UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-8193
DAEDALUS ENTERPRISES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 38-1873250
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization)
300 Parkland Plaza (P.O. Box 1869)
Ann Arbor, Michigan 48106
(Address of principal executive offices)
(313) 769-5649
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed 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 reports); 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. [ X]
Aggregate market value of voting common stock held by non-affiliates of
Registrant at September 30, 1997 (computed by reference to the average bid
and asked prices of the Registrant's common stock): $1,335,474. (Assuming,
but not admitting for any purpose, that all executive officers and directors
of the Registrant, and their associates, may be deemed affiliates.)
Number of shares outstanding of common stock, $.01 par value, as of
September 30, 1997: 534,024 shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
ITEM 1. BUSINESS
GENERAL
Daedalus Enterprises, Inc. (the "Company"), incorporated in Delaware
in August 1968, manufactures products for, and performs development projects
in, the field broadly described as "remote sensing." Remote sensing is the
detection or measurement of various physical parameters of an object or
system without making direct contact with the observed object. The
Company's customers use these remote sensing products to detect and measure
either the emitted or reflected radiation of objects or systems.
The Company is also developing a remote sensing service operation
that would utilize the Company's technology to acquire and process remote
sensing data for users of such data. See "Growth Plan".
PRODUCTS
The principal products manufactured by the Company are airborne
imaging systems. The Company's customers install these systems in aircraft
and use them to acquire optical radiation data from objects on the earth's
surface and in the atmosphere. This data is then processed into a useful
form by data handling and data processing equipment which, in some cases, is
also manufactured by the Company. A principal application of the Company's
remote sensing products has been the measurement of environmental parameters
in support of pollution control programs and environmental impact studies.
The Company manufactures these products by integrating precision
optical, mechanical and electronic components into unified systems. These
components are either purchased off the shelf, or custom designed by the
Company and manufactured by the Company, or designed and specified by the
Company for outside manufacture. Highly technical personnel, supported by
supervisors and engineers, assemble, test and calibrate these systems in
preparation for delivery to customers.
The Company engages in customer-funded projects for the development
of advanced equipment in the remote sensing field. In addition to being a
source of revenue, the Company undertakes these projects to increase its
technical expertise in areas demonstrating strong potential for use in
future products. Some of these projects may lead to the incorporation of
newly developed technology into the existing product line or an expansion of
the product line.
During fiscal 1997, the Company shared costs on two U.S. government
sponsored Small Business Innovation Research ("SBIR") programs. One of
these programs, Large Format Multispectral Camera, is scheduled for
completion in early fiscal 1998. The other, Laser Search and Rescue, will
be completed in late fiscal 1998. The Company has applied for a patent
related to the LASAR search and rescue technology developed under the SBIR
program. The Company is conducting marketing efforts and actively seeking
partners for participation in Phase III commercialization efforts for these
two programs, as well as lobbying the U.S. Government for additional funds
for these programs.
Revenue from standard remote sensing systems and customer-funded
product development systems during the three most recent fiscal years ended
July 31 was approximately as follows:
Year Standard Customer-Funded Product Total
Systems Development Systems (000)
(000) (000)
- ------------------------------------------------------------
1997 2200 788 2988
1996 1657 430 2087
1995 2340 1278 3618
MARKETING
Marketing activities are conducted principally through the Company's
office in Ann Arbor, Michigan, primarily through direct customer contact.
The Company markets its products through direct sales and leases with a
purchase option. In addition to direct marketing of its standard systems,
the Company is engaged in seeking customer-funded product development
projects for advanced equipment. See "Growth Plan" for a description of
expected changes in the Company's marketing strategy as it implements its
growth plan.
Products are marketed to government customers in the United States
and Canada by the Company's sales force which consists of three persons, one
of whom is an officer who carries on other duties in addition to sales
efforts, and a commissioned representative who handles commercial customers.
The Company has no active international subsidiaries or branch
offices. In several countries, the Company has exclusive Sales Agency
Agreements with existing high technology marketing operations. These
agents' efforts are supported by the Company's own sales personnel, who also
travel to other countries where there is no formal representation.
CUSTOMERS
The Company's customers include aerospace, aerial survey, oil and
mineral exploration companies, universities and domestic and foreign federal
and state government agencies. The Company's ability to continue to
contract with such parties is dependent on political, economic and social
factors. Revenue from international markets are sometimes subject to
receiving approved U.S. government export licenses. A substantial portion
of revenue in both domestic and international markets is generated by
customers who depend, at least in part, upon federal, state or local
government appropriations. Many of these customers are involved in programs
aimed at improving man's impact on the environment. See "Growth Plan" for a
description of the Company's efforts to diversify its customer base.
The following table sets forth information with respect to domestic
and international revenue during the three most recent fiscal years ended
July 31:
INTERNATIONAL AND DOMESTIC REVENUE
(in thousands)
Year International Domestic
Asia Europe Other(1) U.S. Gov't. Other Total
1997 1178 154 0 1625 31 2988
1996 562 814 0 618 93 2087
1995 43 2255 8 1228 84 3618
(1) Revenue from geographic areas that amount to less than 10% of total
revenue are shown as "Other."
International revenue normally consists largely of standard
products, while domestic revenue is largely customer-funded product
development. The standard product and customer-funded product development
portions of the business are conducted by the same pool of personnel using
the same operating space and equipment and constitute a single industry
segment. For further information regarding the Company's revenue by
geographic area and operations, see the table included under the caption
"Selected Financial Data", and Note J to Consolidated Financial Statements
which table and note are incorporated herein by reference.
To protect against foreign currency transaction losses,
international sales are generally contracted in U.S. dollars and many large
contracts are secured by irrevocable letters of credit. The Company also
generally receives substantial deposits on large orders from international
customers.
A majority of the Company's revenue each year is derived from a
small number of high dollar value equipment sales and contracts to a
relatively small number of customers. Because each customer may represent a
substantial portion of total revenue for that fiscal year, a small increase
or decrease in the number of customers with whom the Company has contracts
could generate a relatively large percentage increase or decrease in total
revenue. Revenue during a particular fiscal year may result, in substantial
part, from contracts with a single customer. Revenue from U.S. Government
agencies accounted for approximately 54%, 30% and 34% of revenue for fiscal
1997, 1996 and 1995, respectively. Asian customers are an important source
of revenue for the Company, generating 38% and 29% of operating revenue for
fiscal years ended July 31, 1997 and 1996. Italian customers were an
important source of revenue for the Company in fiscal 1995 (28%), but no
significant orders were received in fiscal 1997 or fiscal 1996 as the
Italian market for the Company's current products is near saturation.
