Article 18 hereof. For purposes hereof, the commencement
of construction on the New Building shall be the date specified by Lessor for
the commencement of construction in a written notice from the Lessor to the
Lessee (the "Construction Commencement Notice") delivered to the Lessee at least
thirty (30) days prior to the scheduled date for the commencement of
construction instructing the Lessee to vacate Buildings N3 - N4. The Lessee
shall vacate Buildings N3 and N4 at least ten (10) days prior to the date
specified in the Construction Commencement Notice for the commencement of
construction on the New Building.
01.2. INTERMEDIATE PREMISES
v
<PAGE>
Commencing on date specified in Construction Commencement
Notice for the commencement of construction on the New Building, the Lessor
shall lease to the Lessee and the Lessee shall lease from the Lessor all of
Buildings A, N-1, N-2 (including Rooms N250, N261 and N267) S-1 - S-4, and
Parcel C (the "Intermediate Premises") which the parties agree contain seventy
one thousand seven hundred eighty-four (71,784) rentable square feet. The lease
shall continue until substantial completion of the Tenant Improvements for the
portion of the New Building to be occupied by the Lessee, as defined in
Paragraph 18 hereof.
01.3. OPTION PREMISES
Commencing on the termination of the lease of the Intermediate
Premises, the Lessor shall lease to the Lessee and the Lessee shall lease from
the Lessor Parcel C for a period equal to fifteen (15) years.
Notwithstanding anything herein to the contrary, in the event
that the Lessor exercises its right to cancel the option of the Lessee to
purchase Parcel C as described in the Option to Acquire Parcel C, attached
hereto as Exhibit C, the lease of Parcel C by the Lessee shall terminate
automatically upon the Lessor's payment of the Cancellation Price to the Lessee,
regardless of whether this Lease then extends to the Initial Premises or the
Intermediate Premises. In the event that the payment of the Cancellation Price
by the Lessor occurs during the lease of the Option Premises, this Lease shall
fully terminate upon the Lessor's payment of the Cancellation Price.
01.4. NO PARTNERSHIP
Except as specifically provided in Exhibit C, nothing in this
Lease shall cause the Lessor to in any way be construed as an employer,
employee, fiduciary, partner, joint venturer or otherwise associated in any way
with the Lessee in the operation of the Premises, or to subject the Lessor to
any obligation, loss, charge or expense in connection with or arising from the
Lessee's operation or use of the Premises.
01.5. NET LEASE
The parties intend this Lease to be a net, net, net Lease with
the Lessee paying its proportionate share, as specified herein, of real property
taxes, insurance and certain operating costs for the Premises, the common areas
of the Building, the Building and the land on which it is situated. Lessee shall
have no right to reduce or offset the rent payable hereunder for any reason.
02. TERM
----
The term of the Lease shall be as shown in item 7 of the Basic Lease
Provisions, commencing on the Commencement Date and continuing for a period of
one (1) year; provided, however, that the Lessee shall continue to occupy the
Initial or Intermediate Premises, as applicable, on a month-to-month basis until
2
<PAGE>
substantial completion of Lessee's Tenant Improvements in the New Building as
described in the Development and Construction Agreement between the parties of
even date herewith, unless sooner terminated pursuant to any provision hereof.
03. RENT
----
03.1. INITIAL ANNUAL RENT. The Lessee shall pay to the Lessor as
rent for the Premises an Initial Annual Rent in the amount specified in item 4
of the Basic Lease Provisions in equal monthly installments in the amount
specified in item 5 of the Basic Lease Provisions in advance on the first day of
each month.
The Initial Annual Rent shall be payable beginning on the
Commencement Date and continuing for a period of twelve (12) months from the
Commencement Date. Thereafter, if Lessee remains in possession of the Initial or
Intermediate Premises as provided in Paragraph 2, the Initial Annual Rent shall
be adjusted as provided in Paragraph 3.5, and may be subject to further
adjustment as provided in Paragraph 18. In no event shall Tenant be obligated to
pay rent under this Lease with respect to the Intermediate Premises (other than
Parcel C) at any time Tenant is obligated to pay rent for its premises in the
New Building.
03.1.1 RENTAL DEPOSIT. At the Close of the escrow
described in item 6 of the Basic Lease Provisions, the Lessee shall deposit with
the Lessor an amount equivalent to the first full month's rent as provided in
item 4 of the Basic Lease Provisions.
03.1.2 OPTION PREMISES RENT. The rent for the entire
term of the lease of Parcel C shall be the sum of $10.00, paid in advance at the
close of the escrow pursuant to which Lessor acquires ownership of the Property.
03.2. ADDITIONAL RENT. The Lessee shall reimburse the Lessor, as
additional rent, in the manner and at the times provided, for the Lessee's
proportionate share of all Building Operating Expenses and Common Area Operating
Expenses (as hereinafter defined) incurred by the Lessor. The Lessee's
proportionate share of such Building Operating Expenses and Common Area
Operating Expenses shall be based upon the Lessee's Building Percentage in the
case of Building Operating Expenses, and upon the Lessee's Common Area
Percentage in the case of Common Area Operating Expenses, all as defined herein.
03.3. NO REDUCTION OR OFFSET. All Rent due under this Lease shall
be payable without deduction, abatement or offset.
03.4. DEFINITIONS: For purposes of this Article 3:
(A) The Lessee's Building Percentage is a percentage
calculated by dividing the Leased Area of the Premises by the leasable area of
the Building, and is stipulated by the parties in item 3 of the Basic Lease
Provisions.
3
<PAGE>
(B) Building Operating Expenses shall mean the sum of
all expenses incurred by the Lessor in connection with the operation, repair and
maintenance of the Building, including, but not limited to, heating and air
conditioning; all real property taxes (as hereinafter defined) imposed upon or
with respect to the Building and related improvements (exclusive of the land
underlying all such improvements); all fire and extended coverage, earthquake,
loss of rents, vandalism, malicious mischief and other insurance covering the
Building and losses suffered which fall below the insurance deductible (in
amounts that are commercially reasonable at the time); utilities; materials and
supplies; salaries, wages and other expenses incurred with respect to the
operation, repair and maintenance of the Building, the cost of security and fire
protection; amortization of capital investments for improvements which are
designed to reduce operating costs, improve operations or comply with
governmental conservation or safety programs excluding improvements that relate
exclusively to the roof structure, foundation or exterior and load-bearing walls
over such reasonable period as the Lessor shall determine (together with
interest at five (5) percentage points above the discount rate of the Federal
Reserve Bank of San Francisco on the unamortized amount); and an amount equal to
fifteen percent (15%) of all such expenses to cover the Lessor's administrative
and overhead expenses. Building Operating Expenses attributable to the utilities
and services furnished pursuant to Article 10 shall be apportioned among the
tenants of the Building receiving such services (excluding those tenants
furnishing or paying for their own utilities and janitorial services) based on
the respective leased areas occupied by such tenants. In no event shall Building
Operating Expenses be allocated to the Lessee's interest in Parcel C.
Notwithstanding anything to the contrary contained in the
Lease, Building Operating Expenses and Common Area Operating Expenses shall not
include (i) expenditures classified as capital improvements in accordance with
generally accepted accounting principles, (ii) leasing commissions and finder's
fees, (iii) the cost of capital and noncapital improvements for individual
tenants of the Building or dedicated solely for Lessor's use, (iv) costs
directly chargeable to or recoverable from any tenant under a lease of space in
the Building, (v) attorneys' fees incurred in the preparation or enforcement of
any lease of space in the Building by Lessor, its agents, contractors or
employees, (vi) any penalty or charge for late payment of any operating cost by
Lessor, (vii) amounts expended to correct construction defects in the Building
or to correct faulty workmanship.
If the Lessor manages the Building itself, it shall
manage the Building in the most cost effective manner possible so as to minimize
operating expenses. Any management agreement with a third-party management
company shall provide that the managing agent shall operate the Building through
an on-site building manager in a first-class institutional quality manner and in
the most cost-effective manner possible so as to minimize operating expenses.
(C) Lessee's Common Area Percentage is a percentage
figure calculated by dividing the Leased Area of the Premises by the average
leasable area in all improvements, including the Building and other buildings,
shown on Exhibit A or otherwise constructed during the term of the Lease, during
such year as is initially stipulated to be as shown in item 3 of the Basic Lease
Provisions. Parcel C shall not be taken into consideration. Should the Building
and/or landscape area become a separate legal lot, or should additional
improvements or common area be added to or deleted from Exhibit A, the Lessor
may, at its option, calculate the Lessee's Common Area Percentage by comparing
the common area attributable to the Premises with the common area on such legal
lot or otherwise within Exhibit A as so revised.
4
<PAGE>
(D) Subject to Section 3.4(f), Common Area Operating
Expenses shall mean the sum of all expenses incurred by the Lessor in connection
with the operation and maintenance (but not original construction) of driveways,
landscaping, walkways, plazas, parking facilities, and perimeter property
including, but not limited to: all items described in Section 6.1 hereof (except
the last sentence of Section 6.1); all real property taxes (as hereinafter
defined) imposed upon or with respect to the land included within the Project;
all public liability insurance covering the Buildings and the Project, and
losses suffered which fall below the insurance deductible (in amounts
commercially reasonable at the time); security and fire protection; salaries,
wages and other expenses incurred with respect to maintenance of the common
areas, gardening, landscaping, repaving, repainting and trash removal;
depreciation of equipment used in such maintenance; amortization of capital
investments for improvements which comply with governmental conservation or
safety programs over such reasonable period as the Lessor shall determine
(together with interest at five (5) percentage points above the discount rate of
the Federal Reserve Bank of San Francisco on the unamortized amount); and an
amount equal to fifteen percent (15%) of all such expenses to cover the Lessor's
administrative and overhead expenses. General overhead and depreciation of
improvements shall not be included in the expenses except as specifically set
forth in the foregoing. Any governmental surcharge, fee or assessment imposed
with respect to the parking facilities within the Project shall, to the extent
paid by the Lessor and not passed on to the users of said parking facilities, be
included in Common Area Operating Expenses.
(E) Real Property Taxes shall mean all real and
personal property taxes and assessments incurred during any calendar year,
including, but not limited to: special and extraordinary assessments, meter and
sewer rates and charges, occupancy taxes or similar taxes imposed on or with
respect to the real property or personal property used in connection with the
Common Area, whether or not imposed on or measured by the rent payable by the
Lessee, and other governmental levies and charges, general and special, ordinary
and extraordinary, unforeseen as well as foreseen, of any kind and nature
whatsoever relating to the real or personal property, and any gross rental,
license or business tax measured by or levied on rent payable or space occupied.
If, by law, any property taxes are payable, or may at the option of the taxpayer
be paid, in installments (whether or not interest shall accrue on the unpaid
balance of such property taxes), the Lessor may, at the Lessor's option, pay the
same and, in such event, any such accrued interest on the unpaid balance of such
property taxes shall be deemed to be Real Property Taxes as defined herein. Real
Property Taxes shall also include all expenses reasonably incurred by the Lessor
in seeking a reduction by the taxing authorities of Real Property Taxes
applicable to the Project. Real Property Taxes shall not include any capital
levy, franchise, estate, inheritance, succession, gift or transfer tax of the
Lessor, or any income, profits or excess profits tax, assessment, charge or levy
upon the income of the Lessor; provided, however, that if at any time during the
term of this Lease under the laws of the United States or the State of
California, or any political subdivision of either, a tax or excise on rents,
space or other aspects of real property, is levied or assessed against the
Lessor, the same shall be deemed to be Real Property Taxes. Real Property Taxes
shall also not include (i) special district assessments for improvements to the
roof structure, foundation, exterior and load-bearing walls or (ii) assessments
from a Mello-Roos or similar district formed exclusively for the benefit of the
Project itself, or in connection with an immediately adjacent parcel under
affiliated ownership, for the purpose of financing improvements which do not
benefit all buildings within such district in a substantially equal manner. If
any such property taxes upon the income of the Lessor shall be imposed on a
graduated scale, based upon the Lessor's aggregate rental income, Real Property
Taxes shall include only such portion of such property taxes as would be payable
if the rent payable with respect to the Building and Common Areas were the only
rental income of the Lessor subject thereto.
5
<PAGE>
(F) Notwithstanding anything herein to the contrary,
throughout the term of this Lease 24.42% of (i) Real Property Taxes attributable
to the land in the Project, as opposed to the improvements thereon, and (ii)
liability insurance premiums (excluding casualty and other types of insurance)
shall be allocated to Parcel C. Further, Parcel C shall be allocated a share of
landscaping, water, and weed-clearing costs based upon the actual cost of such
services or utilities supplied to Parcel C.
(G) The Lessee shall have the right to review, copy and
audit all documents and information pertaining to operating expenses and real
property taxes of the Building (and the Project to the extent such expenses are
passed through to the Lessee). In the event such audit indicates the operating
expenses paid by the Lessee are greater than one hundred and five percent (105%)
of the actual operating expenses for the appropriate period, the Lessor will,
within thirty (30) days of its receipt of the audit, reimburse the Lessee for
all costs associated with the audit and the expenses that the Lessee paid in
excess of the audited expenses plus interest on such amounts. The Lessee shall
have the right of rental payment off-set in the event of overcharges.
3.5 RENT ADJUSTMENT FOR CONSUMER PRICE INDEX. Subject to
Section 3.1, the annual rent shall be increased as of the expiration of each
full or partial calendar year of the Lease term (the "Adjustment Date") to
reflect any increase in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index, "Urban Wage Earners and Clerical Workers
(Revised) Series) All Items -Los Angeles - Anaheim Riverside Average (1982-
1984=100)". The index for said subgroup applicable for the month of December (or
the month preceding the Commencement Date for the first full or partial calendar
year of the lease term) preceding each Adjustment Date shall be considered the
"base", and the annual rent following each Adjustment Date shall be computed by
adjusting the annual rent payable for the preceding calendar year thereof by the
percentage change in the index as of the adjustment date over the "base";
provided, however, in no event shall the rent payable for any year be less than
the rent payable for the preceding period on account of the adjustment pursuant
to this Section 3.5, notwithstanding the fact that the index may, as of some
Adjustment Date, be less than the "base"; and provided further than the annual
rent for any year shall not be increased by more than four percent (4%) over the
base rent payable in the preceding lease year. If as of any Adjustment Date
there shall not exist the Consumer Price Index in the same format as set forth
above, the parties shall substitute any official index published by the Bureau
of Labor Statistics or any successor or similar Governmental agency as may then
be in existence and shall be most nearly equivalent thereto. If the parties
shall be unable to agree upon a successor index, the parties shall refer the
choice to arbitration in accordance with the rules of the American Arbitration
Association. This provision shall not apply to the Building Operating Expenses
or Common Area Operating Expenses.
3.6 CALCULATION AND PAYMENT
(A) Annual rent shall be payable to the Lessor without
deduction or offset, in lawful money of the United States at the Lessor's
address herein or to such other persons or at such other places as the Lessor
designates in writing. Rent payable for any period for less than one (1) month
shall be prorated based upon a thirty (30) day month.
6
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Prior to the commencement of the lease term on the earlier
and of each December thereafter or the month following the date on which
construction was substantially completed in a manner that changed the leasable
area affecting the calculation thereof, the Lessor shall give the Lessee a
written estimate of the Lessee's share of Building and Common Area Operating
Expenses for the ensuing year or portion thereof. The Lessee shall pay such
estimated amount to the Lessor in equal monthly installments, in advance. Within
ninety (90) days after the end of each calendar year, the Lessor shall furnish
to the Lessee a statement showing in reasonable detail the actual Building and
Common Area Operating Expenses incurred by the Lessor during such period, and
the parties shall within thirty (30) days make any payment or allowance
necessary to adjust the Lessee's estimated payment to the Lessee's actual
proportionate share as shown by such annual statement. Any amount due the Lessee
shall be credited against installments next coming due under this paragraph.
(B) Within ninety (90) days after each Adjustment Date, the
Lessor shall furnish the Lessee with a written statement showing the percentage
change in the index for the period ending on the Adjustment Date and specifying
the increase, if any, in the annual rent subsequent to the Adjustment Date,
taking into account all prior adjustments to annual rent for the period
preceding the Adjustment Date pursuant to this paragraph above and applying any
percentage increase in the index to the annual rent as previously adjusted. At
the rental payment date next following the Lessee's receipt of such statement,
the Lessee shall pay to the Lessor an amount equal to one-twelfth (1/12th) of
the adjustment pursuant to this Paragraph (b) multiplied by the number of rent
payment dates (including the current one) since the relevant Adjustment Date.