In fiscal 1997, 1996 and 1995, the Company had three, four and three
major customers, respectively, each accounting for at least 10% of the
Company's revenue from operations. Such major customers accounted for
approximately 91%, 81% and 91% of the Company's revenue from operations in
fiscal 1997, 1996 and 1995, respectively. See Note J to Consolidated
Financial Statements. No single customer has generated a majority of the
Company's revenue during any consecutive years during this period.
Management does not consider the Company's business to be dependent upon a
single customer or group of customers.
PRODUCT DEVELOPMENT
The Company is in an industry characterized by technological change,
which requires continuous expenditure of funds for research, development and
product improvement. The Company currently intends to use, whenever
possible, external contract funds and licensing agreements to expand its
product line and minimize internal research and development costs.
The Company has incurred research and development expense of
approximately $102,000, $469,000 and $586,000 for fiscal 1997, 1996 and
1995, respectively. In fiscal 1997, 1996 and 1995 the Company expended
approximately $789,000, $395,000 and $839,000, respectively, in performing
customer-funded product development under contracts for advanced equipment
in the field of remote sensing.
The Company has five employees whose primary responsibility is
product development and five employees who, in addition to their primary
production, manufacturing and administrative duties, also contribute to the
product development effort.
RAW MATERIALS
The Company's operations require a variety of unique precision
optical-mechanical and electronic components and other supplies. Although
most components and supplies are generally available from many commercial
sources, certain components, which are designed and specified to meet the
Company's particular requirements, have a limited number of manufacturing
sources. Due to the specialized nature of these components and the limited
quantities in which they are purchased, procurement lead times may be as
long as six months. However, the Company believes that the loss of a single
supplier would not be expected to have a material adverse effect on the
Company.
COMPETITION
There are several competitors that compete with individual products
produced by the Company. During the past few years, one of these
competitors has begun offering to build products that compete with more of
the Company's standard remote sensing systems. To date, the Company has not
been materially affected by this competition. The Company expects an
increase in the number of competitors as governments worldwide continue to
reduce military spending since many companies selling similar instruments
for military purposes are now beginning to pursue non-military customers.
In addition, the Company's products compete with related technologies, such
as satellite remote sensing systems. In general, the superior spectral and
spatial resolution and scheduling flexibility of the Company's products
enable the Company to compete effectively with suppliers of satellite-based
data when the capabilities of the Company's products justify the generally
more costly airborne data. The Company has been able to compete
successfully against its competitors through the demonstrated performance of
its products and its product support mechanisms, and through the excellent
reputation it has earned and maintained for the durability of its products.
The Company also competes on the basis of its continuous efforts to offer
product improvements and new products that keep its technology at the
leading edge and offer customers the latest innovations.
Management believes that the Company competes successfully in the
field of product development due to the Company's special capabilities in
remote sensing technology and its history of successful completion of such
development products. See "Growth Plan" for a description of expected
changes in competition as the Company implements its growth plan.
BACKLOG
Total August 31, 1997 backlog of unfilled customer orders was
approximately $530,000 compared to approximately $895,000 one year earlier.
The Company expects to fill substantially all of its August 1997 backlog
during fiscal 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - New Orders and Backlog".
GOVERNMENT CONTRACTS
Contracts with U.S. Government agencies generally provide for
reimbursement of costs plus a fee. Revenue, fees and profits on such
contracts are generally recognized on the costs incurred to date.
Reimbursable contract costs (including overhead and general and
administrative expenses) are generally subject to audit and adjustment by
negotiation between the Company and U.S. government representatives.
Revenue under these contracts is recorded at amounts that are expected to be
realized upon the final settlement with any adjustments to revenue reflected
in the year of settlement.
GROWTH PLAN
The Company is in the process of implementing a growth plan that is
focused on two initiatives to provide growth in revenues and profits from
new market areas. The goal of the growth plan is to diversify the Company's
revenue-producing activities and reduce fluctuations in the Company's
revenue and earnings. Management has focused its efforts on two areas of
the plan with the most near-term potential.
The first growth area involves the use and sale of airborne digital
cameras ("ADC") developed by the Company for the mapping of infrastructure
within narrow corridors. Examples of the types of infrastructure that would
be mapped with such a system include gas pipelines, electrical distribution
systems, railroads and highways. The Company has developed an enhanced
version of the ADC and an image processing system that can be bundled with
the ADC for delivery to its customers and for use by the Company in
performing services for customers. The Company completed three contracts in
fiscal 1996 for which it has utilized the ADC, and in the fourth quarter of
fiscal 1996, the Company entered into a marketing alliance with a major
company which provides infrastructure maintenance services to the electric
and gas utilities, and railroads in the United States and Canada. Although
the Company did not receive any such contracts in fiscal 1997, marketing
efforts by the Company and its marketing partner have generated considerable
market interest in the ADC which the Company hopes will generate orders in
fiscal 1998. The Company has also been requested to team with several
engineering companies to provide airborne digital camera services for a
large multi-year inventory program that would establish a foothold in this
emerging market. The Company is continuing to pursue various alternatives to
obtain the additional funding necessary to bring these services to market.
However, there can be no assurance that such funding will be obtained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Sources of Capital".
The other growth area involves performing domestic environmental
surveys to provide a better applications market for the Company's airborne
multispectral scanners. In order to exploit this market, the Company must
perform specific applications and show the results to be reliable and
cost-effective. To date, the Company has completed several contracts in
this area for customers such as the U.S. Environmental Protection Agency and
the U. S. Bureau of Reclamation, and continues to pursue other demonstration
projects. In addition, the Company has completed development of an airborne
digital multispectral camera for NASA under a SBIR project and has
negotiated a strategic alliance to bring this product to the commercial
market in the spring of 1998.
Competition in these new areas of business will be different than
that faced by the Company in its core business and competitors will be more
numerous since there are many more companies offering products and services
in each of these areas of new business. Competition will include
conventional aerial survey firms using film cameras and commercial remote
sensing satellite data. The commercial remote sensing satellite competitors
are in the formative stage and will not have products to offer until two to
three years in the future. The Company believes, however, that its
capabilities in providing the source of unique data using its airborne
digital camera and multispectral scanners for each of these market areas,
coupled with its strategy to team with selected partners in processing and
analyzing such data, will provide the opportunity to secure significant new
business and will enable the Company to compete successfully in each of
these market areas.
These growth plan initiatives will require changes in the Company's
sales and marketing strategies and budgets. The marketing alliance for the
infrastructure information service calls for the Company's partner to
perform most marketing and sales functions. However, the Company will
provide brochures, data samples, and other support to its partner. In
addition, it is anticipated that this market will require more participation
in trade shows and more space advertising than the Company has engaged in
during previous years.
The customers for these new products and services will also be
different than those involved in the Company's core product business. It is
expected that these customers are unfamiliar with the Company. However,
they are familiar with the services provided by the Company's marketing
alliance partner and this is one of the primary strategies to accelerate
access to these markets.
Although implementation of the growth plan began in fiscal 1995,
material revenue impact is not expected until late fiscal 1998 at the
earliest. These strategies are intended to reduce fluctuations in the
Company's revenue and earnings and enhance the Company's profitability and
stockholder value. However, the Company's implementation of these growth
initiatives has been slowed by the small size of the Company's staff, by its
current financial position and by the lack of solid market information
caused by the Company's limited resources. The Company is seeking partners
and additional financing to help bring these services into the market more
quickly. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Sources of Capital".
PERSONNEL
As of September 30, 1997, the Company had 16 full-time employees,
three of whom were executive officers.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company (who serve as such at the
pleasure of the Board of Directors), their ages and the position or office
held by each are as follows:
Name Age Positions with the Company
- ---- --- --------------------------
Thomas R. Ory 58 President and Chief Executive Officer and
Director
Charles G. Stanich 53 Vice President-Research and Development and Chief
Operating Officer and Director
Jane E. Barrett 46 Vice President-Finance, Treasurer and Chief
Financial Officer
Mr. Ory, who was appointed President and Chief Executive Officer in
August 1987, joined the Company in 1972 as Director of its Applications
Division, served as Vice President-Marketing from 1979 to 1984, and
Executive Vice President from 1985 to 1987.
Mr. Stanich, who was appointed Chief Operating Officer in 1987,
joined the Company in 1974 and served as Manager, Research and Development
from 1979 to 1984, and Vice President-Research and Development since 1984.
Ms. Barrett, who was appointed Vice President-Finance and Chief
Financial Officer in March 1997 and who was appointed Treasurer in August
1996, joined the Company in May 1996 as its Controller. Prior to joining
the Company, Ms. Barrett was employed by Federal-Mogul Corporation, a
Fortune 500 manufacturer and distributor of automotive parts, from 1984 to
1996 in various managerial accounting positions. Her most recent position
was International Accounting Manager with responsibility for the financial
functions of a $600 million international division.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following is a listing of the members of the Board of Directors
of the Company and includes information regarding the individual's age,
principal occupation, other business experience, directorships in other
publicly-held companies and term of service with the Company. Directors are
elected at each Annual Meeting of Stockholders, each to hold office until
the next Annual Meeting of Stockholders or until his successor is elected
and qualified. Information regarding executive officers is included under
"Item 1. Business" pursuant to General Instruction G.
Name Age Positions with the Year First
Company and Principal Elected or Appointed
Occupation or Employment Director
- ----------------------------------------------------------------------------
John D. Sanders 59 Director and Chairman of the Board 1982
Thomas R. Ory 58 President and Chief Executive 1987
Officer and Director
William S. Panschar 40 Director 1989
Philip H. Power 59 Director 1985
Charles G. Stanich 53 Vice President-Research and 1989
Development, Chief Operating
Officer and Director
Mr. Sanders serves as a business consultant to emerging technology
companies. He was Chairman and Chief Executive Officer of Tech News, Inc.,
a news publisher, from 1988 to 1996, prior to its sale to The Washington
Post Company. In addition, Mr. Sanders has been a Registered Representative
of Wachtel & Co., Inc., a Washington D.C.-based stock brokerage firm, since
1968. Mr. Sanders serves on the boards of Information Analysis, Inc.,
Hadron Inc., ITC Learning Corp. and S. T. Research Corp.
Mr. Ory, who was appointed President and Chief Executive Officer of
the Company in August 1987, joined the Company in 1972 as Director of its
Applications Division, served as Vice President-Marketing from 1979 to 1984,
and as Executive Vice President from 1985 to 1987.
Mr. Panschar is an insurance agent at The Equitable Life
Assurance Society of the United States, a life insurance and annuity
company, and a registered representative at EQ Financial Consultants, Inc.,
a company which sells mutual funds and other various products, since June
1996. Prior to that he was a Vice-President of National City Bank, Indiana
from October 1993 to May 1996. Prior to taking the position at National
City Bank, Mr. Panschar was the Director-Corporate Development of The Alquin
Group from 1991 to October 1993. Prior to joining The Alquin Group, Mr.
Panschar was employed by Avis Enterprises, Inc. as Vice President-Mergers
and Acquisitions from 1987 to 1990 and by Citicorp Industrial Credit Inc.
from 1981 to 1987.
Mr. Power has served as the Chairman of Suburban Communications
Corp., Livonia, Michigan, for more than five years. Mr. Power currently
serves on the board of Jacobson Stores Inc.
Mr. Stanich, who was appointed Chief Operating Officer in 1987,
joined the Company in 1974 and served as Manager, Research and Development
from 1979 to 1984, and Vice President-Research and Development since 1984.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers and directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it since August 1, 1996, or written
representations from certain reporting persons that no Forms 5 were required
for those persons, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation paid or
accrued by the Company and its subsidiaries during fiscal 1997, 1996 and
1995 to or on behalf of the Company's Chief Executive Officer and Chief
Operating Officer (the "Named Officers"). None of the Company's other
executive officers earned more than $100,000 in salary and bonus during
fiscal 1997 for services rendered to the Company and its subsidiaries.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Long-Term
Compensation
Annual Securities
Name and Principal Fiscal Compensation Underlying All Other
Position Year Salary Options/SARs Compensation (1)
- --------------------------------------------------------------------------------------------
Thomas R. Ory 1997 $148,000 20,000 $25,865
President and CEO 1996 $148,000 -0- $26,501
1995 $148,000 -0- $28,824
Charles G. Stanich 1997 $130,000 20,000 $24,653
Vice President-Research 1996 $130,000 -0- $25,406
and Development 1995 $130,000 -0- $26,439
and COO
(1) Detail of amounts reported in the "All Other Compensation" column is provided in the table below.
Officer's Name Director Medical Reimburse- Imputed Interest on Pension Plan
Fees ment & Related Tax Interest-Free Loan Contribution
- --------------------------------------------------------------------------------------------
Thomas R. Ory $4,800 $2,630 $ 50 $18,385
Charles G. Stanich $4,500 $4,125 $ 0 $16,028
</TABLE>
OPTIONS
The following table sets forth information concerning stock option
grants during fiscal 1997 to the Named Officers. Such options were not
granted pursuant to any of the Company's plans.