Subsequent rental payments shall be increased by one-twelfth (1/12th) of the
adjustment pursuant to this Paragraph (b).
3.7 END OF TERM. Upon the expiration or earlier termination of
this Lease, the Lessee shall pay the Lessor, as additional rent, the aggregate
rental increase which would have been payable by the Lessee pursuant to this
Article 3, except for such expiration or termination, for the portion of the
year in which termination or expiration occurs through the Termination Date. The
amount of such payment shall be calculated by the Lessor based upon Sections
3.2, 3.3 and 3.5 (using the expiration or Termination Date as the Adjustment
Date for Section 3.5) and the best information then available to the Lessor, and
shall give effect to all prior adjustments and payments on account by Lessee
pursuant to this Article 3.
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4. SECURITY DEPOSIT
----------------
The Lessee shall deposit with the Lessor the sum specified in item 10
of the Basic Lease Provisions as security for the faithful performance by the
Lessee of all covenants and conditions of this Lease concurrently with the close
of escrow for the purchase by the Lessor of the land on which the Building is
situated. If the Lessee shall breach or default in the performance of any
covenants or conditions of this Lease, including the payment of rent, the Lessor
may use, apply or retain the whole or any part of such security deposit for the
payment of any rent in default or for any other sum which the Lessor may spend
or be required to spend by reason of the Lessee's default. If the Lessor so
uses or applies all or any portion of said deposit, the Lessee shall, within ten
(10) days after written demand therefor, deposit cash with the Lessor in an
amount sufficient to restore said deposit to the full amount hereinabove stated
and the Lessee's failure to do so shall be a material breach of this Lease.
Should the Lessee comply with all covenants and conditions of this Lease, the
security deposit or any balance thereof shall be returned to the Lessee (or, if
applicable, to the last assignee of the Lessee's interest in this Lease) at the
expiration of the term. Lessor shall not be required to maintain the security
deposit in a separate account. However, interest shall accrue on the security
deposit at the rate payable on a standard interest-bearing account and be paid
semi-annually to Lessee. Should the Lessor sell its interest in the Premises,
the Lessor may transfer to the purchaser thereof the then unexpended or
unappropriated deposit and thereupon the Lessor shall be discharged from any
liability for such funds.
5. USE
---
5.1 USE. The Premises shall be used and occupied for the
purposes described in item 1 of the Basic Lease Provisions, permitted under
applicable ordinances and other Governmental requirements, the covenants,
conditions and restrictions affecting the Project, as the same may be amended
from time to time, and the Rules and Regulations as the Lessor may from time to
time reasonably adopt for the safety, care and cleanliness of the Building and
the Project or the preservation of good order. The Rules and Regulations
presently in effect are attached hereto as Exhibit D. The Lessor shall not be
responsible to the Lessee for the non-performance of any of said Rules and
Regulations, or non-compliance with said covenants, conditions and restrictions,
by any other tenant of the Building. The Rules and Regulations, as the same may
be amended from time to time, shall not materially diminish or change the rights
of the Lessee hereunder.
Notwithstanding the foregoing, Parcel C shall not be used in
any manner which interferes with or impedes the development of the Project,
including the demolition of existing improvements or the construction of new
improvements, or adversely affects the value or integrity of the Project as an
office park.
5.2 COMPLIANCE WITH LAW; NUISANCE. The Lessee, at the Lessee's
sole cost and expense, shall comply promptly and at all times with all laws,
requirements, ordinances, statutes, and regulations of all municipal, state or
federal authorities, or any board of fire insurance underwriters, or other
similar bodies (collectively "regulations"), now in force or which may hereafter
be in force, pertaining to Lessee's use of the Building and the Premises and the
occupancy thereof, including any law that requires alteration, maintenance or
restoration of the Premises as the result of the Lessee's use thereof, but
excluding any regulations relating solely
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to the physical condition or the occupancy of the Building without regard to the
Lessee's use thereof, which shall be complied with by the Lessor and treated as
Building Operating Expense or Common Area Operating Expense if so provided in
Section 3.4. The judgment of any court of competent jurisdiction, or the
admission of the Lessee in any action or proceeding against the Lessee, whether
the Lessor is a party thereto or not, that the Lessee violated any such
ordinances or statutes in the use of the Premises shall be conclusive of that
fact as between the Lessor and the Lessee. The Lessee, at its sole expense,
shall also comply with (i) all requirements for fire extinguishers or fire
extinguisher systems required in the Premises and (ii) all conditions imposed on
the use, occupancy or employment of the Premises and the Building by the County
of Santa Barbara or other governmental authority, excluding any regulations
relating to the roof structure, foundation, exterior and load-bearing walls,
which shall be complied with by the Lessor at its sole cost and expense.
The Lessee shall not commit, or suffer to be committed, any
waste of the Premises, or any nuisance, annoyance or other unreasonable
annoyance which may disturb the quiet enjoyment of adjoining premises or of the
Building by the owners or occupants thereof.
5.3 INSURANCE CANCELLATION. Notwithstanding the provisions of
Paragraph 5.1 above, the Lessee shall not do or permit anything to be done in or
about the Premises nor bring or keep anything therein, including all uses
permitted under Section 5.1 above, which will in any way cause the cancellation
of any fire or other insurance upon the Building, or any other part thereof, or
any of its contents, and if the Lessee's use of the Premises causes an increase
in said insurance rates, the Lessee shall pay as additional rent the amount of
such increase. The Lessee shall be in default under this Lease should the
Lessee cause the cancellation of fire or other insurance upon the Building or
Property or should the Lessee fail to pay any increased insurance rate
attributable to the Lessee's use of the Premises. In determining whether
increased premiums are a result of the Lessee's use or occupancy of the Premises
or Building, a schedule issued by the Lessor's insurer computing the insurance
rate on the Premises or Building, or the leasehold improvements showing the
various components of such rate, shall be conclusive evidence of the several
items and charges which make up such rate. The Lessee shall promptly comply
with all reasonable requirements of the insurance authority or of any insurer
now or hereafter in effect relating to the Premises.
5.4 HAZARDOUS SUBSTANCES. Any corrosive, flammable, hazardous or
other special waste or materials shall be handled or disposed of as directed by
applicable state, Federal, County and City regulations. The Lessee shall
handle, store or dispose of such materials in a careful and prudent manner. At
the termination of the Lease, or any option period thereof, the Lessee shall
fully clean the Premises in such a manner that no residue of such materials or
waste shall remain on the Premises. If required by applicable law, the Lessee
shall notify the appropriate governmental authority of the presence and amount
of any such material or waste, and shall comply with all conditions imposed by
such authority. The Lessee shall contact the appropriate governmental authority
prior to occupancy to determine the existence of any records for the Building
and/or Premises. Specifically thirty (30) days prior to occupancy, the Lessee
shall submit a Hazardous Materials Management Plan (HMMP) and a Hazardous
Materials Floor Plan (HMF) to the Lessor and the appropriate governmental
authority for approval. These plans shall be attached in full to this Lease.
The HMMP shall include the following:
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(A) The company name, address and contact person.
(B) General facility description with map showing location of
all buildings and structures.
(C) Facility hazardous material storage map showing the
location of each proposed hazardous material storage area and access to such
facilities. The map shall be updated annually by the occupant and submitted by
January 1 each year.
(D) A floor plan showing the location of each hazardous
material storage area, storage area access, and the location of emergency
equipment.
The HMF shall include the following:
(A) Hazardous Materials Handling Report describing the safe
handling of hazardous materials to prevent accidents.
(B) Separation or Hazardous Material Report outlining the
methods to be utilized to insure separation and protection of hazardous
materials from such factors that could cause fire, explosion, spills, etc.
(C) Inspection and Record Keeping Plan indicating the
procedures for inspecting each storage facility. An authorized record of
inspection shall be maintained by the Lessee.
(D) Employee Training Program to insure that employees know
how to safety handle hazardous materials.
(E) Hazardous Materials Contingency Plan that clearly
describes appropriate response procedures and measures in case of an accident.
(F) A floor plan identifying the location and quantity of each
hazardous material, including the chemical name and quantity limit for each
class.
The Lessee shall pay inspection fees, based on the hourly inspection
rate, for an environmental audit to be conducted by the appropriate governmental
authority, or the Lessor at the termination of the Lease and prior to
reoccupation of the Building and/or the Premises, if hazardous materials were in
use on the Building and/or Premises. The appropriate governmental authority
shall perform or the Lessee shall arrange for such an audit in a timely manner
to prevent economic hardship to the Lessor and shall certify that the Premises
are available for reoccupation, or shall specify clean-up measures that will
render the Premises safe for reoccupation. The Lessee shall be responsible for
any clean-up that may be required as a result of the audit.
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Should the Lessee fail to comply with any duty set forth in this
Section 5.4, the Lessor may, in addition to all other remedies now or hereafter
provided by this Lease, or by law, perform such duty or make good such default,
and any amounts which the Lessor shall advance pursuant thereto shall be repaid
by the Lessee to the Lessor on demand.
5.5 ENVIRONMENTAL LAWS.
(A) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Lessee, in its
conduct of business on or in any activity, work, thing done, permitted or
suffered by the Lessee, its agents, contractors, employees or invitees on the
Premises, shall at all times and in all respects comply with all federal, state
and county laws, ordinances and regulations (the "Hazardous Materials Laws")
relating to industrial hygiene, environmental protection or the use, analysis,
generation, manufacture, storage, disposal or transportation of any oil,
flammable explosives, asbestos, radioactive materials or waste, or other
hazardous, toxic, contaminated or polluting materials, substances, or wastes,
including, without limitation, any "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under any such laws, ordinances or
regulations (collectively, the "Hazardous Materials"). Such laws, ordinances or
regulations shall include, but not be limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq; the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Section 6901 et seq; the Clean Water Act, 33 U.S.C. Section 466, et
seq; the Safe Drinking Water Act, 14 U.S.C. Section 1401, et seq; the Superfund
Amendment and Reauthorization Act of 1986; Public Law 99-499, 100 Stat. 1613;
the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq, as amended;
those substances defined as "hazardous waste", "extremely hazardous waste",
"restricted hazardous waste" or "hazardous substance" in the Hazardous Waste
Control Act, Section 25100 et seq of the California Health & Safety Code; and
those materials and substances similarly described in the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136, et seq., as amended; the
Atomic Energy Act of 1954, 42 U.S.C. Section 2011, et seq., as amended; the
Porter Cologne Water Quality Control Act, Section 1300 et seq. of the California
Health & Safety Code; and any regulations adopted and publications promulgated
pursuant to said Laws.
(B) HAZARDOUS MATERIALS HANDLING. The Lessee shall, at its
own expense, procure, maintain in effect and comply with all conditions of any
and all permits, licenses and other governmental and regulatory approvals
required for the Lessee's use of the Premises, including, without limitation,
discharge of (appropriately treated) materials or wastes into or through any
sanitary sewer serving the Premises. Except as discharged into the sanitary
sewer in strict accordance and conformity with all applicable Hazardous
Materials Laws, the Lessee shall cause any and all Hazardous Materials removed
from the Premises to be removed and transported solely by duly licensed haulers
to duly licensed facilities for final disposal of such materials and wastes. The
Lessee shall in all respects handle, treat, deal with and manage any and all
Hazardous Materials in, on, under or about the Premises in total conformity with
all applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials. Upon expiration or earlier termination
of the term of the Lease, the Lessee shall cause all Hazardous Materials to be
removed from the Premises and transported for use, storage or disposal in
accordance and compliance with all applicable Hazardous Materials Laws. The
Lessee shall not take any remedial action in response to the presence of any
Hazardous Materials in or about the Premises or the Building, nor enter into any
settlement agreement, consent,
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decree or other compromise in respect to any claims relating to any Hazardous
Materials in any way connected with the Premises or the Building, without first
notifying the Lessor of the Lessee's intention to do so and affording the Lessor
ample opportunity to appear, intervene or otherwise appropriately assert and
protect the Lessor's interest with respect thereto.
(C) NOTICES. The Lessee shall immediately notify the Lessor
in writing of any of the following activities relating to the Lessee's
operations on the Premises: (i) any enforcement, clean-up, removal or other
governmental or regulatory action instituted, completed or threatened pursuant
to any Hazardous Materials Laws; (ii) any claim made or threatened by any person
against the Lessee, the Premises or the Building relating to damage,
contribution, cost recovery compensation, loss or injury resulting from or
claimed to result from any Hazardous Materials in, on or removed from the
Premises or the Building; and (iii) any reports made to any environmental agency
arising out of or in connection with any Hazardous Materials in or removed from
the Premises or the Building, including any complaints, notices, warnings or
asserted violations in connection therewith. The Lessee shall also supply to the
Lessor as promptly as possible, and in any event within five (5) business days
after the Lessee first receives or sends the same, with copies of all claims,
reports, complaints, notices, warnings or asserted violations relating in any
way to the Premises, the Building or the Lessee's use thereof. The Lessee shall
promptly deliver to the Lessor copies of hazardous waste manifests reflecting
the legal and proper disposal of all Hazardous Materials removed from the
Premises.
(D) INDEMNIFICATION OF LESSOR. The Lessee shall indemnify,
defend, protect, and hold the Lessor, and each of the Lessor's partners,
employees, agents, attorneys, successors and assigns, free and harmless from and
against any and all claims, liabilities, penalties, forfeitures, losses or
expenses (including attorneys' fees) for death of or injury to any person or
damage to any property whatsoever arising from or caused in whole or in part,
directly or indirectly, by (A) the presence in, on, under or about the Premises
or the Building, or discharge in or from the Premises or the Building of any
Hazardous Materials resulting from the Lessee's use, analysis, storage,
transportation, disposal, release, threatened release, discharge or generation
of Hazardous Materials to, in, on, under, about or from the Premises or the
Building, but only to the extent such Hazardous Materials are present as a
result of actions of the Lessee, its officers, employees, invitees, assignees,
contractors, or agents, or (B) the Lessee's failure to comply with any Hazardous
Materials Law. The Lessee's obligations hereunder shall include, without
limitation, and whether foreseeable or unforeseeable, all costs of any required
or necessary repair, clean-up or detoxification or decontamination of the
Premises or the Building, and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, and shall
survive the expiration or earlier termination of the term of the Lease. For
purposes of the release and indemnity provisions hereof, any acts or omissions
of the Lessee, or by officers, invitees, employees, agents, assignees,
contractors or subcontractors of the Lessee or others acting for or on behalf of
the Lessee (to the extent any such individual is acting within the scope of his
relationship with the Lessee), whether or not such acts or omissions are
negligent, intentional, willful or unlawful, shall be strictly attributable to
the Lessee.
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6. MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
6.1 LESSOR'S OBLIGATIONS. The Lessor shall cause to be maintained,
in good order, condition and repair, the roof membrane, and common windows and
doors of the Building (excluding the interior surface thereof), heating, venting
and air conditioning systems, and any public and common areas in the Building,
the exterior Building paint as well as all parking areas, driveways, sidewalks,
private roads or streets, landscaping and all other areas located within the
Project other than areas occupied by other buildings (such non-building areas
being herein referred to as "Common Areas"). The costs of such maintenance are
chargeable to the Lessee pursuant to Paragraph 3.2 hereof. The Lessor shall
maintain at its sole cost and expense and without reimbursement by Lessee, the
roof structure, foundation, exterior and load-bearing walls.
6.2 LESSEE'S OBLIGATIONS. The Lessee shall, during the term of
this Lease, keep in good order, condition and repair, the interior of the
Premises and every part thereof, including, but not limited to, all interior
windows and doors in and to the Premises. Except as expressly provided in
Paragraphs 3.4 and 6.1, the Lessor shall incur no expense nor have any
obligation of any kind whatsoever in connection with the maintenance of the
interior of the Premises and the Lessee expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford the Lessee the
right to make repairs at the Lessor's expense or to terminate this Lease because
of any failure to keep the interior of the Premises in good order, condition and
repair. Notwithstanding the foregoing, the Lessor shall be liable for
maintenance or repairs which are caused by the Lessor's gross negligence. The
Lessee shall be responsible for interior janitorial services.