Option/SAR Grants in Last Fiscal Year
Individual Grants
Number of Percent of
Securities total
Underlying Options/SARs
Options/SARs Granted to Exercise
Granted Employees in Price Expiration
Name (#)(a) Fiscal Year ($/Share) Date
- ---- ------------ ------------ --------- ----------
T. Ory 20,000 35.2% $2.25 12/10/06
C. Stanich 20,000 35.2% $2.25 12/10/06
(a) 50% of the options became exercisable immediately upon grant and the
remainder become exercisable on the first anniversary of the grant
date.
The following table provides information concerning unexercised
stock options held as of the end of fiscal 1997 by the Named Officers.
There were no options exercised by the Named Officers during fiscal year
1997.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
Number of Unexercised Value of Unexercised In-the-Money
Options/SARS at Options/SARs at
Fiscal Year-End Fiscal Year-End
-------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable(a) Unexercisable
- ---- ----------- ------------- -------------- -------------
T. Ory 25,000 10,000 $10,000 -0-
C. Stanich 23,000 10,000 $11,500 -0-
(a) The value of unexercised in-the-money options was calculated
using the last sale price of the Company's Common Stock at
July 31, 1997.
TERMINATION OF EMPLOYMENT
Each of the Named Officers is a party to a Senior Officer Severance
Agreement that would require the Company to pay each such officer an amount
equal to one and one-half times each officer's highest annual W-2
compensation from the Company during the three calendar years immediately
preceding each Officer's termination of employment if such termination of
employment meets one of several criteria. In general, such amounts would be
payable upon termination in anticipation of, or after, a change in control
or upon resignation following a reduction in such officer's salary or other
compensation, any diminution of the Officer's authority or duties or a
significant change in the nature and scope of the Officer's duties, any
change in the Officer's status or title (other than a bona fide promotion)
or any required relocation of the Officer's residence should any event occur
after a change in control or within six months prior to a change in control.
The Officer would also be entitled to continuation of coverage under Company
benefit plans for up to 18 months and to outplacement services. The cash
payment required under the agreement may be paid in a lump sum or in monthly
installments over an 18 month period, depending upon the circumstances of
the change in control.
COMPENSATION OF DIRECTORS
Directors receive $900 per quarter with an additional payment of
$300 for each Board or Committee meeting attended, and are reimbursed for
travel expenses incurred in connection with their attendance at Board and
Committee meetings. In addition, Mr. Sanders received payments of $1,500 per
month for consulting services from the Company from January 1997 through
September 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to
the beneficial ownership of shares of the Company's Common Stock, as of
September 30, 1997, by each person who is known by the Company to have been
the beneficial owner of 5% or more of the shares of Common Stock outstanding
as of such date, by each director, director-nominee and Named Officer and by
all directors and executive officers as a group. Unless otherwise noted,
each stockholder exercises sole voting and investment power with respect to
the shares beneficially owned.
Name of Number of Percent of
Beneficial Owner Shares(1) Class(2)
- ---------------- --------- ----------
Thomas R. Ory 56,230 (3) 10.1
Charles G. Stanich 40,226 (4) 7.2
John D. Sanders 28,500 (5) 5.3
William S. Panschar 2,760 0.5
Philip H. Power 15,150 2.8
All directors and executive
officers as a group (6 persons) 147,116 (6) 24.8
(1) The column sets forth shares of Common Stock which are deemed to be
"beneficially owned" by the persons named in the table under Rule
13d-3 of the SEC, including shares of Common Stock that may be
acquired upon the exercise of stock options or warrants that are
currently exercisable or become exercisable within 60 days after
September 30, 1997 as follows: Mr. Ory -- 25,000 shares; Mr.
Stanich -- 23,000 shares; Messrs. Sanders, Power and Panschar --
2,250 shares each; and all directors and executive officers as a
group (including 250 shares purchased under the Employee Stock
Purchase Plan within 60 days after September 30, 1997) -- 58,500
shares.
(2) For purposes of calculating the percentage of Common Stock
beneficially owned, the shares issuable to such person upon exercise
of stock options or warrants that are currently exercisable or
become exercisable within the next 60 days are considered
outstanding.
(3) Includes 24,565 shares with respect to which Mr. Ory shares voting
and investment power with his spouse. Mr. Ory's address is P.O. Box
1869, Ann Arbor, Michigan 48106.
(4) Includes 3,526 and 2,700 shares with respect to which Mr. Stanich
shares voting and investment power with his wife and mother,
respectively. Mr. Stanich's address is P.O. Box 1869, Ann Arbor,
Michigan 48106.
(5) Includes 550 shares owned by Mr. Sanders' wife. Mr. Sanders' address
is 4600 N. 26th St., Arlington, Virginia 22207.
(6) Includes the shares described in notes 1, 3, 4 and 5.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
NONE.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
1) The following consolidated financial statements are included in
response to Item 8 of this report.
Independent Auditors' Report
Consolidated Statements of Operations and Stockholder's Equity for
the years ended July 31, 1997, 1996 and 1995
Consolidated Balance Sheets--July 31, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended July 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
2) Schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is
included in the consolidated financial statements or notes thereto.
3) The exhibits filed herewith are set forth in the Index to
Exhibits which is incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the Company's
fiscal year ended July 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
DAEDALUS ENTERPRISES, INC.
By: /s/Thomas R. Ory
Thomas R. Ory, President
November 21, 1997
INDEX TO EXHIBITS
The Commission File Number for all reports filed on Forms 10-K, 10-Q or 8-K
filed by the Company is 0-8193.
Exhibit No. Description
3.01 Certificate of Incorporation of the Company, with all amendments
thereto, as presently in effect (filed as exhibit 3.01 to the 1994
Form 10-K and incorporated herein by reference)
3.02 Bylaws of the Company, with all amendments thereto, as presently in
effect (filed as exhibit 3.02 to the 1994 Form 10-K and incorporated
herein by reference)
4.43 Real Estate Mortgage in the amount of $425,000 dated March 1, 1991,
between the Company and Manufacturers National Bank, Ann Arbor
(formerly filed as exhibit 4.43, Term Note, to the Company's
Quarterly Report on Form 10-Q for the second quarter of fiscal 1991
and incorporated herein by reference)
4.46 First Amendment to Real Estate Mortgage dated December 23, 1991
between the Company and Manufacturers Bank, N.A. (filed as exhibit
4.46 to the Company's Quarterly Report on Form 10-Q for the second
quarter of fiscal 1992 and incorporated herein by reference)
4.55 Mortgage Extension Agreement between the Company and Comerica Bank,
dated October 30, 1995 (filed as exhibit 4.55 to the Company's
Quarterly Report on Form 10-Q for the first quarter of fiscal 1996
and incorporated herein by reference)
4.57 Master Revolving Note and Advance Formula Agreement between the
Company and Comerica Bank, both dated October 25, 1996 (filed as
exhibit 4.57 to the 1996 Form 10-K and incorporated herein by
reference)
10.60* 1983 Incentive Stock Option Plan (filed as exhibit 10.60 to the 1994
Form 10-K and incorporated herein by reference)
10.610* Long-term Incentive Plan (filed as exhibit 10.610 to the 1994 Form
10-K and incorporated herein by reference)
10.611* Stock Option Plan for Nonemployee Directors (filed as exhibit 10.611
to the 1994 Form 10-K and incorporated herein by reference)
10.612* Form of Senior Officer Severance Agreement with Messrs. Ory and
Stanich, dated June 21, 1995 (filed as Exhibit 10.612 to the 1995
Form 10-K and incorporated herein by reference)
10.613* Form of Incentive Stock Option Agreement Under Long-Term Incentive
Plan (filed as exhibit 10.613 to the Company's Quarterly Report on
Form 10-Q for the first quarter of fiscal 1997 and incorporated
herein by reference)
10.614* Form on Non-Qualified Stock Option Agreement Under Long-Term
Incentive Plan (filed as exhibit 10.614 to the Company's Quarterly
Report on Form 10-Q for the second quarter of fiscal 1997 and
incorporated herein by reference)
10.615* Non-Qualified Stock Option Agreement with Mr. Thomas R. Ory, dated
December 10, 1996 (filed herewith)
10.616* Non-Qualified Stock Option Agreement with Mr. Charles G. Stanich,
dated December 10, 1996 (filed herewith)
10.901 Teaming agreement between the Company and Coastal Environmental
Services, Inc., dated March 17, 1994. (filed as exhibit 10.901 to
the 1994 Form 10-K and incorporated herein by reference)
10.902 Agreement between the Company and James W. Sewall Company, dated
March 25, 1994, for the development of the Airborne Digital Camera
and related software for pipeline right-of-way monitoring and other
applications (filed as exhibit 10.902 to the 1994 Form 10-K and
incorporated herein by reference)
10.903 Teaming agreement between the Company and Pacific Meridian
Resources, dated August 17, 1994 (filed as exhibit 10.903 to the
1994 Form 10-K and incorporated herein by reference)
11.01 Computation of Earnings Per Share (filed on October 21, 1997 with
1997 Form 10-K)
21.01 Subsidiaries of the Company (filed on October 21, 1997 with 1997
Form 10-K)
23.01 Consent of Deloitte & Touche LLP (filed on October 21, 1997 with
1997 Form 10-K)
27.01 Financial Data Schedule (filed on October 21, 1997 with 1997 Form
10-K)
*Company's management contracts and compensatory plans and arrangements
which are required to be filed as exhibits in this Form 10-K.
The Company will furnish to its stockholders a copy of any of the exhibits
listed above upon written request and upon payment of a reasonable fee
(limited to the Company's reasonable expenses in furnishing such exhibits).
Request for exhibits may be directed to Jane E. Barrett, Treasurer, Daedalus
Enterprises, Inc., P.O. Box 1869 Ann Arbor, MI 48106.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement is made as of this 10th day of December, 1996, by and
between DAEDALUS ENTERPRISES, INC., a Delaware corporation (the "Company"),
and THOMAS R. ORY (the "Optionee").
WHEREAS, the Optionee presently serves as an employee of the
Company, and the Company desires to compensate further the Optionee for the
services performed as an employee and to encourage the Optionee to remain as
an employee of the Company; and as an inducement thereto the Company has
determined to grant to the Optionee an option to acquire shares of voting
stock in the Company;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Grant of Option. Subject to the terms and conditions
hereof, the Company hereby grants to the Optionee the right and option to
purchase from the Company up to 20,000 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), at $2.25 per share (the
"Exercise Price").
2. Exercise of Option. During the period commencing on
December 10, 1996 and ending on December 9, 1997 ("Option Period I"), the
Optionee shall have the right to purchase, at the Exercise Price, up to
10,000 shares of Common Stock. During the period commencing on December 10,
1997 and ending on December 10, 2006 ("Option Period II"), the Optionee
shall have the right to purchase, at the Exercise Price, up to 20,000 shares
of Common Stock less any shares of Common Stock purchased during Option
Period I pursuant to the terms of this Agreement. The Optionee shall
exercise the option by delivering to the Company: (a) a written notice in
the form of Exhibit A attached hereto signed by the Optionee and (b) payment
of the total option price, which shall be the Exercise Price multiplied by
the number of shares to be purchased (the "Total Option Price"), in the form
of cash, certified check, bank draft, or money order in an amount equal to
the Total Option Price of the shares then to be purchased pursuant to this
Agreement. Within five (5) days after receipt of the foregoing, the Company
shall issue the shares in the name of the Optionee and deliver the
certificates therefor to the Optionee. If the Optionee fails to pay for all
or any part of the number of shares specified in the written notice or fails
to accept delivery of same upon tender of delivery thereof, the Optionee's
right to exercise his option with respect to such undelivered shares may be
terminated by the Company.
Anything to the contrary herein notwithstanding, the Company's
obligation to sell and deliver stock under this Agreement is subject to
compliance with federal and state laws, rules and regulations applying to
the authorization, issuance or sale of securities, and applicable stock
exchange and automated quotation system requirements as the Company deems
necessary or advisable. The Company shall not be required to sell and
deliver stock pursuant hereto unless and until it receives proof
satisfactory to it that the issuance or transfer of such shares will not
violate any of the provisions of the Securities Act of 1933 or the
Securities Exchange Act of 1934 or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, or the rules and
regulations of any stock exchange or automated quotation system on which the
Company's securities are traded or quoted, or the provisions of any state
law governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and state laws.
3. Effect of Termination of Employment or Death. If, prior
to the date that this option shall first become exercisable, the Optionee's
employment with the Company and its subsidiaries shall be terminated, with
or without cause, or by the act, death, permanent disability, or retirement
of the Optionee, the Optionee's right to exercise this option shall
terminate and all rights hereunder shall cease.
If, on or after the date that this option shall first become
exercisable, the Optionee's employment with the Company and its subsidiaries
shall be terminated by reason of the Optionee's retirement at or after the
normal retirement date, the Optionee shall have the right, within two years
after such termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date of such
termination of employment, subject to any other limitation on the exercise
of this option in effect at the date of exercise.