6.3 ALTERATIONS AND ADDITIONS.
(A) The Lessee shall not, without the Lessor's prior written
consent, make any alterations, improvements, additions or utility installations
in, on or about the Premises unless such work is limited to patching, painting,
redecorating and carpeting or is nonstructural in nature and its cost does not
exceed one-half of the monthly rent then payable. For all work, the Lessee will
provide the Lessor with as-built drawings reflecting any changes to the
Premises. As used in this Paragraph 6.3, the term "utility installations" shall
include bus ducting, power panels, fluorescent fixtures, space heaters, conduits
and wiring. As a condition to giving such consent, the Lessor may require that
the Lessee (i) agree to remove any such alterations, improvements, additions or
utility installations at the expiration or sooner termination of the term, and
to restore the Premises to their prior condition and (ii) unless there has been
no monetary default by the Lessee hereunder in the prior thirty-six (36) months,
provide the Lessor, at the Lessee's sole cost and expenses, a lien and
completion bond in an amount equal to one and one-half (1 1/2) times the
estimated cost of such improvements, to insure the Lessor against any liability
for mechanics' and materialmen's liens and to insure completion of work.
(B) All alterations, improvements and additions to the
Premises shall be performed by the Lessor's contractor for the Project or other
licensed contractor approved by the Lessor, which approval shall not be
unreasonably withheld. The Lessee shall pay, when due, all claims for labor or
materials furnished to or for the Lessee at or for use in the Premises, which
claims are or may be secured by any mechanics' or materialmen's lien against the
Premises or any interest therein, and the Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law.
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6.4 SURRENDER. On the last day of the term hereof, or on any
sooner termination of all or a portion hereof, the Lessee shall surrender to the
Lessor the Premises for which this Lease no longer remains in effect and,
subject to the provisions of Paragraph 6.3(a) hereof, all alterations, additions
and improvements thereto, in the same condition as when received or made,
ordinary wear and tear excepted; provided, however, that the Lessee's machinery,
equipment and trade fixtures (including utility installations) which may be
removed without irreparable or material damage to the Premises, shall remain the
property of the Lessee and be removed by the Lessee. The Lessee shall repair any
damage to the Premises occasioned by the removal of the Lessee's furnishings,
machinery, equipment and trade fixtures, which repair shall include the patching
and filing of holes and repair of structural damage.
6.5 LESSOR'S RIGHTS. If the Lessee fails to perform the Lessee's
obligations under this Article 6, the Lessor may, at its option (but shall not
be required to), and with a five (5) day written notice to the Lessee, perform
such obligations on behalf of the Lessee, and the cost thereof, together with
interest thereon at the rate specified in Paragraph 12.2(a) hereof, shall
immediately become due and payable as additional rent to the Lessor within ten
(10) days following written demand therefor.
7. INSURANCE
---------
The Lessee, at its sole cost and expense, shall, commencing on the
date the Lessee is given access to the Premises for any purpose, and during the
entire term hereof, procure, pay for and keep in full force and effect:
7.1 LESSEE'S LIABILITY INSURANCE. Comprehensive general liability
insurance with respect to the Premises and the operations of or on behalf of the
Lessee in, on or about the Premises, including, but not limited to, personal
injury, product liability (if applicable), blanket contractual, owner's
protective, broad form property damage liability coverage, host liquor liability
and owned and non-owned automobile liability in an amount not less than TWO
MILLION DOLLARS ($2,000,000) Combined Single Limit. Such policy shall contain
(i) severability of interest, (ii) cross liability, and (iii) an endorsement
stating in substance that "such insurance as is afforded by this policy for the
benefit of the Lessor shall be primary as respects any liability or claims
arising out of the occupancy of the Premises by the Lessee, or out of the
Lessee's operations, and any insurance carried by the Lessor shall be excess and
non-contributory."
7.2 LESSEE'S WORKER'S COMPENSATION INSURANCE. Worker's
Compensation coverage as required by law, together with Employer Liability
coverage.
7.3 LESSEE'S FIRE AND EXTENDED COVERAGE INSURANCE. Insurance
against fire, vandalism, malicious mischief and such other additional perils as
now are or hereafter may be included in a standard "All Risks" coverage,
insuring all improvements and betterments made to the Premises, the Lessee's
trade fixtures, furnishings, equipment, stock, loss of income or extra expense,
and other items of personal property in an amount not less than 100% of
replacement value. Such insurance shall contain (i) no coinsurance or
contribution clauses, (ii) a Replacement Cost Endorsement, and (iii) deductible
amounts acceptable to the Lessor.
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7.4 POLICY REQUIREMENTS. All policies of insurance required to be
carried by the Lessee pursuant to these requirements shall be written by
responsible insurance companies authorized to do business in the State of
California. Any such insurance required by the Lessee hereunder may be
furnished by the Lessee under any blanket policy carried by it or under a
separate policy therefor. A true and exact copy of each paid up policy
evidencing such insurance or a certificate of the insurer, certifying that such
policy has been issued, providing the coverage required and containing the
provisions specified herein, shall be delivered to the Lessor prior to the date
the Lessee is given the right to possession of the Premises, and upon renewals,
not less than thirty (30) days prior to the expiration of such coverage. The
Lessor may, at any time, and from time to time, inspect and/or copy any and all
insurance policies required hereunder. In no event shall the then limits of any
policy be considered as limiting the liability of the Lessee under this Lease.
Each policy evidencing insurance required to be carried by the Lessee
pursuant to these requirements shall contain, in form and substance satisfactory
to the Lessor: (i) a provision including the Lessor and any other parties in
interest designated by the Lessor as an additional insured; (ii) a waiver by the
Lessee's insurer of any right to subrogation against the Lessor, its agents,
employees and representatives which arise or might arise by reason of any
payment under such policy or by reason of any act or omission of the Lessor, its
agents, employees or representatives, and (iii) a provision that the insurer
will not cancel or materially change the coverage provided by such policy
without first giving the Lessor thirty (30) days' prior written notice.
7.5 LESSOR'S RIGHTS. If the Lessee fails to procure, maintain
and/or pay for at the times and for the durations specified in this Lease, the
insurance required hereunder, or fails to carry insurance required by any
governmental requirement, the Lessor may (but without obligation to do so), and
with twenty-four (24) hours advance notice to the Lessee, perform such
obligations on behalf of the Lessee, and the cost thereof, together with
interest thereon at the rate specified in Paragraph 12.2(a) hereof, shall
immediately become due and payable as additional rent to the Lessor.
7.6 LESSOR'S INSURANCE. The Lessor shall maintain during the term
of this Lease such insurance against physical damage to the Building
comprehensive liability insurance and other insurance as the Lessor may, from
time to time, determine. The Lessor shall reasonably determine the limits of
coverage, deductibles and specific perils insured against provided, however,
that the Lessor's casualty insurance shall be a so-called All-Risk policy,
insuring the full replacement value of the Building. The Lessor may, but shall
not be obliged to, take out and carry any other form or forms of insurance as it
or the mortgagees of the Lessor may reasonably determine advisable.
Notwithstanding any contributions by the Lessee to the cost of insurance
premiums, with respect to the Building or any alterations of the Premises as may
be provided herein, the Lessee acknowledges that it has no right to receive any
proceeds from any such insurance policies carried by the Lessor.
7.7 INDEMNIFICATION. To the fullest extent permitted by law, the
Lessee shall defend, indemnify and hold harmless the Lessor from and against any
and all claims arising from the Lessee's use of the Premises or the conduct of
its business or from any activity, work or thing done, permitted or suffered by
the Lessee, its agents, contractors, employees or invitees in or about the
Premises or elsewhere, and shall further indemnify and hold harmless the Lessor
from and against any and all claims arising from any breach or default in the
performance of any obligation on the Lessee's part to be performed hereunder, or
arising from any act, neglect, fault or omission of the Lessee, or of its
agents, employees, or invitees, and from and against all costs,
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attorney's fees, expenses and liabilities incurred in or about such claim or any
action or proceeding brought thereon. In case any action or proceeding be
brought against the Lessor by reason of any such claim, the Lessee, upon notice
from the Lessor, shall defend the same at the Lessee's expense by counsel
approved in writing by the Lessor, which approval shall not be unreasonably
withheld. Except for that which is caused by the gross negligence or willful
misconduct of Lessor, the Lessee, as a material part of the consideration to the
Lessor hereunder, hereby assumes all risk of damage to property or injury to
persons in, upon or about the Premises from any cause whatsoever, and the Lessee
hereby waives all of its claims in respect thereof against the Lessor.
7.8 EXEMPTION OF LESSOR FROM LIABILITY. Except in the case of
gross negligence or willful misconduct, the Lessor shall not be liable for
injury to the Lessee's business or any loss of income therefrom or for damage to
the property of the Lessee, the Lessee's employees, invitees, customers or any
other person in or about the Premises, nor shall the Lessor be liable for injury
to the person of the Lessee, the Lessee's employees, agents or contractors,
whether such damage or injury is caused by or results from fire, explosion,
falling plaster, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether such
damage or injury results form conditions arising upon the Premises or upon other
portions of the Building, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible. The Lessor shall not be liable for incorporeal hereditaments
including interference or obstruction of light, air or view. The Lessor shall
not be liable for any damages arising from any act or neglect of any other
tenant of the Building or the other portions of the Project except in the case
of gross negligence or willful misconduct of the Lessor.
The Lessee acknowledges that the Building was constructed many
years ago and does not meet current seismic standards. The Lessor shall not be
liable for injury to the Lessee's business or any lost income therefrom or for
damage to the property of the Lessee, the Lessee's employees, invitees,
customers or any other person in or about the Premises, nor shall the Lessor be
liable for the injury to the person of the Lessee, the Lessee's employees,
agents or contractors as a result of damage or injury caused by earthquake or
seismic hazard.
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8. DAMAGE OR DESTRUCTION
---------------------
8.1 PARTIAL DAMAGE. If the Premises, or so much of the Building as
to cause a material interference with the conduct of the Lessee's business in
the Premises as a whole, are damaged by any casualty, and the damage (exclusive
of any property or improvements installed by the Lessee in the Premises) can be
repaired within one hundred twenty (120) days without the payment of overtime,
the Lessor shall, at the Lessor's expense, repair such damage (exclusive of any
property of the Lessee or improvements installed by the Lessee in the Premises)
as soon as practicable and this Lease shall continue in full force and effect.
If the Premises, or so much of the Building as to cause a material interference
with the conduct of the Lessee's business in the Premises as a whole, are
damaged by any casualty, and the damage (exclusive of any property of the Lessee
or improvements installed by the Lessee in the Premises) cannot be repaired
within one hundred twenty (120) days without the payment of overtime or other
premiums, the Lessor may, at the Lessor's option, either (i) repair such damage
as soon as practicable at the Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessor within
thirty (30) days after the date of the occurrence of such damage of the Lessor's
intention to terminate this Lease, in which event this Lease shall terminate as
of the date of the occurrence of such damage.
8.2 DAMAGE NEAR END OF TERM. If the Premises, or so much of the
Building as to cause a material interference with the conduct of the Lessee's
business in the Premises as a whole, are damaged during the last six (6) months
of the term of this Lease, or any renewal thereof, the Lessor or the Lessee may,
at its option, terminate this Lease as of the date of occurrence of such damage
by giving written notice to the other party of the election to do so within
thirty (30) days after the date of occurrence of such damage; provided, however,
that if the term of this Lease has been extended for any reason whatsoever, the
right to terminate this Lease shall only apply during the last six (6) months of
the then current term of this Lease.
8.3 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(A) If the Lessor is obligated or elects to repair the
Premises as provided above, the rent payable for the period during which such
repair continues shall be abated, in proportion to the degree to which the
Lessee's use of the Premises is impaired; provided, however, that the aggregate
period of abatement hereunder shall not exceed six (6) months. Except for such
abatement, if any, the Lessee shall have no claim against the Lessor for any
damage suffered by reason of any such damage, destruction, repair or
restoration.
(B) If the Lessor is obligated or elects to repair the
Premises as provided above, but does not commence such repair within one hundred
twenty (120) days after the date of the casualty or does not complete such
repair within one hundred eighty (180) days subject to any extension or up to
another sixty (60) days for delays beyond the reasonable control of the Lessor,
the Lessee may, at the Lessee's option, terminate this Lease by giving the
Lessor written notice of the Lessee's election to do so at any time prior to the
commencement of such repair or restoration, in which event this Lease shall
terminate as of the date of such destruction.
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8.4 INSURANCE PROCEEDS UPON TERMINATION. If this Lease is
terminated pursuant to any right given the Lessee or the Lessor to do so under
this Article 8, all insurance proceeds payable under Section 7.6 with respect to
the damage giving rise to such right of termination shall be paid to the Lessor
and any encumbrancers of the Premises, as their interests may appear.
8.5 RESTORATION. The Lessor's obligation to restore shall not
include the restoration or replacement of the Lessee's furnishings, machinery,
equipment, trade fixtures or other personal property or any improvements or
alterations made by the Lessee to the Premises.
8.6 LIMITATION. Notwithstanding the foregoing, in no event shall
any termination right granted in this Article 8 apply to Parcel C so long as the
Lessee's option to acquire Parcel C remains in effect.
9. PERSONAL PROPERTY TAXES
-----------------------
The Lessee shall pay prior to delinquency all Real Property Taxes and
other taxes assessed against, levied upon or attributable to its furnishings,
machinery, equipment, trade fixtures or other personal property contained in the
Premises or elsewhere and, if required, all improvements to the Premises in
excess of the Lessor's "building standard" improvements. When practicable, the
Lessee shall cause said furnishings, machinery, equipment, trade fixtures and
all other personal property to be assessed and billed separately from the real
property of the Lessor.
10. UTILITIES
---------
The Lessor, as an operating expense of the Building, shall furnish
heating, ventilation and air conditioning Monday through Friday from 6:00 a.m.
to 8:00 p.m. and on Saturday from 8:00 a.m. to 6:00 p.m. except for New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
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The Lessee shall pay for all water, gas, heat, light, power,
janitorial services and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately
metered or charged to the Lessee, the Lessee shall pay a pro rata proportion, as
part of operating expenses, based on leasable area, of all charges jointly
metered or charged with other premises. The Lessor shall not be liable in
damages or otherwise unless due to the Lessor's gross negligence or failure to
comply with its obligations hereunder for any failure or interruption of any
utility services being furnished to the building and no such failure or
interruption shall entitle the Lessee to terminate this Lease. In no event
shall the Lessor be liable for any such failure or interruption caused by the
exercise of governmental authority, strikes, riots, acts of God, war, adverse
weather conditions, fire, flood or casualties or acts of third parties beyond
the Lessor's control. The operation and control of utilities, air conditioning
and any other energy system is subject to compliance with any government
authority governing the regulation and use of energy systems within the
commercial office or industrial building structure. The Lessee shall not
subject any of the mechanical, electrical, plumbing, sewer or other utility or
service systems or equipment to exercise or use which causes damage to said
systems or equipment. Any such damages to equipment caused by the Lessee
overloading such equipment shall be rectified by the Lessee, or may, at the
Lessor's option, be rectified by the Lessor, at the Lessee's sole cost and
expense.
11. ASSIGNMENT AND SUBLETTING
-------------------------
11.1 The Lessee shall not voluntarily or by operation of law sublet,
assign, transfer, mortgage or otherwise encumber, or grant concessions, licenses
or franchises with respect to all or any part of the Lessee's interest in this
Lease or the Premises without the prior written consent of the Lessor, which
shall not be unreasonably withheld. If the Lessee desires at any time to assign
this Lease or to sublet the Premises or any portion thereof, it shall first
notify the Lessor of its desire to do so and shall submit in writing to the
Lessor (i) the name of the proposed sublessee or assignee; (ii) the nature of
the proposed sublessee or assignee; (iii) the nature of the proposed sublessee's
or assignee's business to be carried on in the Premises; (iv) the terms and
provisions of the proposed sublease or assignment; (v) such reasonable financial
information as the Lessor may request concerning the proposed sublessee or
assignee, including, but not limited to, a balance sheet as of a date within
ninety (90) days of the request for the Lessor's consent, statements of income
or profit and loss for the two (2) year period preceding the request for the
Lessor's consent, and in the case of a company that is not publicly traded a
written statement in reasonable details as to the business experience of the
proposed sublessee or assignee during the five (5) years preceding the request
for the Lessor's consent; and (vi) the name and address of sublessee's or
assignee's present or previous landlord. Any sublease, license, concession,
franchise or other permission to use the Premises shall be expressly subject and
subordinate to all applicable terms and conditions of this Lease. Any purported
or attempted assignment, transfer, mortgage, encumbrance, subletting, license,
concession, franchise or other permission to use the Premises contrary to the
provisions of this paragraph shall be void.