If termination of employment is for any reason other than death,
disability or retirement, the Optionee shall have the right, for one year
after such termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date of such
termination of employment, subject to any other limitation on the exercise
in effect at the date of exercise.
If this option shall have become exercisable during the Optionee's
term of employment and the Optionee shall die while in the employ of the
Company or terminate his employment due to disability (within the meaning of
Section 22(e) of the Internal Revenue Code of 1986), the Optionee or the
executor or administrator of the estate of the Optionee (as the case may be)
or the person or persons to whom the option shall have been transferred by
will or the laws of descent and distribution, shall have the right, for one
year after the date of the Optionee's death, or the date of his termination
of employment due to disability, to exercise the option to the extent that
it was exercisable and unexercised on the date of death or termination of
employment (as the case may be), subject to any other limitation on the
exercise in effect at the date of exercise.
The transfer of Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of employment for
purposes of this Agreement.
4. Change of Control. Every other provision hereof
notwithstanding, if a "change of control" of the Company occurs prior to the
termination of Option Period II, then the Optionee shall have the right to
purchase, at the Exercise Price and through one transaction to occur on a
date fixed by the Company, up to 20,000 shares of Common Stock less any
shares of Common Stock previously purchased pursuant to the terms of this
Agreement.
As used herein, a "change of control" shall mean (i) receipt by the
Company of a Schedule 13(d) Report as filed with the Securities and Exchange
Commission confirming that a person or group other than the Company or a
wholly-owned subsidiary of the Company, owns beneficially more than 35% of
the outstanding Common Stock, (ii) any purchase under a tender or exchange
offer for the Common Stock other than by the Company or a wholly-owned
subsidiary of the Company following which the offeror owns beneficially more
than 35% of the outstanding Common Stock (iii) shareholder approval of any
merger, consolidation or sale of all or substantially all of the Company's
assets to or into any person or entity other than a wholly-owned subsidiary
of the Company formed for the purpose of changing the Company's corporate
domicile, and/or (iv) a change in the identity of a majority of the members
of the Board of Directors within any twelve-month period, which change or
changes are not recommended by the incumbent directors immediately prior to
any such change or changes.
Notwithstanding the foregoing, no portion of an option held by the
Optionee shall be entitled to acceleration if the exercise or surrender
thereof by the Optionee upon acceleration will result (taking into account
all other payments made or to be made to the Optionee by the Company in the
nature of compensation) in an "excess parachute payment" under Section 280G
of the Internal Revenue Code. The Company's good faith determination as to
the existence of an excess parachute payment shall be final and binding on
the Optionee.
5. Investment Representation. The Optionee represents that,
unless a registration statement under the Securities Act of 1933 is in
effect with respect to the shares of Common Stock acquired upon exercise of
this option, all of such shares will be acquired solely for his own account,
for investment purposes and not with a view to any further sale or
distribution thereof. All certificates representing any option shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH SUCH LAWS."
(b) Any legend required to be placed thereon under
any applicable state or Federal securities law or any other agreement to which
the Optionee and the Company may be a party.
6. Non-Assignability. Neither this option nor any part
hereofmay be transferred by the Optionee other than by will or the laws of
descent and distribution. The option may be exercised during the Optionee's
lifetime only by the Optionee. Any transferee of this option shall take the
option subject to the terms and conditions hereof. No such transfer of this
option shall be effective to bind the Company unless the Company shall have
been furnished with (i) written notice thereof and (ii) a copy of the will
and/or such other evidence as the Company may deem necessary to establish
the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of this Agreement. No assignment or
transfer of this Agreement, or of the right represented thereby, whether
voluntary or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and distribution,
shall vest in the purported assignee or transferee any interest or right
whatsoever.
7. Disputes. As a condition of the granting of the option
granted hereby, the Optionee and the Optionee's successors and assigns agree
that any dispute or disagreement which shall arise under or as a result of
this Agreement shall be determined by the Board of Directors of the Company
in their sole discretion and judgment and that any such determination and
any interpretation by the Board of Directors of the Company of the terms of
this Agreement shall be final and shall be binding and conclusive for all
purposes.
8. Adjustments. The number of shares of the Common Stock
subject to the option granted hereby and the Exercise Price, shall be
appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from payment of a stock
dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or reclassification of Common Stock, and (in accordance with the
provisions contained in the next following paragraph) in the event of a
merger or consolidation in which the Company shall be the surviving
corporation.
After any merger of one or more corporations into the Company, or
after any consolidation of the Company and one or more corporations in which
the Company shall be the surviving corporation, the Optionee shall, at no
additional cost, be entitled upon any exercise of this option to receive
(subject to any required action by shareholders), in lieu of the number of
shares of Common Stock as to which this option shall then be so exercised,
the number and class of shares of stock or other securities to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger or consolidation if at the time of such merger or consolidation the
Optionee had been a holder of record of a number of shares of Common Stock
equal to the number of shares as to which this option shall then be so
exercised. Comparable rights shall accrue to the Optionee in the event of
successive mergers or consolidations of the character described above. Any
such adjustment shall eliminate any fractional share which might otherwise
become subject to an option.
The foregoing adjustments, and their application to particular
circumstances, shall be determined by the Company in its sole discretion.
9. Rights as Shareholder. The Optionee shall have no
rights as a shareholder of the Company with respect to any of the shares of
Common Stock covered by this Agreement until a stock certificate or stock
certificates are issued upon the proper exercise of this option, in full or
in part, and then the Optionee shall have shareholder rights only with
respect to the shares represented by such certificate or certificates. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date such certificate or
certificates are issued.
10. Withholding Taxes. The Company shall have the right to
require a payment from the Optionee to cover applicable withholding for
income and employment taxes upon the exercise of all or a part of the option
granted hereunder.
11. Notices. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered or certified
mail with return receipt requested. All notices to the Company shall be
delivered to the President personally or addressed to the President of the
Company at its principal office at 300 Parkland Plaza, Ann Arbor, Michigan
48106. All notices by the Company to the Optionee shall be delivered to the
Optionee personally or addressed to the Optionee at the Optionee's last
residence address as then contained in the records of the Company or such
other address as the Optionee may in writing designate. Either party may be
written notice to the other party designate a different address to which
notices shall be addressed. Any notice given by the Company to the Optionee
at the Optionee's last designated address shall be effective to bind any
other person who shall acquire rights hereunder.
12. "Optionee" to Include Certain Transferees. Whenever the
word "Optionee" is used in any provision of this Agreement under
circumstances where the provision should logically apply to any other person
or persons to whom this Agreement, in accordance with the provision of
Section 6 hereof, may be transferred, the word "Optionee" shall be deemed to
include such person or persons.
13. Effect on Employment. Neither the execution of this
Agreement nor the granting of any option pursuant to it shall be deemed to
create any right in the Optionee to be retained or continued in the
employment of the Company or any of its subsidiaries.
14. Governing Law. This Agreement has been made in Michigan
and shall be construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
DAEDALUS ENTERPRISES, INC.
By: /s/Charles G. Stanich
---------------------------
Charles G. Stanich
Its: Vice President and Chief
Operating Officer
/s/ Thomas R. Ory
---------------------------
OPTIONEE - Thomas R. Ory
EXHIBIT A
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
President
Daedalus Enterprises, Inc.
300 Parkland Plaza
Ann Arbor, Michigan 48106-1869
An Option was granted to me on December 10, 1996 to purchase 20,000
shares of Daedalus Enterprises, Inc. Common Stock at a price of $2.25 per
share (the "Option").
I hereby elect to exercise the Option with respect to shares.
A certified check (or cash, money order, or bank draft) in the amount of the
exercise price is enclosed herewith.
I authorize the Company to withhold from my compensation or agree to
tender the applicable amount to the Company to satisfy any requirements for
withholding of income and employment tax due to my exercise of this option.
I hereby represent that the shares of Common Stock that I am
purchasing upon this exercise of my option are being purchased for
investment purposes and not with a view to resale. This representation
shall not be binding upon me if the shares of Common Stock that I am
purchasing are subject to an effective registration statement under the
Securities Act of 1933.
-------------------------------------
Optionee - Thomas R. Ory
Dated:
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement is made as of this 10th day of December, 1996, by and
between DAEDALUS ENTERPRISES, INC., a Delaware corporation (the "Company"),
and CHARLES G. STANICH (the "Optionee").
WHEREAS, the Optionee presently serves as an employee of the
Company, and the Company desires to compensate further the Optionee for the
services performed as an employee and to encourage the Optionee to remain as
an employee of the Company; and as an inducement thereto the Company has
determined to grant to the Optionee an option to acquire shares of voting
stock in the Company;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Grant of Option. Subject to the terms and conditions
hereof, the Company hereby grants to the Optionee the right and option to
purchase from the Company up to 20,000 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), at $2.25 per share (the
"Exercise Price").
2. Exercise of Option. During the period commencing on
December 10, 1996 and ending on December 9, 1997 ("Option Period I"), the
Optionee shall have the right to purchase, at the Exercise Price, up to
10,000 shares of Common Stock. During the period commencing on December 10,
1997 and ending on December 10, 2006 ("Option Period II"), the Optionee
shall have the right to purchase, at the Exercise Price, up to 20,000 shares
of Common Stock less any shares of Common Stock purchased during Option
Period I pursuant to the terms of this Agreement. The Optionee shall
exercise the option by delivering to the Company: (a) a written notice in
the form of Exhibit A attached hereto signed by the Optionee and (b) payment
of the total option price, which shall be the Exercise Price multiplied by
the number of shares to be purchased (the "Total Option Price"), in the form
of cash, certified check, bank draft, or money order in an amount equal to
the Total Option Price of the shares then to be purchased pursuant to this
Agreement. Within five (5) days after receipt of the foregoing, the Company
shall issue the shares in the name of the Optionee and deliver the
certificates therefor to the Optionee. If the Optionee fails to pay for all
or any part of the number of shares specified in the written notice or fails
to accept delivery of same upon tender of delivery thereof, the Optionee's
right to exercise his option with respect to such undelivered shares may be
terminated by the Company.
Anything to the contrary herein notwithstanding, the Company's
obligation to sell and deliver stock under this Agreement is subject to
compliance with federal and state laws, rules and regulations applying to
the authorization, issuance or sale of securities, and applicable stock
exchange and automated quotation system requirements as the Company deems
necessary or advisable. The Company shall not be required to sell and
deliver stock pursuant hereto unless and until it receives proof
satisfactory to it that the issuance or transfer of such shares will not
violate any of the provisions of the Securities Act of 1933 or the
Securities Exchange Act of 1934 or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, or the rules and
regulations of any stock exchange or automated quotation system on which the
Company's securities are traded or quoted, or the provisions of any state
law governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and state laws.
3. Effect of Termination of Employment or Death. If, prior
to the date that this option shall first become exercisable, the Optionee's
employment with the Company and its subsidiaries shall be terminated, with
or without cause, or by the act, death, permanent disability, or retirement
of the Optionee, the Optionee's right to exercise this option shall
terminate and all rights hereunder shall cease.
If, on or after the date that this option shall first become
exercisable, the Optionee's employment with the Company and its subsidiaries
shall be terminated by reason of the Optionee's retirement at or after the
normal retirement date, the Optionee shall have the right, within two years
after such termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date of such
termination of employment, subject to any other limitation on the exercise
of this option in effect at the date of exercise.
If termination of employment is for any reason other than death,
disability or retirement, the Optionee shall have the right, for one year
after such termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date of such
termination of employment, subject to any other limitation on the exercise
in effect at the date of exercise.
If this option shall have become exercisable during the Optionee's
term of employment and the Optionee shall die while in the employ of the
Company or terminate his employment due to disability (within the meaning of
Section 22(e) of the Internal Revenue Code of 1986), the Optionee or the
executor or administrator of the estate of the Optionee (as the case may be)
or the person or persons to whom the option shall have been transferred by
will or the laws of descent and distribution, shall have the right, for one
year after the date of the Optionee's death, or the date of his termination
of employment due to disability, to exercise the option to the extent that
it was exercisable and unexercised on the date of death or termination of
employment (as the case may be), subject to any other limitation on the
exercise in effect at the date of exercise.
The transfer of Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of employment for
purposes of this Agreement.
4. Change of Control. Every other provision hereof
notwithstanding, if a "change of control" of the Company occurs prior to the
termination of Option Period II, then the Optionee shall have the right to
purchase, at the Exercise Price and through one transaction to occur on a
date fixed by the Company, up to 20,000 shares of Common Stock less any
shares of Common Stock previously purchased pursuant to the terms of this
Agreement.