11.2 If the Lessee is a nonpublicly-traded corporation, any transfer
of its stock, or any dissolution, merger or consolidation which results in a
change in the control of the Lessee from the person or persons owning a majority
of its voting stock immediately prior thereto, or the sale or other transfer of
all or substantially all of the assets of the Lessee shall constitute an
assignment of the Lessee's interest in this Lease within the meaning of this
Article 11 and the provisions requiring consent contained herein. If any such
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transfer affects the financial condition of the Lessee, the Lessor may require,
as a condition to giving such consent, that the new controlling person(s)
execute a guaranty of this Lease.
11.3 No subletting, assignment, license, concession, franchise or
other permission to use the Premises shall relieve the Lessee of its obligations
to pay the rent or to perform all of the other obligations to be performed by
the Lessee hereunder, unless such release is expressly stated in writing and
consented to by the Lessor. The acceptance of rent by the Lessor from any other
person shall not be deemed to be a waiver by the Lessor of any provisions of
this Lease.
11.4 Within ten (10) days after the Lessor's receipt of the
information specified in Paragraph 11.1 above, the Lessor may by written notice
to the Lessee approve or disapprove such assignment or subletting. If the
Lessor does not act within the ten (10) days, such failure to act is deemed a
disapproval of such request for assignment or subletting. The Lessor shall
advise the Lessee in writing of the basis for any disapproval within ten (10)
days after the approval/disapproval period described above.
11.5 Each assignee or transferee, other than the Lessor, shall
assume all obligations of the Lessee under this Lease to the extent transferred
and shall be and remain liable jointly and severally with the Lessee for the
payment of the rent, and for the due performance of all the terms, covenants,
conditions and agreements to be performed by the Lessee hereunder to the extent
transferred; provided, however, that a transferee other than an assignee shall
be liable to the Lessor for rent only in the amount set forth in the assignment
or transfer. No assignment shall be binding on the Lessor unless such assignee
or Lessee shall deliver to the Lessor a counterpart of such assignment and an
instrument in recordable form which contains a covenant of assumption by such
assignee satisfactory in substance and form to the Lessor, consistent with the
requirements of this Paragraph 11.5, but the failure or refusal of such assignee
to execute such instrument of assumption shall not release or discharge such
assignee from its liability as set forth above.
11.6 Consent by the Lessor to any subletting or assignment shall be
conditioned upon payment by the Lessee to the Lessor of all "Transfer
Consideration" (as hereafter defined) received or to be received, directly or
indirectly, by the Lessee on account of such assignment or subletting. Transfer
Consideration shall be paid to the Lessor at the same time or times as the same
is due to the Lessee. Failure to pay the Lessor the Transfer Consideration, or
any portion or installment thereof, shall be deemed a default under this Lease,
entitling the Lessor to exercise all remedies available to it under law
including, but not limited to, those specified in Article 12 of this Lease.
"Transfer Consideration" shall mean a) in the case of a subletting, any
consideration paid or given, directly or indirectly, by the sublessee to the
Lessee pursuant to the sublease for the use of the Premises, or any portion
thereof, over and above the rent and any additional rent, however denominated,
in this Lease, payable by the Lessee to the Lessor for the use of the Premises
(or portion thereof), prorating as appropriate the amount payable by the Lessee
to the Lessor under this Lease, if less than all of the Premises is sublet, and
(b) in the case of an assignment or a sublease, any consideration paid or given,
directly or indirectly, by the sublessee or assignee to the Lessee in exchange
for entering into the sublease or assignment, but shall not include
reimbursement for any security deposit, reimbursement of any improvements,
fixtures or furnishings installed in the Premises by the Lessee or any payment
for personal property of the Lessee not in excess of the Lessee's book value
thereof. As used herein, consideration shall include consideration in any form,
including, but not limited to, money, property, assumption of liabilities other
than those arising under this Lease, discounts, services, credits or any other
item or thing of value. Irrespective of
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the form of such consideration, the Lessor shall be entitled to be paid in cash
in an amount equivalent to the aggregate of the cash portion of the Transfer
Consideration and the value of any non-cash portion of the Transfer
Consideration. If any Transfer Consideration is to be paid or given in
installments, the Lessee shall pay each such installment at the time the same is
to be paid or given.
11.7 The Lessee shall reimburse the Lessor for the Lessor's
reasonable costs and attorneys' fees incurred in conjunction with the processing
and documentation of any assignment, subletting, transfer, change of ownership
or hypothecation of this Lease or the Lessee's interest in the Premises.
11.8 TRANSFER TO AFFILIATE. Notwithstanding any of the provisions
in this Lease to the contrary, the original Lessee shall have the right, without
the Lessor's consent, to assign this Lease to a corporation or other entity with
which the Lessee may merge or consolidate, to any parent or subsidiary of the
Lessee, or a subsidiary of the Lessee's parent, provided that within fifteen
(15) days of such assignment, such assignee delivers to the Lessor a written
agreement pursuant to which such assignee agrees to assume all of the
obligations of the Lessee under this Lease and be bound by all of the terms
hereof. In the event of any such assignment to a parent, affiliate or successor
by merger or consolidation, no Transfer Consideration or other consideration
paid to the Lessee by the assignee shall be payable to the Lessor, and none of
the other provisions of this Article 11 shall be applicable to such transfer.
Notwithstanding the preceding, in no event shall any such assignment relieve the
original Lessee of any liability whatsoever under this Lease.
12. DEFAULTS; REMEDIES
------------------
12.1 DEFAULT BY LESSEE. The occurrence of any one or more of the
following events shall constitute a default of this Lease by the Lessee:
(A) The vacating or abandonment of the Premises by the Lessee
combined with the failure to pay rent;
(B) The failure of the Lessee to make any payment of rent or
any other payment required to be made by the Lessee hereunder, as and when due,
where such failure shall continue for a period of ten (10) days after written
notice thereof from the Lessor to the Lessee; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161. In the event that the Lessor
has given a ten (10) day notice hereunder twice in any twelve (12) month period,
any subsequent notice hereunder during such period shall allow a cure within
three (3) days of such notice, which three (3) day notice shall also be in lieu
of any notice required under Section 1161;
(C) The failure by the Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease (or the covenants, conditions
and restrictions governing the Project) to be observed or performed by the
Lessee, other than described in Paragraph 12.1(b) hereof, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from the Lessor to the Lessee. Any such notice shall not be in lieu of any
notice required under California Code of Civil Procedure Section 1161. If the
nature of the Lessee's default is such that more than thirty (30) days are
reasonably required for its cure, then the Lessee
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shall not be deemed to be in default if the Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion; or
(D) The making by the Lessee of any general assignment or
general arrangement for the benefit of creditors; the filing by or against the
Lessee of a petition to have the Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against the Lessee, the same is dismissed within
sixty (60) days) the appointment of a trustee or receiver to take possession of
substantially all of the Lessee's assets located at the Premises, or of the
Lessee's interest in this Lease, where possession is not restored to the Lessee
within thirty (30) days; or the attachment, execution or other judicial seizure
of substantially all of the Lessee's assets located at the Premises or of the
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days.
12.2 REMEDIES FOR DEFAULT BY LESSEE. In the event of any such
default, the Lessor may at any time thereafter, upon notice and demand and
without limiting the Lessor in the exercise of any other right or remedy which
the Lessor may have by reason of such default or breach:
(A) Terminate the Lessee's right to possession of the Premises
(other than Parcel C for so long as the Lessee's option to acquire Parcel C
remains in effect) by any lawful means, in which case this Lease shall terminate
(except with regard to Parcel C) and the Lessee shall immediately surrender
possession of the Premises to the Lessor (except with regard to Parcel C). In
such event, the Lessor shall be entitled to recover from the Lessee:
(1) The worth at the time of award of the unpaid rent
which has been earned at the time of termination;
(2) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided;
(3) The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and
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(4) Any other amount necessary to compensate the
Lessor for all the detriment proximately caused by the Lessee's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not limited to: the
cost of recovering possession of the Premises, expenses of releasing including
necessary renovation and alteration of the Premises, reasonable attorneys' fees
and any other reasonable cost. The "worth at the time of award" of the amounts
referred to in subparagraphs (1) and (2) above shall be computed by allowing
interest at five (5) percentage points above the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award. The "worth at the time
of award" of the amount referred to in subparagraph (3) above shall be computed
by discounting such amount at one (1) percentage point above such discount rate.
(B) Pursue any other remedy now or hereafter available to the
Lessor under the laws or judicial decisions of the State of California except
the termination of this Lease as to Parcel C for so long as the Lessee's option
to acquire Parcel C remains in effect, including, but not limited to, the remedy
provided in California Civil Code Section 1951.4 to continue this Lease in
effect.
(C) The Lessor, in addition to the rights hereinbefore given
in the case of the Lessee's breach or default, may pursue any other remedy
available to the Lessor at law or in equity.
(D) In addition to the rights hereinbefore given in the case
of the Lessee's breach or default, Lessor may offset any delinquent rent or
other payment due hereunder against payments due to the Lessee under any
promissory note, option agreement or other instrument or agreement between the
Lessor and the Lessee. The Lessor shall deliver written notice to the Lessee of
the Lessor's intent to exercise such right identifying the delinquent payment
and amount that the Lessor intends to offset.
12.3 DEFAULT BY LESSOR. The Lessor shall not be in default of any
of the obligations of the Lessor under the Lease, unless the Lessor fails to
perform such obligations within a reasonable time, but in no event less than
thirty (30) days after written notice by the Lessee to the Lessor specifying
wherein the Lessor has failed to perform such obligations; provided, however,
that if the nature of the Lessor's default is such that more than thirty (30)
days are required for its cure, the Lessor shall not be in default if the Lessor
commences such cure within such thirty (30) day period and thereafter diligently
prosecutes the same to completion. In the event of any such default by the
Lessor, the Lessee may pursue any remedy now or hereafter available to the
Lessee under the laws of judicial decisions of the State of California, except
that the Lessee shall not have the right to terminate this Lease except as
expressly provided herein nor to set off against any payments due under this
Lease. The Lessee waives any right to deduct the expenses of repairs done by the
Lessor on the Lessor's behalf from the rent and waives, except as herein
provided, any of the Lessor's obligations for tenantability of the Building or
the Premises.
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12.4 LATE CHARGES. The Lessee acknowledges that the late payment by
the Lessee to the Lessor of rent and other sums due hereunder will cause the
Lessor to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges and late charges which may be
imposed on the Lessor by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from the
Lessee shall not be received by the Lessor, or the Lessor's designee, within ten
(10) days after the same is due, the Lessee shall pay to the Lessor a late
charge equal to five percent (5%) of such overdue amount, monthly, until such
overdue amount is paid. The Lessee acknowledges that such late charge
represents a fair and reasonable estimate of the cost that the Lessor will incur
by reason of a late payment by the Lessee. Acceptance of such late charge by
the Lessor shall in no event constitute a waiver of the Lessee's default with
respect to such overdue amounts nor prevent the Lessor from exercising any of
the other rights and remedies granted hereunder.
13. CONDEMNATION OR RESTRICTION ON USE
----------------------------------
13.1 EMINENT DOMAIN. If the whole of the Premises or the Common
Area, or so much thereof as to cause a material interference with the conduct of
the Lessee's business in the Premises as a whole shall be taken under power of
eminent domain, this Lease shall automatically terminate as of the date of such
condemnation, or as of the date possession is taken by the condemning authority,
whichever is earlier. No award for any partial or entire taking or the balance
of the Project shall be apportioned, and the Lessee hereby assigns to the Lessor
any award which may be made in such taking or condemnation, together with any
and all rights of the Lessee now or hereafter arising in or to the same or any
part thereof; provided, however, that nothing contained herein shall be deemed
to give the Lessor any interest in or to require the Lessee to assign to the
Lessor any award made to the Lessee for its relocation expenses, the taking of
personal property and fixtures belonging to the Lessee, the interruption of or
damage to the Lessee's business and/or for the Lessee's unamortized cost of
leasehold improvements. The unamortized portion of the Lessee's expenditures for
improving the Premises shall be determined by multiplying such expenditures by a
fraction, the numerator of which shall be the number of years of the term of
this Lease which shall not have expired at the time of such appropriation or
taking and the denominator of which shall be the number of years of the term of
this Lease which shall not have expired at the time of improving the Premises.
In no event shall options to renew or extend be taken into consideration in
determining the payment to be made to the Lessee. The Lessee's right to receive
compensation or damages for its fixtures and personal property shall not be
affected in any manner thereby.
13.2 ABATEMENT OF RENT. In the event of a partial taking which does
not result in a termination of this Lease, rent shall be abated in proportion to
that part of the Premises so made unusable by the Lessee.
13.3 TEMPORARY TAKING. No temporary taking of the Premises and/or
of the Lessee's rights therein or under this Lease shall terminate this Lease or
give the Lessee any right to any abatement of rent hereunder; and any award made
to the Lessee by reason of any such temporary taking shall belong entirely to
the Lessee and the Lessor shall not be entitled to share therein.
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If such condemnation takes all or a portion of Parcel C, the
Lessor shall cause the award to be allocated by the condemning authority. The
portion of the award allocable to Parcel C shall be paid to the Lessee.
13.4 VOLUNTARY SALE AS TAKING. A voluntary sale by the Lessor to
any public body or agency having the power of eminent domain, either under
threat of condemnation while condemnation proceedings are pending, shall be
deemed to be a taking under the power of eminent domain for the purpose of this
Article 13.
14. BROKERS
-------
The Lessor and the Lessee represent and warrant that they have neither
incurred nor are aware of any broker's, finder's, or similar fee payable as a
result of a claim of any person representing the Lessee in connection with the
origin, negotiation, execution or performance of this Lease and each party
agrees to indemnify and hold harmless the other party from any loss, liability,
damage, cost or expense incurred by reason of a breach of this representation.
15. LESSOR'S LIABILITY
------------------
15.1 The term "Lessor" as used herein shall mean only the owner or
owners at the time in question of the fee title or a lessee's interest in a
ground lease of the Building. In the event of any transfer of such title or
interest, the Lessor herein named (and in case of any subsequent transfers, the
then grantor) shall be relieved from, and after the date of such transfers of
all liability for the Lessor's obligations thereafter to be performed; provided,
however, that any funds in the hands of the Lessor or the then grantor at the
time of such transfer in which the Lessee has an interest shall be delivered to
the grantee. The obligations contained in this Lease to be performed by the
Lessor shall, subject as aforesaid, be binding on the Lessor's successors and
assigns only during their respective periods of ownership.
15.2 The initial Lessor hereunder is a joint venture, corporation,
limited liability company, partnership or sole partnership ("Owner"). In
consideration of the benefits accruing hereunder, the Lessee, its successors and
assigns, agree that, in the event of any actual or alleged failure, breach or
default hereunder by the initial Lessor:
(A) The sole and exclusive remedy shall be against the Project
and the Owner's interest in the Project. There shall be no recourse against the
Owner personally or any other assets of the Owner;
(B) No joint venturer, shareholder, member, partner or sole
proprietor of the Owner ("Member") shall be sued or named a party in any suit or
action (except as may be necessary to secure jurisdiction of the Owner);
(C) No service of process shall be made against any Member
(except as may be necessary to secure jurisdiction of the Owner);
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(D) No Member shall be required to answer or otherwise plead
to any service of process unless such Member is the Owner;
(E) No judgment will be taken against any Member unless such
Member is the Owner;
(F) Any judgment taken against any Member may be vacated and
set aside at any time nunc pro tunc unless such Member is the Owner;
(G) No writ of execution will ever be levied against the
assets of any Member (other than the Project); and
(H) These covenants and agreements are enforceable by the
Owner and also by any Member thereof.
16. PARKING
-------
During the term of this Lease, the Lessee shall have the right in
common with other tenants of the Building (if any) and any adjacent buildings,
to use the parking area available to tenants of the Building. The Lessee's use
of such parking facilities or that of its invitees shall be limited to a maximum
of the number of parking spaces shown in item 10 of the Basic Lease Provisions
(but such space will not be separately identified and the Lessor shall have no
obligation to monitor the use of such parking facility), and shall be subject to
such rules and regulations as may be established, from time to time, by the
Lessor for the effective use of such parking facilities. Such rules and
regulations may include, but shall not be limited to, designation of specific
areas for use by invitees of the Lessee and the Lessor; hours during which
parking shall be available for use; parking attendants; a parking validation or
other control system to prevent parking abuse; and such other matters affecting
the parking operation to the end that said facilities shall be utilized to
maximum efficiency and in the best interest of the Lessor, the Lessee and their
respective invitees.
The Lessor may temporarily close any part of the Common Area for such
periods of time as may be necessary to prevent the public from obtaining
prescriptive rights or to make repairs, alterations, or in connection with the
construction of improvements on the Project. During any such construction, the
Lessor shall provide alternative parking. The Lessor shall not have any express
or implied obligation to enforce or police the parking lot usage. The Lessee's
right to use any area for parking purposes shall be subject to restrictions or
other limitations resulting from any laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be in
force, and no such event shall in any way affect this Lease, abate rent, relieve
the Lessee of any liabilities or obligations under this Lease, or give rise to
any claim whatsoever against the Lessor; specifically, the Lessee's right to use
any area for parking purposes shall be subject to any preferential parking
program for participants in any ridesharing program established by the Lessor.
If the Lessor reasonably determines that the Lessee is regularly using in excess
of the number of parking spaces specified in item 10 of the Basic Lease
Provisions, the Lessor may, in addition to any other remedy, impose a reasonable
charge for such excess usage, payable by the Lessee upon the same terms as the
rent is payable hereunder.
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17. GENERAL PROVISIONS
------------------
17.1 ESTOPPEL CERTIFICATE
(A) The Lessee and the Lessor shall at any time, and from time
to time, upon not less than ten (10) days' prior written notice from the other
party, execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are no, to such party's knowledge, uncured defaults on
the part of the requesting party hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises or any assignee or
sublessee of the Lease.
(B) The Lessee's or the Lessor's failure to deliver such
statement within such time shall be conclusive upon such party that (i) this
Lease is in full force and effect without modification except as may be
represented by the requesting party, (ii) there are no uncured defaults in the
requesting party's performance, and (iii) not more than one (1) month's rent has
been paid in advance.
(C) If the Lessor desires to finance or refinance the
Premises, or any part thereof, the Lessee shall deliver to any lender designated
by the Lessor such financial statements of the Lessee as may be reasonably
required by such lender. If the Lessee is a publicly traded corporation, the
financial statements may be the most recent publicly available statements. All
such financial statements shall be received by the Lessor in confidence and
shall be used only for the purposes herein set forth.
17.2 SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
17.3 TIME OF ESSENCE. Time is of the essence in the performance of
all terms and conditions of this Lease in which time is an element.
17.4 CAPTIONS. Article and paragraph captions have been inserted
solely as a matter of convenience and such captions in no way define or limit
the scope or intent of any provision of this Lease.
17.5 NOTICES. Any notice required or permitted to be given
hereunder shall be in writing and may be served personally or by regular or
overnight mail, addressed to the Lessor and the Lessee respectively at the
addresses set forth before their signatures in item 11 of the Basic Lease
Provisions, or to such other or additional persons or at such other addresses as
may, from time to time, be designated in writing by the Lessor or the Lessee by
notice pursuant hereto.
17.6 WAIVERS. No waiver of any provision hereof shall be deemed a
waiver of any other provision hereof. Consent to or approval of any act by one
of the parties hereto shall not be deemed to render unnecessary the obtaining of
such party's consent to or approval of any subsequent act. The acceptance of
rent
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<PAGE>
hereunder by the Lessor shall not be a waiver of any preceding breach by the
Lessee of any provision hereof, other than the failure of the Lessee to pay the
particular rent so accepted, regardless of the Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
17.7 HOLDING OVER. If the Lessee holds over after the expiration or
earlier termination of the term hereof without the express written consent of
the Lessor, the Lessee shall become a tenant at sufferance only at one hundred
fifty percent (150%) of the monthly rent for the Premises then in effect for the
space, in effect upon the date of such expiration or earlier termination
(subject to adjustment as provided in Article 3 hereof and prorated on a daily
basis), and otherwise upon the terms, covenants and conditions herein specified,
so far as applicable. Acceptance by the Lessor of rent after such expiration or
earlier termination shall not constitute a consent to a holdover hereunder or
result in a renewal. The foregoing provisions of this paragraph are in addition
to and do not affect the Lessor's right of re-entry or any other rights of the
Lessor hereunder or as otherwise provided by law. Lessee shall not be deemed to
be holding over in the event of continued occupancy pursuant to Section 2.
17.8 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
17.9 INUREMENT. Subject to any provisions hereof restricting
assignment or subletting by the Lessee and subject to the provisions of Article
15 hereof, the terms and conditions contained in this Lease shall bind the
parties, their personal representatives, successors and assigns.
17.10 CHOICE OF LAW. This Lease shall be governed by the laws of
the State of California.
17.11 SUBORDINATION. This Lease shall, at the Lessor's option, be
either superior or subordinate to mortgages or deeds of trust on the Premises,
whether now existing or hereinafter created. The Lessee shall, upon written
demand by the Lessor, execute such instruments as may be required, from time to
time, to subordinate the rights and interest of the Lessee under this Lease to
the lien of any mortgage or deed of trust on the Building. Notwithstanding any
such subordination, so long as the Lessee is not in default hereunder, this
Lease shall not be terminated or the Lessee's quiet enjoyment of the Premises
disturbed in the event such mortgage or deed of trust is foreclosed. In the
event of such foreclosure, the Lessee shall thereupon become a Lessee of, and
attorn to, the successor in interest to the Lessor on the same terms and
conditions as are contained in this Lease. The Lessee may condition any
subordination upon the Lessor's and any lender's agreement to execute a
Nondisturbance, Subordination and Attornment Agreement reasonably approved by
the Lessee. The Lessee agrees that a Nondisturbance, Subordination and
Attornment Agreement that provides that the lender or transferee of the Building
and/or the Project is (i) not responsible for any defaults of the Lessor prior
to the date of transfer and (ii) not liable for the security deposit unless it
is actually received from Lessor are reasonable provisions.
The Lessee agrees to execute subordination agreements from time to
time at the request of the Lessor subordinating this Lease and any Memorandum of
this Lease, to easements, rights of way, development agreements, covenants,
conditions and restrictions, or other instruments and documents necessary or
appropriate to the development of the Project and the Building as determined by
the Lessor; provided, however, that no
28
<PAGE>
term or provision of any such instrument or document shall materially diminish
or change the rights of the Lessee hereunder.
17.12 ATTORNEYS' FEES. If any action at law or equity, including
an action for declaratory relief, is brought to enforce the provisions of this
Lease, the prevailing party shall be entitled to recover actual attorneys' fees
incurred in bringing such action and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of the action
and shall be paid whether or not such action is prosecuted to judgment. The
attorneys' fees to be awarded the prevailing party may be determined by the
court in the same action or in a separate action brought for that purpose. Any
judgment or order entered in such action shall contain a specific provision
providing for the recovery of actual attorneys' fees and costs incurred in
enforcing such judgment. The award of attorneys' fees shall not be computed in
accordance with any court schedule, but shall be made so as to fully reimburse
the prevailing party for all attorneys' fees, paralegal fees, costs and expenses
actually incurred in good faith, regardless of the size of the judgment, it
being the intention of the parties to fully compensate the prevailing party for
all attorneys' fees, paralegal fees, costs and expenses paid or incurred in good
faith. For purposes of this section, attorneys' fees shall include, without
limitation, attorneys' fees, paralegal fees, costs and expenses incurred in
relation to any of the following: post-judgment motions; contempt proceedings,
garnishment, levy and debtor or third party examinations; discovery; and
bankruptcy litigation.
17.13 LESSOR'S ACCESS. Subject to compliance with the Lessee's
reasonable security procedures, the Lessor and the Lessor's agents shall have
the right to enter the Premises at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers, lessees, or
lenders, and making such alterations, repairs, improvements or additions to the
Premises or to the Building as the Lessor may deem necessary or desirable. The
Lessor may at any time place on or about the Building any ordinary "For Sale"
signs and the Lessor may, at any time during the last one hundred eighty (180)
days of the term hereof (or during any period in which the Lessee is in default
under this Lease), place on or about the Building any ordinary "For Sale", "For
Lease" or similar signs, all without rebate of rent or liability to the Lessee.
17.14 CORPORATE AUTHORITY. If the Lessee is a corporation, the
Lessee shall, at the Lessor's request, require that each individual executing
this Lease on behalf of said corporation represent and warrant that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the Bylaws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms. The Lessee
shall also, at the Lessor's request, within thirty (30) days after execution of
this Lease, deliver to the Lessor a certified copy of a resolution of the Board
of Directors of said corporation authorizing or ratifying the execution of this
Lease.
17.15 SURRENDER OR CANCELLATION. The voluntary or other surrender
of this Lease by the Lessee, or a mutual cancellation thereof, shall not work a
merger, and shall terminate all or any existing subleases, unless the Lessor
elects to treat such surrender or cancellation as an assignment to the Lessor of
any or all of such subleases.
17.16 ENTIRE AGREEMENT. This Lease, the exhibits hereto which by
this reference are incorporated herein as though set forth in full herein,
covers in full each and every agreement of every kind or
29
<PAGE>
nature whatsoever between the parties hereto concerning the Premises and the
Building, and all preliminary negotiations and agreements of whatsoever kind or
nature are merged herein. The Lessor has made no representations or promises
whatsoever with respect to the Premises or the Building, or the design
configuration of the Project, except those contained herein, and no other
person, form or corporation has at any time had any authority from the Lessor to
make nay representations or promises on behalf of the Lessor. If any such
representations or promises have been made by others, the Lessee hereby waives
all right to rely thereon. No verbal agreement or implied covenant shall be held
to vary the provisions hereof, any statute, law or custom to the contrary
notwithstanding.
Except as otherwise provided herein, nothing expressed or implied
herein is intended or shall be construed to confer upon or grant any person any
rights or remedies under or by reason of any term or condition contained in this
Lease.
17.17 SIGNS. No sign, placard, picture, advertisement, name or
notice shall be inscribed, displayed, printed or affixed to or near any part of
the outside or inside of the Building without the written consent of the Lessor
first had and obtained and without full compliance with all governmental
requirements and with the Project Signage Plan and any other required consents.
The Lessor shall have the right to remove any unapproved sign, placard, picture,
advertisement, name or notice without notice to and at the expense of the
Lessee. All approved signs shall be installed at the Lessee's sole cost and
expense. The Lessee further agrees to maintain any such approved signs, as may
be approved by the Lessor, in good condition and repair at all times. The
Lessee shall not place any sign on a vehicle or movable or non-movable object in
or on the street adjacent to the Project. Lessor hereby approves all existing
signage.
17.18 INTEREST ON PAST DUE OBLIGATIONS. Any amount due from the
Lessee to the Lessor hereunder which is not paid when due shall bear interest at
five (5) percentage points above the discount rate of the Federal Reserve Bank
of San Francisco at the time of the award or the maximum allowable under the
law, whichever is greater, from the date due until paid, but the payment of such
interest shall not excuse or cure any default by the Lessee.
17.19 GENDER; NUMBER. Whenever the context of this Lease requires,
the masculine gender includes the feminine or neuter, and the singular number
includes the plural.
17.20 RECORDING OF LEASE. The Lessee and Lessor shall execute and
record a Memorandum of Lease upon the acquisition of title to the Project by the
Lessor. At the expiration or sooner termination of this Lease, the Lessee shall
execute, acknowledge and deliver to the Lessor, within ten (10) days after
written demand from the Lessor, any quitclaim deed or other document reasonably
required by any reputable title company to remove the cloud of this Lease from
the title of the real property subject to the Lease.
17.21 WAIVER OF SUBROGATION. The Lessor and the Lessee each
hereby waive any and all rights of recovery against the other, or against the
officers, employees and agents and representatives of the other, for loss of or
any damage to such waiving party or its property, or the property of others
under its control, to the extent that such loss or damage is insured against
under any valid and collectible insurance policy in force at the time of such
loss or damages. The Lessee shall, upon obtaining the policies of insurance
30
<PAGE>
required hereunder, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
17.22 CONFIDENTIALITY OF LEASE. The Lessee acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of the Lessor. Disclosure of the terms hereof could adversely
affect the ability of the Lessor to negotiate other leases with respect to the
Building and impair the Lessor's relationship with other tenants of the
Building. The Lessee agrees that it, its partners, officers, directors,
employees and attorneys, shall not disclose the terms and conditions of this
Lease to any other person without the prior written consent of the Lessor. It
is understood and agreed that damages would be an inadequate remedy for the
breach of this provision by the Lessee, and the Lessor shall have the right to
specific performance of this provision and to injunctive relief to prevent its
breach or continued breach.
17.23 QUIET ENJOYMENT. Provided the Lessee has performed all of
the terms, covenants, agreements and conditions of this Lease, including the
payment for rent and all other sums due hereunder, the Lessee shall peaceably
and quietly hold and enjoy the Premises for the term hereof, but subject to the
provisions and conditions of this Lease against the Lessor and all persons
claiming by, through or under the Lessor. The Lessee's right to use the
Premises and the Common Area as herein provided shall be subject to restrictions
or other limitations or prohibitions resulting from any laws, statutes,
ordinances and governmental rules, regulations or requirements now in force or
which may hereafter be in force and no such event shall in any way affect this
Lease, abate rent, relieve the Lessee of any liabilities or obligations under
this Lease or give rise to any claim whatsoever against the Lessor.
17.24 MATERIALS STORAGE RESTRICTIONS. The Lessee agrees to conduct
its business so as not to violate or exceed the design standards of the fire
protection system or any insurance policies maintained by the Lessor pursuant to
Article 7.
17.25 NO AGENCY. Neither party is the agent or partner of the
other, and the legal relationship between the parties hereto shall be governed
solely by the terms of this Lease and the other instruments and documents
referred to herein when duly executed by both parties with respect to the
transactions contemplated hereby.
17.26 FORCE MAJEURE. Notwithstanding any of the items set forth
above, the Lessor shall bear no liability of whatever kind to the Lessee if,
despite the Lessor's exercise of due diligence, the Lessor's carrying out of its
obligations, as defined herein, prevented or delayed by legal action, nor by the
exercise of governmental authority, whether Federal, State of County, or other
or by force majeure, strikes, riots, acts of God, war, adverse weather
conditions, fire, unavoidable casualties, or acts of third parties beyond the
Lessor's control.
17.27 ACCORD AND SATISFACTION. No payment by the Lessee or
receipt by the Lessor of a lesser amount than the rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and the Lessor may
accept such check or payment without prejudice to the Lessor's right to recover
the balance of such rent or pursue any other remedy provided in this Lease.
31
<PAGE>
17.28 FINANCIAL STATEMENTS. The Lessee shall deliver to the
Lessor, prior to the execution of this Lease, its financial statement, and the
annual financial statements of the Lessee within ninety (90) days after the end
of the Lessee's fiscal year, which shall be certified by the Lessee as true and
correct. If the Lessee is a publicly-traded corporation, the financial
statements may be the most recent publicly available statements. The Lessee
shall also provide financial statements of any guarantor of this Lease, which
shall be certified as true and correct by such guarantor. Such financial
statements shall be based upon generally accepted accounting principles applied
on a consistent basis. The financial statements shall clearly show sufficient
information to accurately depict the financial condition of the Lessee as of the
date thereof. If the Lessee is a partnership or joint venturer, such financial
statements shall, upon the Lessor's request, be accompanied by similar financial
statements of each general partner or joint venture of the Lessee. Such similar
statements shall be certified to be true and correct by the subject thereof.
Within five (5) days following written request by the Lessor delivered after any
default by the Lessee in the payment of any sums owing under this Lease, whether
or not any time period allowed for the cure of such default has expired, the
Lessee shall provide the Lessor with copies of the Lessee's financial statement
for the end of the most recent quarter of the Lessee's fiscal year, and the
Lessee's financial statement (including year to date information) for the end of
the month preceding such default. In each case, such financial statement shall
meet all of the preceding requirements for annual financial statements. The
Lessee's failure to deliver the financial statements contemplated hereby within
the time specified shall constitute a material default by the Lessee under this
Lease.
17.29 SUPERSEDES PROPOSAL TO LEASE. This Lease supersedes any
proposals regarding the leasing of the Premises, whether written or oral, and
any such proposals will be terminated, and of no force or effect, effective upon
the execution of this Lease.
17.30 CONSTRUCTION. The provisions of this Lease should be
liberally construed to effectuate its purposes. The language of all parts of
this Lease shall be construed simply according to its plain meaning and shall
not be construed for or against either party, as each party has participated in
the drafting of this Lease and had the opportunity to have their counsel review
it. Whenever the context and construction so requires, all words used in the
singular shall be deemed to be used in the plural, all masculine shall include
the feminine and neuter, and vice versa.
17.31 CONSENT. Except as otherwise provided, in all cases where
the consent or approval shall be requested of the Lessor or the Lessee pursuant
to the Lease, the giving of such consent shall not be unreasonably withheld,
conditioned or delayed by the party from whom such consent or approval is
required.
Whenever the Lease grants the Lessor or the Lessee the right to
take action, exercise discretion, establish rules and regulations or make
allocations or other determinations, the Lessor or the Lessee shall act
reasonably and in good faith and take no action which might result in the
frustration of the reasonable expectations of a sophisticated landlord and/or a
sophisticated tenant concerning the benefits to be enjoyed under the Lease. In
all cases where any party is required to express its denial of consent, such
denial shall be in writing and state all the reasons for such denial.
Furthermore, where consent is required, consent will be deemed to have been
granted unless a written denial of consent is received by the requesting party
within ten (10) business days of when the request for consent has been made.
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<PAGE>
17.32 ARBITRATION. In addition to all of the legal rights and
remedies that are available to the Lessee at law or in equity, in the event that
any dispute or disagreement between the Lessor and the Lessee arises under the
Lease or any related document, the matter may, at the Lessee's election, be
heard by judicial reference conducted in accordance with the California Code of
Civil Procedure and California Evidence Code, or by arbitration in accordance
with the provisions and rules of the American Arbitration Association conducted
with all applicable rights of discovery under the California Evidence Code and
the rules of the California Evidence Code. Either of the above procedures shall
be binding and non-appealable.
18. NEW BUILDING
------------
The Lessee and the Lessor acknowledge that, during the term of this
Lease, the Lessor will be constructing a new building consisting of
approximately 75,000 - 81,000 rentable square feet in the approximate location
shown on Exhibit F attached hereto (the "New Building"). The Lessor will use
its best efforts to cause the New Building to be substantially completed within
fifteen (15) months from the issuance of building permits for the New Building
(the "Construction Period"). The Lessee has agreed to lease approximately
50,000 rentable square feet of the New Building pursuant to the terms of the
Building Lease between the parties of even date herewith. A description of the
development and construction of the New Building, including a description of the
tenant improvement allowance to be given to the Lessee, the tenant improvements
to be constructed for the Lessee (the "Tenant Improvements"), and the
utilization of the tenant improvement allowance for those improvements, is
described in a Development and Construction Agreement between the parties of
even date herewith.
In the event that the Construction Period exceeds twelve (12) months
from the date building permits are issued for the New Building for any reason
whatsoever, the Initial Annual Rent for the Initial or Intermediate Premises, as
applicable, shall be increased to an annual amount of Five Hundred Eight
Thousand Dollars ($508,000), or Forty-two Thousand Four Hundred Thirty-three
Dollars ($42,433) per month. Except in the case of a Tenant-caused delay, as
defined in the Development and Construction Agreement between the Lessor and the
Lessee dated April 25, 1995, in the event that the New Building and the Tenant
Improvements are not substantially complete within the Construction Period, and
the delay is not attributable to factors outside the control of the Lessor,
including, without limitation, delays in receiving approvals, permits, strikes,
labor or materials shortages or acts of God, the base rent shall be reduced to
the Initial Annual Rent of Four Hundred Eight Thousand Dollars ($408,000), or
Thirty-four Thousand Dollars ($34,000) per month plus the adjustment that would
have been made with respect to the Initial Annual Rent pursuant to Paragraph 3.5
on the Adjustment Date. This reduced base rent, with the annual adjustments
provided for in Paragraph 3.5, shall continue to be due and payable until the
Tenant Improvements for the portion of the New Building to be occupied by Lessee
are substantially complete.
The Lessee acknowledges and agrees that the development and
construction of the New Building will inevitably result in dislocation,
inconvenience, dust, noise and disruption. The Lessee further acknowledges that
access to the Premises will be affected by the construction process and that a
portion of the parking area available to the Premises may be used for storage or
access to the construction project. The Lessor shall take reasonable steps to
minimize any dislocation and inconvenience or diminution in access or parking
rights. The Lessee agrees that it shall have no claim for a reduction or
abatement in the rent payable
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<PAGE>
hereunder or for damages as a result of any loss of quite enjoyment except as
may result from the recklessness or willful misconduct of the Lessor, its
agents, contractors and employees.
19. FURTHER CONSTRUCTION
--------------------
The Lessee acknowledges that, in addition to constructing the New
Building, the Lessor intends to construct additional improvements on the
property of which the Premises are a part or to which they are adjacent. The
Lessee again acknowledges and agrees that the development and construction of
the additional improvements will inevitably result in dislocation,
inconvenience, dust, noise and disruption. The Lessee further acknowledges that
access to the Premises will be affected by the construction process and that a
portion of the parking area available to the Premises may be used for storage or
access to the construction project. The Lessor shall take reasonable steps to
minimize any dislocation and inconvenience or diminution in access or parking
rights. The Lessee agrees that it shall have no claim for a reduction or
abatement in the rent payable hereunder or for damages as a result of any loss
of quite enjoyment except as may result from the recklessness or willful
misconduct of the Lessor, its agents, contractors and employees.
20. OPTION TO ACQUIRE PARCEL C
--------------------------
In consideration of the execution of this Lease by the Lessee, the
Lessor hereby grants to the Lessee an option to acquire Parcel C on the terms
and conditions described in the Option to Acquire Parcel C, attached hereto as
Exhibit C.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Interim Lease as of the
date first written above.
LESSOR:
Date: _____________, 1995 BERMANT DEVELOPMENT COMPANY
By:____________________________________
Name and Title:________________________
Address:
-------
130 Cremona Drive, Suite D
Goleta, CA 93117-3075
LESSEE:
Date: _____________, 1995 GRC INTERNATIONAL, INC.,
A DELAWARE CORPORATION
By:____________________________________
Name and Title:________________________
Address:
-------
1900 Gallows Road
Vienna, Virginia 22182
35
<PAGE>
EXHIBIT 13
SELECTED FINANCIAL DATA
- -----------------------
GRC International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEAR 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES $137,808 $129,922 $130,644 $114,107 $108,573
======== ======== ======== ======== ========
OPERATING INCOME * $ 4,760 $ 6,093 $ 5,683 $ 4,092 $ 4,205
======== ======== ======== ======== ========
Income from continuing operations before
cumulative effect of accounting change $ 5,030 $ 6,113 $ 5,509 $ 3,805 $ 3,072
Loss from discontinued operations - - - - (6,000)
Income from cumulative effect of
accounting change - 1,000 - - -
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 5,030 $ 7,113 $ 5,509 $ 3,805 $ (2,928)
======== ======== ======== ======== ========
INCOME (LOSS) PER COMMON
SHARE:
Continuing operations before cumulative
effect of accounting change $ .54 $ .65 $ .60 $ .43 $ .34
Discontinued operations - 0 - - (.67)
From cumulative effect of accounting
change - .11 - - -
-------- -------- -------- -------- --------
$ .54 $ .76 $ .60 $ .43 $ (.33)
======== ======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 9,393 9,426 9,211 8,893 8,875
YEAR-END DATA
Working capital $ 20,768 $ 25,061 $ 26,286 $ 24,055 $ 20,731
Total assets 73,709 69,080 65,082 55,670 52,527
Long-term debt (less
current maturities) 0 0 3,051 4,098 4,154
Stockholders'equity 48,268 45,040 39,310 33,889 30,109
</TABLE>
* Operating income for fiscal 1995 includes the gain of approximately $.9
million from the sale a facility.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
SUMMARY
The following table sets forth for the years indicated the percentage of
total revenues for each item in the Consolidated Statements of income and the
percentage change of those items as compared to the prior year:
<TABLE>
<CAPTION>
RELATIONSHIP TO PERIOD TO
TOTAL REVENUES PERIOD CHANGE
-------------------- -----------------------
1995 1994 1993 95 VS. 94 94 VS. 93
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues 100% 100% 100% 6% (1)%
Cost of revenues 81 80 81 8 (2)
Gross Margin 19 20 19 (1) 6
General, administrative, marketing, __ __ __
research and development expenses 15 15 15 8 3
Provision for losses 1 __ __ 32 95
Gain on sale of asset __ __ __ 100 __
Operating income 3 5 4 (22) 7
Interest income, net __ __ __ (15) 138
Income before cumulative effect of
accounting change and before income 3 5 4 (22) 10
taxes
Provision for income taxes __ __ __ (100) (3)
Income before cumulative effect of 3 5 4 (18) 11
accounting change
Cumulative effect of accounting change __ __ __ (100) 100
Net income 3 5 4 (29) 29
</TABLE>
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
- -----------------------------------------------
Revenues were $137.8 million for 1995, compared with $129.9 million for
1994. The revenue increase of $7.9 million or 6.1% is attributable to a $8.9
million increase in subcontract work (work performed by other organizations and
included in the Company's revenues) offset by a slight decrease of $1.0 million
in the Company's service revenues and product sales. The Company typically does
not earn a fee on subcontract revenues. The revenues generated from the
Company's professional services business remained relatively flat due to the
impact of temporary delays in receiving government funding and delays in the
procurement process (i.e., awarding contracts). Since funding delays are
generally temporary, the Company expects to report the revenues from contract
work already completed in sudsequent periods. The shortfall in product sales is
primarily attributable to the Company's environmental software products, which
experience lower than anticipated revenues from new license sales of its health
and environmental tracking software system.
A large percentage of the Company's revenues are derived from contracts
with the U.S. Department of Defense (DoD). Possible decreases or funding delays
in the DoD budget may negatively impact the Company's plans and ability to
achieve revenue growth. However, the Company believes that its contract base is
sufficiently diverse so that the cancellation of any one DoD program would not
have a material effect on the Company. In addition, the Company also believes
that there are sufficient opportunities for other contract awards in the DoD,
NASA, other governmental agencies and the private sector allow the Company to
sustain its revenue level or grow over time.
As of june 30, 1995, the value of the Company's backlog (without options)
approximates one year's revenues, and the value of the total backlog (with
options) approximates two years, revenues. The backlog consists of approximately
175 active contracts which vary in the period of performance from a few months
to muti-year. The work to be performed on these contracts involves the
following: information technology; studies and analysis; modeling and
simulation; and testing and evaluation.
<PAGE>
Cost of revenues were $111.8 million for 1995, compared with $103.6 million
in 1994. The increase of $8.2 million or 7.9% is attributable entirely to the
increase in subcontract revenues of $8.9 million. Gross margin was $26 million
or 18.9% of revenues for 1995, compared with $26.3 million or 20.3% of revenues
for 1994. The decrease of $.3 million in gross margin is attributable to the
increase of $8.9 million in subcontract work, for which the Company typically
does not earn any fee, and the slight decrease in the Company's product sales.
With the exclusion of the subcontract work from the Company's financial results,
both revenues and gross margin would be flat.
Operating income was $4.8 million or 3.5% of revenues for 1995, compared
with $6.1 million or 4.7% of revenues for 1994. The $1.3 million decrease in
1995 operating income is attributable to increased marketing and R&D
expenditures, the write down of previously capitalized software costs, lower
revenues (excluding subcontract work) and the impact on indirect rates from the
temporary delays in receiving government funding and delays in the procurement
process (i.e., awarding contracts). Operating income for 1995 included the gain
of approximately $.9 million from the sale of the Company's California facility.
During the fiscal year 1995, the Company increased its deferred software
costs by a net $6.2 million, resulting in a balance at June 30, 1995 of
approximately $8.0 million. The Company capitalizes internal software costs
incurred for products to be sold only after technological feasibility has been
established (see Note 1). The majority of the deferred software costs relates to
the Company's efforts associated with its OSU(TM) Network Interface, a
telecommunications product. During fiscal 1995, the Company wrote down the
deferred software costs for prior development efforts associated with its
commercial environmental software products to its estimated net realizable value
by approxiamtely $.5 million (charged to cost of revenues) after reassessing
current trends in the market place.
In October 1993, the Company was served with a lawsuit filed in the
Superior Court of Orange County, California by ICN Biomedicals, Inc. ("ICN") and
its parent company, ICN Pharmaceuticals,Inc. ("Pharamaceuticals"). The suit
alleged fraud, negligent misrepresentation, violations of state and federal
securities laws and other claims against the Company in connection with the sale
of its biomedical business to ICN in 1989, and sought to recover all monies paid
and damages for expenses and interest in the approximate amount of $100 million.
In December 1993, the court ordered ICN to arbitrate its claims, and ICN filed
for arbitration in March 1994. In December 1994, the arbitration panel dismissed
ICN's claims and ordered ICN to pay the Company the remaining amounts due under
the 1989 agreement, approxiamtely $2.7 million. In March 1995, the court
confirmed the arbitration award, and ICN paid the final amounts due to the
Company in April 1995. In May 1995, the court dismissed the remaining claims of
Pharmaceuticals, without prejudice to Pharamaceuticals filing an action in
federal court in Delaware pursuant to the forum selection clause in the 1989
agreement. In June 1995, the court denied Pharmaceuticals motion for
reconsideration of the dismissal. In August 1995, Pharmaceuticals appealed the
dismissal. In September 1995, the Court of Appeal dismissed Pharmaceuticals'
appeal.
As a result of the various arbitration and court decisions, the Company was
able to reverse reserves during fiscal 1995 of approximately $.4 million
(credited to general, administrative, etc.) that were associated with the
various ICN matters. However, during the course of the lawsuit and arbitration,
ICN informed the Company of three ongoing tax inquiries of the biomedical
business involving potential tax deficiencies exceeding $1 million (including
interest and penalties), which include periods of the Company's ownership. The
Company believes that it has adequate reserves to cover the final resolution of
any of these matters that may involve periods of its ownership.
In June 1995, the Company sold approxiamtely 13.1 acres, including all
buildings, structures, parking areas and other improvements, located in Santa
Barbara, California for $4.3 million. The Company received 20% of the proceeds
in cash at closing and took back a promissory note, secured by a Deed of Trust,
for the remaining balance of approxiamtely $3.4. The Company has included the
note in deposits and other. The transaction resulted in the Company recognizing
again of approximately $.9 million for fiscal 1995.
<PAGE>
In addition to the sale of the property, the Company entered into a 15 year
lease for a portion of a new building that is scheduled to be built on the
existing property site.
The Company's net interest income is not significantly different between
the comparable periods.
Income taxes continue to be insignificant to the operating results, since
the Company has utilized both its net operating loss carryforwards and its
capital loss carryforwards to shelter its income from tax.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
- -----------------------------------------------
Revenues were $129.9 million for 1994, compared with $130.6 million for
1993. The revenue decrease of $.7 million or 0.5% is attributable entirely to
the decrease in subcontract work (work performed by other organizations on
subcontracts and included in the Company's revenues). The revenues generated
from the Company's services and products business remained relatively flat, as
expected, due in part to the direct impact of cost-cutting measures on cost-plus
contract work, as well as funding decreases or delays in the government
procurement process.
As of June 30, 1994, the value of the Company's backlog (without options)
is approximately one year's revenues, and the value of the total backlog (with
options) exceeds two years' revenues. The backlog consists of 189 active
contracts which vary in length from a few months to multi-year. The work to be
performed on these contracts involves the following: systems research and
analysis; information systems; operating analysis; testing and evaluation;
systems engineering; economic modeling; cost estimating; applied physics; data
processing; software development; military system effectiveness; and personnel
management.
Operating income was $6.1 million or 4.7% of revenues for 1994, compared
with $5.7 million or 4.3% of revenues for 1993. The increase in operating income
of $.4 million or 7.2% is attributable to the benefits derived from the
Company's efforts to reduce its operating expenses in the area of finance and
administration activities. The consolidation and reorganization of the finance
ant administration functions were undertaken to provide more effective,
efficient and uniform services across all of the Company's entities and
locations. The overall cost reduction in support and facility expense was
achieved in large part by office space consolidation measures which reduced
total facility requirements by over 10%. Lower overhead costs have contributed
to improved profit margins on fixed price type contracts.
Net interest income was $.3 million for 1994, compared with $.1
million for 1993. The increase in net interest income of $.2 million or 138.1%
is attributable to both the interest income earned on the investment of excess
cash and cash equivalents and from the elimination of interest expense
associated with the Company's long-term debt. In October and November 1993, the
Company used approximately $3 million of its available cash and cash equivalents
to pay off the remaining balance on the mortgage associated with its California
property.
Income taxes continue to be insignificant to the operating results, since
the Company has utilized its net operating loss carryforwards to shelter a
significant portion of its income from tax.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The new
statement supersedes the Company's previous accounting practice of accounting
for income taxes under Statement of Financial Accounting Standards No. 96,
"Acounting for Income Taxes" (SFAS 96). As a result of adopting this change, the
Company recognized $1 million of income attributable to recording a net deferred
tax asset on its books.
Net income was $7.1 million or 5.5% of revenues for 1994, compared with
$5.5 million of 4.2% of revenues for 1993. The 1994 increase of $1.6 million of
29.1% is attributable to $1 million from the accounting change, $.4 million from
improved margins on contract work due to the benefits derived from cost-cutting
steps and $.2 million from increased interest income.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has been able to finance its operations during the last three
fiscal years by a combination of internally generated working capital and
borrowing against its available credit facilities. Management believes that the
Company has adequate resources to finance its current and future operations from
existing or internally generated working capital and available credit. In July
1990, the Company entered into a revolving credit agreement in the amount of $10
million. This agreement, amended May 28, 1992, permits the Company to borrow up
to a maximum of $10 million under the agreement. The interest rate under the
agreement is the prime rate (9.0% as of June 30, 1995). The agreement extends
until April 1998, with the Bank required to provide 15 months prior written
notice to terminate the facility (absent any defaults under the agreement). The
agreement remains fully available as of June 30, 1995.
As of June 30, 1995, the Company had $2.7 million of cash and cash
equivalents available to support its working capital requirements.
During July of 1994, the Company used approximately $.8 million of cash and
cash equivalents for the payment associated with the Treasury stock that was
purchased prior to June 30, 1994. The $.8 million was reflected in other current
liabilities at June 30,1994.
Subsequent to June 30, 1995, the Company amended its revolving credit
agreement to double its credit line from $10 million to $20 million. The Company
took this action in anticipation of resources needed to support the growth of
its new Telecommunications unit, which was established in August 1995. This new
unit will focus Company-wide telecommunications business activities for
development, production and commercialization of network systems products,
network systems analysis capabilities, software development network operations
and network security.
STOCK PRICES AND DIVIDENDS
- --------------------------
The Company's common stock is traded on the New York and Pacific Stock
Exchanges. As of July 31, 1995, there were 1,690 holders of record of the
Company's common stock. Stock price information by quarter is presented in
the following table:
<TABLE>
<CAPTION>
FISCAL YEAR
MARKET ------------------------------ THROUGH
PRICE 1994 1995 JULY 31,1995
----- --------- ---------- -------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 8 1/2 5 7/8 14 1/2 11 1/8 26 3/8 15 7/8
2nd Quarter 8 1/8 7 1/8 16 1/2 10 3/4
3rd Quarter 11 1/8 7 3/8 17 3/4 11 3/8
4th Quarter 12 1/8 9 1/2 17 1/8 13 1/8
</TABLE>
In November 1985, the Company declared a dividend of one common stock
purchase right on each share of common stock currently outstanding or to be
issued in the future (see Note 9 to the Company's financial statements presented
elsewhere herein). With the exception of the dividend for the stock rights, the
Company did not declare or pay any other dividend with respect to its common
stock during any of the years included in the financial data, and the Board of
Directors does not presently intend to commence the payment of such dividends.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
GRC International Inc.
We have audited the accompanying consolidated balance sheets of GRC
International, Inc. and subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1995. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of GRC International, Inc. and
subsidiries at June 30, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1995,
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes, effective July 1, 1993, to conform with
Statement of Financial Accounting Standards No. 109.
DELOITTE AND TOUCHE LLP
McLean, Virginia
AUGUST 11, 1995, except as to the fourth
paragraph of Note 5, as to which the date
is September 14, 1995
<PAGE>
GRC INTERNATIONAL, INC, AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Revenues $137,808 $129,922 $130,644
Cost of revenues 111,822 103,594 105,730
-------- -------- --------
Gross margin 25,986 26,328 24,914
General, administrative, marketing,
research and development expenses 21,075 19,438 18,822
Provision for losses 1,054 797 409
Gain on sale of asset (903) -- --
-------- -------- --------
Operating income 4,760 6,093 5,683
Interest income 381 531 526
Interest expense (111) (212) (392)
--------- --------- ---------
Income before cumulative effect of
accounting change and before income taxes 5,030 6,412 5,817
Provision for income taxes -- 299 308
--------- --------- ---------
Income before cumulative effect of 5,030 6,113 5,509
accounting change
Cumulative effect of accounting change -- 1,000 --
--------- --------- ---------
Net income $ 5,030 $ 7,113 $ 5,509
========= ========= =========
INCOME PER COMMOM AND
COMMON EGUIVALENT SHARE:
Before cumulative effect of accounting
change $ .54 $ .65 $ .60
From cumulative effect of accounting
change -- .11 --
--------- --------- ---------
$ .54 $ .76 $ .60
========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
GRC INTERNATIONAL, INC, AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JUNE 30,
-------------
ASSETS
------
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
(IN THOUSANDS)
CURRENT ASSETS:
Cash and cash equivalents $ 2,679 $ 3,660
Accounts receivable 32,419 29,403
Unbilled reimbursable costs and fees 5,662 8,366
Inventories, at the lower of cost
or market 1,990 1,185
Other receivables 1,160 3,380
Prepaid expenses 918 1,570
------- -------
Total current assets 44,828 47,564
------- -------
PROPERTY AND EQUIPMENT, AT COST:
Land, buildings and leasehold
improvements 4,275 8,603
Equipment, furniture and fixtures 13,830 12,229
Less - Accumulated depreciation and
amortization (7,773) (8,488)
------- -------
10,332 12,344
------- -------
OTHER ASSETS:
Goodwill and other intangible
assets, net 2,555 2,799
Deferred software costs, net 7,954 1,714
Deferred income taxes 2,561 2,711
Deposits and other 5,479 1,948
------- ------
18,549 9,172
------- ------
$73,709 $69,080
------- -------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
GRC INTERNATIONAL, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,030 $ 7,113 $ 5,509
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,685 2,613 2,199
Provision for losses on accounts receivable,
unbilled reimbursable costs and fees 705 791 1,079
Gain on sale of assets (903) --- ---
Cumulative effect of accounting change --- (1,000) ---
Changes in assets and liabilities:
Accounts receivable and unbilled reimbursable
costs and fees (1,017) (4,257) (3,904)
Inventory (805) (275) (75)
Prepaid expenses 652 (786) (436)
Accounts payable, accruals, income taxes and other
current liabilities 2,510 (744) 5,153
Other, net (156) (194) (244)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,701 3,261 9,281
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from notes receivables 2,750 --- ---
Capital expenditures (3,731) (3,610) (3,304)
Deferred software costs (7,011) (1,171) (446)
Other, net (85) (1,064) (344)
------- ------- -------
NET CASH USED BY INVESTING ACTIVITIES (8,077) (5,845) (4,094)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt and capital lease obligations --- (3,245) (1,361)
Purchase of treasury stock (3,071) (774) ---
Other, net 466 194 111
------- ------- -------
NET CASH USED BY FINANCING ACTIVITIES (2,605) (3,825) (1,250)
------- ------- -------
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (981) (6,409) 3,937
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 3,660 10,069 6,132
------- ------- -------
CASH & CASH EQUIVALENTS AT END OF YEAR $ 2,679 $ 3,660 $10,069
======= ======= =======
Supplemental disclosures:
Cash payments:
Interest $ 371 $ 214 $ 392
Income taxes 111 411 270
Noncash transactions:
Capital lease obligations --- --- 203
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GRS INTERNATIONAL, INC, AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JUNE 30,
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 7,774 $ 5,135
Accounted compensation and benefits 11,960 11,851
Deferred income taxes 1,581 1,711
Accrued expenses 2,564 2,631
Other current liabilities 201 1,175
-------- --------
Total current liabilities 24,050 22,503
-------- --------
OTHER NON-CURRENT LIABILITIES $ 1,381 $ 1,537
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value -
Authorized - 30,000,000 shares
issued - 9,325,000 shares in 1995
and 9,152,000 shares in 1994 932 915
Paid-in capital 76,812 76,363
Accumulated deficit (25,631) (30,661)
-------- -------
52,113 46,617
Less: Treasury stock, at cost; 300,000 shares
in 1995 and 142,500 shares in 1994 (3,845) (1,577)
-------- --------
Total stockholders' equity 48,268 45,040
-------- --------
$ 73,709 $ 69,080
-------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
GRC INTERNATIONAL, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1995, 1994 AND 1993
----------------------------
(1) ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
---------------------------
include the accounts of GRC International, Inc. and all subsidiaries (the
Company). All significant intercompany balances and transactions have been
eliminated.
MAJOR CUSTOMER - The vast majority of the Company's revenues are derived
--------------
from contracts with the U.S. Department of Defense (DoD).
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
-------------------------
hand, cash in banks and temporary investments purchased with a maturity of three
months or less.
The Company has a policy of investing all available cash, on a daily
basis, in either overnight master note agreements or overnight time deposits
issued by banks. Since these transactions are recorded daily in a book entry
format, the Company does not take possession of any securities. At June 30, 1995
and 1994, the Company had approximately $2.6 million and $3.5 million,
respectively, invested in overnight time deposits issued by Fuji Bank of Japan.
INVENTORIES - Inventory costs include materials, labor and manufacturing
-----------
overhead. Inventories are priced using the average unit cost method.
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies. $ 693 $ 602
Work-in-process 569 91
Finished goods 728 492
------ ------
$1,990 $1,185
====== ======
</TABLE>
PROPERTY AND EQUIPMENT - Expenditures for betterments, major renewals and
----------------------
interest incurred during construction are capitalized and ordinary maintenance
and repairs are charged to operations as incurred.
Depreciation is computed using the straight-line method based on the
estimated useful lives of assets, which range from 3 to 10 years. Amortization
of leasehold improvements is computed using the straight-line method based on
the remaining term of the related lease.
Upon sale or retirement of property and equipment, the difference between
the proceeds and the net book value of the assets is charged or credited to
income.
INTANGIBLE ASSETS - Goodwill, representing the cost in excess of the fair
-----------------
value of the net assets of businesses acquired, is being amortized to operations
on a straight-line basis over periods of up to 40 years. Other intangible assets
are being amortized to operations on a straight-line basis over periods of up to
15 years. The Company periodically evaluates the goodwill and other intangible
assets in relation to the operating performance and future contribution to the
underlying businesses and makes adjustments, if necessary, for any impairment of
these assets. Accumulated amortization as of June 30, 1995 and 1994, of
<PAGE>
goodwill was $1,083,000 and $1,007,000, respectively, and of other intangible
assets was $975,000 and $878,000, respectively.
DEFERRED SOFTWARE COSTS - Internal software costs incurred for products to
-----------------------
be sold are capitalized only after establishing technological feasibility.
Capitalized software is amortized over the greater of straight-line or estimated
future revenue stream on an individual product basis. The amount of software
costs capitalized was $7,011,000, $1,171,000 and $446,000 and the related
amortization expense was $771,000, $162,000 and $140,000 in 1995, 1994 and 1993,
respectively. During fiscal 1995, the Company wrote down the deferred software
costs for prior development efforts associated with its commercial environmental
software products to its estimated net realizable value by $500,000 (charged to
costs of revenues), after reassessing current trends in the marketplace.
ACCOUNTING FOR CONTRACT REVENUES - Service revenues result from contracts
--------------------------------
with various government agencies and private industry. Revenues on cost plus fee
and fixed price contracts are recognized using the percentage of completion
method generally determined on the basis of cost incurred to date as a
percentage of estimated total cost. Revenues on time and materials contracts are
recognized at contractual rates as labor hours and materials are expended.
Losses are recognized in the period in which they become determinable.
Costs incurred in excess of current contract funding are deferred when
management believes they are realizable through subsequent additional funding.
No revenues are recognized related to such costs which are included in unbilled
reimbursable costs and fees in the accompanying consolidated balance sheets.
RESEARCH AND DEVELOPMENT - Research and development expenditures were
------------------------
approximately $1,100,000, $400,000 and $700,000 for 1995, 1994 and 1993,
respectively.
PROVISION FOR LOSSES - The Company includes the provisions for
--------------------
uncollectible accounts and costs incurred in excess of contractual authorization
under the caption of provision for losses on the consolidated statements of
income. In addition, the Company records provisions for rate overruns as a
reduction to revenues, while provisions for both inventories and future losses
on contracts are recorded in cost of revenues.
RETIREMENT PLANS - The Company has a deferred income plan covering
----------------
substantially all of its employees. The plan provides that the Company may make
pension and employee deferred matching contributions for the benefit of
employees. The amount of any such contributions is at the discretion of the
Board of Directors. The total expense under the deferred income plan was
approximately $3,694,000, $3,911,000, and $3,881,000 in 1995, 1994 and 1993,
respectively.
The Company has an unfunded defined benefit pension plan for directors who
are not employees of the Company. After termination as a director for any
reason, a director will receive the then-current directors' retainer fee for the
lesser of 15 years or life. Directors may also elect to receive a lump sum or
other actuarial equivalent of the foregoing benefit. Directors achieve 50%
vesting after five years of service, with annual increases of 10%, until full
vesting is achieved after 10 years of service. However, in the event of a change
in control, directors immediately become fully vested. The total expense charged
under the defined benefit pension plan was approximately $50,000, $73,800 and
$124,000 in 1995, 1994 and 1993, respectively. The present value of the
projected benefit obligation is approximately $185,400 and $239,000 at June 30,
1995 and 1994, respectively.
INCOME TAXES - The provision for income taxes for fiscal years 1995 and
------------
1994 have been computed under the requirements of SFAS No. 109, "Accounting for
Income Taxes". The
<PAGE>
adoption of SFAS No. 109, effective July 1, 1993, resulted in a cumulative
effect adjustment to increase income by $1 million for fiscal year 1994. SFAS
No. 109 supersedes the Company's previous accounting practice of accounting for
income taxes under SFAS No. 96. Both statements require the use of the liability
method of accounting for income taxes, but the recognition of deferred tax
assets was limited under SFAS No. 96. Under SFAS No. 109, deferred tax assets
and liabilities are determined based on the difference between the financial
statement and the tax basis of assets and liabilities, using enacted tax rates
in effect for the year in which the differences are expected to reverse.
EARNINGS PER SHARE - Earnings per common share are computed based upon the
------------------
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Dilutive common equivalent shares consist of
stock options calculated using the treasury stock method. Primary and fully
dilutive per share data, based on 9,393,000 shares in 1995, 9,426,000 shares in
1994 and 9,211,000 shares in 1993, respectively, is the same in each year.
CHANGES IN PRESENTATION - Certain amounts in the 1994 and 1993 Consolidated
-----------------------
Financial Statements have been reclassified to conform to the 1995 presentation.
(2) SALE OF REAL PROPERTY
In June 1995, the Company sold approximately 13.1 acres, including all
buildings, structures, parking areas and other improvements, located in Santa
Barbara, California for $4,300,000. The Company received 20% of the proceeds in
cash at closing and took back a promissory note, secured by a Deed of Trust, for
the remaining balance of approximately $3,400,000. The note has a maturity of
not more than 5 years, accrues interest at the rate of 7% per annum, and
provides for the annual payment of both interest and principal. The Company has
included the note in deposits and other. The transaction resulted in the Company
recognizing a gain of approximately $900,000. for fiscal 1995 from the sale.
In addition to the sale of the property, the Company entered into a 15 year
lease for a portion of a new building that is scheduled to be built on the
existing property site.
(3) DEBT
The Company has entered into a revolving credit agreement that permits it
to borrow up to a maximum of $10 million. Advances under the agreement accrue
interest at the prime rate (9.0% as of June 30, 1995). The agreement extends
until April 1998, with the bank required to provide 15 months prior written
notice to terminate the facility (absent any defaults under the agreement). The
agreement remains fully available as of June 30, 1995.
The agreement contains certain covenants, including a material adverse
change clause, which require that the Company maintain certain minimums for
earnings, tangible net worth, working capital and debt ratios. Any borrowings
made under the agreement would be on an unsecured basis.
<PAGE>
(4) INCOME TAXES
The differences between the tax provision calculated at the statutory
federal income tax rate and the actual tax provision for each year are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at statutory federal rate $ 1,710 $ 2,180 $ 1,978
State income taxes 161 335 189
Utilization of loss carryforwards (753) (1,100) (1,859)
Change in valuation reserve (1,150) (1,150) ---
Other 32 34 ---
------- ------- -------
Actual income tax provision $ --- $ 299 $ 308
======= ======= =======
</TABLE>
The primary components of temporary differences which give rise to the
Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------------
1995 1994
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Reserves and other contingencies $ 1,701 $ 2,080
Compensation not currently deductible 1,884 1,492
Net operating loss 8,476 8,420
AMT and general business credits 1,206 1,187
Other 31 138
Valuation reserve (5,349) (6,499)
------- -------
Total deferred tax assets 7,949 6,818
------- -------
Deferred tax liabilities:
Reimbursable costs and fees (3,224) (4,122)
Prepaid expenses and rent (364) (414)
Depreciation (tax over book) (557) (555)
Internally developed software (2,804) (727)
------- -------
Total deferred tax liabilities (6,949) 5,818
------- -------
Net deferred tax asset $ 1,000 $ 1,000
======= =======
</TABLE>
At June 30, 1995, the Company had net operating loss carryforwards of
approximately $25 million to reduce future federal tax liabilities through 2006.
(5) COMMITMENTS AND CONTINGENCIES
COMMITMENTS - The Company leases all of its facilities and rents certain
-----------
equipment under lease agreements, some with inflation escalator clauses. The
minimum annual rentals due under non-cancelable leases during each of the next
five years and in total thereafter, are presented in the table below.
<PAGE>
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
(IN THOUSANDS)
<S> <C>
1996 $ 5,494
1997 5,300
1998 5,114
1999 4,909
2000 4,639
2001 and thereafter 40,830
-------
$66,286
=======
</TABLE>
Rent expense under operating leases was $6,181,000, $6,716,000 and
$7,194,000 net of sublease income of $395,000, $457,000 and $481,000, in 1995,
1994 and 1993, respectively.
The Company has employment agreements with 13 employees which provide for
severance payments, in the event of a change of control situation, totalling
approximately $2,100,000.
CONTINGENCIES -In October 1993, the Company was served with a lawsuit filed
-------------
in the Superior Court of Orange County, California by ICN Biomedicals, Inc.
("ICN") and its parent company, ICN Pharmaceuticals, Inc. ("Pharmaceuticals").
The suit alleged fraud, negligent misrepresentation, violations of state and
federal securities laws and other claims against the Company in connection with
the sale of its biomedical business to ICN in 1989, and sought to recover all
monies paid and damages for expenses and interest in the approximate amount of
$100 million. In December 1993, the court ordered ICN to arbitrate its claims,
and ICN filed for arbitration in March 1994. In December 1994, the arbitration
panel dismissed ICN's claims and ordered ICN to pay the Company the remaining
amounts due under the 1989 agreement, approximately $2.7 million. In March 1995,
the court confirmed the arbitration award, and ICN paid the final amounts due to
the Company in April 1995. In May 1995, the court dismissed the remaining claims
of Pharmaceuticals, without prejudice to Pharmaceuticals filing an action in
federal court in Delaware pursuant to the forum selection clause in the 1989
agreement. In June 1995, the court denied Pharmaceuticals' motion for
reconsideration of the dismissal. In August 1995, Pharmaceuticals appealed the
dismissal. In September 1995, the Court of Appeal dismissed Pharmaceuticals'
appeal.
As a result of the various arbitration and court decisions, the Company was
able to reverse reserves during fiscal 1995 of approximately $400,000 (credited
to general, administrative, etc.) that were associated with the various ICN
matters.
In addition, during the course of the lawsuit and arbitration, ICN informed
the Company of three ongoing tax inquiries of the biomedical business involving
proposed tax deficiencies exceeding $1 million (including interest and
penalties), which includes periods of ownership by the Company.
Management believes that the proposed tax assessments are excessive and
that ICN is responsible for a significant portion of any liabilities associated
with these assessments. Management does not believe that the ultimate outcome of
these actions will have a material adverse effect on the consolidated financial
conditions or results of operations of the Company.
<PAGE>
(6) ACCOUNTS RECEIVABLE AND UNBILLED REIMBURSABLE COSTS AND FEES
A summary of U.S. Government and non-U.S. Government accounts receivable
and unbilled reimbursable costs and fees is as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable, net of reserves of
$16 in 1995 and $64 in 1994 -
U.S. Government $30,252 $27,789
Non-U.S. Government 2,167 1,614
------- -------
$32,419 $29,403
======= =======
Unbilled reimbursable costs and fees,
net of reserves of $3,821 in 1995
and $3,606 in 1994 -
U.S. Government $ 5,615 $ 7,391
Non-U.S. Government 47 975
------- -------
$ 5,662 $ 8,366
======= =======
</TABLE>
Invoices released in July that relate to June activity were
$11,536,000 and $9,813,000 for 1995 and 1994, respectively, and are reflected in
accounts receivable in the accompanying financial statements.
The components of unbilled reimbursable costs and fees are as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Unbilled reimbursable costs and fees,
net of reserves -
Retainages billable upon completion of contract $ 3,113 $ 5,443
Indirect costs incurred in excess of provisional billing rates 273 108
Costs incurred in excess of contractual authorization,
billable upon execution of a contract or contractual
amendment to increase funding 2,276 2,815
------- -------
$ 5,662 $ 8,366
======= =======
</TABLE>
<PAGE>
At June 30, 1995, unbilled reimbursable costs and fees expected to be
collected after one year were approximately $3,232,000.
Costs incurred by the Company in the performance of U.S. Government
contracts are subject to audit by the Defense Contract Audit Agency (DCAA). In
the opinion of management, the final settlement of these costs will not result
in significant adjustments to recorded amounts.
(7) RELATED PARTY TRANSACTIONS
One of the Company's directors is of counsel to a law firm which serves as
counsel for the Company. As of June 30, 1995, this director owns 19,356 shares
and options to purchase 1,335 shares. In addition, the wife of this director
holds 6,000 shares as trustee of various trusts. Fees for legal services
rendered by the law firm to the Company aggregated $83,000, $25,000 and $20,000,
in 1995, 1994 and 1993, respectively.
A former director who served until November 4, 1993 was a partner in a law
firm which served as counsel for the Company. Fees for legal services rendered
by this law firm to the Company aggregated $4,000 and $38,000, in 1994 and 1993,
respectively.
The chairman and chief executive officer of Mercantile Bankshares
Corporation (Mercantile) is a member of the Company's Board of Directors.
Mercantile has entered into a revolving credit agreement with the Company (see
Note 3 for discussion).
(8) STOCK OPTIONS
On July 28, 1994, the Board adopted and the shareholders approved, at the
1994 Annual Shareholders' Meeting, two new stock-based benefit plans. The first
is a new 1994 Employee Option Plan, under which key employees may be awarded
incentive and non-qualified stock options to purchase up to 500,000 shares of
stock. The second is an Employee Stock Purchase Plan qualified under Section 423
of the Internal Revenue Code which enables all employees to purchase stock at a
15% discount.
As of June 30, 1995, there are 634,593 shares of authorized but unissued
common stock reserved for issuance under the Company's 1985 Employee Stock
Option Plan. The number of shares subject to option at that date is 634,593. An
option entitles the holder to purchase shares of the Company's stock at the
market price on the date of grant. As of June 30, 1995, options for 340,946
shares are exercisable. The following table summarizes the option activity:
<PAGE>
<TABLE>
<CAPTION>
1985 EMPLOYEE STOCK OPTION
SHARES UNDER OPTION
-------------------
OPTION PRICE
NUMBER OF SHARES PER SHARE
---------------- ------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1992 963,125 $2.75 -$6.50
Granted 35,500 3.25 - 6.19
Exercised (281,684) 2.75 - 6.25
Expired/Cancelled (22,250) 2.75 - 5.88
--------
BALANCE, JUNE 30, 1993 694,691 2.75 - 6.50
Granted 164,500 6.50 -11.25
Exercised (112,378) 2.75 - 5.88
Expired/Cancelled (45,125) 3.13 - 7.31
--------
BALANCE, JUNE 30, 1994 701,688 2.75 -11.25
Granted 111,888 12.38 -16.00
Exercised (161,795) 2.75 - 6.06
Expired/Cancelled (17,188) 3.13 -15.44
--------
BALANCE, JUNE 30, 1995 634,593 3.00 -16.00
========
</TABLE>
As of June 30, 1995, there are 500,000 shares authorized but unissued
common stock reserved for issuance under the Company's 1994 Employee Stock
Option Plan. The number of shares subject to option at that date is 195,152. An
option entitles the holder to purchase shares of the Company's stock at the
market price on the date of grant. As of June 30, 1995, there are no options
that are exercisable. The following table summarizes the option activity:
<TABLE>
<CAPTION>
1994 EMPLOYEE STOCK OPTION
SHARES UNDER OPTION
-------------------
OPTION PRICE
NUMBER OF SHARES PER SHARE
---------------- ------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1994 0 N.A.
Granted 200,152 $14.00 -$16.06
Exercised --- ---
Cancelled (5,000) 15.44
-------
BALANCE, JUNE 30, 1995 195,152 14.00 - 16.06
=======
</TABLE>
As of June 30, 1995, there are 89,489 shares of authorized but unissued
common stock reserved for issuance under the Company's Directors Fee Replacement
Plan. The number of shares subject to option at that date is 24,385. Outside
directors may elect to receive stock and/or non-qualified options in lieu of
annual fees and/or other compensation. Options are immediately exercisable.
Options remain exercisable for three years after a participant ceases
<PAGE>
to be a director. As of June 30, 1995, options for 24,385 shares are
exercisable. A separate plan permits outside directors to receive their fees in
the form of phantom stock, but to date, no phantom stock has been awarded. The
table below summarizes the option activity.
As of June 30, 1995, there are 434,994 shares of authorized but unissued
common stock reserved for issuance under the Company's Cash Compensation
Replacement Plan. The number of shares subject to option at that date is 17,118.
Participation in the Plan is limited to upper management of the Company. Under
the Plan, participating executives forego cash compensation (up to 25% of salary
and up to 100% of bonus) to purchase non-qualified options at a 20% discount.
The options are immediately exercisable as to 80% of the shares, with the
remainder becoming exercisable in increments over a four year period. Options
remain exercisable for three years after an executive's termination as an
employee. As of June 30, 1995, options for 14,856 shares are exercisable. The
table below summarizes the option activity.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDER OPTION
-----------------------------
DIRECTORS FEE CASH COMPENSATION
REPLACEMENT PLAN REPLACEMENT PLAN
---------------- ----------------
<S> <C> <C>
BALANCE, JUNE 30, 1992 35,526 0
Granted 9,141 2,737
Exercised (9,229) ---
------- ------
BALANCE, JUNE 30, 1993 35,438 2,737
Granted 5,899 8,104
Exercised (4,452) ---
------- ------
BALANCE, JUNE 30, 1994 36,885 10,841
Granted 7,649 11,283
Exercised (20,149) (5,006)
------- ------
BALANCE, JUNE 30, 1995 24,385 17,118
======= ======
</TABLE>
In December 1994, the Company announced that it had completed the
previously authorized repurchase of 300,000 shares of its common stock, at a
cost of $3,845,000, and that its Board of directors authorized the repurchase of
up to 200,000 additional shares of its common stock in the open market or in
private transactions.
The timing and number of shares of the repurchase of the additional 200,000
shares of common stock will depend greatly on market conditions and other
factors. The shares will be purchased with existing cash, short-term borrowings,
future cash flows, or a combination of these factors, and may be retired or used
for general corporate purposes. As of June 30, 1995, the Company has not
purchased any additional shares under its repurchase program.
<PAGE>
(9) COMMON STOCK PURCHASE RIGHTS
The Company has a Shareholder Rights Plan under which a dividend of one
common stock purchase right (right) is automatically issued for each share of
the Company's common stock. The rights are not exercisable or transferable apart
from the common stock until ten business days after a person has acquired
beneficial ownership of 25% or more of the common stock, or commences, or
announces an intention to commence, a tender offer for 25% or more of the common
stock. Separate certificates for the rights will be mailed to holders of the
common stock as of such date, and each right will entitle the holder thereof to
buy one share of common stock at an exercise price of $30 ($100 beginning
January 1, 1996). However, if any person or group becomes the beneficial owner
of 25% or more of the stock other than pursuant to an offer for all shares which
the independent Directors of the Company determine is fair to and otherwise in
the best interest of the Company and its shareholders, each right not owned by
such person or group will entitle the holder to purchase, at the exercise price
of the rights, that number of shares of common stock of the Company (or other
consideration) which would have a market value of two times the exercise price
---
of the right. Similarly, in the event that the Company is a party to a merger or
other business combination transaction, each right will entitle the holder to
purchase, at the exercise price of the rights, that number of shares of common
stock of the acquiring company which would have a market value of two times the
---
exercise price of the right. The rights are redeemable at $.05 per right prior
to the tenth business day following the public announcement that a person has
acquired beneficial ownership of 25% of the common stock. Upon redemption, the
right to exercise the rights will terminate. The rights expire on December 31,
2005.
<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of GRC International, Inc. is responsible for all
information and representations contained in the annual report. The consolidated
financial statements, which include amounts based on estimates and judgments of
management, have been prepared in conformity with generally accepted accounting
principles. Other financial information in the annual report is consistent with
the consolidated financial statements.
The Company maintains a system of internal financial controls which
provides management with reasonable assurance that transactions are recorded and
executed in accordance with its authorizations, that assets are properly
safeguarded and accounted for, and that records are maintained so as to permit
preparation of financial statements in accordance with generally accepted
accounting principles. This system includes written policies and an
organizational structure that segregates duties. The Company also has instituted
policies and guidelines which require all employees to conduct business
according to the highest standards of integrity.
In addition, the Audit Committee of the Board of Directors, consisting
solely of outside directors, meets periodically with management and the
independent public accountants to discuss auditing, internal accounting controls
and financial reporting matters and to ensure that each is properly discharging
its responsibilities. The independent public accountants periodically meet alone
with the Audit Committee and have full and unrestricted access to the Committee
at any time.
GRC INTERNATIONAL, INC.
Jim Roth Phillip R. Pietras
President and Chief Vice President, Treasurer
Executive Officer and Chief Financial Officer
<PAGE>
SUPPLEMENTARY DATA
- ------------------
Quarterly Results of Operations
(Unaudited)
The following is a summary of the quarterly results of operations for the
years ended June 30, 1995 and 1994 (in thousands, except for per share data):
<TABLE>
<CAPTION>
1995
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues $31,494 $29,813 $35,688 $40,813 $137,808
Operating income * 1,352 903 1,013 1,492 4,760
Net Income 1,507 930 1,107 1,486 5,030
Income per share $ .16 $ .10 $ .12 $ .16 $ .54
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues $30,780 $31,545 $30,883 $36,714 $129,922
Operating income 1,497 1,561 1,421 1,614 6,093
Income before cumulative effect of
accounting change 1,485 1,520 1,475 1,633 6,113
Cumulative effect of accounting change 1,000 --- --- --- 1,000
Net income 2,485 1,520 1,475 1,633 7,113
Income per share:
Before cumulative effect of accounting
change $ .16 $ .16 $ .16 $ .17 $ .65
From cumulative effect of accounting
change .11 --- --- --- .11
------- ------- ------- ------- --------
$ .27 $ .16 $ .16 $ .17 $ .76
======= ======= ======= ======= ========
</TABLE>
* NOTE: Operating income for the fourth quarter of 1995 includes the gain of
approximately $.9 million from the sale of the Company's California
facility, as well as the write down of approximately $.5 million of
deferred software costs.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
--------------------------
As of June 30, 1995, the Registrant had no significant active subsidiaries.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME ON PAGES 13
THROUGH 15 OF GRC INTERNATIONAL'S 1995 ANNUAL REPORT TO STOCKHOLDERS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,679
<SECURITIES> 0
<RECEIVABLES> 32,435
<ALLOWANCES> 16
<INVENTORY> 1,990
<CURRENT-ASSETS> 44,828
<PP&E> 18,105
<DEPRECIATION> 7,773
<TOTAL-ASSETS> 73,709
<CURRENT-LIABILITIES> 24,060
<BONDS> 0
<COMMON> 932
0
0
<OTHER-SE> 48,268
<TOTAL-LIABILITY-AND-EQUITY> 73,709
<SALES> 137,808
<TOTAL-REVENUES> 137,808
<CGS> 111,822
<TOTAL-COSTS> 111,822
<OTHER-EXPENSES> 21,075
<LOSS-PROVISION> 1,054
<INTEREST-EXPENSE> (270)
<INCOME-PRETAX> 5,030
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,030
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