As used herein, a "change of control" shall mean (i) receipt by the
Company of a Schedule 13(d) Report as filed with the Securities and Exchange
Commission confirming that a person or group other than the Company or a
wholly-owned subsidiary of the Company, owns beneficially more than 35% of
the outstanding Common Stock, (ii) any purchase under a tender or exchange
offer for the Common Stock other than by the Company or a wholly-owned
subsidiary of the Company following which the offeror owns beneficially more
than 35% of the outstanding Common Stock (iii) shareholder approval of any
merger, consolidation or sale of all or substantially all of the Company's
assets to or into any person or entity other than a wholly-owned subsidiary
of the Company formed for the purpose of changing the Company's corporate
domicile, and/or (iv) a change in the identity of a majority of the members
of the Board of Directors within any twelve-month period, which change or
changes are not recommended by the incumbent directors immediately prior to
any such change or changes.
Notwithstanding the foregoing, no portion of an option held by the
Optionee shall be entitled to acceleration if the exercise or surrender
thereof by the Optionee upon acceleration will result (taking into account
all other payments made or to be made to the Optionee by the Company in the
nature of compensation) in an "excess parachute payment" under Section 280G
of the Internal Revenue Code. The Company's good faith determination as to
the existence of an excess parachute payment shall be final and binding on
the Optionee.
5. Investment Representation. The Optionee represents that,
unless a registration statement under the Securities Act of 1933 is in
effect with respect to the shares of Common Stock acquired upon exercise of
this option, all of such shares will be acquired solely for his own account,
for investment purposes and not with a view to any further sale or
distribution thereof. All certificates representing any option shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND
MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH SUCH LAWS."
(b) Any legend required to be placed thereon under
any applicable state or Federal securities law or any other agreement to which
the Optionee and the Company may be a party.
6. Non-Assignability. Neither this option nor any part
hereof may be transferred by the Optionee other than by will or the laws of
descent and distribution. The option may be exercised during the Optionee's
lifetime only by the Optionee. Any transferee of this option shall take the
option subject to the terms and conditions hereof. No such transfer of this
option shall be effective to bind the Company unless the Company shall have
been furnished with (i) written notice thereof and (ii) a copy of the will
and/or such other evidence as the Company may deem necessary to establish
the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of this Agreement. No assignment or
transfer of this Agreement, or of the right represented thereby, whether
voluntary or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and distribution,
shall vest in the purported assignee or transferee any interest or right
whatsoever.
7. Disputes. As a condition of the granting of the option
granted hereby, the Optionee and the Optionee's successors and assigns agree
that any dispute or disagreement which shall arise under or as a result of
this Agreement shall be determined by the Board of Directors of the Company
in their sole discretion and judgment and that any such determination and
any interpretation by the Board of Directors of the Company of the terms of
this Agreement shall be final and shall be binding and conclusive for all
purposes.
8. Adjustments. The number of shares of the Common Stock
subject to the option granted hereby and the Exercise Price, shall be
appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from payment of a stock
dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or reclassification of Common Stock, and (in accordance with the
provisions contained in the next following paragraph) in the event of a
merger or consolidation in which the Company shall be the surviving
corporation.
After any merger of one or more corporations into the Company, or
after any consolidation of the Company and one or more corporations in which
the Company shall be the surviving corporation, the Optionee shall, at no
additional cost, be entitled upon any exercise of this option to receive
(subject to any required action by shareholders), in lieu of the number of
shares of Common Stock as to which this option shall then be so exercised,
the number and class of shares of stock or other securities to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger or consolidation if at the time of such merger or consolidation the
Optionee had been a holder of record of a number of shares of Common Stock
equal to the number of shares as to which this option shall then be so
exercised. Comparable rights shall accrue to the Optionee in the event of
successive mergers or consolidations of the character described above. Any
such adjustment shall eliminate any fractional share which might otherwise
become subject to an option.
The foregoing adjustments, and their application to particular
circumstances, shall be determined by the Company in its sole discretion.
9. Rights as Shareholder. The Optionee shall have no rights
as a shareholder of the Company with respect to any of the shares of Common
Stock covered by this Agreement until a stock certificate or stock
certificates are issued upon the proper exercise of this option, in full or
in part, and then the Optionee shall have shareholder rights only with
respect to the shares represented by such certificate or certificates. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date such certificate or
certificates are issued.
10. Withholding Taxes. The Company shall have the right to
require a payment from the Optionee to cover applicable withholding for
income and employment taxes upon the exercise of all or a part of the option
granted hereunder.
11. Notices. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered or certified
mail with return receipt requested. All notices to the Company shall be
delivered to the President personally or addressed to the President of the
Company at its principal office at 300 Parkland Plaza, Ann Arbor, Michigan
48106. All notices by the Company to the Optionee shall be delivered to the
Optionee personally or addressed to the Optionee at the Optionee's last
residence address as then contained in the records of the Company or such
other address as the Optionee may in writing designate. Either party may be
written notice to the other party designate a different address to which
notices shall be addressed. Any notice given by the Company to the Optionee
at the Optionee's last designated address shall be effective to bind any
other person who shall acquire rights hereunder.
12. "Optionee" to Include Certain Transferees. Whenever the
word "Optionee" is used in any provision of this Agreement under
circumstances where the provision should logically apply to any other person
or persons to whom this Agreement, in accordance with the provision of
Section 6 hereof, may be transferred, the word "Optionee" shall be deemed to
include such person or persons.
13. Effect on Employment. Neither the execution of this
Agreement nor the granting of any option pursuant to it shall be deemed to
create any right in the Optionee to be retained or continued in the
employment of the Company or any of its subsidiaries.
14. Governing Law. This Agreement has been made in Michigan
and shall be construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
DAEDALUS ENTERPRISES, INC.
By: /s/ Thomas R. Ory
-------------------------------
Thomas R. Ory
Its: President and Chief Executive
Officer
/s/ Charles G. Stanich
------------------------------
OPTIONEE - Charles G. Stanich
EXHIBIT A
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
President
Daedalus Enterprises, Inc.
300 Parkland Plaza
Ann Arbor, Michigan 48106-1869
An Option was granted to me on December 10, 1996 to purchase 20,000
shares of Daedalus Enterprises, Inc. Common Stock at a price of $2.25 per
share (the "Option").
I hereby elect to exercise the Option with respect to shares.
A certified check (or cash, money order, or bank draft) in the amount of the
exercise price is enclosed herewith.
I authorize the Company to withhold from my compensation or agree to
tender the applicable amount to the Company to satisfy any requirements for
withholding of income and employment tax due to my exercise of this option.
I hereby represent that the shares of Common Stock that I am
purchasing upon this exercise of my option are being purchased for
investment purposes and not with a view to resale. This representation
shall not be binding upon me if the shares of Common Stock that I am
purchasing are subject to an effective registration statement under the
Securities Act of 1933.
----------------------------------
Optionee - Charles G. Stanich
Dated:
