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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
[ ] Transition Report Under Section 13 of 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______ to _______
Commission File Number 000-08193
SENSYS TECHNOLOGIES INC.
(FORMERLY KNOWN AS DAEDALUS ENTERPRISES, INC.)
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(Exact name of registrant as specified in its charter)
Delaware 38-1873250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8419 Terminal Road, Newington, Virginia 22122-1430
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 550-7000
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Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Class Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
- --------------------------------------
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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 the Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
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Issuer's revenues for the fiscal year ended September 30, 1998 were $21,927,000.
As of November 20, 1998, there were 3,968,271 shares of the Registrant's Common
Stock, par value $.01 per share, outstanding. The aggregate market value of the
voting and non-voting shares of the Common Stock held by non-affiliates and
outstanding as of November 20, 1998, was $9,021,000. This amount was computed
using the average bid and ask price as of November 20, 1998, as reported on the
National Association of Securities Dealers, Inc. OTC Bulletin Board.
DOCUMENTS INCORPORATED BY REFERENCE
Part III information will appear in the Registrant's Proxy Statement in
connection with its 1999 Annual Meeting of Stockholders. Such information will
be incorporated by reference as of the date of the filing of such Proxy
Statement.
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SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
FORM 10-KSB ANNUAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No.
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Part I Page No.
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<S> <C>
1. Business 4
2. Properties 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 12
Part II
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5. Market for the Registrant's Common Stock
and Related Stockholder Matters 13
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
7. Financial Statements and Supplementary Data 18
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 19
Part III
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Part III, Items 9 through 12, information will appear in the Registrant's Proxy Statement
in connection with its 1999 Annual Meeting of Stockholders. Such
Proxy Statement will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A and such information will
be incorporated herein by reference as of the date of such filing. 20
13. Exhibits and Reports
on Form 8-K 21
Signatures 22
</TABLE>
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PART I
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ITEM 1. BUSINESS
o GENERAL OVERVIEW
Sensys Technologies Inc. (also referred to as the "Company"), a Delaware
corporation, is the successor company to Daedalus Enterprises, Inc. ("DEI")
which was organized in 1968 and S.T. Research Corporation ("STR") which was
organized in 1972. On June 9, 1998, STR acquired DEI in a transaction accounted
for as a reverse acquisition (the "Acquisition"). As part of this overall
transaction, DEI changed its name to Sensys Technologies Inc. and STR then
merged into Sensys Technologies Inc. to create the Company.
The Company designs, develops and manufactures systems and equipment used for
electronic reconnaissance and imaging. Through its electronic reconnaissance
efforts, the Company supports communications intelligence, signal intelligence,
electronic support measures, electronic intelligence and airborne remote sensing
initiatives of the defense and intelligence communities. The Company's
activities in airborne imaging principally relate to the manufacture of airborne
imaging systems which are installed in aircraft and are used to acquire optical
radiation data from objects on the earth's surface and in the atmosphere.
o ACQUISITION AND MERGER
The Company, as presently organized, resulted from STR's acquisition of DEI.
This acquisition was accomplished through the Acquisition in which a
newly-created subsidiary of DEI merged into STR. The transaction was accounted
for as a reverse acquisition. As a result of the Acquisition, the outstanding
STR shares were converted into approximately 86.5% of the issued and outstanding
shares of DEI. In connection with the Acquisition, the DEI shareholders voted to
amend the DEI Certificate of Incorporation to change the name of DEI to Sensys
Technologies Inc. and to increase the Company's authorized shares from 2,000,000
to 5,000,000.
o BASIC PRODUCTS AND SERVICES
The Company is one of the leaders in high probability radar signal intercept
technology, including the ability to intercept radar signals within a crowded
signal environment. The Company's electronic support measure systems are used on
military platforms, such as ships, submarines and patrol aircraft, and at ground
installations, to intercept, analyze and identify radar signals. A key objective
of such identification is to detect hostile initiatives launched against
domestic security interests. The Company also designs, develops and manufactures
communications reconnaissance systems. These systems are generally employed in
aircraft and ground installations to intercept transmissions occurring over
established communications networks. The electronic support measure systems and
communications reconnaissance systems are primarily sold to the military and
intelligence sectors either directly or through prime contractors to which the
Company serves as a subcontractor.
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The Company also performs studies and systems engineering contracts related to
electronic reconnaissance and signal processing technologies. These activities
are primarily performed for intelligence agencies of the United States. They are
principally undertaken to support the intelligence community's procurement of
major surveillance and signal processing systems.
The Company, as a result of the Acquisition, manufactures airborne multispectral
imaging systems. These systems can be employed at low and high altitudes for the
purpose of remotely sensing ground-based or atmospheric conditions. Applications
for these systems include environmental analysis, facility inspection, disaster
assessment and utility monitoring.
o ELECTRONIC WARFARE SYSTEMS
As part of its electronic warfare technology business, the Company designs,
develops and manufactures electronic support measure, threat warning systems.
These systems intercept a transmitted radar signal and then analyze it for its
intelligence value. Radar is used by military forces for target detection and
identification, weapons guidance and navigation. Terrorists also rely upon radar
for navigation purposes. Therefore, the ability to intercept transmitted radar
and identify it can provide valuable information to protect domestic interests
from attack.
Radar signals exhibit a wide variety of characteristics such as frequency,
direction of arrival, pulse duration, pulse repetition frequency and antenna
rotation rate. All of these signals vary with the type of radar being emitted.
Once the characteristics can be detected, they can then be matched against the
parameters of radars which are associated with specific platforms. This, in
turn, can lead to the identification of the platform as well as the object for
which the radar is being employed.
Electronic support measure systems consist of specialized antennas, receivers,
signal processors and display and interface equipment. The specialized antenna
is critical since the antenna design is generally key to the desired sensitivity
of the system as well as to identifying the accuracy of the direction of arrival
of the intercepted radar signal. Once a radar signal is captured through an
antenna, the antenna converts it into an electrical signal which a receiver can
detect and pass through to a signal processor. The Company designs specific
antennas to meet the applications and requirements of its customers.
As part of the development of its radar threat warning systems, the Company
specializes in the development of broadband receivers. A broadband receiver has
the capacity to monitor a large portion of bandwidth spectrum. Although narrow
band receivers can generally detect very weak signals within the limited
spectrum they monitor, important signals in other spectrums can be missed. For
this reason, the Company utilizes broadband receivers and channelized receivers
in its radar warning systems which possess the capability of detecting and
measuring the frequency of each radar pulse over its entire bandwidth thereby
resulting in a higher probability of interception. Moreover, a broadband
receiver allows for simultaneous surveillance of all radars in a broad spectrum,
the ability to detect frequency hopping radars and the increased prospects of
intercepting a radar which transmits for a short interval of time.
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The Company's receivers then pass the intercepted radar signal to a signal
processor. The signal processor, in turn, dissects all of the detailed
parameters of the signal and manipulates the data derived therefrom to compare
these parameters with known radar signals. The characteristics of these known
signals are generally stored in a database. This comparison can then allow for
assessments of the host platform emitting the signal, the potential threat posed
by the radar target and, in certain cases, the specific intentions surrounding
the use of an enemy weapons system.
The Company believes that as a result of its research and development efforts,
particularly in advanced distributed microprocessor applications, it is at the
forefront of signal processing technology. The Company's processors are capable
of rapidly processing complex environments derived from a broad frequency
spectrum in which multiple signals are intercepted, many of which possess unique
and complex parameters.
The information derived from the signal processors must be presented to the
decision maker. As part of its radar warning systems, the Company provides
display and interface equipment which process the data derived from the signal
processor for presentation. Two key objectives exist at this level. First, only
relevant information for presentation must be derived from the overall signal
environment. Second, all detailed information which is captured must be stored
for later analysis. The Company relies upon its experience and its understanding
of the operational use of reconnaissance data in its attempts to achieve these
objectives.
Electronic support systems which the Company produces can typically sell for up
to $3,000,000 depending upon the system configuration and complexity. The
Company can configure its electronic support systems for small patrol boats as
well as large aircraft carriers and has configured systems specifically for
mobile vehicles. The Company is presently investigating applications of its
threat warning technology for airborne applications.
The Company provides support in the form of maintenance service and spare parts
for its installed systems under contracts similar to production contracts. These
activities generally continue for the life of a system. The Company expects this
aspect of its business to increase as its base of installed products expands.
o COMMUNICATIONS RECONNAISSANCE SYSTEMS
Worldwide commercial communications networks are increasingly being used for
criminal and/or terrorist purposes. Also, certain third world countries utilize
these networks for military purposes as opposed to developing special purpose
military control centers. Because of the usage of these networks, communications
reconnaissance systems have been developed to intercept communications signals
in an attempt to detect and analyze the signal and determine the activity for
which the communications transmission is being employed.
Communications transmission interception has become increasingly complex as
military and commercial systems have been designed to make maximum utilization
of available bandwidth
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not only for added capacity but to enhance the range of features available to
the systems' users. Sophisticated encryption technology is also employed to
prevent the misappropriation of proprietary data. Against this backdrop, the
communications interceptor must monitor multiple frequency bands, derive
information necessary to detect and analyze the transmission and then attempt to
determine the activity which the transmission is supporting.
The Company has been developing intercept technology which is both hardware and
software based. The Company's efforts are specifically aimed at the existing
deployed global communications networks as well as emerging satellite and land
based systems planned for future introduction into the marketplace. As part of
these development efforts, the Company has been investing in broad band digital
receiver technology and real time signal processing to sort through, detect and
analyze communications transmissions. The current prices of the interception
equipment used to intercept commercial communications range up to $2,000,000.
o AIRBORNE IMAGING SYSTEMS
The Company manufactures airborne imaging systems. These systems are installed
in aircraft and are used 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 these 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 electrical components into unified systems. These components are
either purchased off the shelf or are custom designed or manufactured by the
Company or designed and specified by the Company for outside manufacture.
Systems are assembled, tested and calibrated as part of their overall delivery
to the end user customer. Customers generally include aerospace, aerial survey,
oil and mineral exploration companies, universities and domestic and foreign
federal and state government agencies. The current prices for the imaging
systems range up to $2,000,000.
o COMPETITION
There is substantial competition in both the domestic and foreign threat warning
and communications intercept businesses. Competitors for U.S. Government
contracts include major companies such as Raytheon Company, Lockheed-Martin
Corporation, Litton Industries, Inc., Condor Systems, Inc., and TRW
Incorporated. The size and reputation of these companies can give them a
significant advantage in competing for contracts. The Company attempts to
compete in those market niches where it believes it has both a technological and
cost advantage. In the foreign market, a number of overseas companies are
competitors, such as Racal Communications (United Kingdom), Electronica (Italy),
Thompson-CFS and Dassault Electronique (France). These companies are larger and
better known than the Company and, therefore often times maintain a competitive
advantage in their home countries. Nevertheless, the Company believes
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it is one of the top suppliers of electronic support measure systems to the U.S.
Government, and can favorably compete in the foreign threat warning and
communications intercept marketplace.
The principal competitive factors in the threat warning and communications
markets are technical performance, reliability, experience and price. Based on a
combination of these factors, the Company believes that it competes very
favorably in its markets. The Company's most important competitive attributes
are its emphasis on technical superiority and a willingness and capability to
modify its products to meet customer specific needs. Once a particular
supplier's products have been selected for incorporation in a military
electronic system, further competition by other vendors during the life cycle of
the program is usually limited. In the airborne imaging markets, the Company
believes it provides superior technology in the niche market it serves. In all
business sectors in which the Company competes, it always strives to distinguish
itself on the basis of superior technological products and its system
application skills.
There are several competitors who compete with individual imaging products. In
addition, the imaging products compete with satellite based equipment suppliers.
The Company believes it competes successfully due to its product capabilities
and performance.
o MATERIALS
The Company's operations primarily require electronic and mechanical components
and supplies which are generally available from several commercial sources. A
variety of unique optical and electronic components, however, which are designed
and specified to meet particular Company requirements have a limited number of
manufacturing resources. Even with certain limited sources of supply, the
Company believes that the loss of a single supplier would not be expected to
have a material adverse effect on the Company.
o PATENTS
The Company holds several patents and has applied for others. However, the
Company believes that the ownership of patents is not a significant factor in
its business and that its success depends primarily on innovative skills,
technical competence, and the ability to rapidly adapt to new technology and
emerging requirements from its customers. None of the Company's revenue during
the last three fiscal years is attributable to patented technologies. Therefore,
the loss of patent protection does not constitute a material risk of the
Company. The Company has registered no trademarks.
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o MARKETING
Marketing of the Company's reconnaissance products and services is conducted
primarily by members of its technical staff who concentrate on developing an
understanding of a particular customer's technical requirements and maintaining
close contact with such customer. The Company's imaging products are sold by a
small technically skilled marketing staff domestically and by agents in foreign
markets.
Export sales of the threat warning and commercial communication intercept
systems and imaging products and systems must be approved by the U.S. Department
of State, which limits the markets for such products and may result in delay or
possible cancellation of an order.
o PRODUCT DEVELOPMENT
The Company believes that continued success of the Company depends, in a large
part, on its ability to develop and apply new technology. Funding for these
activities comes both from internally sponsored research and development as well
as from customer funded development contracts. Total research and development
expenditures over the past two years were as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
1998 1997
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<S> <C> <C>
Internal research and development $ 994,000 $ 517,000
Customer funded development 5,368,000 6,318,000
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Total $6,362,000 $6,835,000
========== ==========
</TABLE>
Current funded programs include development of (1) high probability of intercept
systems for surface ships, (2) communications intercept capability, and (3)
phase coherent synthesizer techniques for the generation of broad band signals.
o BACKLOG
At September 30, 1998, the Company had a funded backlog of $15,100,000 compared
to a funded backlog of $15,800,000 at September 30, 1997. A significant part of
the Company's business is a short-term effort which is typically transacted in a
six to nine month period.
In addition, at September 30, 1998, the Company had unfunded backlog of
$7,500,000 and options outstanding of approximately $50,000,000, which it
anticipates the U.S. Government and/or prime contractors will exercise and fund
in accordance with the terms of the respective contracts compared to $1,100,000
and $11,000,000, respectively at September 30, 1997. There are also programs for
which the Company, based on prior experience, expects the U.S.
Government to negotiate continuing contractual coverage.
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The increase in the Company's unfunded backlog and options is primarily the
result of a subcontract for engineering and production of components of the
AIEWS systems for U.S. Navy surface ships. Following development, the prime
contractor holds options for subsequent production. The Company anticipates the
options will be exercised during the period 2000 through 2005.
o GOVERNMENT CONTRACTS
During the most recent fiscal year approximately 96% of the Company's revenues
were attributable to contracts with numerous offices and agencies of the U.S.
Government or its prime contractors. The Company's federal government contracts
include cost plus fixed fee, cost plus incentive fee, cost plus award fee, time
and material and fixed price contracts. The fixed price contracts are not
subject to adjustment by reason of costs incurred in the performance of the
contract. With this type of contract the Company assumes the risk that it will
be able to perform at a cost below the fixed price except for costs incurred
because of contract changes ordered by the customer. The Company is subject to
various statutes and regulations governing defense contracts, which carry
substantial penalty provisions including denial of future contracts in the event
the Company is found to have abused any of these regulations. The Company
carefully monitors all of its contracts and contractual efforts to minimize the
possibility of any abuses associated with its government contracts. The Company
has experienced minimal audit adjustments over the past ten years. The Defense
Contract Audit Agency ("DCAA") has completed its audit of the Company's
contracts through the fiscal year ended September 30, 1996.
Although the Company contracts with several agencies of the federal government,
either directly or indirectly through prime contractors, its business is
substantially dependent upon continuing appropriations to support the current
and anticipated programs in which the Company will participate. The Company
believes the markets in which it participates will continue to expand as the
military branches and intelligence agencies continue to rely upon technological
advances for defense and intelligence purposes. There can be no assurances,
however, that federal appropriations will continue to exist at their current
levels or that the Company's products will be utilized in the future.
o ENVIRONMENTAL
The Company's operations do not include any activities which result in
environmental issues. As a result, the Company has incurred no costs in the past
two years related to environmental compliance.
o EMPLOYEES
At September 30, 1998, the Company employed 165 persons. Of these employees, 4
were executive officers, 89 were engaged in engineering activities, 34 were in
manufacturing, and 38 were in administrative and support positions. Many of the
Company's employees are highly
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skilled, with advanced degrees. The Company's continued success depends upon its
ability to continue to attract and retain highly skilled employees. The Company
has experienced low turnover of its employees. The Company has never had a work
stoppage, and none of its employees are represented by a labor organization. The
Company considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company believes that its owned and leased facilities are suitable for their
respective operations. Each facility is well maintained and capable of
supporting higher levels of revenue. The table below sets forth certain
information about the Company's principal facilities:
<TABLE>
<CAPTION>
Owned or Principal
Address Square Feet Leased Description Activity
- ------- ----------- ------ ----------- --------
<S> <C> <C> <C> <C>
8419 Terminal Road 67,000 Leased Two 1-story and one partial Engineering/
Newington, VA 22122 2-story adjacent block Manufacturing/
buildings. Buildings are Administration
in an industrial park
8540 Cinderbed Road 7,100 Leased 1-story brick and glass Engineering
Suite 1700 building in an office park
Newington, VA 22122
300 Parkland Plaza 12,500 Leased 1-story facility in a Engineering/
Ann Arbor, MI 48103 research park Manufacturing/
Administration
</TABLE>
The Company's facilities in Newington and Ann Arbor are equipped with equipment
used for the design, development and manufacture of its products. Facilities in
Newington include a Sensitive Compartmented Information Facility ("SCIF"),
anechoic chamber, secure test areas, environmental equipment, antennas, as well
as general purpose equipment required to manufacture and test its products.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
material pending legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 21, 1998, stockholders holding approximately 65% of the Company's
outstanding shares approved a consent resolution increasing the 400,000 shares
of stock set aside for issuance upon exercise of options granted under the
Company's Long-Term Incentive Plan to 720,000 shares.
There were no other matters submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended September 30, 1998.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Stock is traded on the over the counter market through the
OTC Bulletin Board service under the symbol "STST". Prior to the Acquisition,
the Company's stock representing the outstanding shares of DEI was traded under
the symbol "DEDI".
The following table sets forth the range of high and low actual sales prices of
the Common Stock for the periods indicated. Sale prices include prices between
dealers, may not reflect mark-ups, mark-downs or commissions and may not
represent final actual transactions.
Quarter Ended High Low
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December 31, 1996 2 1-5/8
March 31, 1997 2-1/4 1-7/8
June 30, 1997 2-5/8 2-1/8
September 30, 1997 2-3/4 2-1/4
December 31, 1997 3 2-3/4
March 31, 1998 6-1/4 3
June 30, 1998 6-1/4 4-3/4
September 30, 1998 4-3/4 3-1/8
No dividends have been paid on the Company's Common Stock during the last two
fiscal years. Furthermore, the line of credit covenants contain restrictions on
payment of dividends. The Company currently intends to retain earnings to
finance the growth and development of its business and does not anticipate
paying cash dividends on its Common Stock in the foreseeable future.
As of November 12, 1998, there were approximately 500 beneficial owners of the
Company's Common Stock, including 192 holders of record.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS, BUT ARE
FORWARD-LOOKING STATEMENTS THAT ARE BASED UPON NUMEROUS ASSUMPTIONS ABOUT FUTURE
CONDITIONS THAT COULD PROVE NOT TO BE ACCURATE. ACTUAL EVENTS, TRANSACTIONS AND
RESULTS MAY MATERIALLY DIFFER FROM THE ANTICIPATED EVENTS, TRANSACTIONS OR
RESULTS DESCRIBED IN SUCH STATEMENTS. THE COMPANY'S ABILITY TO CONSUMMATE SUCH
TRANSACTIONS AND ACHIEVE SUCH EVENTS OR RESULTS IS SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THE
EXISTENCE OF DEMAND FOR AND ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES,
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REGULATORY APPROVALS AND DEVELOPMENTS, ECONOMIC CONDITIONS, THE IMPACT OF
COMPETITION AND PRICING, RESULTS OF FINANCING EFFORTS AND OTHER FACTORS
AFFECTING THE COMPANY'S BUSINESS THAT ARE BEYOND THE COMPANY'S CONTROL. THE
COMPANY UNDERTAKES NO OBLIGATION AND DOES NOT INTEND TO UPDATE, REVISE OR
OTHERWISE PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING
STATEMENTS THAT MAY BE MADE TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES.
The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
condensed consolidated financial statements and accompanying notes.
On June 9, 1998, Daedalus Enterprises, Inc. ("DEI") acquired S. T. Research
Corporation ("STR"). See Item 1 "Business: Acquisition and Merger." The
Acquisition was accounted for as a reverse acquisition whereby STR was deemed to
have acquired DEI for financial reporting purposes. Consistent with the reverse
acquisition accounting treatment, the historical financial statements presented
for periods prior to the Acquisition date are the financial statements of STR,
except for stockholders' equity which has been retroactively restated for the
equivalent number of shares of the legal acquiror and therefore, differ from the
consolidated financial statements of DEI as previously reported. The operations
of the former DEI business have been included in the financial statements from
the date of the Acquisition. In connection with the Acquisition, the Company
changed its fiscal year-end from July 31 to September 30, which was the fiscal
year end of STR.
OPERATING CYCLE
In accordance with industry practice, the Company classifies as current assets
amounts relating to long-term contracts which may have terms extending beyond
one year but are expected to be realized during the normal operating cycle of
the Company. The liabilities in the accompanying balance sheets which have been
classified as current liabilities are those expected to be satisfied by the use
of assets classified as current assets. At September 30, 1998, substantially all
contracts will be completed within the next twelve months. Therefore,
substantially all current assets and current liabilities are expected to be
liquidated in the next twelve months.
RESULTS OF OPERATIONS
Revenue for the year ended September 30, 1998 was $21,927,000 compared to
$23,953,000 for the year ended September 30, 1997, resulting in a $2,026,000 or
a 8.5% decrease. The decrease was primarily due to the expiration of certain
long-term contracts coupled with delays in finalizing negotiations on newly
awarded contracts.
The total amounts of contracts funded and unfunded in backlog, as of September
30, 1998 and 1997, were approximately $22,600,000 and $16,900,000, respectively,
including both the
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uncompleted portion of contracts in progress and contracts awarded but not yet
started. The majority of the funded backlog at September 30, 1998 of $15,100,000
is expected to be completed within a year. Options on existing contracts
approximate $50,000,000 at September 30, 1998. The principal amount of options
are on the U.S. Navy Integrated Electronic Warfare System (AIEWS) subcontract
from Lockheed-Martin Corporation. The options are planned for exercise between
the year 2000 and the year 2005 with potential deliveries extending for an
additional two (2) years.
Cost of revenue, as a percentage of revenue, decreased from 86.7% for the year
ended September 30, 1997 to 84.5% for the year ended September 30, 1998. This
improvement primarily resulted from a reduction in contract revenue from which
losses were sustained as well as an increase in the profit margins under other
contracts. The Company attributes this improvement to its efforts to focus on
its more profitable core businesses.
During fiscal 1998, general and administrative expenses increased from
$2,654,000 to $3,424,000, a $770,000 or a 29.0% increase from fiscal 1997. This
was primarily the result of an increase in internally funded research and
development expense which increased by $477,000. Additionally, professional fees
increased $105,000 and bad debt expense increased $155,000. The increase in
professional fees was largely the result of increased costs associated with
STR's transition to a publicly traded company as a result of the Acquisition.
During fiscal 1998, the Company recorded nonrecurring charges of $1,096,000 in
connection with the ongoing restructuring of the Company's operations primarily
emanating from the Acquisition. The restructuring will combine, integrate, and
reengineer the Company's processes, policies and procedures.
Net interest expense of $345,000 for the year ended September 30, 1997,
decreased 42.9% to $197,000 for the year ended September 30, 1998. The decrease
was a result of a repayment of the Company's outstanding line of credit
borrowings resulting from proceeds of $3,783,000 from the Company's private
placement of common stock, completed on January 30, 1998.
Income tax benefit consists of federal and state income taxes. The Company's
effective income tax rate was 37.3% for the year ended September 30, 1998 and
was 37.5% for the year ended September 30, 1997. The rate varied from the
statutory rate primarily due to certain non-deductible expenses.
Net income decreased from $120,000 for the year ended September 30, 1997 to a
net loss of $822,000 for the year ended September 30, 1998. The decrease in net
income was primarily the result of the Company's nonrecurring restructuring
charges.
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LIQUIDITY AND SOURCES OF CAPITAL
Cash flows used in operating activities were $564,000 for the year ended
September 30, 1998. This was primarily a result of lower revenue and higher
operating costs for the year ended September 30, 1998, including payment of the
restructuring charges.
Cash flows used in investing activities of $480,000 for the year ended September
30, 1998 included payment of the expenses related to the acquisition of DEI of
$115,000 and capital expenditures of $365,000. The Company has currently
budgeted $500,000 for capital expenditures during fiscal 1999 including $150,000
principally for machinery and equipment, $150,000 for computer hardware and
software and $200,000 for facility improvements. The Company expects to be able
to finance these expenditures with available working capital and credit
facilities.
On January 30, 1998, the Company completed a private placement, whereby it
issued 582,000 shares of common stock. The common stock was issued for cash of
$6.50 per share for aggregate proceeds of $3,783,000. When restated for the
exchange ratio used in the Acquisition, the Company's equivalent number of
shares issued was 1,501,560 and the issuance price was $2.52. The proceeds were
used to pay outstanding bank borrowings under the Company's line of credit.
Subsequent to the Acquisition, the Company also repaid DEI's existing note
payable to its bank in the amount of $879,000. Cash flows provided by financing
activities of $1,016,000 for the year ended September 30, 1998 were primarily a
result of the proceeds on the private placement offset by the subsequent
repayment of outstanding borrowings.
Inventories, property and equipment, land and building held for sale, and
goodwill increased from September 30, 1997 to September 30, 1998 primarily due
to the acquisition of DEI. The property held for sale was sold on December 1,
1998.
The Company's line of credit from its bank was amended and extended to February
28, 1999. At September 30, 1998, the Company was not in compliance with the
earnings and tangible net worth covenants of the line of credit. In December
1998, the events of non-compliance were waived, and the tangible net worth
covenant was amended by the bank. The Company believes that it will comply with
the covenants under the line of credit, as amended, through the remaining term
of the agreement. The Company believes that its existing funds, amounts
generated by operations, and amounts available for borrowing under its line of
credit will be sufficient to meet its working capital needs through fiscal 1999.
Management has had discussions and expects to negotiate a new credit facility
with the existing lender by February 1999. However, no assurances can be
provided that a new facility possessing acceptable terms will be available to
the Company. The amended line of credit contains various performance covenants
and restrictions including restrictions on dividend payments.
The Company's 1998 tax loss is expected to be utilized as set forth below.
Approximately $526,000 ($200,000 tax benefit) will be utilized under tax loss
carry back provisions of the Internal Revenue Service ("IRS") Code to obtain tax
refunds for taxes paid in prior years. The remaining balance of approximately
$763,000 ($290,000 tax benefit) will be utilized to reduce future taxable
income. The acquired deferred tax assets arising from the DEI net operating
losses and tax credits approximate $732,000. These deferred tax assets have been
fully
16
<PAGE> 17
reserved because of limitations under the IRS Code. To the extent these deferred
tax assets are utilized, there will be a corresponding reduction in goodwill.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure," for fiscal years ending after December 15,
1997. The provisions of SFAS No. 129 established standards for disclosing
information about an entity's capital structure.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," for fiscal years beginning after December 15, 1997. The provisions
of SFAS No. 130 establish standards for reporting and display of comprehensive
income and its components in the financial statements. This statement requires
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in the financial statements and
displayed with the same prominence as other financial statements. The provisions
of SFAS No. 131 establish standards for the way that enterprises report
information about operating segments in annual financial statements and required
that selected information about operating segments in interim financial
statements be reported. It also establishes standards for related disclosure
about products and services, geographic areas, and major customers.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". This statement significantly
changes current financial statement disclosure requirements from earlier
statements. Some of the more significant effects of SFAS No. 132 which will
affect the Company's disclosures are that it:
(1) standardizes the disclosure requirements for pensions and
other postretirement benefits and presents them in one
footnote;
(2) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan
assets;
(3) eliminates certain disclosures that are no longer considered
useful, including general descriptions of the plans and;
revises disclosures about defined-contribution plans.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes a new model for
accounting for derivatives and hedging. The new standard requires enhanced
disclosure of accounting policies for derivative financial instruments and
derivative commodity instruments in the footnotes to the financial statements.
In addition, the standard expands disclosure requirements to include
quantitative and qualitative information about market risk inherent in market
risk sensitive instruments.
17
<PAGE> 18
The Company has adopted SFAS No. 129 for the fiscal year ended September 30,
1998, and will adopt SFAS Nos. 130, 131, and 132 beginning October 1, 1998. The
Company will adopt Statement No. 133 effective October 1, 1999. The Company
believes that the adoption of these statements will not have a material effect
on the Company's consolidated financial position or results of operations.
IMPACT OF INFLATION
The Company's operations were not significantly affected by inflation.
IMPLICATIONS OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
internal business systems, facilities and products that have software, whether
installed or embedded, may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including among, other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. In addition, disruptions in the economy generally resulting
from Year 2000 issues could have a material adverse affect on the Company.
The Company began its assessment of the implications of the Year 2000 issue
during March 1998, by developing plans and a program to address the potential
impact of the Year 2000 on its internal business systems, facilities and
products which might include embedded software. The Company has substantially
completed its review of each of these areas for potential Year 2000 impact.
Based on current information, the Company believes there are no material
operational problems or expenses related to the Year 2000 problem. Certain
versions of the Company's products require modifications and it appears there
may be opportunities to sell upgrades to its customer base. The Company does not
believe that it has any contingent liabilities associated with any products it
has previously manufactured which may not be Year 2000 fully compliant. Detailed
implementation plans are in place for the required modifications or
replacements. Products currently in production have been determined to be Year
2000 compliant and require no remediation. While initial assessments of Year
2000 implications are substantially complete, the Company plans to continually
re-assess its software-embedded products and operational software applications
to insure Year 2000 compliance. In addition, the Company has gathered
information about the Year 2000 compliance status of its significant suppliers,
vendors and subcontractors and continues to monitor their compliance. There have
been no significant compliance issues identified. The Year 2000 review process
and progress are monitored on a regular basis by a special task group of
management. There appears to be no material financial risk to the Company.
The Company has contingency plans for certain critical applications. Such plans
include, among other actions, manual workarounds, increasing inventories and
adjusting staffing strategies.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in this report on pages F-1
through F-23.
18
<PAGE> 19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
The Company's change in accountants was previously disclosed in its report on
Form 8-K filed June 15, 1998. There were no disagreements with the current or
prior auditors.
19
<PAGE> 20
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Information relating to the Directors and Executive Officers of the Company and
compliance with section 16(a) of the Exchange Act will appear beneath the
captions "Election of Directors," "Certain Information Regarding Nominees,"
"Meetings and Committees of the Board," "Business Experience of Executive
Officers," "Compensation of Directors," and "Section 16(a), Beneficial Ownership
Reporting Compliance" in the Company's definitive Proxy Statement which will be
distributed in connection with its 1999 Annual Meeting of Stockholders. Such
Proxy Statement will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A and such information will be incorporated herein by
reference as of the date of such filing.
ITEM 10. EXECUTIVE COMPENSATION
Information relating to management remuneration and transactions will appear
beneath the caption "Executive Compensation" and "Employment Agreements" in the
Company's definitive Proxy Statement which will be distributed in connection
with its 1999 Annual Meeting of Stockholders. Such Proxy Statement will be filed
with the Securities and Exchange Commission pursuant to Regulation 14A and such
information will be incorporated herein by reference as of the date of such
filing.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the ownership of equity securities by management and by
beneficial owners of 5% or more of the Common Stock of the Company will be set
forth under the caption "Stock Ownership of Certain Beneficial Owners" in the
Company's definitive Proxy Statement which will be distributed in connection
with its 1999 Annual Meeting of Stockholders. Such Proxy Statement will be filed
with the Securities and Exchange Commission pursuant to Regulation 14A and such
information will be incorporated herein by reference as of the date of such
filing.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and transactions between the
Company and its Officers and Directors will appear beneath the caption "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement which will be distributed in connection with its 1999 Annual Meeting
of Stockholders. Such Proxy Statement will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A and such information will be
incorporated herein by reference as of the date of such filing.
In the event that the Company's definitive Proxy Statement to be distributed in
connection with its 1999 Annual Meeting of Stockholders is not filed, or mailed
for filing, with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days of the end of the Company's
20
<PAGE> 21
most recent fiscal year, the Company will amend this Report within such time
period to provide the information required by Part III hereof.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibits are listed in the Exhibit Index which is on pages 24 and 25 of this
Form 10-KSB, which is incorporated herein by reference.
(b) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended September 30, 1998.
21
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Sensys Technologies Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Sensys
Technologies Inc. and its subsidiaries at September 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the two years in
the period ended September 30, 1998, in conformity with generally accepted
accounting principles. 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 of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Pittsburgh, PA
December 4, 1998, except
for Note 8, as to which
the date is December 22, 1998
F-1
<PAGE> 23
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 3) $ 112,000 $ 140,000
Accounts receivable 5,082,000 2,916,000
Unbilled contract costs, net (Note 4) 3,826,000 6,198,000
Inventories (Note 5) 536,000 111,000
Deferred tax asset (Note 17) 288,000 264,000
Other current assets 89,000 108,000
Refundable and prepaid income taxes (Note 17) 311,000 75,000
----------- -----------
TOTAL CURRENT ASSETS 10,244,000 9,812,000
----------- -----------
PROPERTY AND EQUIPMENT (Note 6) 1,647,000 932,000
OTHER ASSETS
Deferred tax asset - non current (Note 17) 236,000 -
Goodwill (Note 2) 782,000 -
Property held for sale (Note 7) 1,446,000 -
Other assets 69,000 60,000
----------- -----------
TOTAL ASSETS $14,424,000 $10,804,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 24
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable - line of credit (Note 8) $ 2,049,000 $ 3,911,000
Accounts payable 2,554,000 2,880,000
Accrued salaries, benefits, and related expenses 1,199,000 922,000
Deferred compensation (Note 9) 319,000 291,000
Other accrued expenses (Note 16) 619,000 174,000
Mortgage payable (Note 11) 220,000 -
Capital leases (Note 12) 53,000 76,000
----------- -----------
TOTAL CURRENT LIABILITIES 7,013,000 8,254,000
LONG-TERM LIABILITIES
Capital leases (Note 12) 104,000 14,000
----------- -----------
STOCKHOLDERS' EQUITY (Notes 2 and 13) Common Stock, at September 30, 1998, $.01
par value, authorized 5,000,000 shares; issued and outstanding 3,961,271
shares; at September 30, 1997, $.01 par value, authorized
3,000,000 shares; issued and outstanding 723,792 shares 40,000 19,000
Additional paid-in capital 6,858,000 1,286,000
Retained earnings 409,000 1,231,000
----------- -----------
7,307,000 2,536,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,424,000 $10,804,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 25
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
REVENUE
Contract revenue $21,927,000 $23,953,000
COSTS AND EXPENSES
Cost of revenues 18,522,000 20,762,000
General and administrative expenses 3,424,000 2,654,000
Restructuring costs (Note 16) 1,096,000 -
----------- -----------
Total costs and expenses 23,042,000 23,416,000
----------- -----------
(LOSS) INCOME FROM OPERATIONS (1,115,000) 537,000
OTHER EXPENSES
Interest expense, net (197,000) (345,000)
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (1,312,000) 192,000
INCOME TAX BENEFIT (PROVISION) (Note 17) 490,000 (72,000)
----------- -----------
NET (LOSS) INCOME $ (822,000) $ 120,000
========== ===========
PER SHARE AMOUNT (Note 1)
Basic and diluted (loss) earnings per share $ (0.27) $ 0.06
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 26
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $19,000 $1,289,000 $1,111,000 $2,419,000
Net income - - 120,000 120,000
Repurchase of common stock - (3,000) - (3,000)
------- ---------- ---------- ----------
BALANCE AT SEPTEMBER 30, 1997 19,000 1,286,000 1,231,000 2,536,000
------- ---------- ---------- ----------
Net loss - - (822,000) (822,000)
Issuance of stock, net of related expenses of $6 (Note 13) 15,000 3,762,000 - 3,777,000
Acquisition, including par value adjustment (Note 2) 5,000 1,752,000 - 1,757,000
Exercise of stock options 1,000 58,000 - 59,000
------- ---------- ---------- ----------
BALANCE AT SEPTEMBER 30, 1998 $40,000 $6,858,000 $ 409,000 $7,307,000
======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 27
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (822,000) $ 120,000
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 426,000 360,000
Bad debt expense 155,000 -
Deferred tax (benefit) expense (287,000) 11,000
Accrued restructuring 485,000 -
Cash provided (used) by assets and liabilities:
Accounts receivable (1,826,000) (649,000)
Unbilled contract costs 2,417,000 (1,812,000)
Inventories 83,000 130,000
Other current assets 87,000 (59,000)
Refundable and prepaid income taxes (236,000) (75,000)
Other assets - (13,000)
Accounts payable (387,000) 1,528,000
Accrued expenses (612,000) (457,000)
Other (47,000) 9,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (564,000) (907,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition expenses, net of cash acquired (115,000) -
Acquisitions of property and equipment (365,000) (462,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES $ (480,000) $ (462,000)
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 28
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds under line of credit $(2,740,000) $1,584,000
Principal payments on mortgage debt (5,000) -
Principal payments on capital lease obligations (75,000) (112,000)
Net proceeds of private placement of common stock 3,777,000 -
Proceeds of stock option exercises 59,000 -
Repurchase of common stock - (4,000)
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,016,000 1,468,000
----------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (28,000) 99,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 140,000 41,000
----------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 112,000 $ 140,000
=========== ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired with capital lease obligations $ 141,000 -
=========== ==========
Details of the Acquisition (Note 2)
Fair value of assets acquired $ 3,929,000 -
Fair value of liabilities assumed (2,041,000) -
----------- ----------
Net assets acquired 1,888,000 -
Acquisition expenses (131,000) -
----------- ----------
Stock issued in connection with the Acquisition $ 1,757,000 -
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 177,000 $ 310,000
=========== ==========
Cash paid for income taxes $ 22,000 $ 187,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 29
SENSYS TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Business Activities:
- --------------------
Sensys Technologies Inc. and subsidiaries (the "Company") primarily designs,
develops, manufactures, and markets reconnaissance systems and related products
primarily through U.S. Government contracts. In addition, the Company designs
and manufactures airborne imaging systems.
Principles of Consolidation:
- ----------------------------
The consolidated financial statements include the accounts of Sensys
Technologies Inc. and its wholly owned subsidiaries. All intercompany
transactions have been eliminated in consolidation.
Cash and Cash Equivalents:
- --------------------------
For purposes of the statement of cash flows, the Company considers all
unrestricted highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Inventories:
- ------------
Inventories are stated at the lower of cost or market, determined on the
first-in, first-out basis.
Property and Equipment:
- -----------------------
Property and equipment are recorded at cost and are depreciated over estimated
useful lives ranging from three to eight years using straight-line and double
declining balance methods. Leasehold improvements are amortized over the life of
the improvement or length of lease term, whichever is shorter using the
straight-line method. Amortization of leasehold improvements and capital lease
obligations are included in depreciation expense. The cost and accumulated
depreciation or amortization of assets sold or retired are removed from the
respective accounts and any gain or loss is reflected in other income
(expenses).
Revenue Recognition:
- --------------------
The estimated revenue of performance under Government fixed-price and cost-type
contracts, including customer funded research and development, is recognized
under the percentage of completion method of accounting whereunder the estimated
revenue is determined on the basis of completion to date (the total contract
amount multiplied by percent of performance to date less
F-8
<PAGE> 30
revenue value recognized in previous periods) and general and administrative
expenses are expensed as incurred. Revenues under cost-reimbursement contracts
are recorded as costs are incurred and include estimated earned fees in the
proportion that costs incurred to date bear to total estimated costs. The fees
under certain Government contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or other criteria. Such incentive fee awards or
penalties, which historically are not material, are included in revenue at the
time the amounts can be determined reasonably. Anticipated losses are recognized
at the time they become known. It is reasonably possible that future operating
results may be effected if actual contract costs incurred differ from total
contract costs currently estimated by management.
Research and Development:
- -------------------------
Internally funded research and development costs are included in general and
administrative expenses in the consolidated statement of operations. The amount
of internally funded research and development costs expensed during 1998 and
1997 was $994,000 and $517,000, respectively.
Income Taxes:
- -------------
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred tax assets
and liabilities have been established for the temporary differences between
financial statement and tax bases of assets and liabilities existing at the
balance sheet date using expected tax rates. A valuation allowance is recorded
to reduce a deferred tax asset to that portion that is expected to more likely
than not be realized.
Use of Estimates:
- -----------------
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Accordingly, actual results could differ from those estimates.
Operating Cycle:
- ----------------
In accordance with industry practice, the Company classifies as current assets
amounts relating to long-term contracts which may have terms extending beyond
one year but are expected to be realized during the normal operating cycle of
the Company. The liabilities in the accompanying balance sheets which have been
classified as current liabilities are those expected to be satisfied by the use
of assets classified as current assets. At September 30, 1998, substantially all
contracts will be completed within the next twelve months. Therefore,
substantially all current assets and current liabilities are expected to be
liquidated in the next twelve months.
F-9
<PAGE> 31
Acquisitions:
- -------------
The Company's acquisitions have been accounted for using the purchase method of
accounting. The results of operations for the periods since the date of
acquisition are included in the consolidated financial statements. Costs in
excess of net assets acquired are amortized on the straight-line method
principally over ten years. The Company regularly reviews the individual
components of the balances of all of its long term assets by analyzing the
future recoverability of the assets and recognizes, on a current basis, any
diminution in value.
Earnings Per Share:
- -------------------
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share. This Statement requires the
disclosure of basic and diluted earnings per share and revises the method
required to calculate these amounts under previous standards. Basic earnings per
share is computed using the weighted average number of common shares outstanding
during each period. Diluted earnings per share is computed using the weighted
average number of common and common equivalent shares outstanding during each
period. For the year ended September 30, 1998, the effect of shares issuable
upon exercise of stock options was excluded from the diluted (loss) earnings per
share calculation as their effect would have been antidilutive. The weighted
average shares outstanding were adjusted to reflect the conversion of S.T.
Research Corporation stock in connection with the Acquisition discussed in Note
2. The following summary is presented for the years ended:
<TABLE>
<CAPTION>
September 30,
-------------
1998 1997
----------- ----------
<S> <C> <C>
Net (loss) income $ (822,000) $ 120,000
Weighted average shares
outstanding - basic 3,072,000 1,867,000
Basic (loss) earnings per share $ (.27) $ .06
Effect of dilutive securities:
Shares issuable upon exercise of
stock options - 63,000
----------- ----------
Weighted average shares
outstanding - diluted 3,072,000 1,930,000
Diluted (loss) earnings per share $ (.27) $ .06
</TABLE>
F-10
<PAGE> 32
NOTE 2 - ACQUISITIONS
On June 9, 1998, S.T. Research Corporation ("STR") acquired Daedalus
Enterprises, Inc. ("DEI") in an acquisition whereby the outstanding STR shares
were converted into approximately 86.5% of the issued and outstanding shares of
DEI (the "Acquisition"). As part of this overall transaction, DEI changed its
name to Sensys Technologies Inc. While DEI was the legal acquiror, the
Acquisition was accounted for as a reverse acquisition whereby STR was deemed to
have acquired DEI for financial reporting purposes. Consistent with the reverse
acquisition accounting treatment, the historical financial statements presented
for periods prior to the Acquisition date are the financial statements of STR
except for stockholders' equity which has been retroactively restated for the
equivalent number of shares of the legal acquiror. An adjustment has also been
made to adjust the par value with an offset to additional paid-in capital. The
operations of the former DEI business have been included in the financial
statements from the date of the Acquisition. In connection with the Acquisition,
the Company changed its fiscal year-end from July 31 to September 30 which was
the fiscal year end of STR.
The average market value of the DEI Common Stock for a reasonable period of time
before and after the announcement of the Acquisition determined the purchase
price for accounting purposes. The average market value of DEI stock used to
record the purchase was $3.25 per share and there were 540,751 shares issued and
outstanding at the Acquisition date. As a result, the aggregate value of the
stock used to record the purchase was approximately $1,757,000. In addition,
direct expenses of the purchase of $131,000 consisting of legal, accounting and
other fees were included in the recorded purchase price.
The Company recorded goodwill of $802,000 which will be amortized over a
ten-year period on a straight line basis. In addition, the Company repaid DEI's
existing note payable to its bank in the amount of $879,000. Goodwill
amortization expense for the year ended September 30, 1998 was approximately
$20,000.
The following unaudited pro forma information reflects the pro forma results of
operations of the Company and DEI for the years ended September 30, 1998 and
1997, assuming the companies had combined as of October 1, 1996.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenue $22,884,000 $26,954,000
Net (loss) income $(1,640,000) $ 56,000
Basic and diluted (loss) earnings per share $ (.45) $ .02
</TABLE>
This pro forma information does not purport to be indicative of the results that
actually would have been obtained if the companies had been combined during the
periods presented and is not intended to be a projection of future results.
F-11
<PAGE> 33
The purchase price of $1,888,000, including direct expenses, was allocated as
follows:
<TABLE>
<S> <C>
Current assets $ 1,065,000
Property and equipment 562,000
Property held for sale 1,500,000
Goodwill 802,000
-----------
Total assets 3,929,000
Current liabilities, including debt (2,041,000)
-----------
$ 1,888,000
===========
</TABLE>
At the Acquisition date, DEI had net operating loss carry forwards (NOLs) of
approximately $2,575,000 and tax credits of approximately $40,000. Except for
the amount of acquired NOLs and tax credits which can be used to offset a
built-in tax gain associated with property held for sale, the acquired NOLs and
tax credits are limited as to use under the current Internal Revenue Service Tax
Code. Therefore, the amount of acquired NOLs and tax credits, net of the
built-in tax gain associated with the property held for sale, have been fully
reserved through the recording of a valuation allowance. To the extent that the
reserved NOLs become realized, the corresponding tax benefit will be used to
reduce goodwill.
On January 17, 1997, the Company acquired a division of a corporation for an
aggregate purchase price of $110,000 plus liabilities assumed of $54,000. The
acquisition was accounted for as a purchase and has been included with
operations from the acquisition date. Pro forma results of operations would not
differ significantly from the Company's historical operating results.
The total purchase price of $164,000 was allocated as follows:
<TABLE>
<S> <C>
Property and equipment $141,000
Prepaid expenses and deposits 23,000
--------
Total $164,000
========
</TABLE>
NOTE 3 - CASH HELD IN TRUST - RESTRICTED:
On January 1, 1990, the Company established a health and disability benefit plan
pursuant to the Employee Retirement Income Security Act of 1974 for employees
and their dependents. The Company funds the plan by making monthly contributions
to a trust established and administered by an independent third party. The
monthly contribution is based on a predetermined rate for each enrolled
employee. The excess contributions over claims are maintained in trust to cover
future claims of the enrolled employees. The Company may terminate the trust at
any time. Distribution of trust assets shall be determined by the Company. The
Company maintains individual claim and aggregate stop loss coverage. The Company
records a liability in the financial statements for known claims outstanding and
an estimate, based on prior experience, of incurred but not reported
F-12
<PAGE> 34
claims in excess of amounts remaining in the trust fund. The trust cash account
had a balance of zero as of September 30, 1998 and 1997. The Company accrued a
liability of $151,000 and $144,000 at September 30, 1998 and 1997, respectively,
under its health and disability plan.
NOTE 4 - UNBILLED CONTRACT COSTS, NET:
Net unbilled contract costs consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unbilled costs and accrued profit on
contracts in progress $ 6,359,000 $12,128,000
Progress payments (2,533,000) (5,930,000)
----------- -----------
Total $ 3,826,000 $ 6,198,000
=========== ===========
</TABLE>
Unbilled costs and accrued profit on contracts in progress comprise principally
amounts of revenue recognized on contracts for which billings had not been
presented to the contractor because the amounts were not billable at the balance
sheet date. It is anticipated such unbilled amounts receivable at September 30,
1998, will be billed over the next 270 days as products and/or services are
delivered. Retainages, which approximate $192,000 at September 30, 1998, will be
billed and collected as contracts are finalized with the contractor. As of
September 30, 1998 and 1997, there are no significant unrecovered costs or
estimated profits subject to future negotiation.
Receivables under certain Government contracts are based on provisional rates
that permit recovery of overhead not exceeding certain limits. These overhead
rates are subject to audit on an annual basis by the Defense Contract Audit
Agency (DCAA). When final determination and approval of the allowable rates have
been made, receivables may be adjusted accordingly. In management's opinion, any
adjustments will not be material. The DCAA has completed their audit of the
rates through September 30, 1996.
NOTE 5 - INVENTORIES:
Inventories consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Materials $ 94,000 $107,000
Work in process 442,000 4,000
-------- --------
$536,000 $111,000
======== ========
</TABLE>
F-13
<PAGE> 35
NOTE 6 - PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows at September 30:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Furniture and fixtures $ 123,000 $ 96,000
Machinery and equipment 3,054,000 1,942,000
Leasehold improvements 400,000 317,000
Equipment capitalized under capital leases 156,000 328,000
----------- -----------
Subtotal $ 3,733,000 $ 2,683,000
Less accumulated depreciation
and amortization $(2,086,000) $(1,751,000)
----------- -----------
Total $ 1,647,000 $ 932,000
=========== ===========
</TABLE>
Depreciation and amortization expense was approximately $406,000 and $360,000
for the years ended September 30, 1998 and 1997, respectively.
NOTE 7 - PROPERTY HELD FOR SALE:
Property held for sale consists of land and a building acquired in connection
with the Acquisition. On December 1, 1998, the Company sold the property for
cash of approximately $1,575,000, with net proceeds of approximately $1,500,000
of which approximately $220,000 was used to pay off the mortgage balance. Under
terms of the sales agreement, the Company is leasing approximately fifty percent
of the facility for five years with a five year option. The annual rental
approximates $112,000 for each of the next five years for an aggregate amount of
$560,000.
NOTE 8 - NOTE PAYABLE - LINE OF CREDIT:
On September 30, 1998, the Company's line of credit with its bank was extended
to February 28, 1999. The amended agreement provides a maximum available line of
credit of $3,000,000. However, the total borrowing base generally cannot exceed
the sum of 90 percent of qualified Government accounts receivable and 80 percent
of qualified non-Government accounts receivable.
The bank agreement amendment establishes the interest rate at the bank's prime
(8.25 percent at September 30, 1998) plus .5 percent. The amendment also
contains various covenants as to dividend restrictions, working capital,
tangible net worth, earnings and debt-to-equity ratios. The Company expects to
renew the line of credit under similar terms and conditions.
The Company was not in compliance with the earnings and tangible net worth
covenants at September 30, 1998. In December 1998, the events of non-compliance
were waived, and the tangible net worth covenant was amended by the bank. The
Company believes that it will be able to comply with the covenants under the
line of credit, as amended, through the term of the agreement.
F-14
<PAGE> 36
NOTE 9 - DEFERRED COMPENSATION:
The Company has a Non-Qualified Deferred Compensation Plan whereby employees may
defer compensation with such deferrals taking the status of a general obligation
of the Company. The balance bears interest at prime plus one half percent. The
principal amount of the balance is due to an employee Board member.
NOTE 10 - EMPLOYEE BENEFIT PLANS:
At September 30, 1998, the Company's sole qualified deferred compensation plan
("the Plan") consisted of two segments. The Plan is comprised of a 401(k) plan
and a profit sharing plan. Included in the Plan are the former DEI Defined
Contribution Pension Plan assets and the former S.T. Research Corporation ESOP
stock. In June, 1998, the Plan was amended to merge with the employee stock
ownership plan ("ESOP") segment. Upon the amendment, the right was afforded Plan
participants to liquidate their ESOP shares at market prices and self-direct the
proceeds acquired at market prices. Also, in June of 1998, the Plan was amended
to allow for self direction of profit sharing shares.
To participate in the Plan, eligible employees must have attained 21 years of
age. Eligible employees may elect to participate in the Company's 401(k) plan on
January 1 and July 1. In 1998, the Company matched 50 percent of the first six
percent of employee contributions, which amounted to $174,000. Matching
contributions for 1997 were $112,000.
Company contributions to the ESOP Plan totaled $118,000 in 1997. The Company did
not make an ESOP contribution in 1998. The Company did not make a contribution
to the profit sharing segment in 1998 or 1997.
The total number of Company shares allocated to participants under the profit
sharing plan at September 30, 1998 and 1997, including shares formerly in the
ESOP and 401(k) Plans, was 615,918 and 721,300, respectively.
NOTE 11 - MORTGAGE PAYABLE:
The Company has a mortgage bearing interest at prime (8.25% at September 30,
1998) plus 1.5%, with a balance of $220,000 as of September 30, 1998. The
mortgage was associated with the property held for sale and was paid in full on
December 1, 1998, in connection with the sale of the property.
NOTE 12 - LEASE COMMITMENTS:
Operating Leases:
- -----------------
The facilities at the Company's principal location have been leased from
partnerships (related parties) in which an officer, employees and stockholders
of the Company are partners. The risk and rewards associated with the facilities
and the obligations imposed by the partnerships' debt and other general
obligations reside with the partnerships. In 1993, the Company entered into a
letter agreement to extend the lease commitment for 80% of its principal
location through December 31, 1998. In 1995, the Company entered into a
separate agreement to
F-15
<PAGE> 37
extend the lease on the remaining 20% of its principal location to December 14,
1998. On December 15, 1998, the Company entered into rolling six month leases
for these facilities effective upon the expiration of the respective leases.
These six month leases can be terminated by the parties upon the Company
finalizing a lease agreement with a prospective buyer for these facilities.
On September 2, 1998, the Company entered into a sales agreement for the
property held for sale. A condition of the sales agreement was to enter into a
five year lease for 50% of the facility. Effective with the sale of the
property, on December 1, 1998, the Company entered into a five year lease
agreement with a five year option.
In connection with an acquisition (Note 2), the Company assumed a facility lease
used in the operations of the acquired business. The terms of the lease provide
for annual minimum lease payments of $172,000 plus operating expenses through
April 30, 2003. On November 9, 1998, in accordance with the terms of the lease,
the Company notified the landlord of its intent to terminate the lease effective
December 31, 1998.
The Company leases various equipment under noncancellable operating leases.
Rent expense for the years ended September 30, 1998 and 1997 was $852,000 and
$759,000, respectively, which included $419,000 associated with leases from
related parties in both 1998 and 1997. As of September 30, 1998, minimum rental
payments under operating leases for facilities and equipment are as follows:
<TABLE>
<CAPTION>
Related Party Third Party
------------- -----------
<S> <C> <C>
1999 $105,000 $ 556,000
2000 - 490,000
2001 - 449,000
2002 - 411,000
2003 - 334,000
Remainder - 25,000
-------- ----------
Total $105,000 $2,265,000
======== ==========
</TABLE>
The Company subleases a portion of its facility at its principal location. As of
September 30, 1998, minimum rentals to be received under the sublease through
1999 are $19,000.
Capital Leases:
- ---------------
At September 30, 1998 and 1997, the Company was obligated under capital leases
for equipment having an aggregate book value of $156,000 and $328,000,
respectively. The following schedule summarizes the future minimum lease
payments:
F-16
<PAGE> 38
<TABLE>
<CAPTION>
Years Ending September 30, 1998
-------------------------- ----
<S> <C>
1999 $ 65,000
2000 50,000
2001 50,000
2002 13,000
2003 -
--------
Subtotal 178,000
Less amount representing interest (21,000)
--------
Present value of minimum lease obligations 157,000
Less current portion (53,000)
--------
Capital leases payable - long-term portion $104,000
========
</TABLE>
NOTE 13 - STOCK ISSUANCE
On January 30, 1998, the Company completed a private placement, whereby it
issued 582,000 shares of common stock. The common stock was issued for cash of
$6.50 per share for aggregate proceeds of $3,783,000. When restated for the
exchange ratio used in the Acquisition of 2.58 shares, the equivalent number of
shares issued was 1,501,560 and the issuance price was $2.52. The proceeds were
used to repay outstanding bank borrowings under the Company's line of credit.
NOTE 14 - STOCK OPTIONS:
The Company has an Incentive Stock Option Plan established in 1983 ("1983
Plan"), and a Long-Term Incentive Plan and a Non-Employee Director Stock Option
Plan established in 1995 (collectively the "1995 Plans"). The Long-Term
Incentive Plan provides for the granting of options, restricted stock and/or
performance awards to key employees and the Non-Employee Director Stock Option
Plan provides for the granting of options to outside members of the Board of
Directors to purchase common stock of the Company at the fair market value at
the date of the grant. As of September 30, 1998, there were 720,000 and 21,000
shares of common stock reserved under the Long-Term Incentive Plan and the
Non-Employee Director Stock Option Plan, respectively. There are 38,975
exercisable options outstanding at September 30, 1998 in the Long-Term Incentive
Plan. There are no exercisable options or stock appreciation rights outstanding
under the 1983 Plan at September 30, 1998. No additional options can be granted
under the 1983 Plan. The Non-Employee Director Stock Option Plan was amended
effective with the Acquisition to prohibit future granting of options.
The Company also has a 1991 Stock Option Plan, the ("1991 Plan") and a 1996
Stock Option Plan, the ("1996 Plan"). The 1991 Plan has 25,800 exercisable
shares that are outstanding. The 1996 Plan has 41,280 shares outstanding of
which 31,992 are exercisable.
Options under all of the aforementioned Plans generally vest over a three to
five year period and expire after ten years.
F-17
<PAGE> 39
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
1983 Weighted Average 1995 Weighted Average
Plan Exercise Price Plans Exercise Price
---- -------------- ----- --------------
<S> <C> <C> <C> <C>
Balance at Sept. 30, 1996 28,000 $3.87 22,500 $3.23
Granted - - 16,850 2.25
Expired - - - -
Forfeited - - - -
Balance at Sept. 30, 1997 28,000 3.87 39,350 2.81
Exercised (25,000) 4.00 - -
Granted - - - -
Expired (3,000) 2.75 (375) 2.25
Forfeited - - - -
Balance at Sept. 30, 1998 - - 38,975 2.82
</TABLE>
<TABLE>
<CAPTION>
1991 Weighted Average 1996 Weighted Average
Plan Exercise Price Plan Exercise Price
---- -------------- ---- --------------
<S> <C> <C> <C> <C>
Balance at Sept. 30, 1996 113,520 $1.19 15,480 $3.37
Granted - - 46,440 3.34
Expired (10,320) 1.52 - -
Forfeited (25,800) 1.58 - -
Balance at Sept. 30, 1997 77,400 1.01 61,920 3.35
Exercised (51,600) 1.14 - -
Granted - - - -
Expired - - - -
Forfeited - - (20,640) 3.31
Balance at Sept. 30, 1998 25,800 0.75 41,280 3.37
</TABLE>
Total shares of common stock reserved pursuant to the aforementioned Plans are
151,055.
The weighted average grant date fair value of options granted during 1997 was
$4.60 for the 1996 Plan and $1.03 for the 1995 Plans. There were no options
granted in 1998.
The Black-Scholes model was used to estimate the fair value of the options.
Significant assumptions include a risk-free interest rate of 7.5 percent and an
expected life equal to the term of the options.
F-18
<PAGE> 40
The following summarizes information about stock options outstanding at
September 30, 1998:
<TABLE>
<CAPTION>
1998
Number Range of Weighted Average
Outstanding Exercises Prices Remaining Life
----------- ---------------- --------------
<S> <C> <C> <C>
1983 Option Plan - - -
1995 Option Plans 38,975 $2.25 to $3.94 4.4 years
1991 Option Plan 25,800 $0.75 2.3 years
1996 Option Plan 41,280 $3.37 8.1 years
-------
106,055 $0.75 to $3.94 -
=======
</TABLE>
The Company does not recognize compensation costs for its stock option plan in
the determination of net income. Had compensation costs been determined based on
the fair value at the grant dates for awards under the plan, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below for the years ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Basic and diluted
(loss)
earnings
Net income per share
---------- ---------
<S> <C> <C>
1998:
As reported $(822,000) $(.27)
Pro forma $(822,000) $(.27)
1997:
As reported $ 120,000 $ .06
Pro forma $ 114,000 $ .06
</TABLE>
On October 5, 1998, the Compensation Committee of the Board of Directors
approved the award of 414,000 options at $3.00 per share.
NOTE 15 - STOCK PURCHASE PLAN:
The Company reserved 100,000 shares of common stock for sale to eligible
employees through payroll deductions over six month periods pursuant to the 1983
Employee Stock Purchase Plan (the "Purchase Plan"). The purchase price is the
lower of 90% of the fair market value of the stock on
F-19
<PAGE> 41
the first or last day of the purchase period. Under the Purchase Plan, zero and
1,350 shares were issued in 1998 and 1997, at an average price in 1997 of $2.16.
At September 30, 1998 and 1997, there were 64,468 shares available for future
purchase.
NOTE 16 - RESTRUCTURING COSTS
During fiscal 1998, the Company recorded nonrecurring charges of $1,096,000 in
connection with the ongoing restructuring of the Company's operations. The
restructuring will combine, integrate, and reengineer Company's processes,
policies and procedures. Costs incurred consisted primarily of severance costs
and other employee benefits, professional fees and relocation expenses. Total
restructuring costs included in other accrued expenses at September 30, 1998 was
$485,000.
NOTE 17 - INCOME TAXES:
The income tax provision (benefit) for the years ended September 30, 1998 and
1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
Current:
Federal $(163,000) $51,000
State (40,000) 10,000
Deferred:
Federal (242,000) 10,000
State (45,000) 1,000
--------- -------
$(490,000) $72,000
========= =======
</TABLE>
The Company's deferred tax assets by tax jurisdiction are as follows:
<TABLE>
<CAPTION>
September 30,
-------------
1998 1997
-------- --------
<S> <C> <C>
Federal $442,000 $221,000
State 82,000 43,000
-------- --------
Total $524,000 $264,000
======== ========
</TABLE>
F-20
<PAGE> 42
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
September
1998 1997
---------- --------
<S> <C> <C>
Deferred compensation $ 121,000 $111,000
Accrued vacation 127,000 134,000
Property held for sale (287,000) -
Net operating losses and tax credits 1,294,000 -
Other, net 1,000 19,000
---------- --------
Sub-total $1,256,000 $264,000
Less: Valuation allowance (732,000) -
---------- --------
$ 524,000 $264,000
========== ========
</TABLE>
The provision (benefit) for income taxes from income (loss) from continuing
operations in 1998 and 1997 varied from the U.S. statutory rate for the
following reasons:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Federal statutory rate 34.0% 34.0%
State income taxes, net of federal tax benefit 4.0 4.0
Other, net (.7) (.5)
---- ----
37.3% 37.5%
==== ====
</TABLE>
As a result of limitations under the Internal Revenue Service Tax Code and
uncertainties as to the Company's ability to generate sufficient taxable income
in future periods, a portion of the NOLs acquired in the Acquisition have been
reserved through a valuation allowance. To the extent that the reserved NOLs
become realized, the corresponding tax benefits will be used to reduce goodwill.
The Company's available net operating loss carryforwards and tax credits will
expire from 2009 through 2018.
NOTE 18 - CONCENTRATIONS OF CREDIT RISK:
As of September 30, 1998 and 1997, the Company had funds on deposit in excess of
the federally insured amount with NationsBank. Approximately 96 percent of the
Company's revenues are generated from contracts with U.S. Government agencies or
U.S. Government contractors.
NOTE 19 - RELATED PARTY TRANSACTIONS
Related party transactions related to facility leases are disclosed in Note 12.
In addition, the Company entered into agreements with a corporation in which
certain of the principals were related to an officer of the Company's
predecessor, S.T. Research Corporation. The customer was placed into
receivership and did not possess the financial capacity to pay the Company
thereby resulting in bad debt losses of $155,000 in 1998. The total revenue
recognized from these agreements during fiscal years
F-21
<PAGE> 43
1998 and 1997 was approximately $110,000. The balance of the bad debt losses
related to equipment which was purchased for the agreements and sold to the
customer.
NOTE 20 - FAIR VALUES OF FINANCIAL INSTRUMENTS:
Based on existing rates, economic conditions and the short maturities, the
carrying amounts of all the financial instruments at September 30, 1998 and 1997
are reasonable estimates of their fair values. The Company's financial
instruments include cash and cash equivalents, accounts receivable, the note
payable - line of credit, accounts payable and the capital lease obligations.
NOTE 21 - NEW ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure," for fiscal years ending after December 15,
1997. The provisions of SFAS No. 129 established standards for disclosing
information about an entity's capital structure.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," for fiscal years beginning after December 15, 1997. The provisions
of SFAS No. 130 establish standards for reporting and display of comprehensive
income and its components in the financial statements. This statement requires
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in the financial statements and
displayed with the same prominence as other financial statements. The provisions
of SFAS No. 131 establish standards for the way that enterprises report
information about operating segments in annual financial statements and required
that selected information about operating segments in interim financial
statements be reported. It also establishes standards for related disclosure
about products and services, geographic areas, and major customers.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". This statement significantly
changes current financial statement disclosure requirements from earlier
statements. Some of the more significant effects of SFAS No. 132 which will
affect the Company's disclosures are that it:
(1) standardizes the disclosure requirements for pensions and
other postretirement benefits and presents them in one
footnote;
(2) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan
assets;
(3) eliminates certain disclosures that are no longer considered
useful, including general descriptions of the plans and;
revises disclosures about defined-contribution plans.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes a new model for
accounting for derivatives and hedging. The new standard requires enhanced
disclosure of accounting policies for derivative financial instruments and
derivative commodity instruments in the footnotes to the financial statements.
In addition, the standard expands disclosure requirements to include
quantitative and qualitative information about market risk inherent in market
risk sensitive instruments.
F-22
<PAGE> 44
The Company has adopted SFAS No. 129 for the fiscal year ended September 30,
1998, and will adopt SFAS Nos. 130, 131, and 132 beginning October 1, 1998. The
Company will adopt Statement No. 133 effective October 1, 1999. The Company
believes that the adoption of these statements will not have a material effect
on the Company's consolidated financial position or results of operations.
NOTE 22 - EXPORT SALES/FOREIGN OPERATIONS:
The Company had export sales to various countries which amounted to $335,000 and
$2,843,000 in 1998 and 1997, respectively. The Company has no foreign
operations.
F-23
<PAGE> 45
SIGNATURES
- ----------
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
SENSYS TECHNOLOGIES INC.
(Registrant)
By: /s/ S. Kent Rockwell
----------------------------------------
S. Kent Rockwell
Chief Executive Officer and
Vice Chairman of the Board of Directors
(principal executive officer)
Date: December 28, 1998
22
<PAGE> 46
Pursuant to the requirements of the Securities 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.
Signature Title
/s/ S.R. Perrino Chairman of the Board of Directors
- ---------------------------------
S.R. Perrino
Date: December 28, 1998
/s/ Robert R. Bower Sr. Vice President, CFO
- --------------------------------- and Treasurer
Robert R. Bower
Date: December 28, 1998
/s/ Admiral James B. Busey, Jr Director
- ---------------------------------
Admiral James B. Busey, Jr.
Date: December 28, 1998
/s/ Charles Bernard Director
- ---------------------------------
Charles Bernard
Date: December 28, 1998
/s/ Thomas R. Ory Director
- ---------------------------------
Thomas R. Ory
Date: December 28, 1998
/s/ Philip H. Power Director
- ---------------------------------
Philip H. Power
Date: December 28, 1998
/s/ John D. Sanders Director
- ---------------------------------
John D. Sanders
Date: December 28, 1998
23
<PAGE> 47
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated as of December 23, 1997 by and
among the Company, DEI Merger Sub, Inc. and S.T. Research Corporation
(incorporated by reference to Exhibit 2.1 to Form 8-K filed with the
Securities and Exchange Commission on December 29, 1997, File No.
000-08193).
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to Form 8-K filed with the Securities and
Exchange Commission on June 15, 1998, File No. 000-08193).
3.2 By-Laws, as amended (filed herewith)
4.1 Specimen Stock Certificate for Common Stock (filed herewith)
10.1 Sensys Technologies Inc. Long-Term Incentive Plan, as amended
(incorporated by reference to the registration statement filed on Form
S-8 filed with the Securities and Exchange Commission on October 5,
1998, Registration No. 333-65351).
10.2 Form of Incentive Stock Option Agreement under Long-Term Incentive Plan
(filed herewith)
10.3 1996 Employee Incentive Stock Option Plan of S.T. Research Corporation
(filed herewith)
10.4 1996 Director Incentive Stock Option Plan of S.T. Research Corporation
(filed herewith)
10.5 1991 Incentive Stock Option Plan of S.T. Research Corporation (filed
herewith)
10.6 Non-Qualified Stock Option Agreement with Mr. Thomas R. Ory, dated
November 8, 1989 (filed as exhibit 10.607 to the 1993 Form 10-K and
incorporated herein by reference)
10.7 Non-Qualified Stock Option Agreement with Mr. Charles G. Stanich, dated
November 8, 1989 (filed as exhibit 10.608 to the 1993 Form 10-K and
incorporated herein by reference)
10.8 Stock Option Agreement with Charles Bernard (filed herewith)
24
<PAGE> 48
Exhibit No. Description
- ----------- -----------
10.9 Stock Option Agreement with John Sanders (filed herewith)
10.10 Stock Option Agreement with Robert R. Bower (filed herewith)
10.11 Sensys Technologies Inc. 401(k) Profit Sharing Plan (filed herewith)
10.12 Employment Agreement with Thomas R. Ory (filed herewith)
10.13 Employment Agreement with Charles Stanich (filed herewith)
10.14 Credit Line Agreement with NationsBank, N.A. (filed herewith)
10.15 Lease dated December 1, 1985 for premises in Newington, Virginia
(filed herewith)
10.16 Lease dated December 11, 1989 for premises in Newington, Virginia
(filed herewith)
10.17 Lease dated August 24, 1998 for premises in Newington, Virginia
(filed herewith)
10.18 Lease dated December 1, 1998 for premises in Ann Arbor, Michigan
(filed herewith)
10.19 Agreement for the sale of real estate located at 300 Parkland Plaza,
Ann Arbor, Michigan, dated December 1, 1998 (filed herewith)
10.20 Agreement with Donald Reiser (filed herewith)
27 Financial Data Schedule (filed herewith)
25
<PAGE> 1
EXHIBIT 3.2
SENSYS TECHNOLOGIES INC.
(a Delaware Corporation)
AMENDED AND RESTATED
BYLAWS
(as adopted on August 5, 1998)
<PAGE> 2
SENSYS TECHNOLOGIES INC.
AMENDED AND RESTATED
BYLAWS
ARTICLE 1: STOCKHOLDERS
SECTION 1.1. ANNUAL MEETING. There shall be an annual meeting of the
stockholders of Sensys Technologies Inc. (the "Corporation") no later than the
last day of February of each year at 10:00 a.m. local time, or at such other
date or time as shall be designated from time to time by the board of directors
of the Corporation (the "Board of Directors") and stated in the notice of the
meeting, for the election of directors and for the transaction of such other
business as may come before the meeting.
SECTION 1.2. SPECIAL MEETINGS. A special meeting of the stockholders of
the Corporation may be called at any time by the written resolution or other
request of a majority of the members of the Board of Directors. Such written
resolution or request shall specify the purpose or purposes for which such
meeting shall be called.
SECTION 1.3. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, whether annual or special, stating the date, hour and place
thereof, shall be served either personally or by mail, not less than ten nor
more than sixty days before the meeting, upon each stockholder of record
entitled to vote at such meeting and upon any other stockholder to whom the
giving of notice of such a meeting may be required by law. Notice of a special
meeting shall also state the purpose or purposes for which the meeting is called
and shall indicate that such notice is being issued by or at the direction of
the Board of Directors. If, at any meeting, action is proposed to be taken that
would, if taken, entitle stockholders to receive payment for their stock
pursuant to the General Corporation Law of the State of Delaware, the notice of
such meeting shall include a statement of that purpose and to that effect. If
mailed, notice shall be deemed to be delivered when deposited in the United
States mail or with any private express mail service, postage or delivery fee
prepaid, and shall be directed to each such stockholder at its address as it
appears on the records of the Corporation, unless such stockholder shall have
previously filed with the secretary of the Corporation a written request that
notices intended for such stockholder be mailed to some other address, in which
case, it shall be mailed to the address designated in such request.
SECTION 1.4. PLACE OF MEETING. The Board of Directors may designate any
place, either in the State of Delaware or outside the State of Delaware, as the
place a stockholder meeting shall be held for any annual meeting or any special
meeting called by the Board of Directors. If no designation is made, the place
of such meeting shall be the principal office of the Corporation.
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SECTION 1.5. FIXING DATE OF RECORD. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date which: (a) shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and (b) shall not be less than
ten nor more than sixty days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of such meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date which: (a) shall not precede the
date upon which the resolution fixing the record date is adopted, and (b) shall
be not more than sixty days prior to such action. If no record date is fixed by
the Board of Directors, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
SECTION 1.6. INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed, the proxies and ballots shall be received and be
taken in charge, and all questions touching the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided by
one or more inspectors. Such inspectors shall be appointed by the Board of
Directors before or at such meeting or, if no such appointment shall have been
made, then by the presiding corporate officer at the meeting. If, for any
reason, any of the inspectors previously appointed shall fail to attend the
meeting or shall refuse or be unable to serve, inspectors in place of any
inspectors so failing to attend or refusing or being unable to serve shall be
appointed in like manner.
SECTION 1.7. QUORUM. At any meeting of the stockholders, the holders of
one-third of the outstanding shares of each class and series, if any, of the
capital stock of the Corporation present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number shall be required by law, in which case, the
representation of the number so required shall constitute a quorum.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed in
accordance with these Bylaws for an annual or special meeting, a majority in
interest of the stockholders present in person or by proxy may
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adjourn, from time to time, without notice other than by announcement at the
meeting, until the requisite holders of the amount of stock necessary to
constitute a quorum shall attend. At any such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 1.8. BUSINESS. The chairman, if any, of the Board of Directors,
or, in his absence the vice-chairman, if any, of the Board of Directors or the
president of the Corporation or an executive vice-president of the Corporation,
in the order named, shall call meetings of the stockholders to order and shall
act as the chairman of such meeting. The secretary of the Corporation shall act
as secretary at all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the presiding corporate officer
may appoint any person to act as the secretary of the meeting.
SECTION 1.9. STOCKHOLDER PROPOSALS. No proposal by a stockholder shall be
presented for vote at an annual meeting of stockholders unless such stockholder
shall, not later than the close of business on the last business day of the
month of October, provide the Board of Directors or the secretary of the
Corporation with written notice of its intention to present a proposal for
action at the forthcoming meeting of stockholders. No proposal by a stockholder
shall be presented for vote at a special meeting of stockholders unless such
stockholder shall, not later than the close of business on the tenth calendar
day following the date on which notice of such meeting is first given to
stockholders, provide the Board of Directors or the secretary of the Corporation
with written notice of its intention to present a proposal for action at the
forthcoming special meeting of stockholders. Any such notice shall be given by
personal delivery or shall be sent via first class certified mail, return
receipt requested, postage prepaid and shall include the name and address of
such stockholder, the number of voting securities that such stockholder holds of
record and a statement that such stockholder holds beneficially (or if such
stockholder of record does not own such shares beneficially, including the
executed consent and authorization of the beneficial stockholder), the text of
the proposal to be presented for vote at the meeting and a statement in support
of the proposal. No new business proposed by a stockholder, shall be acted upon
at such annual or special meeting unless stated and filed as herein provided.
Notwithstanding any other provision of these Bylaws, the Corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at a
special or annual meeting of stockholders if the Board of Directors reasonably
believes the proponents thereof have not complied with Sections 13 or 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder; nor shall the Corporation be required to include any stockholder
proposal not required to be included in its proxy materials to stockholders in
accordance with any such section, rule or regulation.
SECTION 1.10. VOTING; PROXIES. At all meetings of stockholders, a
stockholder entitled to
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vote may vote either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the secretary of the Corporation at or before the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 1.11. VOTING BY BALLOT. The votes for directors, and upon the
demand of any stockholder or when required by law, the votes upon any question
before the meeting, shall be by ballot.
SECTION 1.12. VOTING LISTS. The corporate officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares of stock registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to such meeting, during ordinary business hours for a
period of at least ten days prior to the meeting, either at a place within the
city in which such meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where such meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 1.13. VOTING OF STOCK OF CERTAIN HOLDERS. Shares of capital stock
of the Corporation standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the bylaws of such
corporation may prescribe, or in the absence of such provision, as the board of
directors of such corporation may determine.
Shares of capital stock of the Corporation standing in the name of a
deceased person, a minor ward or an incompetent person may be voted by such
person's administrator, executor, court-appointed guardian or conservator,
either in person or by proxy, without a transfer of such stock into the name of
such administrator, executor, court-appointed guardian or conservator. Shares of
capital stock of the Corporation standing in the name of a trustee may be voted
by such trustee, either in person or by proxy.
Shares of capital stock of the Corporation standing in the name of a
receiver may be voted by such receiver, either in person or by proxy, and stock
held by or under the control of a receiver may be voted by such receiver without
the transfer thereof into his name if authority to do so is contained in any
appropriate order of the court by which such receiver was appointed.
A stockholder whose stock is pledged shall be entitled to vote such
stock, either in person or by proxy, until the stock has been transferred into
the name of the pledgee; thereafter, the pledgee shall be entitled to vote,
either in person or by proxy, the stock so transferred.
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Shares of its own capital stock belonging to the Corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares of capital stock at any given
time; however, shares of the Corporation's own capital stock held by it in a
fiduciary capacity may be voted and shall be counted in determining the total
number of shares of outstanding capital stock at any given time.
ARTICLE 2: BOARD OF DIRECTORS
SECTION 2.1. NUMBER AND TERM OF OFFICE. The business and the property of
the Corporation shall be managed and controlled by the Board of Directors. The
Board of Directors shall consist of no fewer than three directors and no more
than ten directors. Within the limits above specified, the number of directors
shall be determined by the Board of Directors pursuant to a resolution adopted
by a majority of the directors then in office. Except as provided herein in
these bylaws, directors shall be elected at the annual meeting of stockholders
and each director shall serve for one year and until his or her successor shall
be elected and quality. Directors need not be stockholders.
SECTION 2.2. REMOVAL. Any director, any class of directors or the entire
Board of Directors may be removed from office by stockholder vote at any time
without regard to reason therefore, but only if the holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of each
class and series, if any, of the capital stock of the Corporation entitled to
vote upon election of directors shall vote in favor of such removal.
SECTION 2.3. VACANCIES. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, shall be filled
only by the affirmative vote a majority of the remaining directors then in
office, although the same may represent less than a quorum; except that
vacancies resulting from removal from office by a vote of the stockholders may
be filled by the stockholders at the same meeting at which such removal occurs;
provided, however, that the holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of each class and series, if any, of
the capital stock of the Corporation entitled to vote upon the election of
directors shall vote for each replacement director. All directors elected to
fill vacancies shall hold office for a term expiring at the time at which the
term of the class to which they have been elected expires. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of an incumbent director. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at any time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the Board of Directors (as
constituted immediately prior to any applicable increase), the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares of capital stock at the time
outstanding, taken together as a class, having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships,
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or to replace the directors chosen by the directors then in office.
SECTION 2.4. PLACE OF MEETINGS, ETC. The Board of Directors may hold its
meetings, and may have an office and keep the books of the Corporation (except
as otherwise may be provided by law), in such place or places in the State of
Delaware or outside of the State of Delaware, as the Board of Directors may
determine from time to time. Any director may participate telephonically in any
meeting of the Board of Directors in accordance with Section 2.14 and such
participation shall be considered to be the same as his physical presence
thereat.
SECTION 2.5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held on the day of the annual meeting of stockholders after the
adjournment thereof and at such other times and places as the Board of Directors
may fix. No notice shall be required for any such regular meeting of the Board
of Directors.
SECTION 2.6. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by direction of the chairman of the Board of
Directors, the Vice-Chairman of the Board of Directors, the president of the
Corporation, an executive vice-president of the Corporation or of the directors
then in office. The secretary of the Corporation shall give notice of each
special meeting, stating the date, hour and place thereof, by delivering the
same personally or by mail, at least five days before such meeting, to each
director; however, such notice may be waived by any director. If mailed, notice
shall be deemed to be delivered when deposited in the United States mail or with
any private express document delivery service, postage or delivery fee prepaid.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting. At any meeting at which every director shall be
present, even though without any notice, any business may be transacted.
SECTION 2.7. QUORUM; ACTIONS BY BOARD. A majority of the total number of
directors then in office shall constitute a quorum for the transaction of
business; however, if at any meeting of the Board of Directors there be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time. At any meeting of the Board of Directors at which a quorum is
present, action may be taken by the affirmative vote of at least a majority of
the members of the Board of Directors in attendance at such meeting, unless
otherwise set forth herein.
SECTION 2.8. BUSINESS. Business shall be transacted at meetings of the
Board of Directors in such order as the Board of Directors may determine. At all
meetings of the Board of Directors, the chairman, if any, of the Board of
Directors, or in his absence the vice-chairman, if any, of the Board of
Directors, the president of the Corporation, or an executive vice-president of
the Corporation, in the order named, shall preside.
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SECTION 2.9. CONTRACTS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of the Corporation's directors or officers
have a financial interest or are directors or officers, shall be void or
voidable solely for this reason or solely because such director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes such contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(a) The material facts relating to such officer's or director's
relationship or interest and relating to the contract or transaction are
disclosed or are known to the Board of Directors or committee thereof, and the
Board of Directors or committee thereof in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, although the disinterested directors may represent less than a
quorum; or
(b) The material facts relating to such officer's or director's
relationship or interest and relating to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair with respect to the
Corporation as of the time it is authorized, approved or ratified by the Board
of Directors, a committee thereof or the stockholders.
For purposes of the foregoing provisions, interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes such a contract or
transaction.
SECTION 2.10. COMPENSATION OF DIRECTORS. Each director of the Corporation
who is not a salaried officer or employee of the Corporation or of a subsidiary
of the Corporation shall receive such allowances for serving as a director and
such fees for attendance at meetings of the Board of Directors, the executive
committee or any other committee appointed by the Board of Directors as the
Board of Directors may from time to time determine.
SECTION 2.11. ELECTION OF OFFICERS AND COMMITTEES. At the first regular
meeting of the Board of Directors in each year (at which a quorum shall be
present) held next after the annual meeting of stockholders, the Board of
Directors shall elect the principal officers of the Corporation and members of
the executive committee, if any, to be elected by the Board of Directors under
the provisions of Article 3 and Article 4 of these Bylaws. The Board of
Directors may designate such other committees with such power and authority (to
the extent permitted by law, the Corporation's Certificate of Incorporation, as
in effect, and these Bylaws), as may be provided by resolution of the Board of
Directors.
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SECTION 2.12. NOMINATION. Subject to the rights of holders of any class
or series of stock having a preference over the common stock of the Corporation
as to dividends or upon liquidation, nominations for the election of directors
may be made by the Board of Directors or by any stockholder entitled to vote in
the election of directors generally. However, any stockholder entitled to vote
in the election of directors generally may nominate one or more persons for
election as directors at a meeting only if written notice of such stockholder's
intention to make such nomination or nominations has been given, either by
personal delivery or by United States first class certified mail, postage
prepaid, return receipt requested and to the secretary of the Corporation not
later than: (a) with respect to an election to be held at an annual meeting of
stockholders, the close of business on the last day of the month of October, and
(b) with respect to an election to be held at a special meeting of stockholders
for the election of directors, the close of business on the tenth day following
the date on which notice of such meeting is first given to stockholders. Each
such notice shall set forth: (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) a representation that the stockholder is a holder of record of capital
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (iv) such other information regarding each such nominee
as would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated by the Board of Directors; and (v) the
consent of each such nominee to serve as a director of the Corporation if so
elected. The presiding corporate officer at the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
SECTION 2.13. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board of Directors
or such committee, as the case may be, consent thereto in writing and such
writing is filed with the minutes of the proceedings of the Board of Directors
or the committee.
SECTION 2.14. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board
of Directors or any committee thereof may participate in a regular or special
meeting of the Board of Directors or committee thereof by means of conference
telephone or similar communications equipment by means of which all persons
participating in such meeting can hear one another and such participation shall
constitute presence in person at such meeting.
ARTICLE 3: EXECUTIVE COMMITTEE
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SECTION 3.1. NUMBER AND TERM OF OFFICE. The Board of Directors may, by
resolution adopted by the affirmative vote of a majority of the members of the
Board of Directors, create an executive committee and elect the members thereof
from among the directors then in office. The executive committee shall consist
of such number of members as may be fixed from time to time by resolution of the
Board of Directors in accordance with and as permitted by applicable law. The
Board of Directors by resolution shall appoint those directors who shall serve
as members of the executive committee. Unless otherwise ordered by the Board of
Directors, each elected member of the executive committee shall continue to be a
member thereof until the expiration of his term of service as a director.
SECTION 3.2. POWERS. The executive committee may, while the Board of
Directors is not in session, exercise all or any of the powers of the Board of
Directors in all cases in which specific directions shall not have been given by
the Board of Directors; provided, however, that the executive committee shall
not have the power or authority of the Board of Directors with respect to
amending the Corporation's Certificate of Incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, amending the Bylaws, declaring a dividend,
authorizing the issuance of stock or adopting a certificate of ownership and
merger.
SECTION 3.3. MEETINGS. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon delivery of not less than five days notice,
given in person, by mail, by telegraph or by facsimile (if allowed by law),
stating the place, date and hour of the meeting, but such notice may be waived
by any member of the executive committee. If mailed, notice shall be deemed to
be delivered when deposited in the United States mail or with any private
express mail service, postage or delivery fee prepaid. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting. At any meeting at which every member of the executive committee
shall be present, in person or by telephone, even though without any notice, any
business may be transacted.
SECTION 3.4. PRESIDING OFFICER. At all meetings of the executive
committee the chairman of the executive committee, who shall be designated by
the Board of Directors from among the members of the committee, shall preside,
and the Board of Directors shall designate a member of such committee to preside
in the absence of the chairman thereof. The Board of Directors may also
similarly elect from its members one or more alternate members of the executive
committee to serve at the meetings of such committee in the absence or
disqualification of any regular member or members, and, in case more than one
alternate is elected, shall designate at the time of election the priorities as
between them.
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SECTION 3.5. VACANCIES. The Board of Directors, by the affirmative vote
of a majority of the members of the Board of Directors then in office, shall
fill vacancies in the executive committee by election from the directors.
SECTION 3.6. RULES OF PROCEDURE; QUORUM. All action by the executive
committee shall be reported to the Board of Directors at the next succeeding
meeting of the Board of Directors after such action has been taken and shall be
subject to revision or alteration by the Board of Directors; provided, however,
that no rights or acts of third parties shall be affected by any such revision
or alteration. The executive committee shall fix its own rules of procedure, and
shall meet where and as provided by such rules or by resolution of the Board of
Directors, but in every case the presence of a majority of the total number of
members of the executive committee shall be necessary to constitute a quorum. In
every case, the affirmative vote of a majority of all of the members of the
executive committee present at the meeting shall be necessary for the adoption
of any resolution.
ARTICLE 4: OFFICERS
SECTION 4.1. NUMBER AND TERM OF OFFICE. The officers of the Corporation
shall be a president, a chief executive officer, one or more executive
vice-presidents, a secretary, a treasurer, and such other officers as may be
elected or appointed from time to time by the Board of Directors, including such
additional vice-presidents with such designations, if any, as may be determined
by the Board of Directors and such assistant secretaries and assistant
treasurers as may be determined by the Board of Directors. In addition, the
Board of Directors may elect a chairman thereof and may also elect a
vice-chairman as officers of the Corporation (each of whom shall be a director).
Any two or more offices may be held by the same person, except that the offices
of president and secretary, and president and executive vice-president or vice
president, may not be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except those of president, treasurer and
secretary.
The officers of the Corporation shall be elected or appointed annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders. Each officer shall hold office until his or
her successor shall have been duly elected or appointed, until his or her death
or until he or she shall resign or shall have been removed by the Board of
Directors.
SECTION 4.2. VACANCIES. Vacancies or new offices may be filled at any
time by the affirmative vote of a majority of the members of the Board of
Directors.
Each of the salaried officers of the Corporation shall devote his entire
time, skill and energy to the business of the Corporation, unless the contrary
is expressly consented to by the
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Board of Directors or the executive committee, if any.
SECTION 4.3. REMOVAL. Any officer may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation would
be served thereby.
SECTION 4.4. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman, if
any, of the Board of Directors shall preside at all meetings of stockholders and
of the Board of Directors and shall have such other authority and perform such
other duties as are prescribed by law, by these Bylaws and by the Board of
Directors. The Chairman may sign, with the secretary of the Corporation or an
authorized assistant secretary, certificates for stock of the Corporation. The
Board of Directors may designate the chairman thereof as chief executive
officer, in which case he shall have such authority and perform such duties as
are prescribed by these Bylaws and the Board of Directors for the chief
executive officer.
SECTION 4.5. THE VICE-CHAIRMAN OF THE BOARD OF DIRECTORS. The
vice-chairman, if any, of the Board of Directors shall have such authority and
perform such other duties as are prescribed by these Bylaws and by the Board of
Directors. In the absence or inability to act of the chairman of the Board of
Directors, the vice-chairman shall preside at the meetings of the stockholders
and of the Board of Directors and shall have and exercise all of the powers and
duties of the chairman of the Board of Directors. The Vice-Chairman may sign,
with the secretary of the Corporation or an authorized assistant secretary,
certificates for stock of the Corporation. The Board of Directors may designate
the vice-chairman as chief executive officer, in which case he shall have such
authority and perform such duties as are prescribed by these Bylaws and the
Board of Directors for the chief executive officer.
SECTION 4.6. THE PRESIDENT. The president of the Corporation shall have
such authority and perform such duties as are prescribed by law, by these
Bylaws, by the Board of Directors and by the chief executive officer (if the
president is not the chief executive officer). If there is no chairman or
vice-chairman, of the Board of Directors, or in the chairman's or
vice-chairman's absence or the chairman's or vice-chairman's inability to act as
the chairman of the Board of Directors, the president shall preside at all
meetings of stockholders and of the Board of Directors. The president my sign,
with the secretary of the Corporation or an authorized assistant secretary,
certificates for stock of the Corporation. Unless the Board of Directors
designates the chairman of the Board of Directors or the vice-chairman as chief
executive officer, the president shall be the chief executive officer, in which
case he shall have such authority and perform such duties as are prescribed by
these Bylaws and the Board of Directors for the chief executive officer.
SECTION 4.7. THE CHIEF EXECUTIVE OFFICER. Unless the Board of Directors
designates the chairman of the Board of Directors or the vice-chairman as chief
executive officer, the president shall be the chief executive officer of the
Corporation. Subject to the supervision and direction
<PAGE> 13
Bylaws of Sensys Technologies Inc.
(as adopted on August 5, 1998)
Page 13
of the Board of Directors, the chief executive officer of the Corporation shall
have general supervision of the business, property and affairs of the
Corporation, including the power to appoint and discharge agents and employees,
and the powers vested in him or her by the Board of Directors, by law or by
these Bylaws or which usually attach or pertain to such office.
SECTION 4.8. THE EXECUTIVE VICE-PRESIDENTS. In the absence of the
chairman of the Board of Directors, if any, the president of the Corporation,
and in the event of the inability or refusal of the president of the Corporation
to act, the vice-chairman, if any, of the Board of Directors, or in the event of
the inability or refusal of either of them to act, the executive vice-president
of the Corporation (or in the event there is more than one executive
vice-president of the Corporation, the executive vice-presidents thereof in the
order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the chairman of the Board of
Directors, of the president of the Corporation and of the vice-chairman of the
Board of Directors, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the chairman of the Board of Directors, the
president of the Corporation and the vice-chairman of the Corporation. Any
executive vice-president of the Corporation may sign, with the secretary of the
Corporation or an authorized assistant secretary, certificates for stock of the
Corporation and shall perform such other duties as from time to time may be
assigned to him or her by the chairman of the Board of Directors, the president
of the Corporation, the vice-chairman of the Board of Directors, the Board of
Directors or these Bylaws.
SECTION 4.9. THE VICE-PRESIDENTS. The vice-presidents of the Corporation,
if any, shall perform such duties as may be assigned to them from time to time
by the chairman of the Board of Directors, the president, the vice-chairman, the
Board of Directors, or these Bylaws.
SECTION 4.10. THE TREASURER. Subject to the direction of the chief
executive officer of the Corporation and the Board of Directors, the treasurer
of the Corporation shall: (a) have charge and custody of all the funds and
securities of the Corporation; (b) when necessary or proper, endorse for
collection or cause to be endorsed on behalf of the Corporation, checks, notes
and other obligations, and cause the deposit of the same to the credit of the
Corporation in such bank or banks or depository as the Board of Directors may
designate or as the Board of Directors by resolution may authorize; (c) sign all
receipts and vouchers for payments made to the Corporation other than routine
receipts and vouchers, the signing of which he or she may delegate; (d) sign all
checks made by the Corporation (provided, however, that the Board of Directors
may authorize and prescribe by resolution the manner in which checks drawn on
banks or depositories shall be signed, including the use of facsimile
signatures, and the manner in which officers, agents or employees shall be
authorized to sign); (e) unless otherwise provided by resolution of the Board of
Directors, sign with an officer-director all bills of exchange and promissory
notes of the Corporation; (f) if authorized by the Board of Directors, sign with
the president or an executive vice-president all certificates representing
shares of the capital stock; (g) whenever required by the Board of Directors,
render a statement of his or her cash account;
<PAGE> 14
Bylaws of Sensys Technologies Inc.
(as adopted on August 5, 1998)
Page 14
(h) enter regularly full and accurate account of the Corporation in books of the
Corporation to be kept by the treasurer for that purpose; (i) exhibit, at all
reasonable times, his or her books and accounts to any director of the
Corporation upon application at the treasurer's office during regular business
hours; and (j) perform all acts incident to the position of treasurer. If
required by the Board of Directors, the treasurer of the Corporation shall give
a bond for the faithful discharge of his or her duties in such sum as the Board
of Directors may require.
SECTION 4.11. THE SECRETARY. The secretary of the Corporation shall: (a)
keep the minutes of all meetings of the Board of Directors, the minutes of all
meetings of the stockholders and (unless otherwise directed by the Board of
Directors) the minutes of all committees, in books provided for that purpose;
(b) attend to the giving and serving of all notices of the Corporation; (c) sign
with an officer or director or any other duly authorized person, in the name of
the Corporation, all contracts authorized by the Board of Directors or by the
executive committee, and, when so ordered by the Board of Directors or the
executive committee, affix the seal of the Corporation thereto; (d) have charge
of the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors or the executive committee may direct, all
of which shall, at all reasonable times, be open to the examination of any
director, upon application at the secretary's office during regular business
hours; and (e) in general, perform all of the duties incident to the office of
the secretary, subject to the control of the chief executive officer and the
Board of Directors.
SECTION 4.12. THE ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers of the Corporation shall respectively, if required by the
Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors may determine. The
assistant secretaries of the Corporation as thereunto authorized by the Board of
Directors may sign with the chairman of the Board of Directors, the president of
the Corporation, the vice-chairman of the Board of Directors or an executive
vice-president of the Corporation, certificates for stock of the Corporation,
the issue of which shall have been authorized by a resolution of the Board of
Directors. The assistant treasurers and assistant secretaries, in general, shall
perform such duties as shall be assigned to them by the treasurer or the
secretary, respectively, or chief executive officer, the Board of Directors, or
these Bylaws.
SECTION 4.13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a director of
the Corporation.
SECTION 4.14. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors or by the executive committee, any officer-director or any person
or persons appointed in writing by any of them, shall have full power and
authority on behalf of the Corporation to attend, to act and to vote at any
meetings of stockholders of any Corporation in which the Corporation may hold
stock, and at any such meeting shall possess and may exercise any and all the
rights and
<PAGE> 15
Bylaws of Sensys Technologies Inc.
(as adopted on August 5, 1998)
Page 15
powers incident to the ownership of such stock, and which, as the owner thereof,
the Corporation might have possessed and exercised if present. The Board of
Directors may confer like powers upon any other person or persons.
ARTICLE 5: CONTRACTS AND LOANS
SECTION 5.1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 5.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
ARTICLE 6: CERTIFICATES FOR STOCK AND THEIR TRANSFER
SECTION 6.1. CERTIFICATES FOR STOCK. Certificates representing shares of
capital stock of the Corporation shall be in such form as may be determined by
the Board of Directors. Such certificates shall be signed by the chairman of the
Board of Directors, the president of the Corporation, the vice-chairman of the
Board of Directors or an executive vice-president of the Corporation and by the
secretary or an authorized assistant secretary and shall be sealed with the seal
of the Corporation. The seal may be a facsimile. If a stock certificate is
countersigned: (i) by a transfer agent other than the Corporation or its
employee, or (ii) by a registrar other than the Corporation or its employee, any
other signature on the certificate may be a facsimile. In the event that any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. All certificates for capital stock
shall be consecutively numbered or otherwise identified. The name of the person
to whom the shares of capital stock represented thereby are issued, with the
number of shares of capital stock and date of issue, shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares of capital stock shall have been
surrendered and canceled, except that, in the event of a lost, destroyed or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 6.2. TRANSFERS OF STOCK. Transfers of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney
<PAGE> 16
Bylaws of Sensys Technologies Inc.
(as adopted on August 5, 1998)
Page 16
thereunto authorized by power of attorney duly executed and filed with the
secretary of the Corporation, and on surrender for cancellation of the
certificate for such capital stock. The person in whose name capital stock
stands on the books of the Corporation shall be deemed to be the owner thereof
for all purposes as regards the Corporation.
ARTICLE 7: FISCAL YEAR
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall begin
on the first day of October in each year and end on the last day of September in
each year.
ARTICLE 8: SEAL
SECTION 8.1. SEAL. The Board of Directors shall approve a corporate seal
which shall be in the form of a circle and shall have inscribed thereon the name
of the Corporation.
ARTICLE 9: WAIVER OF NOTICE
SECTION 9.1. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of these Bylaws or under the provisions of the
Certificate of Incorporation or under the provisions of the General Corporation
Law of the State of Delaware, waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance of
any person at a meeting for which any notice is required to be given under the
provisions of these Bylaws, the Certificate of Incorporation or the General
Corporation Law of the State of Delaware shall constitute a waiver of notice of
such meeting except when the person attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any businesses
because the meeting is not lawfully called or convened.
ARTICLE 10: AMENDMENTS
SECTION 10.1. AMENDMENTS. These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted at any meeting of the Board of Directors
by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%)
of the members of the Board of Directors.
ARTICLE 11: INDEMNIFICATION AND ADVANCEMENT OF COSTS
SECTION 11.1. INDEMNIFICATION AND ADVANCEMENT OF COSTS. The Corporation
shall indemnify its officers, directors, employees and agents to the fullest
extent permitted by the Certificate of Incorporation consistent with General
Corporation Law of the State of Delaware, as amended from time to time; and the
Corporation may advance costs incurred by officers,
<PAGE> 17
Bylaws of Sensys Technologies Inc.
(as adopted on August 5, 1998)
Page 17
directors, employees and agents of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise, in their defenses of any
civil, criminal, administrative or investigative action or proceeding asserted
against one or more of them by reason of the fact of his, her, or their serving
or having served in such capacity or capacities at the request of the
Corporation and in advance of a final disposition of such action, suit or
proceeding to the fullest extent permitted by the Certificate of Incorporation
consistent with the General Corporation Law of the State of Delaware, as amended
from time to time, provided that the terms and conditions of such advancement of
costs is approved by the Board of Directors. Nothing herein is intended to limit
the Corporation's authority to indemnify its officers, directors, employees and
agents or to advance funds in connection therewith, under the General
Corporation Law of the State of Delaware, as amended from time to time.
<PAGE> 1
Exhibit 4.1
[LOGO]
NUMBER SENSYS TECHNOLOGIES INC. SHARES
C SPECIMEN
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
THIS CERTIFIES that CUSIP 817265 10 1
SPECIMEN
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 PER
SHARE OF
- -------------------SENSYS TECHNOLOGIES INC.---------------------------------
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[SEAL]
Authorized Signature:
/s/ R. R. Bower /s/ S. R. Perrino
Senior Vice President of President & Chief Executive Officer
Finance and Chief Financial Officer
Countersigned and Registered: American Stock Transfer & Trust Company
Transfer Agent and Registrar
By:
------------------------------------
Authorized Signature
<PAGE> 2
SENSYS TECHNOLOGIES INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF
THE CORPORATION, AND THE QUALIFICATIONS LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE CORPORATION, OR TO
THE TRANSFER AGENT OF THE CORPORATION.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though there were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________Custodian_______________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
________________
(State)
JT TEN - as joint tenants with right of UNIF TRF MIN ACT - __________Custodian (until age __)
survivorship and not as tenants (Cust.)
in common __________under Uniform Transfers
(Minor) to Minor Act
_________________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________
________________________________________________________________________________
Please print or typewrite name and address, including zip code, of assignee
____________________________________________________ Shares of the common stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
____________________________________________________ Attorney to transfer the
said stock on the books of the within named Corporation with full power of
submission in the premises.
Dated
____________________________
X ________________________________________
X ________________________________________
Notice: The signature to this assignment must
correspond with the name as written upon the face of the Certificate in every
particular, without alteration or enlargement or any change whatsoever.
Signature(s) Guaranteed:
By:___________________________________________
The signatures must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signatures guarantee medallion program) pursuant to S.E.C. Rule
17Ad-15.
<PAGE> 1
EXHIBIT 10.2
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
SENSYS TECHNOLOGIES INC.
LONG TERM INCENTIVE PLAN
THIS AGREEMENT is entered into effective as of ______________, 19__, by
and between SENSYS TECHNOLOGIES INC. ("Corporation") and ________________
("Optionee"), pursuant to the Corporation's Long Term Incentive Plan (the
"Plan"). The Corporation hereby grants to the Optionee an Incentive Stock Option
under Section 422 of the Internal Revenue Code of 1986, as amended, to purchase
a total of ______ shares of Common Stock, subject to the terms and conditions
contained in the Plan and as hereinafter provided (the "Option"). Capitalized
terms not defined in this Agreement shall have the meanings respectively
ascribed to them in the Plan.
1. Option Price. The Option shall be exercisable at a price of $_____
per share.
2. Option Exercise. (a) The Option shall become exercisable in
installments as follows:
__________ shares on or after ________________
__________ shares on or after ________________
__________ shares on or after ________________
__________ shares on or after ________________
__________ shares on or after ________________
To the extent not exercised, installments shall accumulate and the Optionee may
exercise them thereafter in whole or in part. In the event of a Change in
Control, the Option immediately shall become exercisable in full. Any provision
of this Agreement to the contrary notwithstanding, the Option shall expire on,
and no longer be exercisable after, the date which is the tenth (10th)
anniversary of the date of this Agreement (the "Expiration Date").
(b) The Option shall be exercisable by delivery to the President of
the Corporation of a written and duly executed notice in the form attached
hereto.
(c) Payment of the full purchase price of any shares with respect to
which the option is being exercised shall accompany the notice of exercise of
the Option. Payment shall be made in any of the following ways - (a) in cash,
(b) by certified check, bank draft or money order, or (c) by delivery to the
Corporation of a properly executed exercise notice, acceptable to the
Corporation, together with irrevocable instructions to the Optionee's broker to
deliver to the Corporation sufficient cash to pay the exercise price and any
applicable income and employment withholding taxes (the "cashless exercise
procedure").
3. Termination.
<PAGE> 2
(a) Termination Before Option Becomes Exercisable. If Optionee's
employment is terminated for any reason prior to the date that the Option or a
portion thereof first becomes exercisable, such Option or portion thereof shall
terminate and all rights thereunder shall cease.
(b) Terminating After Option Becomes Exercisable. To the extent an
Option is exercisable and unexercised on the date the Optionee's employment is
terminated
(i) for any reason other than death, disability or retirement,
the Option shall terminate on the earlier of (A) the expiration date of
the Option, and (B) the first anniversary of such Optionee's termination;
(ii) because the Optionee has died or become subject to a
disability, the Option shall terminate on the first anniversary of the
date of the Optionee's termination; or
(iii) due to retirement, the Option shall terminate on the
earlier of (A) the expiration date and (B) the second anniversary of the
Optionee's termination.
During the period from the Optionee's termination until the termination of the
Option, the Optionee, or the person or persons to whom the Option shall have
been transferred by will or by the laws of descent and distribution, may
exercise the Option only to the extent that such Option was exercisable on the
date of the Optionee's termination. Unless the Option is exercised within three
months following the Optionee's termination of employment (extended to one year
in the event of the Optionee's disability or death), the Option shall be taxed
as a "nonqualified stock option" under Section 83 of the Internal Revenue Code
("Code") and shall not receive the favorable capital gain tax treatment of an
"incentive stock option" under Section 422 of the Code.
4. Optionee's Agreement. The Optionee agrees to all the terms stated
in this Agreement, as well as to the terms of the Plan, a copy of which is
attached hereto and of which the Optionee acknowledges receipt.
5. Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Corporation with respect to any of the shares covered by the
Option until the issuance of a stock certificate or certificates upon the
exercise of the Option, and then 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.
6. Non-Transferability of Option. The Option shall not be transferred
in any manner other than by will or the laws of descent or distribution. During
the lifetime of the Optionee, the Option shall be exercised only by the
Optionee. No transfer of the Option shall be effective to bind the Corporation
unless the Corporation shall have been furnished with written notice thereof and
such evidence as the Corporation may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
the Option.
<PAGE> 3
7. Compliance with Securities, Tax and Other Laws. The Option may not
be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable Federal or State securities law or any other law or
valid regulation. As a condition to exercise of the Option, the Corporation may
require the Optionee, or any person acquiring the right to exercise the Option,
to make any representation or warranty that the Corporation deems to be
necessary under any applicable securities, tax, or other law or regulation.
8. Adjustments. The Optionee acknowledges the power of the Committee
under Section 6.1 of the Plan to adjust the number of shares which may be
purchased pursuant to the Option and the exercise price of the Option upon the
occurrence of certain events to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available by the grant of the Option.
9. No Right to Remain in Office. The granting of the Option does not
confer upon the Optionee any right to be retained as an Employee.
10. Amendment and Termination of Option. Except as otherwise provided
in this Agreement, the Corporation may not, without the consent of the Optionee,
alter or impair any Option granted under the Plan. The Option shall be
considered terminated in whole or in part, to the extent that, in accordance
with the provisions of the Plan, it can no longer be exercised for shares
originally subject to the Option.
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 Corporation or the Committee shall
be sent or delivered to the President of the Corporation at the Corporation's
headquarters. All notices by the Corporation 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 Corporation or such
other address as the Optionee may designate. Either party by notice to the other
may designate a different address to which notices shall be addressed. Any
notice given by the Corporation to the Optionee at the Optionee's last
designated address shall be effective to bind any other person who shall acquire
rights hereunder.
IN WITNESS WHEREOF, the Corporation, by its duly authorized officer, and
the Optionee have executed this Agreement effective as of their date and year
first above written.
SENSYS TECHNOLOGIES INC.
By:
----------------------------------------
Robert R. Bower, Chief Financial Officer
OPTIONEE:
----------------------------------------
(Name)
<PAGE> 4
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
GRANTED UNDER THE SENSYS TECHNOLOGIES INC.
LONG TERM INCENTIVE PLAN
President
Sensys Technologies Inc.
8419 Terminal Road
Newington, VA 22122-1430
I hereby elect to exercise the Incentive Stock option with respect to
_______ shares. Payment of the exercise price is being made as follows:
____ Cash delivered with this notice.
____ Certified check, bank draft or money order delivered with this
notice.
____ Subject to Section 2(c) of the agreement relating to the Option, I
am making a "cashless exercise" and have given the designated broker the
irrevocable instructions required by the Plan.
____ A combination of the above, described below, equal to the exercise
price:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
The stock certificates for the shares acquired upon exercise should be
issued to:
(name)
------------------------------------------------------------------
(address)
------------------------------------------------------------------
------------------------------------------------------------------
(Social Security No.)
------------------------------------------------------------------
I hereby agree to notify the President of the Corporation if I dispose of
the shares acquired pursuant to the exercise of this Option prior to one year
after the date on which the Option was granted or two years after the date on
which the Option is exercised.
Dated:________________, _____ _________________________________
(print name)_____________________
<PAGE> 1
EXHIBIT 10.3
1996 EMPLOYEE INCENTIVE STOCK OPTION PLAN AGREEMENT
INCENTIVE STOCK OPTION PLAN OF S.T RESEARCH CORPORATION
ADOPTED AS OF MAY 22, 1996
1. PURPOSE OF THE PLAN. The purpose of the Incentive Stock Option Plan of
S.T. Research Corporation (STR) (the "Plan") is to encourage selected employees
to acquire or expand a proprietary interest in STR, a Virginia corporation (the
"Company"). To accomplish this objective, the Plan provides a means whereby
eligible employees may receive stock options that qualify as "incentive stock
options" under Section 422A of the Internal Revenue Code as added by the
Economic Recovery Tax Act of 1981 and as it may be amended from time to time
("Section 422A").
2. ELIGIBLE EMPLOYEES. Key employees, including officers and directors who
are employees of the Company or of any affiliate of the Company, are eligible to
receive an option or options under the Plan. The term "affiliate", as used in
the Plan, means a parent or subsidiary corporation, as defined in the applicable
provisions of the Internal Revenue Code (the "Code").
3. STOCK SUBJECT TO THE PLAN. An aggregate of 60,000 authorized but
unissued, or treasury, shares of the common stock of the Company, or such number
and class of securities as adjusted to give effect to the anti dilution
provisions contained in Paragraph 6.2 hereof, may be sold upon the exercise of
options granted under the Plan. In the event that any option outstanding under
the Plan expires, or is terminated for any reason, unexercised in whole or in
part, prior to the end of the period during which options may be granted under
the Plan, the shares of stock allocable to the unexercised portion of such
option may again be subjected to option under the Plan.
4. ADMINISTRATION. The Plan shall be administered by the Company's Board of
Directors (the "Board"). Subject to the general purposes, terms and conditions
of the Plan, the Board shall have full power to implement and carry out the Plan
in all ways permissible under the applicable provisions of the Code, including,
but not limited to, the following: (1) to construe and interpret the Plan; (2)
to prescribe, amend and rescind rules and regulations relating to the Plan; and
(3) to make all other determinations necessary or advisable for the
administration of the Plan. The Board shall determine which employees should be
granted options under the Plan, the number of shares of stock covered by each
option, and the terms and conditions of each option.
5. GRANTING OF OPTIONS. Options shall be granted within 10 years from the
effective date of the Plan. Each option shall be evidenced by a written Stock
Option Agreement executed by the Company and the employee to whom such option is
granted. An option shall be deemed to have been granted only when the Stock
Option Agreement has been duly executed by the Company and the employee to whom
such option is granted has been notified of the granting of the option.
<PAGE> 2
6. TERMS AND CONDITIONS OF OPTIONS. Each option shall be subject to the
following terms and conditions:
6.1 OPTION PRICE. The option price, that shall be approved by the Board,
shall be determined in accordance with the applicable provisions of the Code and
shall in no event be less than the fair market value of the Company's common
stock at the time the option is granted. If an employee owns more than 10% of
the outstanding stock of the Company, the option price shall be at least 110% of
the fair market value of the stock. The fair market value for the purposes of
the Plan shall be determined by the Board in accordance with reasonable criteria
that do not conflict with the applicable provisions of the Code.
6.2 ADJUSTMENTS. In the event that the common stock of the Company is changed
by reason of any stock split, reverse stock split, recapitalization, or other
change in the capital structure of the Company, or converted into or exchanged
for other securities as a result of any merger, consolidation or reorganization,
or in the event that the outstanding number of shares of common stock of the
Company is increased through payment of a stock dividend, appropriate
proportionate adjustments shall be made in the number and class of shares of
stock subject to the Plan, and the number and class of shares of stock subject
to any option outstanding under the Plan; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustment. Any such adjustment shall be made by the Board, whose determination
shall be conclusive. If there is any other change in the number or kind of the
outstanding shares of common stock of the Company, or of any other security into
which such stock shall have been changed or for which it shall have been
exchanged, and if the Board, in its sole discretion, determines that such change
equitably requires any adjustment in the options then outstanding under the
Plan, such adjustment shall be made in accordance with the determination of the
Board. No adjustments shall be required by reason of the issuance or sale by the
Company for cash or other consideration of additional shares of its common stock
or securities convertible into or exchangeable for shares of its common stock.
All adjustments shall be made in such a manner that each option which is
adjusted will continue to qualify under Section 422A as an "incentive stock
option."
6.3 OTHER RIGHTS IN EVENT OF CERTAIN REORGANIZATIONS. New option rights may
be substituted for the option rights granted under the Plan, or the Company's
duties as to options outstanding under the Plan may be assumed, by an employer
corporation other than the Company, or by a parent or subsidiary of such
employer corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved, in such a manner that will allow the then outstanding options to
continue to qualify as "incentive stock options" under Section 422A and to the
full extent permitted thereby. Despite the foregoing provisions of this Section
6(3), in the event such employer corporation, or parent or subsidiary of such
employer corporation, refuses to substitute new option rights for, and
substantially equivalent to, the option rights granted under this Agreement, or
to assume the option rights granted under this Agreement, as permitted by the
Code, the option rights granted under this Agreement shall terminate and
thereupon become null and void: (1) upon the reorganization, dissolution or
liquidation of the Company, or similar occurrence; or (2) upon any merger,
consolidation, acquisition or separation, or similar occurrence, if the Company
is not the surviving corporation; provided, however, that each
<PAGE> 3
optionee shall have the right, immediately prior to or concurrently with such
reorganization, dissolution, liquidation, merger, consolidation, acquisition,
separation, or similar occurrence, and upon at least 10 days' written notice
thereof to exercise any unexpired option rights granted hereunder to the extent
such option rights are exercisable at the time of mailing of such notice, but in
any event subject to the time limitations for exercise of options provided in
the Code.
In the event that the Board, in its sole discretion, determines that it
is desirable to offer its shares to the public pursuant to a registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, or pursuant to an exemption under such Act, the
Secretary of the Company shall notify all optionees affected of such
determination in writing. In that event, all outstanding options shall become
null and void 30 days after such notice is mailed, but each affected optionee
shall, during such 30 day period, have the right to exercise any unexpired
option rights granted under this Agreement to the extent such option rights are
exercisable at the time of mailing of such notice, but in any event subject to
the time limitations for exercise of options provided in the Code.
6.4 OPTION EXERCISE PERIOD. Each option granted under the Plan shall become
exercisable on a date or in installments, and shall expire on a date, determined
by the Board, but in no event shall an option expire later than 10 years from
the date such option is granted, and in the case of an employee who owns more
than 10% of the outstanding stock of the Company, in no event shall an option
expire later than five (5) years from the date such option is granted.
6.5 NON ASSIGNABILITY OF OPTION RIGHTS. No option granted under the Plan
shall be assignable or otherwise transferable by the optionee except by will or
by the laws of descent and distribution. During the life of an optionee, his or
her option shall be exercisable only by him or her.
6.6 OTHER PROVISIONS. Each option granted under the Plan may contain such
other terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Board, and shall include such provisions and conditions as are
necessary to qualify the option under Section 422A as an "incentive stock
option.
7. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN. The Board may at any
time amend, suspend, or terminate the Plan. However, the Board of Directors may
not, without approval of the holders of a majority of the combined issued and
outstanding voting shares of the Company, increase the aggregate number of
shares of stock subject to the Plan (except as provided in Section 6.2 of this
Agreement), and neither the amendment, suspension, nor termination of the Plan
shall, without the consent of the optionee, alter or impair any rights or
obligations under any option granted under the Plan (except as provided in
Section 6.2 or Section 6.3 in this Agreement). No option may be granted during
any period of suspension or after termination of the Plan.
8. ACTION BY EXECUTIVE COMMITTEE. Any and all action authorized or required
under Sections 1 through 7 of the Plan to be taken by the Board may be taken by
the Executive Committee of the Board if there be one and if the Board has duly
delegated its authority to the Executive Committee to take such action.
<PAGE> 4
9. LIMIT ON STOCK SUBJECT TO OPTIONS. Options shall not be granted to any
individual pursuant to this Plan, the effect of which would be to permit such
person to first exercise options, in any calendar year, for the purchase of
shares having a fair market value in excess of ($100,000) (determined at the
time of the grant of the options).
10. NON-EXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the Board,
the submission of the Plan to the shareholders of the Company for their
approval, nor any provision of the Plan shall be construed as creating any
limitation on the power of the Board to adopt additional compensation
arrangements from time to time as it may deem desirable, including, without
limitation, the granting of stock options and bonuses otherwise than under the
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
11. EFFECTIVE DATE OF THE PLAN. The effective date of this Plan is May 22,
1996. On this date the approval of both the shareholders and the board of
directors of the Company was duly obtained. Options may be granted and exercised
under the Plan only after there has been compliance with all applicable federal
and state securities laws.
<PAGE> 1
EXHIBIT 10.4
1996 DIRECTOR INCENTIVE STOCK OPTION PLAN AGREEMENT
INCENTIVE STOCK OPTION PLAN OF S.T RESEARCH CORPORATION
ADOPTED AS OF MAY 22, 1996
1. PURPOSE OF THE PLAN. The purpose of the Incentive Stock Option Plan of
S.T. Research Corporation (STR) (the "Plan") is to encourage directors and
selected employees to acquire or expand a proprietary interest in STR, a
Virginia corporation (the "Company"). To accomplish this objective, the Plan
provides a means whereby directors and eligible employees may receive stock
options that qualify as "incentive stock options" under Section 422A of the
Internal Revenue Code as added by the Economic Recovery Tax Act of 1981 and as
it may be amended from time to time ("Section 422A").
2. ELIGIBLE EMPLOYEES AND DIRECTORS. Key employees and directors, including
officers and directors who are employees of the Company or of any affiliate of
the Company, are eligible to receive an option or options under the Plan. The
term "affiliate", as used in the Plan, means a parent or subsidiary corporation,
as defined in the applicable provisions of the Internal Revenue Code (the
"Code").
3. STOCK SUBJECT TO THE PLAN. An aggregate of 60,000 authorized but
unissued, or treasury, shares of the common stock of the Company, or such number
and class of securities as adjusted to give effect to the anti dilution
provisions contained in Paragraph 6.2 hereof, may be sold upon the exercise of
options granted under the Plan. In the event that any option outstanding under
the Plan expires, or is terminated for any reason, unexercised in whole or in
part, prior to the end of the period during which options may be granted under
the Plan, the shares of stock allocable to the unexercised portion of such
option may again be subjected to option under the Plan.
4. ADMINISTRATION. The Plan shall be administered by the Company's Board of
Directors (the "Board"). Subject to the general purposes, terms and conditions
of the Plan, the Board shall have full power to implement and carry out the Plan
in all ways permissible under the applicable provisions of the Code, including,
but not limited to, the following: (1) to construe and interpret the Plan; (2)
to prescribe, amend and rescind rules and regulations relating to the Plan; and
(3) to make all other determinations necessary or advisable for the
administration of the Plan. The Board shall determine which employees should be
granted options under the Plan, the number of shares of stock covered by each
option, and the terms and conditions of each option.
5. GRANTING OF OPTIONS. Options shall be granted within 10 years from the
effective date of the Plan. Each option shall be evidenced by a written Stock
Option Agreement executed by the Company and the employee or director to whom
such option is granted. An option shall be deemed to have been granted only when
the Stock Option Agreement has been duly executed by
<PAGE> 2
the Company and the employee or director to whom such option is granted has been
notified of the granting of the option.
6. TERMS AND CONDITIONS OF OPTIONS. Each option shall be subject to the
following terms and conditions:
6.1 OPTION PRICE. The option price, that shall be approved by the Board,
shall be determined in accordance with the applicable provisions of the Code and
shall in no event be less than the fair market value of the Company's common
stock at the time the option is granted. If an employee or director owns more
than 10% of the outstanding stock of the Company, the option price shall be at
least 110% of the fair market value of the stock. The fair market value for the
purposes of the Plan shall be determined by the Board in accordance with
reasonable criteria that do not conflict with the applicable provisions of the
Code.
6.2 ADJUSTMENTS. In the event that the common stock of the Company is changed
by reason of any stock split, reverse stock split, recapitalization, or other
change in the capital structure of the Company, or converted into or exchanged
for other securities as a result of any merger, consolidation or reorganization,
or in the event that the outstanding number of shares of common stock of the
Company is increased through payment of a stock dividend, appropriate
proportionate adjustments shall be made in the number and class of shares of
stock subject to the Plan, and the number and class of shares of stock subject
to any option outstanding under the Plan; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustment. Any such adjustment shall be made by the Board, whose determination
shall be conclusive. If there is any other change in the number or kind of the
outstanding shares of common stock of the Company, or of any other security into
which such stock shall have been changed or for which it shall have been
exchanged, and if the Board, in its sole discretion, determines that such change
equitably requires any adjustment in the options then outstanding under the
Plan, such adjustment shall be made in accordance with the determination of the
Board. No adjustments shall be required by reason of the issuance or sale by the
Company for cash or other consideration of additional shares of its common stock
or securities convertible into or exchangeable for shares of its common stock.
All adjustments shall be made in such a manner that each option which is
adjusted will continue to qualify under Section 422A as an "incentive stock
option."
6.3 OTHER RIGHTS IN EVENT OF CERTAIN REORGANIZATIONS. New option rights may
be substituted for the option rights granted under the Plan, or the Company's
duties as to options outstanding under the Plan may be assumed, by an employer
corporation other than the Company, or by a parent or subsidiary of such
employer corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved, in such a manner that will allow the then outstanding options to
continue to qualify as "incentive stock options" under Section 422A and to the
full extent permitted thereby. Despite the foregoing provisions of this Section
6(3), in the event such employer corporation, or parent or subsidiary of such
employer corporation, refuses to substitute new option rights for, and
substantially equivalent to, the option rights granted under this Agreement, or
to assume the option rights granted under this Agreement, as permitted by the
Code, the option rights granted under this Agreement shall terminate and
thereupon become null
<PAGE> 3
and void: (1) upon the reorganization, dissolution or liquidation of the
Company, or similar occurrence; or (2) upon any merger, consolidation,
acquisition or separation, or similar occurrence, if the Company is not the
surviving corporation; provided, however, that each optionee shall have the
right, immediately prior to or concurrently with such reorganization,
dissolution, liquidation, merger, consolidation, acquisition, separation, or
similar occurrence, and upon at least 10 days' written notice thereof to
exercise any unexpired option rights granted hereunder to the extent such option
rights are exercisable at the time of mailing of such notice, but in any event
subject to the time limitations for exercise of options provided in the Code.
In the event that the Board, in its sole discretion, determines that it
is desirable to offer its shares to the public pursuant to a registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, or pursuant to an exemption under such Act, the
Secretary of the Company shall notify all optionees affected of such
determination in writing. In that event, all outstanding options shall become
null and void 30 days after such notice is mailed, but each affected optionee
shall, during such 30 day period, have the right to exercise any unexpired
option rights granted under this Agreement to the extent such option rights are
exercisable at the time of mailing of such notice, but in any event subject to
the time limitations for exercise of options provided in the Code.
6.4 OPTION EXERCISE PERIOD. Each option granted under the Plan shall become
exercisable on a date or in installments, and shall expire on a date, determined
by the Board, but in no event shall an option expire later than 10 years from
the date such option is granted, and in the case of an employee or director who
owns more than 10% of the outstanding stock of the Company, in no event shall an
option expire later than five (5) years from the date such option is granted.
6.5 NON ASSIGNABILITY OF OPTION RIGHTS. No option granted under the Plan
shall be assignable or otherwise transferable by the optionee except by will or
by the laws of descent and distribution. During the life of an optionee, his or
her option shall be exercisable only by him or her.
6.6 OTHER PROVISIONS. Each option granted under the Plan may contain such
other terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Board, and shall include such provisions and conditions as are
necessary to qualify the option under Section 422A as an "incentive stock
option.
7. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN. The Board may at any
time amend, suspend, or terminate the Plan. However, the Board of Directors may
not, without approval of the holders of a majority of the combined issued and
outstanding voting shares of the Company, increase the aggregate number of
shares of stock subject to the Plan (except as provided in Section 6.2 of this
Agreement), and neither the amendment, suspension, nor termination of the Plan
shall, without the consent of the optionee, alter or impair any rights or
obligations under any option granted under the Plan (except as provided in
Section 6.2 or Section 6.3 in this Agreement). No option may be granted during
any period of suspension or after termination of the Plan.
8. ACTION BY EXECUTIVE COMMITTEE. Any and all action authorized or required
under
<PAGE> 4
Sections 1 through 7 of the Plan to be taken by the Board may be taken by the
Executive Committee of the Board if there be one and if the Board has duly
delegated its authority to the Executive Committee to take such action.
9. LIMIT ON STOCK SUBJECT TO OPTIONS. Options shall not be granted to any
individual pursuant to this Plan, the effect of which would be to permit such
person to first exercise options, in any calendar year, for the purchase of
shares having a fair market value in excess of ($100,000) (determined at the
time of the grant of the options).
10. NON-EXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the Board,
the submission of the Plan to the shareholders of the Company for their
approval, nor any provision of the Plan shall be construed as creating any
limitation on the power of the Board to adopt additional compensation
arrangements from time to time as it may deem desirable, including, without
limitation, the granting of stock options and bonuses otherwise than under the
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
11. EFFECTIVE DATE OF THE PLAN. The effective date of this Plan is May 22,
1996. On this date the approval of both the shareholders and the board of
directors of the Company was duly obtained. Options may be granted and exercised
under the Plan only after there has been compliance with all applicable federal
and state securities laws.
<PAGE> 1
EXHIBIT 10.5
INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Stock Option Plan ("Plan") is to secure for
S.T. Research Corporation ("Corporation") the benefits of the incentive inherent
in ownership of stock of the Corporation by key employees and directors. Such
key employees and directors will thus be encouraged to acquire a permanent
interest in the future growth and prosperity of the Corporation and to remain in
its service. The Plan will also permit the Corporation to compete with other
organizations offering similar plans in obtaining and retaining the services of
competent executives who the Corporation may wish to employ during the period of
the Plan.
2. STOCK SUBJECT TO PLAN. The maximum number of shares which may be issued
under the Plan shall be 40,000 authorized but unissued shares of the common
stock of the Corporation which are hereby reserved for this purpose. Issued
shares, however, that may be reacquired by the Corporation, either specifically
for use under the Plan or otherwise, may be used for purposes of the Plan from
time to time in place of such reserved shares if the Board of Directors of the
Corporation so determines. In the event that stock options (as defined in
Paragraph 5 hereof) granted under the Plan terminate, in whole or in part
without having been exercised, the number of shares subject thereto may again
become available for issuance under the Plan. No stock option shall be granted
after December 31, 1995. Thereafter, the number of shares reserved for purposes
of the Plan from time to time shall be such number of shares as are issuable
under the then outstanding stock incentives.
3. ELIGIBILITY AND PARTICIPATION. Incentive stock options shall be granted
under the Plan only to key employees, and directors, including officers of the
Corporation as defined in Section 425(f) of the Internal Revenue Code of 1954,
as amended ("Code"). Key employees shall be selected by the Executive
Compensation and Stock Option Committee referred to in Paragraph 4 hereof
("Committee"), which also will determine the number of incentive stock options
to be granted to each key employee. In making such selections and determining
the number of stock incentives to be issued to a key employee, the Committee may
consider the nature of the services rendered by the key employee or director,
the employee's or director's current and potential contribution to the
Corporation and such other factors as it may, in its discretion, deem relevant.
Key employees or directors holding stock incentives are hereafter
referred to as "Participants."
No option shall be granted to a key employee or director in any calendar
year (under the Plan or under any other plan of any Subsidiary qualifying under
Section 422A of the Code) if the aggregate fair market value (determined as of
the time the option is granted) of the shares of stock represented by the option
and any other options granted to such key employee in such calendar year exceeds
$50,000 plus any "unused limit carryover" to such year. An "unused limit
carryover" is one-half of the excess of $50,000 over the aggregated fair market
value (determined as of the time the option is granted) of the stock for which
an employee was granted options in any calendar year after 1987. This "unused
limit carryover" shall be carried over to each of the three succeeding calendar
years. The amount of the "unused limit carryover" from any calendar
<PAGE> 2
year which may be taken into account in any succeeding calendar year shall be
the amount of such carryover reduced by the amount of such carryover which was
used in prior calendar years. In any calendar year the amount of options granted
shall be treated as first using up to $50,000 limitation of such calendar year
and then shall be treated as using up "unused limit carryovers" to such year in
the order of the calendar years in which the carryovers arose.
4. ADMINISTRATION. The Plan shall be administered by a Committee which shall
consist of not fewer than two (2) members of the Board of Directors of the
Corporation who shall be selected by the Board.
Subject to any express provisions of the Plan to the contrary, the
Committee shall have authority, in its discretion, to determine the key
employees to be Participants; the number of stock options to be granted; and the
time when they shall be granted and when they shall be exercisable; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms of the Option Agreement ("Agreements") offered to any key
employee; to construe the respective Agreements and the Plan; and to make all
other determinations necessary and advisable for the administration of the Plan.
The determination of the Committee with respect to the matters referred to in
this paragraph shall be conclusive.
5. STOCK OPTION. An "option" shall consist of a "stock option" as defined in
Section 422A of the Code to purchase a specified number of shares of common
stock of the Corporation. The exercise price of any option shall be equal to
100% of the fair market value of such shares on the date the option is granted.
Unless the Committee determines otherwise, an option shall be granted to a key
employee, officer, or director of the Corporation.
Fair Market Value
For the purpose of this Plan, "fair market value" as of any date shall
be:
A. For as long as the Corporation is a private Corporation, the most
recent appraised value as determined by an independent appraiser. Such
appraisal is to be completed on a annual basis within 180 days of
September 30 each year.
B. At such time that the Company's stock is publicly traded,
the mean between the highest and lowest quoted selling prices determined
by reference to the composite table reflecting transactions on the stock
exchange or over the counter market on such date. If, however, there is
no sale on the relevant date, then fair market value shall be determined
on the last previous day on which a sale is reported.
6. GRANTING OF STOCK OPTIONS AND TERMS OF ACQUISITION. Stock options shall
be deemed to have been granted under the Plan on the date on which the Committee
shall have selected a key employee and determined the number of stock option
shares to be granted to said employee. As soon as practicable thereafter, the
key employee shall be offered an Agreement and said key employee shall execute
the Agreement promptly thereafter. Nothing in the Plan or in any Agreement
entered into under it shall confer any right to continue in the employ of the
Corporation or of any subsidiary or interfere in any way with the right of the
Corporation or of
<PAGE> 3
any Subsidiary or interfere in any way with the right of the Corporation or of
any Subsidiary to terminate employment of any Participant at any time.
7. DURATION OF STOCK INCENTIVES. Each stock incentive granted hereunder
shall expire five (5) years (or sooner, as the Committee may determine) from the
date it is granted. The expiration date of any stock incentive may be
accelerated as hereinafter provided in the event of termination of employment,
retirement, or death of the Participant.
8. TRANSFERABILITY OF STOCK OPTIONS. A stock option may be exercised during
the lifetime of the Participant only by the Participant. A stock incentive
granted under the Plan shall be transferable by the Participant only at the time
of the Participant's death by will or the laws of descent and distribution.
9. EXERCISE OF STOCK.
A. General Requirements:
No stock option shall be exercised within one year from the date it is
granted. In addition, no stock option shall be exercised unless the Participant
at the time of such exercise shall be, and at all times from the date of the
granting of the stock option to the date of such exercise shall have been, an
employee, officer or director of the Corporation or of any Subsidiary. Subject
to the terms of this Plan, and unless otherwise provided in an Agreement or
otherwise restricted by the Committee, a stock option granted under the Plan may
be exercised in whole at any time or in part from time to time. Further, an
option shall be treated as outstanding until such option is exercised in full or
expires by reason of lapse of time. An employee at time of option ( or at time
of grant) cannot own more than 10% voting stock.
B. Exercise of Option:
Shares may be pursuant to an option granted under the Plan to a
Participant only upon receipt by the Corporation of notice in writing of the
Participant's intention to purchase, specifying the number of shares as to which
the Participant desires to exercise the option and the date of purchase. Except
as provided in the next succeeding paragraph, the Participant shall pay the
Corporation by check the full purchase price of the shares purchased on the
specified date of purchase, and certificates, therefore, issued as of such
specified date of purchase, shall be promptly delivered to the Participant by
the Corporation. No Participant nor the legal representatives, legatees or
distributees of said Participant, as the case may be, will be, or will be deemed
to be, a holder of any shares acquired pursuant to the exercise of an option
until the purchase price shall have been paid in full. In the discretion of the
Committee, the purchase price may be paid by the Participant in whole or in part
with common stock of the Corporation on such terms and conditions as may be
approved by the Committee, but in any event the use of such common stock shall
be limited to one time for each option granted under the Plan.
<PAGE> 4
C. Miscellaneous:
To the extent necessary to comply with the securities laws of the United
States or any state, the Committee may, as a condition precedent to the exercise
of such stock incentive, require the Participant (or the legal representatives,
legatees or distributees, in the event of the Participant's death) to convenant
and agree as to the time and circumstances of disposition of the shares being
acquired by exercise of such stock option.
10. TERMINATION OF EMPLOYMENT, RETIREMENT, OR DEATH.
In the event a Participant's employment by the Corporation or by any
Subsidiary shall terminate for any reason other than total physical disability,
death, or retirement on or after normal retirement date, the Participant's Stock
Option and all rights to purchase or receive shares pursuant thereto, as the
case may be, shall forthwith terminate. (For purposes of this Plan, "normal
retirement date" means the January 1st closest to the employee's 65th birthday
or such other date as may be approved by the Committee.)
However, no such termination shall occur if the Committee authorizes the
Participant to exercise such stock option at any time prior to the earlier of
(i) the date the stock option otherwise would expire, or (ii) the expiration of
not more than three (3) months after the date of such termination, but only to
the extent that the Participant was entitled to exercise the stock option at the
date of such termination.
A. Disabilitv or Retirement:
In the event a Participant's employment by the Corporation
shall terminate because of total physical disability or retirement
on or after normal retirement date, the Participant may exercise
such stock option at any time prior to the earlier of (i) the
expiration date of the stock incentive, or (ii) the expiration of
three (3) months after the date of such termination, but only if,
and to the extent that, the Participant was entitled to exercise
the stock option at the date of such termination.
B. Death:
In the event of the death of a Participant, a stock option
granted to the Participant may be exercised by the person or
persons to whom the Participant's rights under the stock option
pass by will or the laws of descent and distribution (including
the Participant's estate during the period of administration) at
any time within a period of six (6) months after death (or such
later date not exceeding one (1) year to which the Committee may
extend such period), but in no event later than the expiration
date of the stock option, but only if; and to the extent that, the
Participant was entitled to exercise the stock option at the date
of death.
<PAGE> 5
C. Exercise of Stock Option:
To the extent that the stock option of any Participant
whose employment is terminated shall not have been exercised
within the periods above provided; such stock option, and all
rights to purchase or receive shares pursuant thereto, as the case
may be, shall forthwith terminate.
11. ADJUSTMENTS.
In the event of any stock dividend, split-up, combination or exchange of
shares, recapitalization, merger, consolidation, acquisition or disposition of
property or stock, separation, reorganization, liquidation or the like, the
aggregate number and class of shares available under the Plan and the number and
class of shares subject to each outstanding stock option and the option prices
may be proportionately adjusted, and other appropriate changes in the Plan stock
options outstanding may be made by the Committee, whose determination shall be
conclusive.
12. CHANGE IN STOCK OPTION.
The committee may, with the consent of the Participant, modify or change
the type of stock option granted or the terms of the Agreement(s) except as to
the option price or the initial value.
13. AMENDMENT OR TERMINATION OF PLAN.
A. General:
The Board of Directors of the Corporation may at any time
terminate the Plan or make such changes in it, additions to it, or
deletions from it as the Board of Directors deems advisable;
provided, however, that without the prior approval of the
shareholders of the Corporation, the Board of Directors shall not,
except as provided in Paragraph 11 hereof; make changes in,
additions to or deletions from the Plan which would increase the
maximum number of shares as to which stock options may be granted
under the Plan, or would reduce the option price at which options
may be granted, or would extend the period during which stock
incentives may be granted or exercised beyond the time originally
prescribed. No termination or amendment of the Plan shall
materially adversely affect the rights of a Participant without
the Participant's consent.
B. Restrictions on Exercise:
Notwithstanding any other provision in the Plan, in the
event of a change in any federal or state law or regulation which
would make the exercise of all or part of an existing stock
incentive unlawful or subject the Corporation to a penalty, the
Committee may restrict such exercise without the consent of the
Participant or other holder thereof in order to comply with such
law or regulation or to avoid such penalty.
<PAGE> 6
14. EFFECTIVE DATE OF PLAN AND EFFECT UPON PRIOR PLANS.
The effective date of the Plan is January 01, 1991, subject to approval
of the shareholders of the Corporation within twelve months.
15. COMMITTEE INDEMNITY.
No member of the Committee (Paragraph 4) shall be personally liable for
any action taken or decision made in good faith relating to the Plan or any
option granted thereunder.
16. OPTION AGREEMENT.
The grant of an option shall be evidenced by a written "Incentive Stock
Option Agreement" executed by the corporation and the optionee, stating the
number of shares of common stock subject to the option evidenced thereby and
such other terms and conditions of the option as the Committee may from time to
time determine. Such Option Agreement(s) shall state that the options are
intended to be incentive stock options.
17. MECHANICS OF EXERCISE OF OPTIONS.
An option may be exercised from time to time by written notice by the
optionee to the Committee of his intent to exercise the option with respect to a
specified number of shares.
The specified number of shares will be issued and transferred to the
optionee upon receipt by the Committee of (i) such notice, and (ii) cash payment
for such shares.
18. NON-ASSIGNABILITY.
During the life of the optionee, such option shall be exercisable only by
him or by his guardian or legal representative.
19. WITHHOLDING TAXES.
Whenever the Corporation proposes or is required to issue or transfer
shares of common stock pursuant to exercise of an option, the Corporation shall
have the right to require the optionee to remit to the Corporation an amount
sufficient to satisfy any federal, state, and local withholding tax requirements
prior to the delivery of any certificate for such shares.
20. NO RIGHT TO EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any Participant the right to continue in the employ of the
Corporation or any Subsidiary or effect any right which the Corporation or any
Subsidiary may have to terminate the employment of such Participant.
21. NO RIGHTS AS STOCKHOLDER.
<PAGE> 7
Recipient of options shall have no rights as Stockholders of the
Corporation with respect thereto unless and until certificates for shares of
common stock are issued to them.
<PAGE> 1
EXHIBIT 10.8
STOCK OPTION AGREEMENT
S.T. Research Corporation (hereinafter "Corporation"), desiring to afford
an opportunity to the Director named below to purchase certain shares of the
Corporation's common stock, hereby grants to the Director, and the Director
hereby accepts, the following option to purchase shares. Any such purchase shall
be made during the term ending on the expiration date of this Option and shall
be subject to the terms and conditions that follow:
1. IDENTIFYING PROVISIONS
As used in this Option Agreement, the following terms shall have the
following respective meanings:
A. Director: Chuck Bernard
----------------------
B. Date of Grant: January 31, 1992
----------------------
C. Number of Shares Optioned: 10,000
----------------------
D. Option Exercise Price Per Share: 2.50
----------------------
E. Expiration Date: January 31, 1996
----------------------
2. TIMING OF PURCHASES
This Option is exercisable in full at any time during the period between
the Date of Grant and the Expiration Date.
3. RESTRICTIONS ON EXERCISE
The following provisions shall apply to the exercise of this Option:
A. Termination of Directorship. If the Director ceases to be
employed as a director of the Corporation for any reason other
than death, only that portion of this Option exercisable at the
time of such termination may thereafter be exercised, and it may
not be exercised more than thirty (30) days after such termination
nor after the expiration date of this Option, whichever date is
sooner,
<PAGE> 2
unless such termination is by reason of the director's permanent
and total disability, in which case such period of thirty (30)
days shall be extended to one (1) year.
B. Death of Director. Should the Director die during the term of this
Option, the Director's legal representative(s) or the person(s)
entitled to act as such under the Director's last will and
testament or under applicable interstate laws, shall have the
right to exercise this Option, but only for the number of shares
for which the Director was entitled to exercise on the date of his
death in accordance with Section 2 of this Agreement, and such
right shall expire and this Option shall terminate thirty (30)
days following the date of the Director's death or on the
expiration date of this Option, whichever date is sooner. In all
other respects, this Option shall terminate upon such death.
3. NON-TRANSFERABLE
The Director may not transfer this Option except by will or the laws of
descent and distribution. This Option shall not be otherwise transferred,
assigned, pledged, hypothecated or disposed of in any way, whether by operation
of law or otherwise, and shall be exercisable during the Director's lifetime
only by the Director or his guardian or legal representative.
5. ADJUSTMENTS AND CORPORATE REORGANIZATIONS
If the outstanding shares of the company subject to this Option are
increased or decreased, or are changed into or exchanged for a different number
or kind of shares or securities, as a result of one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or the
like, appropriate adjustments shall be made in the number and/or kind of shares
or securities for which the unexercised portions of this Option may thereafter
be exercised, all without any change in the aggregate exercise price applicable
to the unexercised portions of this Option, but with a corresponding adjustment
in the exercise price per share or other unit. No fractional share of stock
shall be issued under this Option or in connection with
<PAGE> 3
any such adjustment. Such adjustments shall be made by or under authority of the
Corporation's Board of Directors whose determinations as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation of the Corporation as a result of which
the outstanding securities of the class subject to this Option are changed into
or exchanged for cash or property or securities not of the Corporation's issue,
or upon a sale of substantially all the property of the Corporation to, or the
acquisition of stock representing more than eighty percent (80%) of the voting
power of the stock of the Corporation outstanding by, another corporation or
person, this Option shall terminate, unless provision be made in writing in
connection with such transaction for the assumption of options theretofore
granted under the Stock Option Plan under which this Option was granted, or the
substitution for such options of any options covering the stock of a successor
employer corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices, in which event this
Option shall continue in the manner and under the terms so provided. If this
Option shall terminate pursuant to the foregoing sentence, the Director shall
have the right, at such time prior to the consummation of the transaction
causing such termination as the Corporation shall designate, to exercise the
unexercised portions of this Option, including the portions thereof which would,
but for this Section entitled "Adjustments and Corporate Reorganizations," not
yet be exercisable.
6. EXERCISE: PAYMENT FOR AND DELIVERY OF STOCK
This Option may be exercised by the Director or other person entitled to
exercise it by giving four (4) business days' written notice of exercise to the
Corporation specifying the number of shares to be purchased and the total
purchase price, accompanied by a check to the order of the Corporation in
payment of such price. If the Corporation is required to withhold on account of
any present or future tax imposed as a result of such exercise, the notice of
exercise shall be accompanied by a check to the order of the Corporation in
payment of the amount of such
<PAGE> 4
withholding.
7. RIGHTS IN SHARES BEFORE ISSUANCE AND DELIVERY
No person shall be entitled to the privileges of stock ownership in
respect of any shares issuable upon exercise of this Option, unless and until
such shares have been issued to such person as fully paid shares.
8. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES
By accepting this Option, the Director represents and agrees for himself
and his transferees by will or the laws of descent and distribution that, unless
a registration statement under the Securities Act of 1933 is in effect as to
shares purchased upon any exercise of this Option.
A. any and all shares so purchased shall be acquired for his personal
account and not with a view to or for sale in connection with any
distribution, and
B. each notice of the exercise of any portion of this Option shall be
accompanied by a representation and warranty in writing, signed by
the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not
with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Corporation, such securities may be issued and delivered without
causing the Corporation to be in violation or incur any liability under any
federal, state or other securities law, any requirement of any securities
exchange listing agreement to which the Corporation may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Corporation.
<PAGE> 5
9. NOTICES
Any notice to be given to the Corporation shall be addressed to the
Corporation in care of its Secretary at its principal office, and any notice to
be given to the Director shall be addressed to him at the address given beneath
his signature hereto or at such other address as the Director may hereafter
designate in writing to the company.
Any such notice shall be deemed duly given when enclosed in a properly
sealed envelope or wrapper addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
10. LAWS APPLICABLE TO CONSTRUCTION
This Agreement has been executed and delivered by the Corporation in the
Commonwealth of Virginia, and this Agreement shall be construed and enforced in
accordance with the laws of said State.
IN WITNESS WHEREOF, the Corporation has granted this Option on the Date
of Grant specified above.
S.T. RESEARCH CORPORATION
WITNESS: By: /s/ S. R. Perrino
-----------------------------
/s/ Yvonne L. Wilson Name: /s/ S. R. Perrino
- --------------------------------- -----------------------------
Title: President
-----------------------------
ACCEPTED:
By: /s/ Charles W. Bernard
----------------------
Name: /s/ Charles W. Bernard
----------------------
Title: Director
--------
<PAGE> 1
EXHIBIT 10.9
STOCK OPTION AGREEMENT
Options granted under the Incentive Stock Option Plan of S.T. Research
Corporation.
This Stock Option Agreement ("Agreement") is entered into as of December
9, 1996, between John D. Sanders, a Virginia Resident, residing at 4600 26th
Street North, Arlington, Virginia 22207 ("Director") and S.T. Research
Corporation, a Virginia Corporation with its principal place of business at 8419
Terminal Road, Newington, Virginia 22122 ("Company").
GENERAL
On May 22, 1996, the Company adopted an incentive stock option plan
designated as the Incentive Stock Option Plan of S.T. Research Corporation (the
"Plan"), pursuant to the options that qualify as "incentive stock options" under
Section 422A of the Internal Revenue Code (the "Code") as added by the Economic
Recovery Act of 1981 and as it may be amended from time to time ("Section 422A")
may be granted to selected key employees and directors of the Company or any of
its affiliates.
On the date of this Agreement the Director is a bona fide Director of the
Company or one of its affiliates, as defined in the Plan.
The Board of Directors of the Company (the "Board") regards the Director
as a key Director, as contemplated by the Plan, has determined that it would be
to the advantage and interest of the Company and its shareholders to grant to
the Director the option rights provided for within this Agreement as an
inducement to remain in the service of the Company and as an incentive for
increased efforts during such service, and has instructed the Company's officers
to issue such option rights as provided in the Plan.
The Board (or an Executive Committee designated by the Board) has
approved of the granting to the Director of the option rights evidenced by this
Agreement.
In consideration for the mutual promises, covenants, and Agreements made
below, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. GRANT OF OPTION RIGHTS. Subject to the Director's continued membership as
a Board member, as provided in this Agreement, the Company hereby grants to the
Director the option rights specified below (the "Option Rights"):
1.1 The number of shares of the Company's stock that are subject to the
Option Rights is 10,000 shares of the Company's common stock (the "Shares").
<PAGE> 2
1.2 The option exercise price, which is not less than the fair market value
of the Shares as of the date hereof, and in the case of an Director who owns 10%
or more of the Company's stock, not less than 110% of the fair market value of
the Shares as of the date of this Agreement, is $8.69 per Share.
1.3 The Option Rights may be exercised during the time periods, and as to the
number of Shares with respect to when the Option is exercisable during each such
time period, as follows:
1.3.1 Option Rights for up to 100% of the Shares may be exercised at any time
or times, from and including the date that is 12 months from the date hereof to
and including the Expiration Date;
1.4 The minimum number of Shares with respect to which the Option Rights may
be exercised is the lesser of 100 Shares or the total number of Shares with
respect to when the Option Rights may be exercised during any given time period.
1.5 To exercise any of the Option Rights, the Director must have remained on
the Board of the Company or one of its affiliates continuously through the
exercise date, except as otherwise provided in Section 3 below. The granting of
the Option Rights shall impose no obligation on the Company or any of its
affiliates to continue the Director as a Board member, and shall not lessen or
affect the right of the Company or any affiliate that employs the Director as a
Board member to terminate such membership or to change the duties or other terms
of the Director. Any Option Rights that are not exercised on or before the
Expiration Date (as defined in Section 3 below) shall automatically terminate
and become null and void.
2. FRACTIONAL SHARES; COMPLIANCE WITH LAWS. In no event shall the Company be
required to issue fractional shares upon the exercise of any Option Rights
granted under this Agreement. No Option Rights may be exercised, and the Company
shall not be required to issue or deliver any certificate(s) for any of the
Shares until there has been compliance with all then applicable requirements of
law, including such registration or other proceedings under federal and state
securities laws as may in the Company's opinion be necessary or appropriate.
3. NECESSITY OF BOARD MEMBERSHIP WHEN OPTION IS EXERCISED. The Option
Rights, to the extent they have not expired or been exercised, shall terminate
and become null and void on the date that the Director ceases, for any reason,
to be a Board member of the Company or one of its affiliates, and shall not be
exercisable on or after such date, except that:
3.1 In the event of the termination of such Board membership for any reason
other than the death or disability of the Director, the Director may, at any
time within a period of one month after such termination of Board membership,
exercise any or all of the Option Rights to the extent the Option Rights were
exercisable under the provisions of Section 1 in this Agreement on the date of
the termination of such Board membership.
3.2 In the event of the death of disability of the Director while a Board
member, the Director, the personal representatives of the Director or any person
or persons who acquired any such Option Rights from the Director by will or the
applicable laws of descent and distribution may, at
<PAGE> 3
any time within a period of three months after the death or disability of the
Director, exercise any or all of the Option Rights to the extent the Option
Rights were exercisable under the provisions of Section 1 within this Agreement
on the date of the death or disability of the Director.
In no event may any Option Rights be exercised by any person or entity
after the date immediately preceding the 10th anniversary date of this
Agreement, or the date on which the Option Rights terminate pursuant to this
Section 3 or any other provision of this Agreement. Each such date is referred
to in this Agreement as the "Expiration Date." References throughout this
Agreement to the Director shall be deemed, where appropriate, to include any
person entitled to exercise the Option Rights after the death of the Director
under the terms of Section 3.1 or Section 3.2.
4. NONASSIGNABILITY OF OPTION RIGHTS. The Option Rights: (1) shall, except
as provided in Section 3 of this Agreement, be exercisable only by the Director;
(2) shall not be transferred, assigned, pledged or hypothecated in any manner
whatsoever, whether voluntarily, involuntarily or by operation of law; and (3)
shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of the
Option Rights contrary to the provisions of this Agreement, the Option Rights
shall immediately become null and void.
5. ADJUSTMENTS. Appropriate proportionate adjustments shall be made by the
Company in the number and class of Shares subject to the Option Rights and the
exercise price of the Option Rights in the event that: (1) the common stock of
the Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization; or (2) the outstanding number of shares of
common stock of the Company is increased through payment of a stock dividend;
provided, however, that the Company shall not be required to issue fractional
Shares as a result of any such adjustment. If there is any other change in the
number or kind of the outstanding shares of capital stock of the Company, or of
any other security into which such stock shall have been changed or for which it
shall have been exchanged, and if the Board, in its sole discretion, determines
that such change equitably requires any adjustment in the Option Rights granted
under this Agreement, such adjustment shall be made in accordance with the
determination of the Board. No adjustments shall be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
sales of its capital stock or securities convertible into or exchangeable for
shares of its capital stock. All adjustments shall be made in such a manner that
will allow the Option Rights to continue to qualify under Section 422A as
"Incentive Stock Option" rights.
New option rights may be substituted for the Option Rights, or the
Company's duties under this Agreement may be assumed by an employer corporation
other than the Company, or by a parent or subsidiary of such employer
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation, or like occurrence, where the Company
is involved, in such a manner that will allow the Option Rights to continue to
qualify as "incentive stock option" rights under Section 422A and to the full
extent permitted thereby. Notwithstanding the foregoing provisions of this
Paragraph 5, in the event such employer corporation, or parent or subsidiary of
such employer corporation, refuses to substitute new
<PAGE> 4
option rights for, and substantially equivalent to, the option rights, or to
assume the Options Rights, as permitted by the Code, the Option Rights shall
terminate and therefore become null and void: (1) upon the reorganization;
dissolution or liquidation of the Company, or similar occurrence; or (2) upon
any merger, consolidation, acquisition, or separation, or similar occurrence, if
the Company is not the surviving corporation; provided, however, that the
Director shall have the right, immediately prior to or concurrently with such
reorganization, dissolution, liquidation, merger, consolidation, acquisition,
separation or similar occurrence, and upon at least 10 days' written notice
thereof, to exercise any unexpired Option Rights granted under this Agreement to
the extent the Option Rights are exercisable at the time of mailing of such
notice, but subject, nevertheless, to the condition that no Option Rights
granted under this Agreement may be exercised after the Expiration Date.
In the event that the Board of Directors, in its discretion, determines
that it is in the best interests of the Company to offer its shares of capital
stock to the public pursuant to a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
or pursuant to an exemption under such Act, the Secretary of the Company shall
notify the Director in writing of such determination. In that event, all
outstanding Option Rights shall become null and void 30 days after such notice
is mailed, but the Director shall during such 30-day period, have the right to
exercise any unexpired Option Rights granted to him or her under this Agreement
to the extent such Option Rights are exercisable at the time of mailing of such
notice, but in any event subject to the time limitations for exercise of the
Option Rights provided in the Code.
6. METHOD OF EXERCISE; RIGHTS OF OPTIONEE IN STOCK. The Option Rights shall
be exercisable upon delivery to the Company of an executed Investment
Representation Letter attached hereto as Exhibit A, accompanied by payment in
cash to the Company of the option exercise price as to the Shares being
purchased. Neither the Director nor his / her personal representatives, heirs,
or legatees shall have any rights or privileges of a shareholder of the Company
in respect to the Shares issuable upon the exercise of the Option Rights, unless
and until certificate(s) representing such shares shall have been issued and
delivered in accordance with the terms hereof.
7. NOTICES. Any notice to be given under the terms of this Agreement shall
be mailed, telegraphed or delivered, and confirmed, to the Company, in care of
its Secretary, at the principal office of the Company, and any notice to be
given to the Director shall be mailed, telegraphed or delivered, and confirmed,
to him or her at the address given beneath his / her signature hereto, or at
such other address as either party may hereafter designate in writing to the
other. Any such notice shall be deemed to have been duly given 48 hours after
the deposit in the United States mail, addressed as mentioned before, registered
or certified and postage and registry or certification fee prepaid.
8. DATE OF GRANT. The Option Rights shall be deemed to have been granted on
the date when the Company executed this Agreement and notified the Director of
the granting of the Option Rights. Such date is within 10 years from the
Effective Date as defined in the Plan.
9. OPTION RIGHTS GOVERNED BY PLAN AND INTERNAL REVENUE CODE. The provisions
of the
<PAGE> 5
Plan shall be deemed to be incorporated in and to have been made a part of this
Agreement, and shall be deemed to be controlling in the event that any of the
provisions of this Agreement are inconsistent. This Agreement shall be deemed to
include such other provisions not set forth in the Plan or herein, or
inconsistent with any provisions set forth in the Plan or herein, as may be
necessary to qualify the option granted under this Agreement as an "incentive
stock option" under Section 422A.
10. ACQUISITION FOR INVESTMENT. By accepting this Stock Option Agreement, the
Director represents, covenants, and warrants for himself, his personal
representatives, heirs, and legatees that such stock Option Rights are being
acquired with no view to any distribution and that, upon each issuance of Shares
in accordance with this Agreement, the Director, his personal representatives,
heirs, or legatees receiving such Shares shall, if requested, represent in
writing to the Company that such Shares are being acquired with no view to any
distribution or shall make such other representations in writing to the Company,
with respect to the further transfer of such Shares, as may be deemed by the
Company to be necessary or appropriate under the applicable federal and state
securities laws. The Company, at its sole discretion, may take all reasonable
steps (including the affixing of an appropriate legend on certificates embodying
such Shares) to assure itself against any resale or distribution not in
compliance with federal or state securities laws.
11. PERSONS BOUND. Subject to the provisions against assignment set forth in
Section 4 hereof, this Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company, and the personal representatives,
heirs, and legatees of the Director.
The Company has caused this Agreement to be executed on its behalf by an
officer of the Company, on the date set forth above, and the Director has
executed this Agreement on or as of such date, which date is the time of the
granting of the Option Rights.
We have carefully reviewed this contract and agree to and accept its
terms and conditions. We are executing this Agreement as of the day and year
first written above.
Director: Company:
John D. Sanders S.T. Research Corporation
Robert R. Bower
Secretary
By: /s/ John D. Sanders By: /s/ R. R. Bower
-------------------------------- ---------------------------
<PAGE> 1
EXHIBIT 10.10
STOCK OPTION AGREEMENT
Options granted under the Incentive Stock Option Plan of S.T. Research
Corporation.
This Stock Option Agreement ("Agreement") is entered into as of December
9, 1996, between Robert R. Bower, a Virginia Resident, residing at 2710
Glencroft Road, Vienna, Virginia 22180 ("Employee") and S.T. Research
Corporation, a Virginia Corporation with its principal place of business at 8419
Terminal Road, Newington, Virginia 22122 ("Company").
GENERAL
On May 22, 1996, the Company adopted an incentive stock option plan
designated as the Incentive Stock Option Plan of S.T. Research Corporation (the
"Plan"), pursuant to the options that qualify as "incentive stock options" under
Section 422A of the Internal Revenue Code (the "Code") as added by the Economic
Recovery Act of 1981 and as it may be amended from time to time ("Section 422A")
may be granted to selected key employees of the Company or any of its
affiliates.
On the date of this Agreement the Employee is a bona fide employee of the
Company or one of its affiliates, as defined in the Plan.
The Board of Directors of the Company (the "Board") regards the Employee
as a key employee, as contemplated by the Plan, has determined that it would be
to the advantage and interest of the Company and its shareholders to grant to
the Employee the option rights provided for within this Agreement as an
inducement to remain in the service of the Company and as an incentive for
increased efforts during such service, and has instructed the Company's officers
to issue such option rights as provided in the Plan.
The Board (or an Executive Committee designated by the Board) has
approved of the granting to the Employee of the option rights evidenced by this
Agreement.
In consideration for the mutual promises, covenants, and Agreements made
below, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. GRANT OF OPTION RIGHTS. Subject to the Employee's continued employment,
as provided in this Agreement, the Company hereby grants to the Employee the
option rights specified below (the "Option Rights"):
1.1 The number of shares of the Company's stock that are subject to the
Option Rights is 6,000 shares of the Company's common stock (the "Shares").
<PAGE> 2
1.2 The option exercise price, which is not less than the fair market value
of the Shares as of the date hereof, and in the case of an Employee who owns 10%
or more of the Company's stock, not less than 110% of the fair market value of
the Shares as of the date of this Agreement, is $8.69 per Share.
1.3 The Option Rights may be exercised during the time periods, and as to the
number of Shares with respect to when the Option is exercisable during each such
time period, as follows:
1.3.1 Option Rights for up to 20% of the Shares may be exercised at any time or
times, from and including the date that is 12 months from the date hereof to and
including the Expiration Date;
1.3.2 Option Rights for up to an additional 20% of the Shares may be exercised
at any time or times, from and including the date that is 24 months from the
date of this Agreement to and including the Expiration Date;
1.3.3 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 36 months from the
date of this Agreement to including the Expiration Date;
1.3.4 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 48 months from the
date of this Agreement to including the Expiration Date; and
1.3.5 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 60 months from the
date of this Agreement to including the Expiration Date.
1.4 The minimum number of Shares with respect to which the Option Rights may
be exercised is the lesser of 100 Shares or the total number of Shares with
respect to when the Option Rights may be exercised during any given time period.
1.5 To exercise any of the Option Rights, the Employee must have remained in
the employ of the Company or one of its affiliates continuously through the
exercise date, except as otherwise provided in Section 3 below. The granting of
the Option Rights shall impose no obligation on the Company or any of its
affiliates to continue the employment of the Employee, and shall not lessen or
affect the right of the Company or any affiliate that employs the Employee to
terminate such employment or to change the duties, compensation, or other terms
of employment of the Employee. Any Option Rights that are not exercised on or
before the Expiration Date (as defined in Section 3 below) shall automatically
terminate and become null and void.
2. FRACTIONAL SHARES; COMPLIANCE WITH LAWS. In no event shall the Company be
required to issue fractional shares upon the exercise of any Option Rights
granted under this Agreement. No Option Rights may be exercised, and the Company
shall not be required to issue or deliver any certificate(s) for any of the
Shares until there has been compliance with all then applicable requirements of
law, including such registration or other proceedings under federal and state
<PAGE> 3
securities laws as may in the Company's opinion be necessary or appropriate.
3. NECESSITY OF EMPLOYMENT WHEN OPTION IS EXERCISED. The Option Rights, to
the extent they have not expired or been exercised, shall terminate and become
null and void on the date that the Employee ceases, for any reason, to be an
employee of the Company or one of its affiliates, and shall not be exercisable
on or after such date, except that:
3.1 In the event of the termination of such employment for any reason other
than the death or disability of the Employee, the Employee may, at any time
within a period of one month after such termination of employment, exercise any
or all of the Option Rights to the extent the Option Rights were exercisable
under the provisions of Section 1 in this Agreement on the date of the
termination of such employment.
3.2 In the event of the death of disability of the Employee while in the
employ of the Company, the Employee, the personal representatives of the
Employee or any person or persons who acquired any such Option Rights from the
Employee by will or the applicable laws of descent and distribution may, at any
time within a period of three months after the death or disability of the
Employee, exercise any or all of the Option Rights to the extent the Option
Rights were exercisable under the provisions of Section 1 within this Agreement
on the date of the death or disability of the Employee.
In no event may any Option Rights be exercised by any person or entity
after the date immediately preceding the 10th anniversary date of this
Agreement, or the date on which the Option Rights terminate pursuant to this
Section 3 or any other provision of this Agreement. Each such date is referred
to in this Agreement as the "Expiration Date." References throughout this
Agreement to the Employee shall be deemed, where appropriate, to include any
person entitled to exercise the Option Rights after the death of the Employee
under the terms of Section 3.1 or Section 3.2.
4. NONASSIGNABILITY OF OPTION RIGHTS. The Option Rights: (1) shall, except
as provided in Section 3 of this Agreement, be exercisable only by the Employee;
(2) shall not be transferred, assigned, pledged or hypothecated in any manner
whatsoever, whether voluntarily, involuntarily or by operation of law; and (3)
shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of the
Option Rights contrary to the provisions of this Agreement, the Option Rights
shall immediately become null and void.
5. ADJUSTMENTS. Appropriate proportionate adjustments shall be made by the
Company in the number and class of Shares subject to the Option Rights and the
exercise price of the Option Rights in the event that: (1) the common stock of
the Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization; or (2) the outstanding number of shares of
common stock of the Company is increased through payment of a stock dividend;
provided, however, that the Company shall not be required to issue fractional
Shares as a result of any such adjustment. If there is any other change in the
number or kind of the outstanding shares of capital stock of the Company, or of
any
<PAGE> 4
other security into which such stock shall have been changed or for which it
shall have been exchanged, and if the Board, in its sole discretion, determines
that such change equitably requires any adjustment in the Option Rights granted
under this Agreement, such adjustment shall be made in accordance with the
determination of the Board. No adjustments shall be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
sales of its capital stock or securities convertible into or exchangeable for
shares of its capital stock. All adjustments shall be made in such a manner that
will allow the Option Rights to continue to qualify under Section 422A as
"Incentive Stock Option" rights.
New option rights may be substituted for the Option Rights, or the
Company's duties under this Agreement may be assumed by an employer corporation
other than the Company, or by a parent or subsidiary of such employer
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation, or like occurrence, where the Company
is involved, in such a manner that will allow the Option Rights to continue to
qualify as "incentive stock option" rights under Section 422A and to the full
extent permitted thereby. Notwithstanding the foregoing provisions of this
Paragraph 5, in the event such employer corporation, or parent or subsidiary of
such employer corporation, refuses to substitute new option rights for, and
substantially equivalent to, the option rights, or to assume the Options Rights,
as permitted by the Code, the Option Rights shall terminate and therefore become
null and void: (1) upon the reorganization; dissolution or liquidation of the
Company, or similar occurrence; or (2) upon any merger, consolidation,
acquisition, or separation, or similar occurrence, if the Company is not the
surviving corporation; provided, however, that the Employee shall have the
right, immediately prior to or concurrently with such reorganization,
dissolution, liquidation, merger, consolidation, acquisition, separation or
similar occurrence, and upon at least 10 days' written notice thereof, to
exercise any unexpired Option Rights granted under this Agreement to the extent
the Option Rights are exercisable at the time of mailing of such notice, but
subject, nevertheless, to the condition that no Option Rights granted under this
Agreement may be exercised after the Expiration Date.
In the event that the Board of Directors, in its discretion, determines
that it is in the best interests of the Company to offer its shares of capital
stock to the public pursuant to a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
or pursuant to an exemption under such Act, the Secretary of the Company shall
notify the Employee in writing of such determination. In that event, all
outstanding Option Rights shall become null and void 30 days after such notice
is mailed, but the Employee shall during such 30-day period, have the right to
exercise any unexpired Option Rights granted to him or her under this Agreement
to the extent such Option Rights are exercisable at the time of mailing of such
notice, but in any event subject to the time limitations for exercise of the
Option Rights provided in the Code.
6. METHOD OF EXERCISE; RIGHTS OF OPTIONEE IN STOCK. The Option Rights shall
be exercisable upon delivery to the Company of an executed Investment
Representation Letter attached hereto as Exhibit A, accompanied by payment in
cash to the Company of the option exercise price as to the Shares being
purchased. Neither the Employee nor his / her personal representatives, heirs,
or legatees shall have any rights or privileges of a shareholder of the Company
in respect to the Shares issuable upon the exercise of the Option Rights, unless
and
<PAGE> 5
until certificate(s) representing such shares shall have been issued and
delivered in accordance with the terms hereof.
7. NOTICES. Any notice to be given under the terms of this Agreement shall
be mailed, telegraphed or delivered, and confirmed, to the Company, in care of
its Secretary, at the principal office of the Company, and any notice to be
given to the Employee shall be mailed, telegraphed or delivered, and confirmed,
to him or her at the address given beneath his / her signature hereto, or at
such other address as either party may hereafter designate in writing to the
other. Any such notice shall be deemed to have been duly given 48 hours after
the deposit in the United States mail, addressed as mentioned before, registered
or certified and postage and registry or certification fee prepaid.
8. DATE OF GRANT. The Option Rights shall be deemed to have been granted on
the date when the Company executed this Agreement and notified the Employee of
the granting of the Option Rights. Such date is within 10 years from the
Effective Date as defined in the Plan.
9. OPTION RIGHTS GOVERNED BY PLAN AND INTERNAL REVENUE CODE. The provisions
of the Plan shall be deemed to be incorporated in and to have been made a part
of this Agreement, and shall be deemed to be controlling in the event that any
of the provisions of this Agreement are inconsistent. This Agreement shall be
deemed to include such other provisions not set forth in the Plan or herein, or
inconsistent with any provisions set forth in the Plan or herein, as may be
necessary to qualify the option granted under this Agreement as an "incentive
stock option" under Section 422A.
10. ACQUISITION FOR INVESTMENT. By accepting this Stock Option Agreement, the
Employee represents, covenants, and warrants for himself, his personal
representatives, heirs, and legatees that such stock Option Rights are being
acquired with no view to any distribution and that, upon each issuance of Shares
in accordance with this Agreement, the Employee, his personal representatives,
heirs, or legatees receiving such Shares shall, if requested, represent in
writing to the Company that such Shares are being acquired with no view to any
distribution or shall make such other representations in writing to the Company,
with respect to the further transfer of such Shares, as may be deemed by the
Company to be necessary or appropriate under the applicable federal and state
securities laws. The Company, at its sole discretion, may take all reasonable
steps (including the affixing of an appropriate legend on certificates embodying
such Shares) to assure itself against any resale or distribution not in
compliance with federal or state securities laws.
11. PERSONS BOUND. Subject to the provisions against assignment set forth in
Section 4 hereof, this Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company, and the personal representatives,
heirs, and legatees of the Employee.
The Company has caused this Agreement to be executed on its behalf by an
officer of the Company, on the date set forth above, and the Employee has
executed this Agreement on or as of such date, which date is the time of the
granting of the Option Rights.
<PAGE> 6
We have carefully reviewed this contract and agree to and accept its
terms and conditions. We are executing this Agreement as of the day and year
first written above.
Employee: Company:
Robert R. Bower S.T. Research Corporation
S.R. Perrino, President
By: /s/ R.R. Bower By: /s/ S. R. Perrino
-------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.11
SENSYS TECHNOLOGIES INC.
401(K) PROFIT SHARING PLAN
EFFECTIVE JUNE 9, 1998
INCLUDING AMENDMENTS THROUGH SEPTEMBER 30, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
<TABLE>
<S> <C>
2.1 TOP HEAVY PLAN REQUIREMENTS.........................................................11
2.2 DETERMINATION OF TOP HEAVY STATUS...................................................11
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER.........................................14
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY.............................................14
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES.......................................14
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR..............................................15
2.7 RECORDS AND REPORTS.................................................................16
2.8 APPOINTMENT OF ADVISERS.............................................................16
2.9 INFORMATION FROM EMPLOYER...........................................................16
2.10 PAYMENT OF EXPENSES.................................................................16
2.11 MAJORITY ACTIONS....................................................................16
2.12 CLAIMS PROCEDURE....................................................................17
2.13 CLAIMS REVIEW PROCEDURE.............................................................17
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY...........................................................18
3.2 TERMINATION OF ELIGIBILITY..........................................................18
3.3 OMISSION OF ELIGIBLE EMPLOYEE.......................................................18
3.4 INCLUSION OF INELIGIBLE EMPLOYEE....................................................18
3.5 APPLICATION PROCEDURE...............................................................19
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 EMPLOYER'S CONTRIBUTIONS........................................................... 20
4.2 FORM AND TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION.................................20
4.3 PROFIT SHARING CONTRIBUTION.........................................................20
4.4 MATCHING CONTRIBUTION...............................................................20
4.5 401(K) CONTRIBUTIONS................................................................21
4.6 CHANGE IN 401(K) CONTRIBUTIONS .....................................................21
4.7 LIMITATIONS WITH RESPECT TO 401(K) CONTRIBUTIONS ...................................21
4.8 CONTRIBUTION PERCENTAGE LIMITATION WITH RESPECT TO MATCHING CONTRIBUTIONS ..........24
4.9 MAINTENANCE OF ACCOUNTS.............................................................27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.10 ALLOCATION OF PROFIT SHARING CONTRIBUTIONS, FORFEITURES AND EARNINGS................28
4.11 MAXIMUM ANNUAL ADDITIONS............................................................28
4.12 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS...........................................30
4.13 ROLLOVER CONTRIBUTIONS..............................................................30
4.14 QUALIFIED MILITARY SERVICE .........................................................31
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY...................................................................32
5.2 PARTICIPANT DIRECTED INVESTMENTS ...................................................32
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND.........................................................34
6.2 METHOD OF VALUATION.................................................................34
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT...........................................35
7.2 DETERMINATION OF BENEFITS UPON DEATH................................................35
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY....................................36
7.4 DETERMINATION OF BENEFITS UPON TERMINATION..........................................36
7.5 DISTRIBUTION OF BENEFITS............................................................39
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED................................................42
7.7 DISTRIBUTION FOR MINOR BENEFICIARY..................................................42
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN......................................43
7.9 NONTERMINABLE PROTECTIONS AND RIGHTS................................................43
7.10 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION.....................................43
7.11 DIRECT ROLLOVER.....................................................................43
7.12 LOANS...............................................................................44
7.13 HARDSHIP DISTRIBUTIONS..............................................................46
7.17 LIMITATIONS ON 401(K) CONTRIBUTION ACCOUNT DISTRIBUTIONS............................47
ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE...............................................49
8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE.........................................49
8.3 OTHER POWERS OF THE TRUSTEE.........................................................50
8.4 VOTING COMPANY STOCK................................................................52
8.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS............................................52
</TABLE>
<PAGE> 4
<TABLE>
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8.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES.......................................53
8.7 ANNUAL REPORT OF THE TRUSTEE........................................................53
8.8 AUDIT...............................................................................53
8.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE......................................54
ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 AMENDMENT...........................................................................56
9.2 TERMINATION.........................................................................56
9.3 MERGER OR CONSOLIDATION.............................................................57
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS................................................................58
10.2 ALIENATION..........................................................................58
10.3 CONSTRUCTION OF PLAN................................................................58
10.4 GENDER AND NUMBER...................................................................58
10.5 LEGAL ACTION........................................................................59
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS..............................................59
10.7 BONDING.............................................................................59
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE..........................................60
10.9 INSURER'S PROTECTIVE CLAUSE.........................................................60
10.10 RECEIPT AND RELEASE FOR PAYMENTS....................................................60
10.11 ACTION BY THE EMPLOYER..............................................................60
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY..................................60
10.13 HEADINGS............................................................................61
10.14 UNIFORMITY..........................................................................61
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS.........................................................62
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS.............................................62
11.3 DESIGNATION OF AGENT................................................................62
11.4 EMPLOYEE TRANSFERS..................................................................63
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION...............................................63
11.6 AMENDMENT...........................................................................63
11.7 DISCONTINUANCE OF PARTICIPATION.....................................................63
11.8 ADMINISTRATOR'S AUTHORITY...........................................................63
</TABLE>
<PAGE> 5
SENSYS TECHNOLOGIES INC.
401(K) PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this _________ day of
______________________, 1998 by and between SENSYS TECHNOLOGIES INC. (herein
referred to as the "Employer") and ______________________________ and ROBERT R.
BOWER (herein collectively referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, S.T. Research Corporation ("STR") maintains the S.T. Research
Corporation 401(k)/Employee Stock Ownership Plan (the "Plan"), which includes an
employee stock ownership ("ESOP") portion of the plan; and
WHEREAS, STR desires to terminate the ESOP portion of the Plan and to
merge it into the profit sharing portion of the Plan, to maximize the
administrative efficiency regarding the Plan; and
WHEREAS, STR desires to amend the Plan to comply with the applicable
requirements of the Small Business Jobs Protection Act of 1996 and other recent
legislation, regulations and other guidance; and
WHEREAS, Daedalus Enterprises, Inc. ("Daedalus") maintains the Pension
Plan for Employees of Daedalus Enterprises, Inc. (the "Pension Plan") and the
Daedalus Enterprises, Inc. Employee 401(k) Plan (collectively referred to as the
"Daedalus Plans"); and
WHEREAS, in connection with the merger transaction involving STR and
Daedalus, pursuant to which the combined companies will operate under the name
"Sensys Technologies Inc.", STR desires to merge the qualified plans maintained
by Daedalus into the Plan (and in so doing converting the Pension Plan from a
money purchase pension plan into a profit sharing plan); and
WHEREAS, the Employer has determined that the most efficient means of
accomplishing the foregoing would be to amend and restate the Plan in its
entirety, effective June 9, 1998, to merge the Daedalus Plans into the Plan
effective August 1, 1998, and to rename the Plan the "Sensys Technologies Inc.
401(k)/Profit Sharing Plan".
NOW, THEREFORE, effective June 9, 1998, the Employer hereby amends and
restates the Plan to read as follows:
1
<PAGE> 6
ARTICLE I
DEFINITIONS
"Account" or "Accounts" means, singly or collectively (as the case may
be), an Employee's 401(k) Contributions Account, Matching Contributions Account,
Profit Sharing Account, and Rollover Account.
"Act" or "ERISA" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
"Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
"Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o). The term Affiliated Employer
shall be modified as required by Code Section 415(h) for purposes of applying
the limitations of Code Section 415 to this Plan.
"Anniversary Date" means December 31.
"Annuity Starting Date" means the first day of the first period for which
an amount is paid as an annuity, or, in the case of a benefit not payable in the
form of an annuity, the first day on which all events have occurred which
entitle the Participant to such benefit.
"Appropriate Form" means the form provided or prescribed by the
Administrator for the particular purpose.
"Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Section
7.2.
"Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
"Company Stock" means common stock issued by the Employer that satisfies
the requirements of Code Section 409(l).
"Compensation" with respect to any Participant means such Participant's
wages, salaries, fee for services and all other payments of compensation paid by
the Employer or an Affiliated Employer during the Plan Year which the Employer
is required to report in Box 1 of the
2
<PAGE> 7
Participant's Federal Income Tax Withholding Statement (Form W-2) or its
equivalent. For a Participant's initial year of participation, all Compensation
paid during the Plan Year in which his participation commenced shall be
recognized. However, Compensation paid prior to the Merger Date to Participants
formerly employed by Daedalus shall not be taken into account under the Plan for
purposes of determining such Participants' share of any Profit Sharing
Contribution. Effective June 30, 1998, for purposes of determining a
Participant's share of any Matching Contributions or Profit Sharing
Contributions made under the Plan, severance pay (i.e., compensation amounts
paid to the Participant while he is not actively employed by the Employer or an
Affiliated Employer) shall not be taken into account.
Compensation in excess of $150,000 shall be disregarded. The $150,000
annual compensation limit shall be adjusted by the Commissioner for increases in
the cost of living in accordance with Code Section 401(a)(17)(B). The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which compensation is determined (determination
period) beginning in such calendar year. For any short Plan Year, the
Compensation limitations referred to in this paragraph shall be an amount equal
to the Compensation limit for the calendar year in which the Plan Year begins
multiplied by the ratio obtained by dividing the number of full months in the
short Plan Year by twelve (12).
"Daedalus" means Daedalus Enterprises, Inc., as it existed prior to the
merger involving S.T. Research Corporation.
"Daedalus Pension Plan" means the Pension Plan for Employees of Daedalus
Enterprises, Inc., which was merged into this Plan on August 1, 1998.
"Daedalus 401(k) Plan" means the Daedalus Enterprises, Inc. Employee
401(k) Plan, which was merged into this Plan on August 1, 1998.
"Early Retirement Date" means the first day of any month on which the
Participant retires prior to his Normal Retirement Date following the later of
the date the Participant attains age fifty-five (55), or completes eleven (11)
Years of Service.
"Eligible Employee" means any Employee other than a Leased Employee,
provided however, that (A) Employees whose employment is governed by the terms
of a collective bargaining agreement between Employee representatives (within
the meaning of Code Section 7701(a)(46)) and the Employer under which retirement
benefits were the subject of good faith bargaining between the parties will not
be eligible to participate in this Plan unless such agreement expressly provides
for coverage in this Plan, and (B) Employees of Affiliated Employers shall not
be eligible to participate in this Plan unless such Affiliated Employers have
specifically adopted this Plan in writing.
"Employee" means any person who is employed by the Employer or Affiliated
Employer in the capacity of a common-law employee, but excluding any person who
is an independent contractor (regardless of whether such person is subsequently
determined to be an Employee by
3
<PAGE> 8
any person other than the Employer, such persons specifically including, but not
limited to, the Internal Revenue Service). Employee shall include Leased
Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) unless
such Leased Employees are covered by a plan described in Code Section 414(n)(5)
and such Leased Employees do not constitute more than 20% of the recipient's
non-highly compensated work force.
"Employer" means Sensys Technologies Inc. and any Participating Employer
(as defined in Section 11.1) which shall adopt this Plan; any successor which
shall maintain this Plan; and any predecessor which has maintained this Plan,
specifically including S.T. Research Corporation and Daedalus Enterprises, Inc.
"Employer Contributions" means Matching Employer Contributions, 401(k)
Contributions and Profit Sharing Contributions.
"Enrollment Date" means January 1 and July 1, and such other dates
determined to be appropriate by the Administrator.
"Entry Date" means January 1 and July 1.
"ESOP" means the S.T. Research Corporation Employee Stock Ownership Plan,
as in effect prior to its termination and merger into the profit sharing portion
of this Plan.
"Excess Aggregate Contributions" means, with respect to any Plan Year and
with respect to any Participant, the excess of the aggregate amount of Matching
Contributions and any earnings and losses allocable thereto (except to the
extent such Matching Contributions are used to meet the requirements of Section
4.7(b)), and the 401(k) Contribution Account (to the extent permitted by the
Regulations and if the Administrator elects to take into account 401(k)
Contributions when calculating the contribution percentage under Section 4.8(a)
of Highly Compensated Participants for such Plan Year), over the maximum amount
of such contributions that could be made to the Matching Contribution Account
and 401(k) Contribution Account of such Participants without violating the
requirements of Section 4.8(a). The amount of each Highly Compensated
Participant's share of the Excess Aggregate Contributions shall be determined in
accordance with Code Section 401(m)(6)(C) and applicable regulations and other
Internal Revenue Service guidance.
"Excess Contributions" means, with respect to any Plan Year, the excess of
the aggregate amount of 401(k) Contributions made to the 401(k) Contribution
Accounts of Highly Compensated Participants for such Plan Year, over the maximum
amount of such contributions that could be made to the 401(k) Contribution
Accounts of such Participants without violating the requirements of Section
4.7(b). The amount of each Highly Compensated Participant's share of the Excess
Contributions shall be determined in accordance with Code Section 401(k)(8)(C)
and applicable regulations and other Internal Revenue Service guidance.
4
<PAGE> 9
"Fiduciary" means any person who (a) exercises any discretionary authority
or discretionary control respecting management of the Plan or exercises any
authority or control respecting management or disposition of its assets, (b)
renders investment advice for a fee or other compensation, direct or indirect,
with respect to any monies or other property of the Plan or has any authority or
responsibility to do so, or (c) has any discretionary authority or discretionary
responsibility in the administration of the Plan, including, but not limited to,
the Trustee, the Employer and its representative body, and the Administrator.
"Fiscal Year" means the Employer's accounting year of 12 months commencing
on October 1st of each year and ending the following September 30th.
"Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the Anniversary Date of the Plan Year during which (a)
distribution is made of the entire Vested portion of a Terminated Participant's
Account, or (b) the Participant incurs his fifth consecutive One-Year Break in
Service, whichever is earlier. For purposes of (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. In addition, the term Forfeiture shall also include
amounts deemed to be Forfeitures pursuant to any other provision of this Plan.
"Former Participant" means a person who has been a Participant, but who
has ceased to be a Participant for any reason.
"401(k) Contributions" means the contributions made by an Employer on a
Participant's behalf under Section 4.5, and which, with respect to a Plan Year,
satisfy the conditions of Regulation Section 1.401(k)-1(b)(4).
"401(k) Contributions Account" means the separate account for each
Participant which shall reflect his share of the Trust Fund attributable to
401(k) Contributions. A Participant's 401(k) Account also shall include his
account under the Daedalus 401(k) Plan upon its merger into this Plan.
"415 Compensation" with respect to any Participant means such
Participant's Compensation as defined in Regulations Section 1.415-2(d)(10).
Effective for Plan Years commencing on or after January 1, 1998, 415
Compensation shall include elective contributions excluded from the
Participant's income pursuant to Code Sections 125, 402(e)(3), 402(h), 403(b),
408(p), or 457.
"Highly Compensated Employee" means an Employee described in Code Section
414(q) and the Regulations thereunder as in effect for the applicable Plan Year,
and generally means an Employee who performed services for the Employer during
the "determination year" and:
(a) at any time during the current or preceding Plan Year was a
"five percent owner" as defined in Code Section 416(i)(1)(B).
5
<PAGE> 10
(b) who received compensation (within the meaning of Code Section
414(q)(4)) during the preceding Plan Year from the Employer in excess of
$80,000 (adjusted at such time and in such manner as is provided in Code
Section 414(q)(1)(B)). The Employer may elect to limit the number of
Employees who qualify as a Highly Compensated Employee under this
subsection (b) to those Employees who are in the top-paid group of
employees (as determined in accordance with Code Section 414(q)(3)) for
such preceding year, in such manner as prescribed by Regulations.
"Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. The method set forth in this Section for determining who
is a "Highly Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section 414(q) definition
is applicable.
"Highly Compensated Participant" means any Highly Compensated Employee who
is eligible to participate in the Plan.
"Hour of Service" means (1) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period; (2) each hour
for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period (provided that an
Employee shall be entitled to 40 Hours of Service for each work week described
in this subparagraph (2)); and (3) each hour for which back pay is awarded or
agreed to by the Employer without regard to mitigation of damages. These hours
will be credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in which the
award, agreement or payment is made. The same Hours of Service shall not be
credited both under (1) or (2), as the case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or
6
<PAGE> 11
indirectly through, among others, a trust fund, or insurer, to which the
Employer contributes or pays premiums and regardless of whether contributions
made or due to the trust fund, insurer, or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the aggregate.
Hours of Service will be credited for employment with other Affiliated
Employers. The provisions of Department of Labor regulations 2530.200b-2(b) and
(c) are incorporated herein by reference. Hours of Service will be credited for
employment with Daedalus and STR prior to their merger, in accordance with their
respective methods of crediting service under their qualified retirement plans.
"Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
"Key Employee" means an Employee as defined in Code Section 416(i) and the
Regulations thereunder. Generally, any Employee or former Employee (as well as
each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in which such
Plan Year ends and owning (or considered as owning within the meaning of
Code Section 318) both more than one-half percent interest and the largest
interests in the Employer.
(c) a "five percent owner" of the Employer, as defined in Code
Section 416(i)(1)(B).
(d) a "one percent owner" of the Employer, as defined in Code
Section 416(i)(1)(B)(ii), having an annual "415 Compensation" from the
Employer of more than $150,000.
"Late Retirement Date" means the first day of the month coinciding with or
next following a Participant's actual Retirement Date after having reached his
Normal Retirement Date.
7
<PAGE> 12
"Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are performed under the primary direction or control of the
recipient. Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer.
"Limitation Year" means the Plan Year.
"Matching Contributions" means the matching contributions made by an
Employer on behalf of a Participant under Section 4.4.
"Matching Contributions Account" means the separate account for each
Participant which shall reflect his share of the Trust Fund attributable to
Matching Contributions.
"Merger Date" shall mean August 1, 1998, the date the Daedalus Pension
Plan and Daedalus 401(k) Plan were merged into this Plan.
"Non-Highly Compensated Participant" means any Participant who is not a
Highly Compensated Employee.
"Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
"Normal Retirement Age" means the Participant's 65th birthday.
"Normal Retirement Date" means the first day of the month coinciding with
or next following the Participant's Normal Retirement Age.
"1-Year Break in Service" means the applicable computation period during
which an Employee has not completed more than 500 Hours of Service with the
Employer. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
Years of Service and 1-Year Breaks in Service shall be measured on the same
computation period. "Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason. A "maternity or paternity leave of absence" means an absence
from work for any period by reason of the Employee's pregnancy, birth of the
Employee's child, placement of a child with the Employee in connection with the
adoption of such child, or any absence for the purpose of caring for such child
for a period immediately following such birth or placement. For this purpose,
Hours of Service shall be credited for the computation period in which the
absence from work
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begins, only if credit therefore is necessary to prevent the Employee from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service per
day. The total Hours of Service required to be credited for a "maternity or
paternity leave of absence" shall not exceed 501.
"Participant" means any Eligible Employee who participates in the Plan as
provided in Section 3.1, and has not for any reason become ineligible to
participate further in the Plan.
"Plan" means this instrument, including all amendments thereto.
"Plan Sponsor" means Sensys Technologies Inc.
"Plan Year" means the calendar year.
"Pre-Retirement Survivor Annuity" means an immediate annuity for the life
of the Participant's spouse the payments under which must be equal to the amount
of benefit which can be purchased with the Accounts of the Participant under the
profit sharing portion of the Plan used to provide the death benefit under the
Plan.
"Profit Sharing Account" means the separate account for each Participant
which shall reflect his share of the Trust Fund attributable to Profit Sharing
Contributions, including (1) that portion of the Plan which reflected the
Participant's ESOP Account (as determined under the terms of the Plan prior to
this amendment and restatement), which ESOP Account was merged into the Profit
Sharing Account), and (2) that portion of the Plan which reflected the
Participant's share of the Profit Sharing Contributions made under the Plan. A
Participant's Profit Sharing Account also shall include his account under the
Daedalus Pension Plan upon its conversion into a profit sharing plan and merger
into this Plan.
"Profit Sharing Contributions" means the contributions made by an Employer
on behalf of a Participant under Section 4.3.
"Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
"Retired Participant" means a person who has been a Participant, but who
has become entitled to retirement benefits under the Plan.
"Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early Retirement Date or Late
Retirement Date.
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"Rollover Account" means the separate account for each Eligible Employee
in which shall reflect his share of the Trust Fund attributable to Rollover
Contributions.
"Rollover Contributions" means the contributions made by an Eligible
Employee to the Trust under Section 4.14.
"Super Top Heavy Plan" means a plan described in Section 2.2(b).
"Terminated Participant" means a person who has been a Participant, but
whose employment has been terminated other than by death, Total and Permanent
Disability or retirement.
"Top Heavy Plan" means a plan described in Section 2.2(a).
"Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
"Total and Permanent Disability" means a physical or mental condition of a
Participant resulting from bodily injury, disease, or mental disorder which
totally and permanently renders him incapable of performing his regular
employment duties for the Employer. The disability of a Participant shall be
determined by (a) a licensed physician chosen by the Administrator, (b) on
evidence that the Participant is eligible for benefits under any long-term
disability plan sponsored by the Employer but administered by an independent
third party, or (c) on evidence that the Participant is eligible for total and
permanent disability benefits under the Social Security Act in effect on the
date of his disability. The determination shall be applied uniformly to all
Participants.
"Trustee" means the person, persons or entity named as trustee herein or
in any separate trust forming a part of this Plan, and any successors.
"Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
"Valuation Date" means the Anniversary Date and such other dates for
valuation of the Trust Fund as designated by the Administrator; provided,
however, that the Valuation Date for 401(k) Contribution Accounts and Rollover
Accounts shall be the last day of each calendar quarter, and such other dates
for valuation of the Trust Fund as designated by the Administrator.
"Vested" means the nonforfeitable portion of any Account maintained on
behalf of a Participant.
"Year of Service" means the 12 consecutive month computation period
during which an Employee has at least 1000 Hours of Service. For purposes of
eligibility for participation, the 12 consecutive month computation period shall
begin with the date on which the Employee first performs an Hour of Service, and
anniversaries thereof. The participation computation
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<PAGE> 15
period beginning after a 1-Year Break in Service shall be measured from the date
on which an Employee again performs an Hour of Service. For vesting purposes,
the 12 consecutive month computation period shall be the Plan Year. Years of
Service prior to the Effective Date of the Plan shall be counted, except as
provided in Section 7.4(f). Notwithstanding the foregoing, for any short Plan
Year, the determination of whether an Employee has completed a Year of Service
shall be made in accordance with Department of Labor regulation 2530.203-2(c).
Years of Service with any Affiliated Employer shall be recognized.
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<PAGE> 16
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 7.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.11 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as of
the Determination Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of Key Employees under this
Plan and all plans of an Aggregation Group, exceeds sixty percent (60%) of the
Present Value of Accrued Benefits and the Aggregate Accounts of all Key and
Non-Key Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit and/or Aggregate Account balance shall
not be taken into account for purposes of determining whether this Plan is
a Top Heavy or Super Top Heavy Plan (or whether any Aggregation Group
which includes this Plan is a Top Heavy Group). In addition, if a
Participant or Former Participant has not performed any services for any
Employer maintaining the Plan at any time during the five year period
ending on the Determination Date, any accrued benefit for such Participant
or Former Participant shall not be taken into account for the purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in which,
as of the Determination Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of Key Employees under this
Plan and all plans of an Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits and the Aggregate Accounts of all Key and
Non-Key Employees under this Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Account balance as of the most recent valuation
occurring within a twelve (12) month period ending on the Determination
Date;
(2) an adjustment for any contributions due as of the Determination Date.
Such adjustment shall be the amount of any contributions actually made
after the
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<PAGE> 17
valuation date but due on or before the Determination Date, except for the
first Plan Year when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are allocated as of a
date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding Plan Years. However,
in the case of distributions made after the valuation date and prior to
the Determination Date, such distributions are not included as
distributions for top heavy purposes to the extent that such distributions
are already included in the Participant's Aggregate Account balance as of
the valuation date. Notwithstanding anything herein to the contrary, all
distributions, including distributions made prior to January 1, 1984, and
distributions under a terminated plan which if it had not been terminated
would have been required to be included in an Aggregation Group, will be
counted. Further, distributions from the Plan (including the cash value of
life insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
(5) with respect to unrelated rollovers and plan-to-plan transfers (ones
which are both initiated by the Employee and made from a plan maintained
by one employer to a plan maintained by another employer), if this Plan
provides the rollovers or plan-to-plan transfers, it shall always consider
such rollovers or plan-to-plan transfers as a distribution for the
purposes of this Section. If this Plan is the plan accepting such
rollovers or plan-to-plan transfers, it shall not consider such rollovers
or plan-to-plan transfers as part of the Participant's Aggregate Account
balance.
(6) with respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by the
same employer), if this Plan provides the rollover or plan-to-plan
transfer, it shall not be counted as a distribution for purposes of this
Section. If this Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan transfer as part
of the Participant's Aggregate Account balance, irrespective of the date
on which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to be
treated as the same employer in (5) and (6) above, all employers
aggregated under Code Section 414(b), (c), (m) and (o) are treated as the
same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
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<PAGE> 18
(1) Required Aggregation Group: In determining a Required Aggregation
Group hereunder, each plan of the Employer in which a Key Employee is a
participant in the Plan Year containing the Determination Date or any of
the four preceding Plan Years, and each other plan of the Employer which
enables any plan in which a Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or 410, will be required to be
aggregated. Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group will
be considered a Top Heavy Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation Group will be considered
a Top Heavy Plan if the Required Aggregation Group is not a Top Heavy
Group.
(2) Permissive Aggregation Group: The Employer may also include any other
plan not required to be included in the Required Aggregation Group,
provided the resulting group, taken as a whole, would continue to satisfy
the provisions of Code Sections 401(a)(4) and 410. Such group shall be
known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is part of
the Required Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top Heavy Group. No plan in the
Permissive Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination Dates fall
within the same calendar year shall be aggregated in order to determine
whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the Employer
if it was maintained within the last five (5) years ending on the
Determination Date.
(e) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined benefit
plan, the Present Value of Accrued Benefit for a Participant other than a Key
Employee, shall be as determined using the single accrual method used for all
plans of the Employer and Affiliated Employers, or if no such single method
exists, using a method which results in benefits accruing not more rapidly than
the slowest accrual rate permitted under Code Section 411(b)(1)(C). The
determination of the Present Value of Accrued Benefit shall be determined as of
the most recent valuation date that falls within or ends with the 12-month
period ending on the Determination Date except as provided in Code Section 416
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<PAGE> 19
and the Regulations thereunder for the first and second plan years of a
defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all
Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary for
the proper administration of the Plan to assure that the Plan is being
operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and the
Act.
(b) The Employer shall establish a "funding policy and method",
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run goal
and investment growth (and stability of same) is a more current need, or
shall appoint a qualified person to do so. The Employer or its delegate
shall communicate such needs and goals to the Trustee, who shall
coordinate such Plan needs with its investment policy. The communication
of such a "funding policy and method" shall not, however, constitute a
directive to the Trustee as to investment of the Trust Funds. Such
"funding policy and method" shall be consistent with the objectives of
this Plan and with the requirements of Title I of the Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or allocated
by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal
periodic review by the Employer or by a qualified person specifically
designated by the Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
(d) The Employer will furnish Plan Fiduciaries and Participants with
notices and information statements when voting rights must be exercised
pursuant to Section 8.4.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
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<PAGE> 20
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer does
not appoint an Administrator, the Employer will function as the Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power and discretion to construe
the terms of the Plan and to determine all questions arising in connection with
the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
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<PAGE> 21
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder
and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Plan;
(g) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(h) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated
to such Participant's Account pursuant to Section 8.4; and
(i) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator,
may appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with the
administration of this Plan.
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2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of administrative
authority pursuant to Section 2.5, if there shall be more than one
Administrator, they shall act by a majority of their number, but may authorize
one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with the Administrator on
forms supplied by the Employer. Written notice of the disposition of a claim
shall be furnished to the claimant within 90 days after the application is
filed. In the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood by
the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will be
provided. In addition, the claimant shall be furnished with an explanation of
the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within
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<PAGE> 23
the next 60 days, at which the claimant may be represented by an attorney or any
other representative of his choosing and at which the claimant shall have an
opportunity to submit written and oral evidence and arguments in support of his
claim. At the hearing (or prior thereto upon 5 business days written notice to
the Administrator) the claimant or his representative shall have an opportunity
to review all documents in the possession of the Administrator which are
pertinent to the claim at issue and its disallowance. Either the claimant or the
Administrator may cause a court reporter to attend the hearing and record the
proceedings. In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the party causing
the court reporter to attend the hearing. A final decision as to the allowance
of the claim shall be made by the Administrator within 60 days of receipt of the
appeal (unless there has been an extension of 60 days due to special
circumstances, provided the delay and the special circumstances occasioning it
are communicated to the claimant within the 60 day period). Such communication
shall be written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Each Eligible Employee shall become a Participant hereunder as of the
Entry Date coinciding with or next following the later of his employment
commencement date or attainment of age 21. If an Eligible Employee terminates
employment with the Employer and is subsequently rehired by the Employer, he
shall be again eligible to participate in the Plan on the later of the date of
his rehire or the date as of which he would have become a Participant if he had
not terminated employment. Eligible Employees who were participants in the
Daedalus Pension Plan and the Daedalus 401(k) Plan as of the Merger Date shall
become Participants in this Plan as of the Merger Date.
3.2 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in his interest in the Plan for each Year of Service
completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the
terms of the Plan. Additionally, his interest in the Plan shall continue
to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has not
incurred a 1-Year Break in Service, such Employee will participate
immediately upon returning to an eligible class of Employees. If such
Participant incurs a 1-Year Break in Service, eligibility will be
determined under the break in service rules described in Section 7.4(f).
3.3 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted.
3.4 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
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<PAGE> 25
to the ineligible person shall constitute a Forfeiture for the Plan Year in
which the discovery is made.
3.5 APPLICATION PROCEDURE
To become a Participant, an eligible Employee must execute the Appropriate
Form or Forms required by the Employer, if any. Such Employee must perform all
acts required of him within 60 days of the date on which he is notified of his
eligibility. If he fails to perform within the required time, he may become a
Participant on the Entry Date after he complies with the above conditions,
unless such actions are waived by the Administrator in a uniform and
nondiscriminatory manner. The Administrator, within its discretion, may change
the application procedures to permit the use of any other reasonable procedures
necessary to enroll any employees in the Plan. In no event, however, shall any
Employee participate in the Plan prior to the execution of all Appropriate
Forms.
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ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 EMPLOYER'S CONTRIBUTIONS
For the Plan Year during which the Plan is adopted and each Plan Year
thereafter, the Employer shall contribute to the Plan any or all of the
following contributions on behalf of its employees who are Participants in the
Plan:
(a) Any Profit Sharing Contributions which are made in accordance
with Section 4.3; and
(b) Any Matching Contributions which are made in accordance with
Section 4.4; and
(c) The amount of the total compensation reduction elections of all
Participants made pursuant to Section 4.5, which amount shall be
deemed the Employer's 401(k) Contribution;
In addition, any contribution that was payable under the Daedalus Pension Plan
prior to its merger into this Plan shall be contributed to this Plan. Such
amount shall be allocated to the Profit Sharing Accounts of Participants who
were participants in the Daedalus Pension Plan, in such manner as required under
the Daedalus Pension Plan if the contribution were to have been allocated under
that Plan. Any elective deferrals under the Daedalus 401(k) Plan (or related
qualified nonelective contributions) that had not yet been contributed to that
Plan prior to the Merger Date shall be contributed to this Plan and allocated to
the 401(k) Accounts of the appropriate Participants, who participated in the
Daedalus 401(k) Plan.
4.2 FORM AND TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer Contributions will be paid in cash; provided, however, that
Profit Sharing Contributions and Matching Contributions may be contributed in
the form of Company Stock. Except as provided in Section 4.5, regarding 401(k)
Contributions, the Employer shall pay to the Trustee its contribution to the
Plan for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
4.3 PROFIT SHARING CONTRIBUTION
For each Plan Year, the Employer shall contribute to the profit sharing
portion of the Plan such amount as shall be determined by the Employer. The
Profit Sharing Contribution for any Plan Year shall not cause the total
contributions by the Employer under this Plan to exceed the maximum allowable
current deduction under the applicable provisions of the Code, or the applicable
limitations set forth in this Article IV.
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4.4 MATCHING CONTRIBUTION
For each Plan Year, the Employer shall contribute on behalf of each
Participant who makes a 401(k) Contribution for the Plan Year a discretionary
matching contribution equal to a percentage of some or all of the Participant's
401(k) Contributions made with respect to the Fiscal Year ending during the Plan
Year, the exact percentage to be determined by the Employer with respect to each
Plan Year (which may be zero). Such Matching Contributions shall be subject to
the limitations of Section 4.8, and the other applicable limitations set forth
in this Article IV. The amount of Matching Contributions and the level of 401(k)
Contributions to be matched for each Plan Year may be discontinued or changed by
the Employer, within its sole discretion at any time. Effective June 30, 1998,
no Matching Contribution shall be made with respect to any 401(k) Contributions
made by Participant who is not actively employed by the Employer or an
Affiliated Employer at the time such 401(k) Contributions are made.
4.5 401(k) CONTRIBUTIONS
Under an election procedure established by the Administrator, each
Participant may direct the Employer to make 401(k) Contributions on his behalf.
Subject to the limitations in this Article IV, the amount of 401(k)
Contributions may be any whole percentage of the Participant's Compensation,
from a minimum of 1 percent up to a maximum of 15 percent (with a $25 per month
minimum), for each pay period to which the election applies. Only Compensation
paid by an Employer may be deferred as a 401(k) Contribution.
Each Participant shall authorize the Employer to reduce his cash
remuneration for each pay period by the amount of his total 401(k) Contributions
to the Plan for such period. During such period, the Employer shall contribute
to the Trust for credit to the 401(k) Contributions Account of each Participant
who authorizes 401(k) Contributions on his behalf an amount equal to such
Participant's Compensation for such period multiplied by the percentage
authorized by the Participant. A Participant's 401(k) Contribution shall be
contributed to the Trust no later than the 15th day of the month following the
month in which the Compensation reduction occurred, or by such later date as
permitted under the Act. A Participant's election to have the Employer make
401(k) Contributions on his behalf shall remain in effect until the earliest of
the date he ceases to be a Participant, the date the election is changed or
suspended pursuant to Section 4.6, or the date the election is limited in
accordance with any provisions under this Article IV.
4.6 CHANGE IN 401(k) CONTRIBUTIONS
As of any Enrollment Date, a Participant may direct that the rate of
401(k) Contributions on his behalf be changed to a higher or lower percentage
permitted by Section 4.5, by filing with the Administrator the Appropriate Form
within the time prescribed by the Administrator. In addition, a Participant may,
at any time, direct that 401(k) Contributions on his behalf be discontinued by
filing the Appropriate Form with the Administrator within the time prescribed by
the Administrator. A Participant who has directed that 401(k) Contributions be
discontinued may not direct that 401(k) Contributions be resumed before the next
Enrollment Date after
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written notice authorizing the recommencement of 401(k) Contributions is
submitted to the Administrator.
4.7 LIMITATIONS WITH RESPECT TO 401(k) CONTRIBUTIONS
Notwithstanding the foregoing provisions of this Section 4, the following
limits on 401(k) Contributions shall apply:
(a) Dollar Limit. The total amount of 401(k) Contributions contributed on
behalf of any Participant for any calendar year shall not exceed the
maximum amount permitted under section 402(g) of the Code or other
applicable law. A Compensation reduction election made by a participant
may be canceled to the extent necessary to conform to such limit in the
maximum amount of 401(k) Contributions.
If Participant notifies the Administrator in a notarized writing not
later than March 1 following the close of the taxable year of the
Participant that more than the maximum dollar amount permitted under
section 402(g) has been contributed as 401(k) Contributions on his behalf
for such year as a result of his participation in a qualified retirement
plan of another employer, the amount of any excess deferrals (adjusted to
reflect income (earnings and losses) allocable to such excess deferrals to
the extent and in the manner required under Code section 402(g) and
applicable Treasury Regulations) under the Plan shall be refunded to the
Participant from his 401(k) Contribution Account not later than the April
15th next following the close of such taxable year.
The amount of excess deferrals that may be distributed pursuant to
this Section 4.7(a) with respect to a Participant shall be reduced by any
Excess Contributions previously distributed with respect to the
Participant for the Plan Year beginning with or within the calendar year
to which such excess deferrals relate.
(b) Deferral Percentage Limit. In no event shall the Employer make
401(k) Contributions for Participants for any Plan Year that would result
in a violation of the "actual deferral percentage" limitation set forth
below. The actual deferral percentage for the group of Highly Compensated
Participants shall not exceed the greater of (1) or (2) below:
(1) the actual deferral percentage for the Non-Highly Compensated
Participant group, times 1.25, or
(2) the actual deferral percentage for the Non-Highly
Compensated Participant group, times two (2), but only to the
extent the actual deferral percentage for the Highly Compensated
Participant group does not exceed the actual deferral percentage
for the Non-Highly Compensated Participant group by more than
two percentage points.
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The actual deferral percentage for each of the above groups for any
Plan Year shall be the average of the deferral ratios, calculated
separately for each Participant in the particular group, of:
(i) the aggregate amount of the 401(k) Contributions,
including Qualified Non-Elective Contributions or
qualified matching contributions paid to the Plan or
designated on his behalf for such year, to
(ii) the eligible Employee's "Compensation" for such year.
A Participant's actual deferral percentage shall be zero if no 401(k)
Contributions are made on his behalf for such Plan Year.
If the Plan and one or more other plans which include qualified cash
or deferred arrangements are considered as one plan for purposes of
Sections 401(a)(4) and 410(b) of the Code, the qualified cash or deferred
arrangements included in such plans shall be treated as one arrangement
for purposes of this Section 4.7(b). The actual deferral percentage taken
into account under this Section 4.7(b) for any Highly Compensated
Participant under two or more qualified cash or deferred arrangements of
the Employer shall be determined as if all such qualified cash or deferred
arrangements were treated as one qualified cash or deferred arrangement.
(c) Prevention or Correction of Violations of the Deferral
Percentage Limit. The Administrator shall determine as of the end of the
Plan Year, and at such time or times in its discretion, whether one of the
actual deferral percentage tests specified in Section 4.7(b) is satisfied
for such Plan Year. This determination shall be made after first
determining the treatment of excess deferrals within the meaning of
Section 402(g) of the Code under Section 4.7(a). In the event that neither
of such actual deferral percentage tests is satisfied, the Administrator
may either refund the Excess Contributions in the manner described in
Section 4.7(c)(1), or make additional contributions on behalf of
Non-Highly Compensated Participant, as provided in Section 4.7(c)(2) and
(3).
(1) If required in order to comply with the provisions of
Section 4.7(b) and the Code, the Administrator may refund
Excess Contributions for a Plan Year. The distribution of such
Excess Contributions shall be made to Highly Compensated
Participants to the extent practicable before the 15th day of
the third month immediately following the Plan Year for which
such Excess Contributions were made, but in no event later
than the end of the Plan Year following such Plan Year or, in
the case of the termination of the Plan, no later than the end
of the 12-month period immediately following the date of such
termination. The distribution of any Excess Contributions
shall include an allocable share of "Income". For this
purpose, "Income" means the income or loss allocable to Excess
Contributions for the Plan Year and for the period between the
end of the
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Plan Year and the date of distribution (the "gap period"). The
income or loss allocable to Excess Contributions for the Plan
Year and the gap period is calculated separately and is
determined by multiplying the income or loss for the Plan Year
or the gap period by a fraction, the numerator of which is the
Participant's Excess Contributions for the Plan Year, and the
denominator of which is the sum of the Participant's 401(k)
Contribution Account, Matching Contributions Account and
Profit Sharing Account as of the end of such Plan Year,
reduced by the gain allocable to such Accounts for the Plan
Year and increased by the loss allocable to such Accounts for
the Plan Year. In lieu of the "fractional method" described
above, a "safe harbor" method may be used to allocate the
allocable Income for the gap period. Under the safe harbor
method, allocable income for the gap period shall be deemed
equal to 10 percent of the Income allocable to Excess
Contributions for the Plan Year multiplied by the number of
calendar months in the gap period. For purposes of determining
the number of months in the gap period, a distribution
occurring on or before the 15th day of the month shall be
treated as having been made on the last day of the preceding
month and distribution occurring after such 15th day shall be
treated as having been made on the first day of the following
month.
(2) The Employer may, in the discretion of the Board of
Directors after consulting with the Administrator, make
additional contributions to the 401(k) Contribution Account of
Non-Highly Compensated Participants, which additional
contributions shall be qualified nonelective contributions as
described in Section 401(m)(4)(C) of the Code and the
regulations thereunder, up to an amount necessary to assure
that the actual deferral percentage limitation described in
Section 4.7(b) is not exceeded in the Plan Year.
(3) The Employer may, in the discretion of the Board of
Directors after consulting with the Administrator, make
additional contributions to the 401(k) Contribution Account of
Non-Highly Compensated Participants, which additional
contributions shall be qualified matching contributions as
described in IRS Regulations Section 1.401(k)-1(g)(13), or
designate Matching Contributions made with respect to the Plan
Year as qualified matching contributions, up to an amount
necessary to assure that the actual deferral percentage
limitation described in Section 4.7(b) is not exceeded in the
Plan Year.
(4) The Administrator is authorized to implement rules under
which it may utilize any combination of the methods described
in this Section 4.7(c) to assure that the limitations of
Section 4.7(b) are satisfied.
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(d) Forfeiture of Related Matching Contribution. Matching
Contributions made in respect of any such refunded 401(k) Contributions
(adjusted to reflect income in a manner comparable to the procedure
described above) shall be forfeited in accordance with applicable
Regulations.
(e) The actual deferral percentages for Highly Compensated
Participants and Non-Highly Compensated Participants shall be determined
in accordance with any requirements established by applicable Treasury
Regulations; and the foregoing provisions of this Section 4.7 shall be
interpreted and administered in accordance with such Treasury
Regulations.
4.8 CONTRIBUTION PERCENTAGE LIMITATION WITH RESPECT TO MATCHING
CONTRIBUTIONS
(a) For any Plan Year, the contribution percentage for the Highly
Compensated Participant group shall not exceed the greater of (1) or (2)
as follows:
(1) the contribution percentage for the Non-Highly Compensated
Participant group, times 1.25, or
(2) the contribution percentage for the Non-Highly Compensated
Participant group, times two (2), but only to the extent the
contribution percentage for the Highly Compensated
Participant group does not exceed the contribution percentage
for the Non-Highly Compensated Participant group by more than
two percentage points.
The contribution percentage for each of the specified groups for
a Plan year shall be the average of the ratios (calculated separately)
for each Participant in such group of:
(i) the aggregate amount of Matching Contributions made on his
behalf for such year (other than those treated as qualified
matching contributions for the Plan Year) and, if the
Administrator so elects in accordance with and to the extent
permitted by IRS Regulations, some or all of his 401(k)
Contributions, to
(ii) the eligible Employee's "Compensation" for such year.
A Participant's contribution percentage shall be zero if no Matching
Contributions are made on his behalf for such Plan Year.
If the Plan and one or more other plans of the Employer are
treated as one plan for purposes of Sections 401(a)(4) and 410(b) of the
Code, all 401(k) Contributions or Matching Contributions of such plans
shall be treated as being made under a single plan for purposes of this
Section 4.8. The contribution ratio taken into account under this
Section 4.8 for any Highly Compensated Participant who is eligible to
receive Matching
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Contributions under two or more plans described in Section 401(a) of the Code or
arrangements described in Section 401(k) of the Code that are maintained by the
Employer shall be determined as if all such contributions were made under a
single plan. The determination and treatment of the contribution ratio of any
Participant shall satisfy such other requirements as may be required by the
Regulations.
(b) The Administrator shall determine as of the end of the Plan Year, and
at such time or times in its discretion, whether one of the contribution
percentage tests specified in Section 4.8(a) is satisfied for such Plan Year.
This determination shall be made after first determining the treatment of excess
deferrals within the meaning of Section 402(g) of the Code under Section 4.7(a)
and then determining the treatment of Excess Contributions under Section 4.7(b).
In the event that neither of such contribution percentage tests is satisfied,
the Administrator may either refund the Excess Aggregate Contributions in the
manner described in Section 4.8.(b)(1), or make additional contributions on
behalf of Non-Highly Compensated Participant, as provided in Section 4.8(b)(2).
(1) The Administrator may distribute or forfeit the Excess Aggregate
Contributions in the manner described in this Section 4.8(b). The
distribution or forfeiture of such excess aggregate contributions
shall be made with respect to such Highly Compensated Participants to
the extent practicable before the 15th day of the third month
immediately following the Plan Year for which such excess aggregate
contributions were made, but in no event later than the end of the
Plan Year following such Plan Year or, in the case of the termination
of the Plan, no later than the end of the 12-month period immediately
following the date of such termination. However, in no case may the
amount of Excess Aggregate Contributions distributed or forfeited with
respect to any Highly Compensated Participant exceed the amount of
Matching Contributions made on behalf of the Highly Compensated
Participant for the Plan Year. The distribution of any Excess
Aggregate Contributions shall include an allocable share of "Income".
For this purpose, "Income" means the income or loss allocable to
Excess Aggregate Contributions for the Plan Year and for the period
between the end of the Plan Year and the date of distribution (the
"gap period"). The income or loss allocable to Excess Aggregate
Contributions for the Plan Year and the gap period is calculated
separately and is determined by multiplying the income or loss for the
Plan Year or the gap period by a fraction, the numerator of which is
the Participant's Excess Aggregate Contributions for the Plan Year,
and the denominator of which is the Participant's Matching
Contributions Account (including any portion of his 401(k)
Contributions Account and Profit Sharing Account permitted to be
treated as a Matching Contribution for purposes of applying the
contribution percentage test under Section 4.8(a)) as of the end of
such Plan Year, reduced by the gain allocable to such Account for the
Plan Year
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and increased by the loss allocable to such Account for the
Plan Year. In lieu of the "fractional method" described above, a "safe
harbor" method may be used to allocate the allocable Income for the
gap period. Under the safe harbor method, allocable income for the gap
period shall be deemed equal to 10 percent of the Income allocable to
Excess Aggregate Contributions for the Plan Year multiplied by the
number of calendar months in the gap period. For purposes of
determining the number of months in the gap period, a distribution
occurring on or before the15th day of the month shall be treated as
having been made on the last day of the preceding month and
distribution occurring after such 15th day shall be treated as having
been made on the first day of the following month.
(2) The Employer may, in the discretion of the Board of Directors
after consulting with the Administrator, make additional contributions
to the Matching Contribution Account of Non-Highly Compensated
Participants, which additional contributions shall be qualified
nonelective contributions as described in Section 401(m)(4)(C) of the
Code and the regulations thereunder, up to an amount necessary to
assure that the contribution percentage limitation described in
Section 4.8(b) is not exceeded in the Plan Year.
(3) The Administrator is authorized to implement rules under
which it may utilize any combination of the methods described in this
Section 4.8(b) to assure that the limitations of this Section 4.8(b)
are satisfied.
(d) Multiple Use: If, with respect to one or more Highly Compensated
Participants, the sum of the deferral percentage and the contribution percentage
(as defined in Sections 4.7 and 4.8 respectively) exceeds the "Aggregate Limit"
(as defined in Regulation Section 1.401(m)-2(b)(3)), then the contribution
percentage of such Highly Compensated Participants shall be reduced, by the
distribution or forfeiture of Matching Contributions (in accordance with the
applicable Regulations and guidance pertaining to Code Section 401(m)(9)(A)) so
that the Aggregate Limit is not exceeded. The amount by which each Highly
Compensated Participant's contribution percentage amounts is reduced shall be
treated as an Excess Aggregate Contribution. The deferral percentage and
contribution percentage of the Highly Compensated Participants are determined
after any corrective measures taken under Sections 4.7 and 4.8. Multiple use
does not occur if either the deferral percentage or contribution percentage of
the Highly Compensated Participants does not exceed 1.25 multiplied by the
deferral percentage or contribution percentage of the Non-Highly Compensated
Participants.
(e) The contribution percentages for Highly Compensated Participants and
Non-Highly Compensated Participants shall be determined in accordance with any
requirements established by applicable Treasury Regulations; and the foregoing
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provisions of this Section 4.8 shall be interpreted and administered in
accordance with such Treasury Regulations.
4.9 MAINTENANCE OF ACCOUNTS
(a) The Administrator shall establish and maintain separate bookkeeping
Accounts in the name of each Participant, to which the Administrator
shall credit as of each Valuation Date all amounts allocated to each
such Participant as hereafter set forth. To the extent necessary, the
Administrator shall segregate the Participant's Account with respect to
his interests derived from the Daedalus Pension Plan and the Daedalus
401(k) Plan (e.g., for purposes of preserving Code Section 411(d)(6)
protected benefits).
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the
Employer's contribution for each year. Within a reasonable time after
the date of receipt by the Administrator of such information, the
Administrator shall allocate such contributions on the following basis:
(1) Any 401(k) Contributions shall be allocated to each
Participant's 401(k) Contribution Account in an amount equal to the
amount deferred by each Participant in accordance with his
Compensation reduction agreement under Section 4.5.
(2) Any Matching Contributions shall be allocated to each
Participant's Matching Contribution Account in accordance with
Section 4.4.
(3) Any Profit Sharing Contributions shall be allocated to the
Participant's Profit Sharing Account.
(4) Any Rollover Contributions shall be credited to the Employee's
Rollover Contribution Account.
4.10 ALLOCATION OF PROFIT SHARING CONTRIBUTIONS, FORFEITURES AND EARNINGS
(a) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer's Profit Sharing Contributions for each Plan Year. Within a
reasonable period of time after the date of receipt by the Administrator
of such information, the Administrator shall allocate such Profit
Sharing Contribution, if any, to each Eligible Participant's Account in
the same proportion that each such Eligible Participant's Compensation
for the year bears to the total Compensation of all Eligible
Participants for such year. A Participant is eligible to share in the
allocation of Profit Sharing Contributions if he has completed 1,000 or
more Hours of Service during the Plan Year.
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(b) All Matching Contributions which are forfeited shall (except
to the extent applied under Section 4.11(d)) be reallocated to the
Matching Contribution Accounts of Participants who made 401(k)
Contributions during the Plan Year in which the Forfeiture occurred, in
the proportion that each eligible Participant's 401(k) Contributions for
the Plan Year bears to the total of all eligible Participant's 401(k)
Contributions for the Plan Year. All Profit Sharing Contributions which
are forfeited shall (except to the extent applied under Section 4.11(d))
be reallocated to the Profit Sharing Contribution Accounts of eligible
Participants in the same manner as if the Forfeiture were a Profit
Sharing Contribution.
(c) As of each Valuation Date, any earnings or losses (including
net appreciation or net depreciation) of the Trust Fund shall be
allocated in the same proportion that each Participant's and Former
Participant's "Adjusted Account" bears to the total of all Participants'
"Adjusted Accounts". For purposes of this Section 4.11(d), the term
"Adjusted Account" means a Participant's or Former Participant's
Accounts determined as of the last preceding Valuation Date, plus any
Employer Contributions allocated since the last Valuation Date, and
minus any withdrawals or distributions occurring since the last
Valuation Date. For purposes of determining a Participant's Adjusted
Account, that portion of the Participant's Account invested in Company
Stock shall be disregarded (although dividends on such Company Stock
shall be allocated to the Participant's Account). Notwithstanding any
provision to the contrary, to the extent individual Accounts are
maintained for Participants for which Participants exercise investment
discretion, all earnings, such as interest, dividends, realized and
unrealized investment profits and losses, and expenses will be allocated
to each Participant Account, in accordance with procedures established
by the Administrator, as modified from time to time, and such Accounts
shall not be considered to be Adjusted Accounts for purposes of this
Section 4.11(c).
(d) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be applied to
proportionally reduce the Employer's Top-Heavy minimum contribution
obligation under Article II hereof, if any, then to restore
contributions required to restore a Participant's Account under Section
7.4(f), and finally shall be allocated among Participants as provided in
Section 4.11(b). Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.11) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.13.
(e) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer Contributions and Forfeitures allocated to the
Participant's Accounts of each Non-Key Employee shall be equal to at
least three percent (3%) of such Non-Key Employee's "415 Compensation"
(reduced by Employer Contributions and Forfeitures, if any, allocated to
each Non-Key Employee in any defined contribution plan included with
this plan in a
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<PAGE> 36
Required Aggregation Group). However, if the sum of the
Employer Contributions and Forfeitures allocated to the Participant's
Account of each Key Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415 Compensation", the sum of
the Employer Contributions and Forfeitures allocated to the
Participant's Account of each Non-Key Employee shall be equal to the
largest percentage allocated to the Participant's Accounts of any Key
Employee. For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Account of any Key Employee
shall be equal to the ratio of the sum of the Employer Contributions and
Forfeitures allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee. For any Top Heavy Plan Year, the
minimum allocations shall be allocated to the Profit Sharing Account of
all Non-Key Employees who are Participants and who are employed by the
Employer on the last day of the Plan Year, including Non-Key Employees
who have (1) failed to complete a Year of Service; and (2) declined to
make mandatory contributions (if required) to the Plan.
(f) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate Accounts shall be
maintained as follows:
(1) Accounts for nonforfeitable benefits attributable to
pre-break service; and
(2) Accounts representing his status in the Plan attributable to
post-break service.
4.11 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any Limitation Year shall equal
the lesser of: (1) $30,000 (adjusted from time to time in accordance
with Code Section 415(d)), or (2) twenty-five percent (25%) of the
Participant's "415 Compensation".
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's Accounts
for any Limitation Year of (1) Employer Contributions, (2) 401(k)
contributions, (3) employee after-tax contributions, (4) Forfeitures,
(5) amounts allocated to an individual medical account, as defined in
Code Section 415(l)(2) which is part of a pension or annuity plan
maintained by the Employer and (6) amounts derived from contributions
which are attributable to post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition", or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(l)(1).
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(c) For purposes of applying the limitations of Code Section 415,
the following are not "annual additions": (1) the transfer of funds from
one qualified plan to another, (2) rollover contributions (as defined in
Code Sections 402(a) (5), 403(a)(4), 403(b)(8) and 408(d)(3)); (3)
repayments of loans made to a Participant from the Plan; (4) repayments
of distributions received by an Employee pursuant to Code Section
411(a)(7)(B) (cash-outs); and (5) repayments of distributions received
by an Employee pursuant to Code Section 411(a)(3)(D) (mandatory
contributions).
(d) If in addition to this Plan, the Participant is covered under
another qualified defined contribution plan maintained by the Employer
or an Affiliated Employer, such plans shall be treated as a single plan
for purposes of applying the provisions of this Section 4.11.
(e) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan fraction
(as defined in Code Section 415(e)(2)) and the defined contribution plan
fraction (as defined in Code Section 415(e)(3)) for any "limitation
year" may not exceed 1.0. In that case, the annual additions under this
Plan shall be reduced, but only to the extent necessary to ensure that
such limitation is not exceeded. This provision shall not apply for Plan
Years commencing on or after January 1, 2000.
(f) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all qualified
defined contribution plans (whether terminated or not) ever maintained
by the Employer shall be treated as one defined contribution plan.
(g) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
4.12 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of 401(k) Contributions that
may be made with respect to any Participant under the Section 415
limitations, or other facts and circumstances to which Regulation
1.415-6(b)(6) shall be applicable, the "annual additions" under this
Plan would cause the maximum "annual additions" to be exceeded for any
Participant, the Administrator shall reduce "annual additions" in the
following manner, and consistent with Code Section 415 and the
Regulations thereunder:
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(1) If the Participant is also a participant in any other
qualified plan maintained by the Employer or an Affiliated
Employer, such Participant's annual additions shall first
be reduced in accordance with the terms of such plan.
(2) Any 401(k) Contributions (adjusted for investment
performance, if ascertainable) to the extent they would
reduce annual additions to the maximum permitted amount,
shall be distributed to the Participant.
(3) Any Matching Contributions, to the extent they would
reduce annual additions to the maximum permitted amounts,
shall be treated as a Matching Contribution for the year
and used to reduce the amount of Matching Contributions
actually made for such year and each succeeding year, if
necessary.
(4) Any Profit Sharing Contributions, to the extent they would
reduce annual additions to the maximum permitted amounts,
shall be treated as an additional Profit Sharing
Contribution for the year such reduction would occur and
be reallocated to Participants as of the last day of such
year, if necessary.
4.13 ROLLOVER CONTRIBUTIONS
(a) Within the discretion of the Administrator, the Plan may
receive any amounts theretofore received by an Eligible Employee from a
qualified plan, either directly within 60 days after such receipt, or
through the medium of an individual retirement account (IRA), provided
that such contribution does not consist of nor does the IRA contain any
assets other than those attributable to prior employer contributions
under a qualified plan. In addition, the Plan may receive a direct
payment of "eligible rollover distributions" (as defined in Section
7.11) from another qualified plan, which amounts shall be deemed
"direct rollover" contributions. No transfer shall be permitted,
however, unless in the opinion of legal counsel for the Employer, the
transfer will not jeopardize the tax exempt status of the Plan or
Trust or create adverse tax consequences for the Employer. Amounts in
a Participant's Rollover Account shall be subject to the provisions of
this Plan, and such amounts shall not be subject to Forfeiture for any
reason and may not be withdrawn by, or distributed to the Participant,
in whole or in part, except as provided in Section 7 of the Plan. The
Participant's Rollover Account shall be invested as part of the general
Trust and shall share in any income earned thereon, any investment
gains and losses attributable thereto, less any expenses, pursuant to
the terms of this Plan.
(b) For purposes of this Section the term "amounts transferred
from another qualified plan" shall mean: (1) distributions received by
an Employee from another qualified Plan which are eligible for tax free
rollover to a qualified plan and which are
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<PAGE> 39
transferred by the Employee to this Plan within 60 days following his
receipt thereof; (2) amounts transferred to this Plan from a conduit
individual retirement account provided that the conduit individual
retirement account has no assets other than assets which (A) were
eligible for tax free rollover to a qualified plan and (B) were
deposited in such conduit individual retirement account within 60 days
of receipt thereof and other than earnings on said assets; and (3)
amounts distributed to the Employee from a conduit individual retirement
account meeting the requirements of clause (2) above, and transferred by
the Employee to this Plan within 60 days of his receipt thereof from
such conduit individual retirement account. Prior to accepting any
transfers to which this Section applies, the Administrator may require
the Employee to establish that the amounts to be transferred to this
Plan meet the requirements of this Section and may also require the
Employee to provide an opinion of counsel satisfactory to the Employer
that the amounts to be transferred meet the requirements of this
Section.
(c) The Administrator shall not accept a distribution from any
other qualified retirement plan if the Administrator determines that the
transfer of such interest (1) would impose upon this Plan requirements
as to the form of distribution that would not otherwise apply herein,
(2) would otherwise result in elimination of Code Section 411(d)(6)
protected benefits, or (3) would cause the Plan to be a direct or
indirect transferee of a plan to which the joint and survivor annuity
requirements of Sections 401(a)(11) and 417 of the Code apply.
4.14 QUALIFIED MILITARY SERVICE
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credits with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
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<PAGE> 40
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) Up to 100 percent of the Profit Sharing Accounts and Matching
Contributions Accounts may be invested in Company Stock.
(b) With due regard to subparagraph (a) above, the Administrator
may also direct the Trustee to invest funds under the Plan in other
property described in the Trust or in life insurance policies to the
extent permitted by subparagraph (c) below, or the Trustee may hold such
funds in cash or cash equivalents, all pursuant to an investment policy
determined by the Trustee or its delegate and as in effect from time to
time.
(c) With due regard to subparagraph (a) above, the Administrator
may also direct the Trustee to invest funds under the Plan in insurance
policies on the life of any "keyman" Employee. The proceeds of a
"keyman" insurance policy may not be used for the repayment of any
indebtedness owed by the Plan which is secured by Company Stock. In the
event any "keyman" insurance is purchased by the Trustee, the premiums
paid thereon during any Plan Year, net of any policy dividends and
increases in cash surrender values, shall be treated as the cost of Plan
investment and any death benefit or cash surrender value received shall
be treated as proceeds from an investment of the Plan.
(d) All purchases of Company Stock shall be made at a price
which, in the judgment of the Administrator, does not exceed the fair
market value thereof. All sales of Company Stock shall be made at a
price which, in the judgment of the Administrator, is not less than the
fair market value thereof. The valuation rules set forth in Article VI
shall be applicable.
5.2 PARTICIPANT DIRECTED INVESTMENTS
(a) The Administrator, in its sole discretion, may make a
determination to rely on Section 404(c) of ERISA, as such section
relates to Participant investment direction regarding the investment of
all or any part of the Plan assets under the profit sharing portion of
the Plan. In the event of a decision to comply with Section 404(c) of
ERISA, the Administrator shall establish rules and regulations and
administer the profit sharing portion of the Plan in a manner consistent
with the disclosure, confidentiality and other provisions of Section
404(c) of ERISA and the regulations promulgated thereunder.
(b) In the event that reliance on Section 404(c) is sought with
respect to any portion of the Plan, the Administrator shall have the
exclusive authority and discretion to direct the Trustee to establish
one or more investment funds for the investment of the assets of the
Trust fund. Such investment funds may include, but need not be limited
to, (i) mutual fund(s) managed by an investment company or companies
selected by the
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<PAGE> 41
Administrator, (ii) collective investment trusts, (iii) unit investment
trusts and (iv) annuities. In making such direction, the Administrator
shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. The Administrator
may, at any time, direct that a new investment fund or funds be
established and/or discontinue an existing investment fund or funds. The
assets constituting each investment fund shall be segregated and kept
separate from the assets constituting the other investment funds. All
dividends, interest and other income of, as well as any cash received
from the sale or exchange of securities or other property of an
investment fund, shall be invested and reinvested in the same investment
fund.
(c) If the Trustee receives any contribution under the Plan as to
which written instructions directing its investment are not in effect,
the Trustee may, in its discretion, either (i) hold all or a portion of
the contribution uninvested without liability for loss of income or
appreciation pending receipt of proper investment direction, or (ii)
hold all or any portion of the contribution in savings accounts and
other types of time or demand deposits with any financial institution.
(d) Such of the Participant's Accounts as the Administrator shall
permit the direction of Participants shall be invested, by means of
providing the Appropriate Form to the Administrator or its delegate, in
one or more of the investment funds, allocated in whole percentages
totaling 100%.
(e) The Participant shall receive written confirmation of the
Participant's investment instructions as soon as reasonably practicable
after such instructions are given. Notwithstanding the above, the
Trustee or the Administrator may decline to follow a Participant's
investment direction if doing so would result in a non-exempt prohibited
transaction under Section 4975 of the Code and/or 406 of ERISA, or any
transaction which, if implemented, would give rise to an event described
in DOL Regulations Section 2550.404c-1(d)(2)(ii).
(f) Notwithstanding the provisions of this Section 5.2 to the
contrary, no Participant may direct the disposition of Company Stock
contributed to the Plan after June 30, 1998 and held in his Profit
Sharing Account or Matching Contributions Account.
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<PAGE> 42
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date", to determine the net worth of the assets comprising the
Trust Fund as it exists on the "valuation date." In determining such net worth,
the Trustee shall value the assets comprising the Trust Fund at their fair
market value as of the "valuation date" and shall deduct all expenses for which
the Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all relevant factors
for determining the fair market value of securities. In the case of a
transaction between a Plan and a disqualified person, value must be determined
as of the date of the transaction. For all other Plan purposes, value must be
determined as of the most recent date under the Plan. An independent appraisal
will not in itself be a good faith determination of value in the case of a
transaction between the Plan and a disqualified person. However, in other cases,
a determination of fair market value based on at least an annual appraisal
independently arrived at by a person who customarily makes such appraisals and
who is independent of any party to the transaction will be deemed to be a good
faith determination of value.
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<PAGE> 43
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date or Early Retirement
Date. However, a Participant may postpone the termination of his employment with
the Employer to a later date, in which event the participation of such
Participant in the Plan, including the right to receive allocations pursuant to
Article IV, shall continue until his Late Retirement Date. As soon as
administratively feasible after the Participant's retirement on or after his
Normal Retirement Date, Late Retirement Date or Early Retirement Date, but in no
event later than one (1) year after the close of the Plan Year in which such
Participant's retirement occurs, the Participant will be distributed his
Account, determined as of the Valuation Date preceding the date of distribution,
in accordance with Sections 7.5 and 7.6. Participants shall become fully Vested
in their Accounts upon their Normal Retirement Date.
7.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Annuity Starting
Date, all amounts credited to such Participant's Accounts shall become
fully Vested. Within a reasonable period after the Participant's death,
but in no event later than one (1) year after the close of the Plan Year
in which such Participant's death occurs, the Administrator shall direct
the Trustee, in accordance with the provisions of Sections 7.5 and 7.6,
to distribute the value of the deceased Participant's Accounts to the
Participant's Beneficiary, determined as of the Valuation Date preceding
the date of distribution.
(b) Upon the death of a Participant after his Annuity Starting
Date, the Administrator shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute any remaining Vested
amounts credited to the Accounts of a deceased Former Participant to
such Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value
of the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) The Beneficiary of the death benefit payable pursuant to this
Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
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<PAGE> 44
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p)
which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on
the Appropriate Form. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by filing written
notice of such revocation or change with the Administrator. However, the
Participant's spouse must again consent in writing to any change in
Beneficiary unless the original consent acknowledged that the spouse had
the right to limit consent only to a specific Beneficiary and that the
spouse voluntarily elected to relinquish such right. In the event no
valid designation of Beneficiary exists at the time of the Participant's
death, the death benefit shall be payable to his estate.
(e) Any consent by the Participant's spouse to waive any rights
to the death benefit must be in writing, must acknowledge the effect of
such waiver, and be witnessed by a Plan representative or a notary
public. Further, the spouse's consent must be irrevocable and must
acknowledge the specific nonspouse Beneficiary.
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Accounts shall become fully Vested. The Trustee, in
accordance with the provisions of Sections 7.5 and 7.6, shall distribute to such
Participant all amounts credited to such Participant's Accounts, determined as
of the Valuation Date preceding the date of distribution. Unless the Participant
elects to defer receipt of the distribution pursuant to Section 7.5,
distribution shall commence as soon as administratively practicable after it is
determined that the Participant is Totally and Permanently Disabled, but in no
event later than one (1) year after the close of the Plan Year in which such
Participant's Total and Permanent Disability is determined.
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or Retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Accounts and invest the
aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit, common or collective trust fund of a
bank or a deferred annuity. In the event the Vested portion of a
Participant's Account is not segregated, the amount shall remain
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<PAGE> 45
in a separate account for the Terminated Participant and share in
allocations pursuant to Section 4.10 until such time as a distribution
is made to the Terminated Participant.
Distribution due to a Terminated Participant shall be made on the
occurrence of an event which would result in the distribution had the
Terminated Participant remained in the employ of the Employer (upon the
Participant's death, Total and Permanent Disability, Normal Retirement
or Early Retirement). However, the Administrator shall direct the
Trustee to distribute the entire Vested portion of the Terminated
Participant's Account (1) as soon as administratively practical after
the Participant's termination of employment, with respect to the
Participant's 401(k) Contributions Account, and (2) with respect to the
remainder of the Participant's Account, after the close of the Plan Year
during which the Participant terminates employment, or at anytime
afterwards, provided that in each case the Participant properly consents
to receive the distribution. However, if such Terminated Participant is
reemployed by the Employer before distribution is required to commence
under this paragraph, such distribution shall be postponed. Any
distribution under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of Sections 7.5 and 7.6,
including all notice and consent requirements of Code Sections
411(a)(11) and 417 and the Regulations thereunder. Distributions shall
be made as soon as administratively practicable after the distribution
event or request, determined as of the Valuation Date immediately
preceding the distribution. For purposes of this Section 7.4, if the
value of a Terminated Participant's Vested Accounts is zero, the
Terminated Participant shall be deemed to have received a distribution
of such Vested Accounts.
(b) A Participant shall at all times be fully vested in his
401(k) Contributions Account and his Rollover Account. The Vested
portion of any Participant's Matching Contribution Account and Profit
Sharing Account shall be a percentage of the total amount credited to
such Accounts determined on the basis of the Participant's number of
Years of Service according to the following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage
<S> <C>
0 - 2 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
(c) Notwithstanding the vesting schedule provided for in
paragraph (b) above, for any Top Heavy Plan Year, the Vested portion of
the Matching Contribution Account and Profit Sharing Account of any
Participant who has an Hour of Service after the Plan becomes top heavy
shall be a percentage of the total amount credited to such Accounts
41
<PAGE> 46
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
<TABLE>
<CAPTION>
Years of Service Percentage
Less than 2 0%
<S> <C>
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy
Plan, the Administrator shall revert to the vesting schedule in effect
before this Plan became a Top Heavy Plan. Any such reversion shall be
treated as a Plan amendment pursuant to the terms of the Plan.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
Accounts of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan
shall be treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy status. In the
event that the Plan is amended to change or modify any vesting schedule,
a Participant with at least three (3) Years of Service as of the
expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to such
amendment. If a Participant fails to make such election, then such
Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of the
amendment and shall end 60 days after the latest of:
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<PAGE> 47
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f) (1) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and such
Former Participant had received, or was deemed to have received, a
distribution of his entire Vested interest prior to his reemployment,
his forfeited account shall be reinstated only if he repays the full
amount distributed to him before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed by the
Employer or the close of the first period of five (5) consecutive 1-Year
Breaks in Service commencing after the distribution, or in the event of
a deemed distribution, upon the reemployment of such Former Participant.
In the event the Former Participant does repay the full amount
distributed to him, or in the event of a deemed distribution, the
undistributed portion of the Participant's Accounts must be restored in
full, unadjusted by any gains or losses occurring subsequent to the
Valuation Date coinciding with or preceding his termination. The source
for such reinstatement shall first be any Forfeitures occurring during
the year in which repayment occurs. If such source is insufficient, then
the Employer shall contribute an amount which is sufficient to restore
any such forfeited Accounts provided, however, that if a discretionary
contribution is made for such year, such contribution shall first be
applied to restore any such Accounts and the remainder shall be
allocated in accordance with Article IV.
(2) If any Former Participant is reemployed after a 1-Year
Break in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for
computing Years of Service for eligibility and for vesting
purposes only after he has been employed for one (1) Year
of Service following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from Employer contributions shall have Years of
Service credited prior to the 1-Year Break in Service
disregarded if his consecutive 1-Year Breaks in Service
equal or exceed five (5); and
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<PAGE> 48
(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service.
7.5 DISTRIBUTION OF BENEFITS
(a) Form of Distribution
(1) Except as provided in Section 7.5(b), the Administrator,
pursuant to the election of the Participant, shall direct
the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled in one or
more of the following methods:
(A) One lump-sum payment;
(B) Payments over a period certain in monthly,
quarterly, semiannual, or annual cash installments
over a period not exceeding fifteen years; or
(C) Payments over a period certain in monthly,
quarterly, semiannual, or annual cash installments
over a period not exceeding the Participant's life
expectancy, which shall be recalculated annually.
(b) (1) If the Participant elects to receive his Accounts over
his life expectancy, the Participant is married and
alive on his Annuity Starting Date, he shall receive the
value of all of his Accounts under the Plan in the form
of a joint and survivor annuity. The joint and survivor
annuity is an annuity that commences immediately and
shall be equal in value to a single life annuity. Such
joint and survivor benefits following the Participant's
death shall continue to the spouse during the spouse's
lifetime at a rate equal to 50 percent of the rate at
which such benefits were payable to the Participant. The
Participant may elect to have any annuity provided for
in this Section distributed upon the attainment of the
"earliest retirement age" under the Plan. The earliest
retirement age" is the earliest date on which, under the
Plan, the Participant could elect to receive retirement
benefits.
(2) The Participant may elect to waive the joint and survivor
annuity payment. Any election to waive the joint and
survivor annuity must be made by the Participant in
writing during the election period and be consented to by
the Participant's spouse. If the spouse is legally
incompetent to give consent, the spouse's legal guardian,
even if such guardian is the Participant, may give
consent. Such election shall designate a Beneficiary (or a
form of benefits) that may not be changed without spousal
consent (unless the consent of the spouse expressly
permits designations by the Participant
44
<PAGE> 49
without the requirement of further consent by the
spouse). Such spouse's consent shall be irrevocable and
must acknowledge the effect of such election and be
witnessed by a Plan representative or a notary public.
Such consent shall not be required if it is established
to the satisfaction of the Administrator that the
required consent cannot be obtained because there is no
spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations. The
election made by the Participant and consented to by his
spouse may be revoked by the Participant in writing
without the consent of the spouse at any time during the
election period. The number of revocations shall not be
limited. Any new election must comply with the
requirements of this paragraph. A former spouse's waiver
shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor
annuity shall be the 90 day period ending on the Annuity
Starting Date.
(4) With regard to the election, the Administrator shall
provide to the Participant no less than 30 days and no
more than 90 days before the Annuity Starting Date a
written explanation of:
(A) the terms and conditions of the joint and survivor
annuity, and
(B) the Participant's right to make, and the effect of,
an election to waive the joint and survivor
annuity, and
(C) the right of the Participant's spouse to consent to
any election to waive the joint and survivor
annuity, and
(D) the right of the Participant to revoke such
election, and the effect of such revocation.
The Participant (and spouse, if married, may waive the
30-day period if the distribution of the elected form of
benefit commences more than 7 days after the Participant
(and spouse, if married) was provided the written
explanation.
(d) If the Participant's Vested Accounts do not exceed $5,000 and
have never exceeded $5,000 at the time of any prior distribution, the
Administrator shall distribute such benefit without such Participant's
consent no later than the close of the Plan Year which follows the Plan
Year in which the Participant's termination of employment occurs.
(e) Any distribution to a Participant whose Vested Accounts
exceed, or have ever exceeded, $5,000 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to his Normal Retirement Age. With regard
to this required consent:
45
<PAGE> 50
(1) No consent shall be valid unless the Participant has
received a general description of the material features
and an explanation of the relative values of the optional
forms of benefit available under the Plan that would
satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit.
(3) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days
before the first day on which all events have occurred
which entitle the Participant to such benefit. However,
such distribution may commence less than 30 days after the
notice required under the preceding sentence is given,
provided that: (A) the Administrator clearly informs the
Participant that the Participant has a right to a period
of at least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution,
and (B) the Participant, after receiving the notice,
affirmatively elects a distribution.
(4) Written consent of the Participant to the distribution
must not be made before the Participant receives the
notice described in (3) above.
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not
consent to the distribution.
(f) Distributions of a Participant's Account after a Valuation
Date shall not be credited with earnings or losses from the Valuation
Date to the date of distribution.
(g) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder (including Regulation
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference):
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the
calendar year in which (i) in the case of a 5-percent
owner (as defined in Code Section 416(i)), the
Participant attains age 70 1/2, or (ii) in the case of a
Participant who is not a 5-percent owner (as herein
defined), the Participant attains age 70 1/2 or retires,
whichever occurs later. Alternatively, distributions to a
Participant must begin no later than the applicable April
1st as determined under the preceding sentence and must be
made over a period certain measured by the life expectancy
of the Participant (or the life expectancies of the
46
<PAGE> 51
Participant and his designated Beneficiary) in accordance
with Regulations.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death
benefit requirements of Code Section 401(a)(9)(G) and the
Regulations thereunder.
(h) A Vested Participant who has been married for at least one
year and dies before his Annuity Starting Date, having properly elected
to receive his Accounts in the form of a life annuity, shall have his
Accounts paid as a Pre-Retirement Survivor Annuity. Otherwise, the
Participant shall have his death benefit paid in a lump sum to his
Beneficiary.
(i) If the Participant has not received a distribution of his
Participant Account prior to his death, the Participant's Account must
be distributed to the Participant's Beneficiary not later than the close
of the last day of the Plan Year which includes the fifth anniversary of
the Participant's death. However, if the Beneficiary is the
Participant's spouse, distribution must occur no later than the Plan
Year in which the Participant would have attained age 70 1/2. If the
Participant's spouse dies before the Participant's Accounts are
distributed, the preceding sentence shall be applied as if the spouse
were the Participant.
(j) Unless a Former Participant elects in writing to defer the
receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not
later than the 60th day after the close of the Plan Year in which the
latest of the following events occurs:
(1) the date on which the Participant attains the earlier of
age 65 or the Normal Retirement Age specified herein;
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(3) the date the Participant terminates his service with the
Employer.
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED
Distributions will be in cash, unless the Participant's Accounts are
comprised of investments which are directed by him and which may be directly
transferred to an eligible retirement plan (as defined in Code Section
401(a)(31)), in which case the Participant may elect to have such assets
distributed in-kind.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
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<PAGE> 52
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the Participant's attainment
of his Normal Retirement Age, remain unpaid solely by reason of the inability of
the Administrator, after sending a registered letter, return receipt requested,
to the last known address, and after further diligent effort, to ascertain the
whereabouts of such Participant or his Beneficiary, the amount so distributable
shall be treated as a Forfeiture pursuant to the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.
7.9 NONTERMINABLE PROTECTIONS AND RIGHTS
This Section exists in the Plan because the Plan holds assets formerly
attributable to the ESOP. No Company Stock acquired by the ESOP with the
proceeds of an exempt loan hereof may be subject to a put, call, or other
option, or buy-sell or similar arrangement when held by and when distributed
from the Trust Fund, whether or not the Plan is then an ESOP. The protections
and rights granted in this Section are nonterminable, and such protections and
rights shall continue to exist under the terms of this Plan so long as any
Company Stock acquired under the ESOP with the proceeds of an exempt loan hereof
is held by the Trust Fund or by any Participant or other person for whose
benefit such protections and rights have been created, and neither the repayment
of such loan nor the failure of the Plan to be an ESOP, nor an amendment of the
Plan shall cause a termination of said protections and rights.
7.10 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
7.11 DIRECT ROLLOVER
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(a) Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under section 401(a) (9) of the Code;
and the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) An eligible retirement plan is an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are distributees
with regard to the interest of the spouse or former spouse.
(4) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
7.12 LOANS
(a) Upon authorization by the Administrator of a loan program to
be administered pursuant to this Section 7.12, a Participant who is
employed by an Employer and, to the extent required by Department of
Labor Regulations, any former Employee who is a participant and a
party-in-interest (as defined in Section 3(14) of the Act) shall be
entitled to obtain a loan from his 401(k) Contributions Account under
the Plan, subject to the restrictions set forth herein. Any loan
hereunder shall not be for less than $1,000.
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(b) No loan to a Participant may exceed the lesser of:
(1) $50,000, reduced by the greater of (a) the outstanding
balance of loans from the Plan to the Participant on the
date the loan is made, or (b) the highest outstanding
balance of loans from the Plan to the participant during
the one-year period ending on the day before the date the
loan is made (not taking into account any payments made
during such one-year period),
(2) one-half of the value of the participant's vested interest
under the Plan, reduced by the outstanding balance of
loans from the Plan to the Participant on the date the
loan is made, or
(3) the Participant's 401(k) Account, other than that portion
of the 401(k) Account that is comprised of Participant loans.
For purposes of this Section 7.12, any loan from a plan
maintained by an Employer or an Affiliated Employer shall be treated as
if it were a loan made from the Plan and the participant's vested
interest under any such other plan shall be considered a vested interest
under this Plan; provided, however, that the provisions of this
paragraph shall not be applied so as to allow the amount of a loan under
this Section to exceed the amount that would otherwise be permitted in
the absence of this paragraph.
(c) Any loan to a participant under the Plan shall be secured by
the pledge of the portion of the Participant's interest in the Plan
invested in such loan.
(d) Each loan shall bear interest at a rate set by the
Administrator, which shall be a reasonable rate of interest.
(e) Any loan hereunder shall be repaid within five years of the
date on which the loan is made; provided, however, that any loan to a
participant the proceeds of which are to be used to acquire a principal
residence of the Participant within a reasonable time of the granting of
the loan may be repaid within ten years after the date on which the loan
is made. The foregoing provision shall apply only if the Administrator
receives evidence satisfactory to it, within such period as the
Administrator shall prescribe, that the proceeds of the loan are being
used for the purpose specified herein.
(f) Repayment of loans shall be made by payroll deduction on a
level amortization basis, with the first such deduction to be made on
the pay date next following the date loan funds are disbursed; provided,
however, that a participant may prepay the entire outstanding balance of
his loan at any time (but may not make a partial prepayment). In the
event that a payroll deduction cannot be made in full because a
Participant is on an unpaid leave of absence or for any other reason,
the Participant shall pay directly to the Plan the full amount that
would have been deducted from his
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paycheck, with such payment to be made on the last business day of the
month in which the amount would have been deducted.
(g) Notwithstanding anything above to the contrary, except to the
extent prohibited under applicable Department of Labor Regulations, in
the event that prior to full repayment of a loan under this Section
7.12, a Participant terminates employment for any reason (including
death), such loan shall become due and immediately payable, in full.
(h) In the event that a Participant fails to make full repayment
of a loan under this Section 7.12 within 15 days after the date such
payment is due, a default on the loan shall occur. In the event of such
a default, (i) all remaining-payments on the loan shall be immediately
due and payable and (ii) the Participant shall not be entitled to any
further loans from the plan. In the case of any default on a loan to a
Participant, the Administrator shall apply the portion of the
Participant's interest in the Plan held as security for the loan in
satisfaction of the loan on the earliest possible date. In addition, the
Administrator shall take any and all legal action it shall consider
necessary or appropriate to enforce collection of the unpaid loan, with
the costs of any legal proceeding or collection procedure to be charged
to the Accounts of the Participant.
(i) Notwithstanding anything elsewhere in the Plan to the
contrary, in the event a loan is outstanding hereunder on the date of a
Participant's death, his estate shall be his Beneficiary as to the
portion of his interest in the Plan invested in such loan (with his
Beneficiary or Beneficiaries as to the remainder of his interest in the
Plan to be determined in accordance with otherwise applicable provisions
of the Plan).
(j) A request by a Participant for a loan shall be made in
writing to the Administrator using the Appropriate Form and shall
specify the amount and term of the requested loan and, if the term of
the loan requested exceeds five years, such request shall include a
statement confirming that he needs the loan for the purpose of acquiring
a principal residence for himself. The Administrator shall establish
rules and procedures for determining whether a loan request should be
approved or denied. When determining whether a loan application should
be approved, the terms and conditions of this section 7.12 shall be
applied on a uniform and nondiscriminatory basis with respect to all
Participants. If a Participant's request for a loan is approved by the
Administrator, the Administrator shall furnish the Trustee with written
instructions directing the Trustee to make the loan in cash to the
Participant as promptly as practicable (but not prior to the execution
by the participant of a promissory note and such other documents as the
Administrator shall consider necessary in this connection).
(k) Any loan made under this Section 7.12 shall be made pro rata
from the Participant's 401(k) Contributions Account in each of the
investment funds in which the Participant has an interest. In making any
loan under this Section 7.12, the Trustee shall
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be fully entitled to rely on the instructions furnished by the
Administrator, and shall be under no duty to make any inquiry or
investigation with respect thereto.
(l) A loan to a Participant shall be considered an investment of
the 401(k) Contribution Account of the Participant from which the loan
is made. All loan repayments shall be credited to a Participant's 401(k)
Contribution Account and shall be reinvested exclusively in one or more
of the investment funds in the same manner as current contributions for
the Participant.
(m) Loans under the Daedalus 401(k) Plan may be transferred to
this Plan and shall be administered in accordance with the terms of such
loan, to the extent consistent with applicable law. The Administrator
may impose such rules or regulations as it determines appropriate to
administer such transferred loans.
7.13 HARDSHIP DISTRIBUTIONS
(a) Subject to the following provisions of this Section, each
Participant may request a withdrawal of all or any portion of his 401(k)
Contribution Account on account of immediate and heavy financial need
(as determined by the Administrator in accordance with this Section
7.13); provided, however, that no amount in a Participant's 401(k)
Contribution Account that is deemed invested in an outstanding loan to
the Participant may be withdrawn. Notwithstanding the foregoing, no
earnings in the Participant's 401(k) Contribution Account may be
distributed under this Section 7.13. For the purposes of this Section
7.13, the term "immediate and heavy financial need" shall include the
need of funds for (i) the payment of medical care provided the expenses
described in Section 213(d) of the Code incurred by, or necessary (even
though not yet incurred) for the treatment of, the Participant, the
Participant's spouse, or any of the Participant's dependents (as defined
in Section 152 of the Code), (ii) the payment of tuition for the 12
months following the date of withdrawal for post-secondary education of
the Participant, the Participant's spouse, the Participant's children,
or any of the Participant's dependents (as defined in Section 152 of the
Code), (iii) the purchase (excluding mortgage payments) of a principal
residence for the Participant, (iv) the prevention of eviction of the
Participant from his principal residence or the prevention of
foreclosure on the mortgage of the Participant's principal residence or
(v) such other immediate and heavy financial emergency as determined by
the Administrator pursuant to uniformly applicable guidelines and IRS
Regulations. The amount of any withdrawal pursuant to this Section 7.13
shall not exceed the amount required to meet the financial emergency,
but may be grossed up to take into account federal, state and local
taxes that would be attributable to the withdrawal. A withdrawal by
reason of an immediate and heavy financial need may be requested by a
Participant only after he has (i) withdrawn all employee contributions
permitted to be withdrawn under this Plan or any other plan maintained
by the Employer and (ii) received all loans permitted under this Plan or
under any other qualified plan maintained by the Employer or an
Affiliated Employer.
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(b) A Participant shall give the Administrator written notice of
a request for a withdrawal pursuant to the provisions of this Section
7.13 in accordance with such procedures as the Administrator shall
establish. In distributing a Participant's withdrawal pursuant to this
Section 7.13 the investment fund or funds in which a Participant's
401(k) Contribution Account is invested shall be reduced on a pro rata
basis. No withdrawal pursuant to this Section 7.13 shall be of an
aggregate amount less than $500. In the event a Participant who has
requested a withdrawal terminates service prior to the effective date
(as specified below) of the withdrawal, the withdrawal request shall be
void. Withdrawals shall become effective on the last business day of the
month in which the Administrator receives a properly executed withdrawal
form, unless a later date is requested therein, provided such request is
received within the first three weeks of the month in which a withdrawal
is requested. Payment of any withdrawals pursuant to this Section 7.13
shall be made solely in cash.
(c) A Participant who makes a withdrawal pursuant to Sections
7.13 shall be suspended from making any further 401(k) Contributions
under the Plan or any other plan of the Employer for a period of 12
months, effective as of the date the withdrawal is received.
Notwithstanding any other provision of the Plan, the 401(k)
Contributions of a Participant made in the Plan Year following the Plan
Year during which a withdrawal pursuant to Sections 7.13 was made, shall
not exceed the applicable limit under Section 402(g) of the Code for
such Plan Year less the amount of 401(k) Contributions made by the
Participant during the Plan Year during which the withdrawal pursuant to
Section 7.13 was made.
7.14 LIMITATIONS ON 401(K) CONTRIBUTION ACCOUNT DISTRIBUTIONS
(a) Notwithstanding anything in the Plan to the contrary, a
Participant's 401(k) Contribution Account may not be distributed earlier than
upon one of the following events:
1. The Participant's retirement, death, Disability or
termination of service;
2. The termination of the Plan without the establishment or
maintenance of another defined contribution plan (other
than an employee stock ownership plan or a simplified
employee plan);
3. The Participant's attainment of age 59-1/2 or upon the
Participant's hardship; or
4. The sale or disposition by the Employer to an unrelated
corporation of (i) substantially all of the assets used in
a trade of business or (ii) the Employer's interest in a
subsidiary, but only with respect to Participants who
continue employment with the acquiring corporation or the
subsidiary, as the case may be, and the acquiring
corporation does not maintain the Plan after the
disposition.
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ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by
the Employer, to invest, manage, and control the Plan assets subject,
however, to the direction of an Investment Manager if the Trustee should
appoint such manager as to all or a portion of the assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their, Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish
to the Employer and/or Administrator for each Plan Year a written annual
report per Section 8.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) Subject to the provisions of Article V, the Trustee shall
invest and reinvest the Trust Fund to keep the Trust Fund invested
without distinction between principal and income and in such securities
or property, real or personal, wherever situated, as the Trustee shall
deem advisable, including, but not limited to, stocks, common or
preferred, bonds and other evidences of indebtedness or ownership, and
real estate or any interest therein. The Trustee shall at all times in
making investments of the Trust Fund consider, among other factors, the
short and long-term financial needs of the Plan on the basis of
information furnished by the Employer. In making such investments, the
Trustee shall not be restricted to securities or other property of the
character expressly authorized by the applicable law for trust
investments.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
(c) In the event the Trustee invests any part of the Trust Fund,
pursuant to the directions of the Administrator, in any shares of stock
issued by the Employer, and the Administrator thereafter directs the
Trustee to dispose of such investment, or any part thereof, under
circumstances which, in the opinion of counsel for the Trustee, require
registration of the securities under the Securities Act of 1933 and/or
qualification of the
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securities under the Blue Sky laws of any state or states, then the
Employer at its own expense, will take or cause to be taken any and all
such action as may be necessary or appropriate to effect such
registration and/or qualification.
8.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription
rights or other options, and to make any payments incidental thereto; to
oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to inquire
into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
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(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or
defend suits or legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at any
time or from time to time, whatever rights and privileges may be granted
under such annuity, or other Contracts; to collect, receive, and settle
for the proceeds of all such annuity or other Contracts as and when
entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(p) To vote Company Stock as provided in Section 8.4;
(q) To consent to or otherwise participate in reorganizations,
recapitalizations, consolidations, mergers and similar transactions with
respect to Company Stock or any other securities and to pay any
assessments or charges in connection therewith;
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(r) To deposit such Company Stock (but only if such deposit does
not violate the provisions of Section 8.4 hereof) or other securities in
any voting trust, or with any protective or like committee, or with a
trustee or with depositories designated thereby;
(s) To sell or exercise any options, subscription rights and
conversion privileges and to make any payments incidental. thereto;
(t) To exercise any of the powers of an owner, with respect to
such Company Stock and other securities or other property comprising the
Trust Fund. The Administrator, with the Trustee's approval, may
authorize the Trustee to act on any administrative matter or class of
matters with respect to which direction or instruction to the Trustee by
the Administrator is called for hereunder without specific direction or
other instruction from the Administrator;
(u) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(v) To do all such acts as shall be necessary to effect the
merger of the Daedalus 401(k) Plan and the Daedalus Pension Plan into
this Plan.
(w) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
8.4 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the Plan
assets. Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled to direct
the Trustee as to the manner in which the Company Stock which is entitled to
vote and which is allocated to the Participant's Account is to be voted. The
Trustee shall not vote Company Stock which a Participant or Beneficiary fails to
exercise pursuant to this Section. For purposes of this Section the term
"registration-type class of securities" means: (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so registered
except for the exemption from registration provided in subsection (g)(2)(H) of
such Section 12.
8.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
(a) The Trustee shall make distributions from the Trust Fund at
such times, to such persons and in such manner as the Administrator
directs in writing. Any undistributed part of a Participant's interest
in his accounts shall be retained in the Trust
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Fund until the Administrator directs its distribution. Any portion of a
Participant's Account to be distributed in cash shall be paid by the
Trustee mailing its check to the same person at the same address. If a
dispute arises as to who is entitled to or should receive any benefit or
payment, the Trustee may withhold or cause to be withheld such payment
until the dispute has been resolved.
(b) As directed by the Administrator, the Trustee shall make
payments out of the Trust Fund. Such directions or instructions need not
specify the purpose of the payments so directed and the Trustee shall
not be responsible in any way respecting the purpose or propriety of
such payments except as mandated by the Act.
(c) In the event that any distribution or payment directed by the
Administrator shall be mailed by the Trustee to the person specified in
such direction at the latest address of such person filed with the
Administrator, and shall be returned to the Trustee because such person
cannot be located at such address, the Trustee shall promptly notify the
Administrator of such return. Upon the expiration of sixty (60) days
after such notification, such direction shall become void and unless and
until a further direction by the Administrator is received by the
Trustee with respect to such distribution or payment, the Trustee shall
thereafter continue to administer the Trust as if such direction had not
been made by the Administrator. The Trustee shall not be obligated to
search for or ascertain the whereabouts of any such person.
8.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
8.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
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(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be
deemed an approval thereof. The approval by the Employer of any
statement of account shall be binding as to all matters embraced therein
as between the Employer and the Trustee to the same extent as if the
account of the Trustee had been settled by judgment or decree in an
action for a judicial settlement of its account in a court of competent
jurisdiction in which the Trustee, the Employer and all persons having
or claiming an interest in the Plan were parties; provided, however,
that nothing herein contained shall deprive the Trustee of its right to
have its accounts judicially settled if the Trustee so desires.
8.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
8.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
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(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to such Trustee at his last known address,
at least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with all
the estate, rights, powers, discretions, and duties of his predecessor
with like respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 8.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 8.7 for the approval by the Employer of
annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 8.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty or
responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 8.7 and this subparagraph.
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ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 AMENDMENT
(a) The Plan Sponsor, by resolution of its Board of Directors,
shall have the right at any time to amend the Plan, subject to the
limitations of this Section. However, any amendment which affects the
rights, duties or responsibilities of the Trustee and Administrator may
only be made with the Trustee's and Administrator's written consent. Any
such amendment shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute any such
amendment unless the Trust provisions contained herein are a part of the
Plan and the amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to or become property of
the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits described
in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit. In addition,
no such amendment shall have the effect of terminating the protections
and rights set forth in Section 7.9, unless such termination shall then
be permitted under the applicable provisions of the Code and
Regulations; such a termination is currently expressly prohibited by
Regulation 54.4975-11(a)(3)(ii).
(d) Notwithstanding any provision of this Plan to the contrary,
to the extent that any optional form of benefit under this Plan permits
a distribution prior to the Employee's retirement, death, Disability or
severance from employment, and prior to Plan termination, the optional
form of benefit is not available with respect to benefits attributable
to assets (including the post-transfer earnings thereon) and liabilities
that are transferred, within the meaning of Code Section 414(l), or
converted to (or into) this Plan from a money purchase pension plan
qualified under Code Section 401(a) (other than any portion of those
assets and liabilities attributable to voluntary employee
contributions).
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9.2 TERMINATION
(a) The Plan Sponsor, by resolution of its Board of Directors,
shall have the right at any time to terminate the Plan, which decision
shall be delivered in writing to the Trustee and Administrator. Upon any
full or partial termination, all amounts credited to the affected
Participants' Accounts shall become 100% Vested, and all unallocated
amounts shall be allocated to the accounts of all Participants in
accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Sections 7.5 and 7.6. Except as permitted by Regulations, the
termination of the Plan shall not result in the reduction of "Section
411(d) (6) protected benefits" in accordance with Section 9.1(c).
9.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 9.1(c).
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ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of 1984.
The Administrator shall establish a written procedure to determine the
qualified status of domestic relations orders and to administer
distributions under such qualified orders. Further, to the extent
provided under a "qualified domestic relations order", a former spouse
of a Participant shall be treated as the spouse or surviving spouse for
all purposes under the Plan.
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act
and the laws of the Commonwealth of Virginia, other than its laws respecting
choice of law, to the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would
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so apply, and whenever any words are used herein in the singular or plural form,
they shall be construed as though they were also used in the other form in all
cases where they would so apply.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of the Trust,
by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the. Plan or any funds contributed thereto to be used for,
or diverted to, purposes other than the exclusive benefit of
Participants, Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer within
the one (1) year period. Earnings of the Plan attributable to the excess
contributions may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
(c) Notwithstanding any provisions to the contrary, any
contribution by the Employer to the Trust Fund is conditioned upon the
deductibility of the contribution by the Employer under the Code and, to
the extent any such deduction is disallowed, the Employer may, within
one (1) year following the disallowance of the deduction, demand
repayment of such disallowed contribution and the Trustee shall return
such contribution within one (1) year following the disallowance.
Earnings of the Plan attributable to the excess contribution may not be
returned to the Employer, but any losses attributable thereto must
reduce the amount so returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the
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funds such Fiduciary handles; provided, however, that the minimum bond shall be
$1,000 and the maximum bond, $500,000. The amount of funds handled shall be
determined at the beginning of each Plan Year by the amount of funds handled by
such person, group, or class to be covered and their predecessors, if any,
during the preceding Plan Year, or if there is no preceding Plan Year, then by
the amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the Fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Act Section
412(a)(2)), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bonds
shall be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund or by the Employer.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
10.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
10.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
10.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
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10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
10.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.14 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this
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Plan and all of the provisions hereof, and participate herein and be known as a
Participating Employer, by a properly executed document evidencing said intent
and will of such Participating Employer.
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle,
hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof. However, the
assets of the Plan shall, on an ongoing basis, be available to pay
benefits to all Participants and Beneficiaries under the Plan without
regard to the Employer or Participating Employer who contributed such
assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or
a Participating Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such Participant's Account
as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall continue
to his credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Participants of the Employer or
Participating Employer by which the forfeiting Participant was employed.
(e) Any expenses of the Trust which are to be paid by the
Employer or borne by the Trust Fund shall be paid by each Participating
Employer in the same proportion that the total amount standing to the
credit of all Participants employed by such Employer bears to the total
standing to the credit of all Participants.
11.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
11.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment
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hereunder, and the Participating Employer to which the Employee is transferred
shall thereupon become obligated hereunder with respect to such Employee in the
same manner as was the Participating Employer from whom the Employee was
transferred.
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
All contributions made by a Participating Employer, as provided for in
this Plan, shall be determined separately by each Participating Employer, and
shall be allocated only among the Participants eligible to share of the Employer
or Participating Employer making the contribution. On the basis of the
information furnished by the Administrator, the Trustee shall keep separate
books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
11.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
11.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke
its participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 9.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
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11.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
SENSYS TECHNOLOGIES INC.
By
---------------------------
TRUSTEES
-----------------------------
C.A. KNOERNSCHILD
-----------------------------
ROBERT R. BOWER
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EXHIBIT 10.12
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Agreement is made as of this 23rd day of December, 1997 (the
"Agreement"), by and between Daedalus Enterprises, Inc., a Delaware corporation
(the "Company"), and Thomas R. Ory (the "Employee").
BACKGROUND
A. The Employee desires to be employed by the Company and the Company
desires to employ the Employee, subject to certain terms and conditions.
B. The parties desire to memorialize certain agreements regarding the
employment of the Employee with the Company, including agreements relating to
duties during employment, employment terms, nondisclosure of Confidential
Information (as such term is defined herein), the proprietary rights of the
Company in Company Technology (as such term is defined herein), and the business
activities of the Employee during, upon, and after termination of the Employee's
employment with the Company.
C. The parties desire that this Agreement will become effective only upon
the closing of the Merger and, until effective, will not affect the Senior
Officer Severance Agreement between the Company and Employee, dated as of June
21, 1995 (the "Severance Agreement").
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants and promises contained
in this Agreement, the parties hereto agree as follows:
I. DEFINITIONS
1.1 Business. The term "Business" shall mean the past, present, or
prospective activities, products, or services of the Company.
1.2 Confidential Information. The term "Confidential Information" shall
mean all information, in whatever form, regarding the Company and its Business,
including, without limitation, information relating to: (i) the formulas,
products, design, manufacture, methods, application, know-how, research,
development and processes of the Business; (ii) sources of supplies and
materials; (iii) operating and other cost data; (iv) lists of present, past and
prospective customers, and credit and financial data concerning such customers;
(v) customer proposals; (vi) price lists and data relating to pricing of the
Company's products or services; (vii) sales activities, procedures, and
techniques; (viii) computer programs; (ix) third-party licensed programs and (x)
data bases.
<PAGE> 2
1.3 Company Technology. The term "Company Technology" shall mean ideas,
concepts, know-how, works of authorship and inventions, and improvements and
modifications thereof, patentable or unpatentable, copyrightable or
non-copyrightable known to the Employee as a consequence of or through the
Employee's employment with the Company and which relate to the Business.
1.4 Restricted Period. The term "Restricted Period" shall mean the period
commencing with the Effective Time and ending on the date that is two years
after the Effective Time.
1.5 Employment Period. The term "Employment Period" shall mean the period
commencing at the Effective Time and ending on the date that is two years after
the Effective Time, unless sooner terminated in accordance with Article 8 below.
1.6 Merger Agreement. The term "Merger Agreement" shall mean the
Agreement and Plan of Merger, dated as of the date hereof, by and among the
Company, DEl Merger Sub, Inc. and S. T. Research Corporation.
1.7 Merger. The term "Merger" shall mean the Merger contemplated by the
Merger Agreement.
1.8 Effective Time. The term "Effective Time" shall have the meaning set
forth in the Merger Agreement.
II. EMPLOYMENT
2.1 Employment. Effective at the Effective Time, the Company employs the
Employee as Vice President of the Company and President of the Company's Sensing
and Imaging Systems Division, reporting directly to the Company's President (the
"Division"), and the Employee accepts such employment, upon the terms and
conditions set forth in this Agreement.
2.2 Duties. During the Employment Period, the Employee's primary
responsibility shall be to perform and discharge such duties for the Company
from his place of employment in Ann Arbor, Michigan as may be reasonably
assigned to the Employee from time to time by the Board of Directors of the
Company and/or the President of the Company and, in the absence of such
assignment, such services customary to such office as are necessary to the
operations of the Company. The Employee shall devote substantially all of his
business time, attention and energies to the business of the Company and shall
not be otherwise employed during the Employment Period.
2.3 Employment Period Compensation. For all obligations and services to
be rendered by the Employee hereunder, the Company shall pay to the Employee an
annual salary during the Employment Period of $154,800 payable in bi-weekly
installments). The Board of Directors may, at its option, increase Employee's
salary or pay him bonuses as it
<PAGE> 3
deems appropriate in light of the performance of the Employee, the Division and
the Company and the Company's practices in respect of its other officers. All
payments shall be subject to all applicable taxes required to be withheld by the
Company pursuant to federal, state or local law. The Company shall provide
Employee with five weeks of vacation annually, medical insurance under a medical
insurance plan maintained by the Company which provides coverage and benefits
comparable to those provided to Employee under the plan maintained by the
Company on the date hereof and the other fringe benefits, perquisites and
benefits of employment provided to salaried officer-level executives of the
Company serving in a capacity similar to Employee from time to time during the
Employment Period; provided, that the Company shall not be required to provide
Employee with a vehicle at Company expense.
2.4 Board of Directors Position. The Company shall cause Employee to be
nominated for election to the Board of Directors of the Company at each meeting
of stockholders of the Company at which directors are elected occurring during
the Employment Period.
III. CONFIDENTIALITY
3.1 Confidentiality. The Employee covenants and agrees to keep
confidential all Confidential Information, and in any event shall not now or at
any future time publish, divulge, reproduce, transmit, or provide the
Confidential Information or any portion thereof to any entity, except (a) as the
Company may expressly authorize in writing; (b) for Confidential Information
which subsequently becomes part of the public domain (other than as a result of
a breach of this Agreement by Employee); (c) for Confidential Information which
Employee rightfully received from a party other than the Company, any subsidiary
of the Company or any of its directors, employees, agents or representatives; or
(d) to the extent disclosure is required by law.
3.2 Return of Confidential Information. The Employee acknowledges that
all Confidential Information is and shall remain the property of the Company.
Accordingly, the Employee further agrees that upon the Employee's termination of
employment with the Company, the Employee shall return to the Company all
Confidential Information now or hereinafter in the possession, custody, or
control of the Employee, including any reproductions or copies thereof.
IV. PROPRIETARY RIGHTS
4.1 Ownership and Assignment. Upon the Company's request and to the
extent permitted by law, the Employee shall grant and assign to the Company all
rights, title and interest of the Employee, if any, in and to the Company
Technology, including, without limitation, all inventions, improvements,
technical information and suggestions relating in any way to the products,
services or Business which the Employee has conceived, developed or acquired
during the Employment Period (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such invention,
improvement or technical information. Employee further agrees to execute any
documents the Company deems reasonably necessary to
<PAGE> 4
evidence the Company's rights, title and interest in the Company Technology and
the assignment by the Employee of all rights, title and interest in the Company
Technology.
4.2 Return of Company Technology. The Employee acknowledges that all
Company Technology is and shall remain the property of the Company. Accordingly,
the Employee further agrees that upon the Employee's termination of employment
with the Company, the Employee shall return to the Company all Company
Technology now or hereinafter in the possession, custody, or control of the
Employee, including any reproductions or copies thereof and shall not thereafter
be permitted to use any Company Technology.
V. NON-COMPETITION AND RESTRICTED BUSINESS ACTIVITIES
5.1 Non-Compete. The Employee acknowledges that the services to be
provided hereunder are unique and that their loss would cause irreparable injury
to the Company. The Employee also hereby acknowledges and recognizes the highly
competitive nature of the Company's business and, accordingly, covenants and
agrees to the following:
(a) During the Restricted Period, the Employee shall not, directly or
indirectly (other than on behalf of the Company or its subsidiaries or
affiliates), (i) engage in the design, development, manufacture, sale,
licensing, promotion, marketing or servicing of products or provision of
services which at any time heretofore or hereafter during the Employment Period
were designed, developed, manufactured, sold, licensed, promoted, marketed,
serviced or provided by either the Company or any of its subsidiaries or
affiliates; or (ii) engage in any activity which is in direct competition with
the activities of the Company, or any of its subsidiaries or affiliates, whether
such engagement is as an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 2% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent,
representative or otherwise.
(b) During the Restricted Period, the Employee shall not, directly or
indirectly (other than on behalf of the Company or its subsidiaries or
affiliates), solicit, induce, or influence any customer, supplier, lender,
lessor or any other person which has a business relationship with the Company or
its subsidiaries or affiliates at any time during the Restricted Period to
discontinue, modify, or reduce the extent of such relationship with the Company
or any of its subsidiaries or affiliates.
(c) During the Restricted Period, the Employee shall not, directly or
indirectly, recruit, solicit or otherwise induce or influence any employee,
sales agent, or consultant of the Company, or its subsidiaries or affiliates, or
any person who served as such at any time during the six months prior thereto,
to discontinue such employment, agency, or consultant relationship with the
Company or its subsidiaries or affiliates, or employ or seek to employ, or cause
any business which competes directly or indirectly with the Company to employ or
seek to employ any employee, sales agent, or consultant of the Company or any of
its subsidiaries or affiliates.
<PAGE> 5
VI. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
6.1 Contracts. The Employee hereby represents and warrants that, except
for this Agreement or as disclosed to the Company in writing, the Employee is
not a party or otherwise subject to any contract, agreement, or arrangement,
whether written or oral, related to: (i) the nondisclosure of confidential
information of any entity or person; (ii) the proprietary rights in, and
ownership of, ideas, concepts, know-how, works of authorship, inventions, and
improvements and modifications thereof, patentable or unpatentable,
copyrightable or noncopyrightable; or (iii) a covenant, agreement, or commitment
by the Employee not to compete with any entity or person.
6.2 No Violation of Other Agreements. The Employee hereby represents and
warrants that the Employee's execution and delivery of this Agreement and
performance of the Employee's obligations hereunder, and performance of the
Employee's employment obligations and duties while employed at the Company, do
not, and will not, violate the terms of any other contract, agreement, or
arrangement, whether written or oral, to which the Employee is a party or
otherwise subject to, including, without limitation, any non-compete or
confidentiality agreement between the Employee and a former employer.
VII. REMEDIES
7.1 Equitable Remedy Available.
(a) Except as provided in paragraph (b) of this Section 7.1, the
Employee acknowledges and agrees that the Company's remedy at law for a breach
or threatened breach of any of the provisions of Sections 3, 4 or 5 would be
inadequate. In recognition of this fact, in the event of a breach by the
Employee of any of the provisions of Sections 3, 4 or 5, the Employee agrees
that, in addition to the Company's remedy at law and the Company's rights under
Article 8 hereof, the Company shall be entitled to obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach.
(b) If, following termination of employment without cause by the
Company pursuant to Section 8.4 or termination by the Employee pursuant to 8.5,
the Employee breaches Section 5.1, the Company shall not be obligated to make
any further payments to Employee pursuant to this Agreement, which
(notwithstanding anything in Section 7.1(a) to the contrary) shall constitute
the Company's sole remedy for such breach.
VIII. TERMINATION
8.1 Termination. Employee's employment will terminate on the first to
occur of the events set forth in Sections 8.2 through 8.5.
<PAGE> 6
8.2 Cause. The Employee's employment under this Agreement may be
terminated by the Company for "Cause". The following, as determined by the
Company's Board of Directors in its sole discretion, acting in good faith, shall
constitute "Cause" for termination: an act of material dishonesty or fraud by
Employee that is injurious to the Company, willful gross misconduct, intentional
failure in any material respect to perform his duties and responsibilities
consistent with the provisions of Section 2 hereof, or breach of any of the
provisions of Sections 3, 4, 5 or 6 of this Agreement. Prior to a determination
of Cause, the Company's Board of Directors shall give the Employee notice of its
intent to terminate the Employee's employment for Cause, an opportunity to be
heard and an opportunity to cure such failure within the thirty (30) day period
following the Employee's receipt of such notice. If the Employee's employment
under this Agreement is terminated by the Company for any reason set forth in
this Section 8.2, the Company shall continue to be liable only for the
compensation set forth in Section 2.3 of this Agreement, if any, with respect to
periods of time prior to the date of such termination.
8.3 Death and Disability. The Company may terminate the Employee's
employment in the event of Employee's "Disability" and employment will terminate
automatically upon Employee's death. "Disability" shall be deemed to exist if
Employee has substantially failed to perform his duties under this Agreement for
90 days in any 120 day period for reasons of mental or physical health, as
determined by competent medical evidence. If the Employee's employment under
this Agreement is terminated for any reason set forth in this Section 8.3, the
Company shall continue to be liable only for the compensation set forth in
Section 2.3 of this Agreement, if any, with respect to periods of time prior to
the date of such termination.
8.4 Without Cause. The Company may terminate the Employee's employment
for any reason other than the reasons listed in Sections 8.2 and 8.3 or for no
reason. If the Employee's employment under this Agreement is terminated pursuant
to this Section 8.4, the Company shall continue to pay the Employee the
compensation and provide the fringe benefits described in Section 2.3 at the
rate or level, as applicable, in effect on the date of such termination until
the date two years from the Effective Time.
8.5 Termination By Employee. The Employee may terminate his employment
under this Agreement (a) upon the failure of the Company to provide the Employee
with the compensation and fringe benefits described in Section 2.3; (b) upon any
other material breach of this Agreement by the Company; (c) upon any diminution
of the Employee's authority, duties and responsibilities, or a significant
change in the nature or scope of the Employee's duties from those that are
provided in Section 2.2 (without the consent of the Employee); (d) any change in
the Employee's status or title from that which is set forth in Section 2.1,
except for a bona fide promotion or with the consent of the Employee; or (e) if
the Company moves (without the consent of the Employee) the Employee's office to
a location that is more than 25 miles from its present location in Ann Arbor,
Michigan. If the Employee terminates his employment under this Agreement for any
reason set forth in this Section 8.5, the Company shall continue to pay the
Employee the compensation and provide the fringe benefits described in Section
2.3 at the rate or level, as applicable, in effect on the date of such
termination until the date two years from the Effective Time. If the Employee
terminates his
<PAGE> 7
employment other than for a reason set forth in Sections 8.3 or 8.5, the Company
shall pay to the Employee, within ten (10) days following such termination, a
lump sum equal to three months' salary at the higher of the rate being paid to
the Employee on the date of such termination or the rate specified in Section
2.3.
8.6 No Duty to Seek Employment. The Employee shall be under no duty or
obligation to seek or accept other employment after termination of employment
with the Company and shall not be required to mitigate the amount of any
payments due hereunder by seeking or accepting employment.
8.7 Termination of Employment after Employment Period. If Employee's
employment is terminated during the first year following the Employment Period
by the Company other than for Cause or by Employee for Good Cause, the Company
shall pay to the Employee, within ten (10) days following such termination, a
lump sum equal to six months' salary at the higher of the rate being paid to the
Employee on the date of such termination or the rate specified in Section 2.3
and shall continue to provide the fringe benefits described in Section 2.3 for
six months following such termination. If Employee's employment is terminated
for any other reason during the first year following the Employment Period, or
for any reason after the first year following the Employment Period, Employee
shall be entitled to receive such severance pay as provided by Company policy in
effect at the time of such termination.
IX. MISCELLANEOUS
9.1 Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
9.2 Severability. In case any one or more of the provisions or parts of a
provision contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement; and this Agreement shall, to the fullest extent permitted by
law, be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provision or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
9.3 Waiver. No delay or failure on the part of the Company in exercising
its rights under this Agreement, and no partial or single exercise of such
rights, shall constitute a waiver of rights contained in this Agreement on a
future occasion. Any waiver of rights under this Agreement shall be effective
only in the specific instance and for the specific purpose for which such
written waiver was given.
9.4 Assignment. This Agreement may not be assigned by the Employee, but
may be assigned by the Company only (a) in the event that the Company shall be
merged with, or consolidated into, any other corporation, to the surviving
corporation, or (b) in the event that
<PAGE> 8
the Company shall sell and transfer substantially all of its assets to, or shall
become a subsidiary of, another entity.
9.5 Notices. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and hand delivered or, if
mailed by registered or certified mail, postage prepaid with return receipt
requested or sent by express courier service, charges prepaid by shipper, to his
residence in the case of notices to the Employee, and to the principal offices
of the Company at 8419 Terminal Road, P.O. Box 1430, Newington, Virginia 22122
to the attention of the President in the case of notices to the Company (or to
such other address as a party is directed pursuant to written notice from the
other party). Any notice given by the Company to the Employee at his last
directed address shall be effective to bind any other person who shall acquire
rights hereunder.
9.6 Survival of Terms. Any termination of this Agreement shall not affect
the ongoing provisions of this Agreement, which shall survive such termination
in accordance with their terms.
9.7 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties and supersedes all prior and contemporaneous
agreements, arrangements, and understandings relating to the subject matter of
this Agreement. No representation, inducement, agreement, promise, or
understanding altering, modifying, amending, taking from or adding to, the terms
and conditions hereof shall have any force or effect unless the same is in
writing and validly executed by each of the parties hereto.
9.8 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws and decisions of the State of Michigan
without regard to its conflict of laws principles.
9.9 Termination of Severance Agreement. The Severance Agreement shall
terminate and be of no further force and effect at the Effective Time.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date and year first above written.
DAEDALUS ENTERPRISES, INC. EMPLOYEE
By: /s/ Charles G. Stanich /s/ Thomas R. Ory
------------------------------ -----------------------------
Its: VP - R&D/COO Thomas R. Ory
------------------------------
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Agreement is made as of this 23rd day of December, 1997 (the
"Agreement"), by and between Daedalus Enterprises, Inc., a Delaware corporation
(the "Company"), and Charles G. Stanich (the "Employee").
BACKGROUND
A. The Employee desires to be employed by the Company and the Company
desires to employ the Employee, subject to certain terms and conditions.
B. The parties desire to memorialize certain agreements regarding the
employment of the Employee with the Company, including agreements relating to
duties during employment, employment terms, nondisclosure of Confidential
Information (as such term is defined herein), the proprietary rights of the
Company in Company Technology (as such term is defined herein), and the business
activities of the Employee during, upon, and after termination of the Employee's
employment with the Company.
C. The parties desire that this Agreement will become effective only upon
the closing of the Merger and, until effective, will not affect the Senior
Officer Severance Agreement between the Company and Employee, dated as of June
21, 1995 (the "Severance Agreement").
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants and promises contained
in this Agreement, the parties hereto agree as follows:
I. DEFINITIONS
1.1 Business. The term "Business" shall mean the past, present, or
prospective activities, products, or services of the Company.
1.2 Confidential Information. The term "Confidential Information" shall
mean all information, in whatever form, regarding the Company and its Business,
including, without limitation, information relating to: (i) the formulas,
products, design, manufacture, methods, application, know-how, research,
development and processes of the Business; (ii) sources of supplies and
materials; (iii) operating and other cost data; (iv) lists of present, past and
prospective customers, and credit and financial data concerning such customers;
(v) customer proposals; (vi) price lists and data relating to pricing of the
Company's products or services; (vii) sales activities, procedures, and
techniques; (viii) computer programs; (ix) third-party licensed programs and (x)
data bases.
<PAGE> 2
1.3 Company Technology. The term "Company Technology" shall mean ideas,
concepts, know-how, works of authorship and inventions, and improvements and
modifications thereof, patentable or unpatentable, copyrightable or
non-copyrightable known to the Employee as a consequence of or through the
Employee's employment with the Company and which relate to the Business.
1.4 Restricted Period. The term "Restricted Period" shall mean the period
commencing with the Effective Time and ending on the date that is two years
after the Effective Time.
1.5 Employment Period. The term "Employment Period" shall mean the period
commencing at the Effective Time and ending on the date that is two years after
the Effective Time, unless sooner terminated in accordance with Article 8 below.
1.6 Merger Agreement. The term "Merger Agreement" shall mean the
Agreement and Plan of Merger, dated as of the date hereof, by and among the
Company, DEl Merger Sub, Inc. and S. T. Research Corporation.
1.7 Merger. The term "Merger" shall mean the Merger contemplated by the
Merger Agreement.
1.8 Effective Time. The term "Effective Time" shall have the meaning set
forth in the Merger Agreement.
II. EMPLOYMENT
2.1 Employment. Effective at the Effective Time, the Company employs the
Employee as Vice President of the Company and Executive Vice President of the
Company's Sensing and Imaging Systems Division, reporting directly to the
Company's President (the "Division"), and the Employee accepts such employment,
upon the terms and conditions set forth in this Agreement.
2.2 Duties. During the Employment Period, the Employee's primary
responsibility shall be to perform and discharge such duties for the Company
from his place of employment in Ann Arbor, Michigan as may be reasonably
assigned to the Employee from time to time by the Board of Directors of the
Company and/or the President of the Company and, in the absence of such
assignment, such services customary to such office as are necessary to the
operations of the Company. The Employee shall devote substantially all of his
business time, attention and energies to the business of the Company and shall
not be otherwise employed during the Employment Period.
2.3 Employment Period Compensation. For all obligations and services to
be rendered by the Employee hereunder, the Company shall pay to the Employee an
annual salary during the Employment Period of $136,800 payable in bi-weekly
installments). The Board of Directors may, at its option, increase Employee's
salary or pay him bonuses as it
<PAGE> 3
deems appropriate in light of the performance of the Employee, the Division and
the Company and the Company's practices in respect of its other officers. All
payments shall be subject to all applicable taxes required to be withheld by the
Company pursuant to federal, state or local law. The Company shall provide
Employee with five weeks of vacation annually, medical insurance under a medical
insurance plan maintained by the Company which provides coverage and benefits
comparable to those provided to Employee under the plan maintained by the
Company on the date hereof and the other fringe benefits, perquisites and
benefits of employment provided to salaried officer-level executives of the
Company serving in a capacity similar to Employee from time to time during the
Employment Period; provided, that the Company shall not be required to provide
Employee with a vehicle at Company expense.
2.4 Board of Directors Position. The Company shall cause Employee to be
nominated for election to the Board of Directors of the Company at each meeting
of stockholders of the Company at which directors are elected occurring during
the Employment Period.
III. CONFIDENTIALITY
3.1 Confidentiality. The Employee covenants and agrees to keep
confidential all Confidential Information, and in any event shall not now or at
any future time publish, divulge, reproduce, transmit, or provide the
Confidential Information or any portion thereof to any entity, except (a) as the
Company may expressly authorize in writing; (b) for Confidential Information
which subsequently becomes part of the public domain (other than as a result of
a breach of this Agreement by Employee); (c) for Confidential Information which
Employee rightfully received from a party other than the Company, any subsidiary
of the Company or any of its directors, employees, agents or representatives; or
(d) to the extent disclosure is required by law.
3.2 Return of Confidential Information. The Employee acknowledges that
all Confidential Information is and shall remain the property of the Company.
Accordingly, the Employee further agrees that upon the Employee's termination of
employment with the Company, the Employee shall return to the Company all
Confidential Information now or hereinafter in the possession, custody, or
control of the Employee, including any reproductions or copies thereof.
IV. PROPRIETARY RIGHTS
4.1 Ownership and Assignment. Upon the Company's request and to the
extent permitted by law, the Employee shall grant and assign to the Company all
rights, title and interest of the Employee, if any, in and to the Company
Technology, including, without limitation, all inventions, improvements,
technical information and suggestions relating in any way to the products,
services or Business which the Employee has conceived, developed or acquired
during the Employment Period (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such invention,
improvement or technical information. Employee further agrees to execute any
documents the Company deems reasonably necessary to
<PAGE> 4
evidence the Company's rights, title and interest in the Company Technology and
the assignment by the Employee of all rights, title and interest in the Company
Technology.
4.2 Return of Company Technology. The Employee acknowledges that all
Company Technology is and shall remain the property of the Company. Accordingly,
the Employee further agrees that upon the Employee's termination of employment
with the Company, the Employee shall return to the Company all Company
Technology now or hereinafter in the possession, custody, or control of the
Employee, including any reproductions or copies thereof and shall not thereafter
be permitted to use any Company Technology.
V. NON-COMPETITION AND RESTRICTED BUSINESS ACTIVITIES
5.1 Non-Compete. The Employee acknowledges that the services to be
provided hereunder are unique and that their loss would cause irreparable injury
to the Company. The Employee also hereby acknowledges and recognizes the highly
competitive nature of the Company's business and, accordingly, covenants and
agrees to the following:
(a) During the Restricted Period, the Employee shall not, directly or
indirectly (other than on behalf of the Company or its subsidiaries or
affiliates), (i) engage in the design, development, manufacture, sale,
licensing, promotion, marketing or servicing of products or provision of
services which at any time heretofore or hereafter during the Employment Period
were designed, developed, manufactured, sold, licensed, promoted, marketed,
serviced or provided by either the Company or any of its subsidiaries or
affiliates; or (ii) engage in any activity which is in direct competition with
the activities of the Company, or any of its subsidiaries or affiliates, whether
such engagement is as an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 2% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent,
representative or otherwise.
(b) During the Restricted Period, the Employee shall not, directly or
indirectly (other than on behalf of the Company or its subsidiaries or
affiliates), solicit, induce, or influence any customer, supplier, lender,
lessor or any other person which has a business relationship with the Company or
its subsidiaries or affiliates at any time during the Restricted Period to
discontinue, modify, or reduce the extent of such relationship with the Company
or any of its subsidiaries or affiliates.
(c) During the Restricted Period, the Employee shall not, directly or
indirectly, recruit, solicit or otherwise induce or influence any employee,
sales agent, or consultant of the Company, or its subsidiaries or affiliates, or
any person who served as such at any time during the six months prior thereto,
to discontinue such employment, agency, or consultant relationship with the
Company or its subsidiaries or affiliates, or employ or seek to employ, or cause
any business which competes directly or indirectly with the Company to employ or
seek to employ any employee, sales agent, or consultant of the Company or any of
its subsidiaries or affiliates.
<PAGE> 5
VI. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
6.1 Contracts. The Employee hereby represents and warrants that, except
for this Agreement or as disclosed to the Company in writing, the Employee is
not a party or otherwise subject to any contract, agreement, or arrangement,
whether written or oral, related to: (i) the nondisclosure of confidential
information of any entity or person; (ii) the proprietary rights in, and
ownership of, ideas, concepts, know-how, works of authorship, inventions, and
improvements and modifications thereof, patentable or unpatentable,
copyrightable or noncopyrightable; or (iii) a covenant, agreement, or commitment
by the Employee not to compete with any entity or person.
6.2 No Violation of Other Agreements. The Employee hereby represents and
warrants that the Employee's execution and delivery of this Agreement and
performance of the Employee's obligations hereunder, and performance of the
Employee's employment obligations and duties while employed at the Company, do
not, and will not, violate the terms of any other contract, agreement, or
arrangement, whether written or oral, to which the Employee is a party or
otherwise subject to, including, without limitation, any non-compete or
confidentiality agreement between the Employee and a former employer.
VII. REMEDIES
7.1 Equitable Remedy Available.
(a) Except as provided in paragraph (b) of this Section 7.1, the
Employee acknowledges and agrees that the Company's remedy at law for a breach
or threatened breach of any of the provisions of Sections 3, 4 or 5 would be
inadequate. In recognition of this fact, in the event of a breach by the
Employee of any of the provisions of Sections 3, 4 or 5, the Employee agrees
that, in addition to the Company's remedy at law and the Company's rights under
Article 8 hereof, the Company shall be entitled to obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach.
(b) If, following termination of employment without cause by the
Company pursuant to Section 8.4 or termination by the Employee pursuant to 8.5,
the Employee breaches Section 5.1, the Company shall not be obligated to make
any further payments to Employee pursuant to this Agreement, which
(notwithstanding anything in Section 7.1(a) to the contrary) shall constitute
the Company's sole remedy for such breach.
VIII. TERMINATION
8.1 Termination. Employee's employment will terminate on the first to
occur of the events set forth in Sections 8.2 through 8.5.
<PAGE> 6
8.2 Cause. The Employee's employment under this Agreement may be
terminated by the Company for "Cause". The following, as determined by the
Company's Board of Directors in its sole discretion, acting in good faith, shall
constitute "Cause" for termination: an act of material dishonesty or fraud by
Employee that is injurious to the Company, willful gross misconduct, intentional
failure in any material respect to perform his duties and responsibilities
consistent with the provisions of Section 2 hereof, or breach of any of the
provisions of Sections 3, 4, 5 or 6 of this Agreement. Prior to a determination
of Cause, the Company's Board of Directors shall give the Employee notice of its
intent to terminate the Employee's employment for Cause, an opportunity to be
heard and an opportunity to cure such failure within the thirty (30) day period
following the Employee's receipt of such notice. If the Employee's employment
under this Agreement is terminated by the Company for any reason set forth in
this Section 8.2, the Company shall continue to be liable only for the
compensation set forth in Section 2.3 of this Agreement, if any, with respect to
periods of time prior to the date of such termination.
8.3 Death and Disability. The Company may terminate the Employee's
employment in the event of Employee's "Disability" and employment will terminate
automatically upon Employee's death. "Disability" shall be deemed to exist if
Employee has substantially failed to perform his duties under this Agreement for
90 days in any 120 day period for reasons of mental or physical health, as
determined by competent medical evidence. If the Employee's employment under
this Agreement is terminated for any reason set forth in this Section 8.3, the
Company shall continue to be liable only for the compensation set forth in
Section 2.3 of this Agreement, if any, with respect to periods of time prior to
the date of such termination.
8.4 Without Cause. The Company may terminate the Employee's employment
for any reason other than the reasons listed in Sections 8.2 and 8.3 or for no
reason. If the Employee's employment under this Agreement is terminated pursuant
to this Section 8.4, the Company shall continue to pay the Employee the
compensation and provide the fringe benefits described in Section 2.3 at the
rate or level, as applicable, in effect on the date of such termination until
the date two years from the Effective Time.
8.5 Termination By Employee. The Employee may terminate his employment
under this Agreement (a) upon the failure of the Company to provide the Employee
with the compensation and fringe benefits described in Section 2.3; (b) upon any
other material breach of this Agreement by the Company; (c) upon any diminution
of the Employee's authority, duties and responsibilities, or a significant
change in the nature or scope of the Employee's duties from those that are
provided in Section 2.2 (without the consent of the Employee); (d) any change in
the Employee's status or title from that which is set forth in Section 2.1,
except for a bona fide promotion or with the consent of the Employee; or (e) if
the Company moves (without the consent of the Employee) the Employee's office to
a location that is more than 25 miles from its present location in Ann Arbor,
Michigan. If the Employee terminates his employment under this Agreement for
any reason set forth in this Section 8.5, the Company shall continue to pay the
Employee the compensation and provide the fringe benefits described in Section
2.3 at the rate or level, as applicable, in effect on the date of such
termination until the date two years from the Effective Time. If the Employee
terminates his
<PAGE> 7
employment other than for a reason set forth in Sections 8.3 or 8.5, the
Company shall pay to the Employee, within ten (10) days following such
termination, a lump sum equal to three months' salary at the higher of the rate
being paid to the Employee on the date of such termination or the rate
specified in Section 2.3.
8.6 No Duty to Seek Employment. The Employee shall be under no duty or
obligation to seek or accept other employment after termination of employment
with the Company and shall not be required to mitigate the amount of any
payments due hereunder by seeking or accepting employment.
8.7 Termination of Employment after Employment Period. If Employee's
employment is terminated during the first year following the Employment Period
by the Company other than for Cause or by Employee for Good Cause, the Company
shall pay to the Employee, within ten (10) days following such termination, a
lump sum equal to six months' salary at the higher of the rate being paid to the
Employee on the date of such termination or the rate specified in Section 2.3
and shall continue to provide the fringe benefits described in Section 2.3 for
six months following such termination. If Employee's employment is terminated
for any other reason during the first year following the Employment Period, or
for any reason after the first year following the Employment Period, Employee
shall be entitled to receive such severance pay as provided by Company policy in
effect at the time of such termination.
IX. MISCELLANEOUS
9.1 Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
9.2 Severability. In case any one or more of the provisions or parts of a
provision contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement; and this Agreement shall, to the fullest extent permitted by
law, be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provision or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
9.3 Waiver. No delay or failure on the part of the Company in exercising
its rights under this Agreement, and no partial or single exercise of such
rights, shall constitute a waiver of rights contained in this Agreement on a
future occasion. Any waiver of rights under this Agreement shall be effective
only in the specific instance and for the specific purpose for which such
written waiver was given.
9.4 Assignment. This Agreement may not be assigned by the Employee, but
may be assigned by the Company only (a) in the event that the Company shall be
merged with, or consolidated into, any other corporation, to the surviving
corporation, or (b) in the event that
<PAGE> 8
the Company shall sell and transfer substantially all of its assets to, or shall
become a subsidiary of, another entity.
9.5 Notices. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and hand delivered or, if
mailed by registered or certified mail, postage prepaid with return receipt
requested or sent by express courier service, charges prepaid by shipper, to his
residence in the case of notices to the Employee, and to the principal offices
of the Company at 8419 Terminal Road, P.O. Box 1430, Newington, Virginia 22122
to the attention of the President in the case of notices to the Company (or to
such other address as a party is directed pursuant to written notice from the
other party). Any notice given by the Company to the Employee at his last
directed address shall be effective to bind any other person who shall acquire
rights hereunder.
9.6 Survival of Terms. Any termination of this Agreement shall not affect
the ongoing provisions of this Agreement, which shall survive such termination
in accordance with their terms.
9.7 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties and supersedes all prior and contemporaneous
agreements, arrangements, and understandings relating to the subject matter of
this Agreement. No representation, inducement, agreement, promise, or
understanding altering, modifying, amending, taking from or adding to, the terms
and conditions hereof shall have any force or effect unless the same is in
writing and validly executed by each of the parties hereto.
9.8 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws and decisions of the State of Michigan
without regard to its conflict of laws principles.
9.9 Termination of Severance Agreement. The Severance Agreement shall
terminate and be of no further force and effect at the Effective Time.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date and year first above written.
DAEDALUS ENTERPRISES, INC. EMPLOYEE
By: /s/ Thomas R. Ory /s/ Charles G. Stanich
------------------------------ ----------------------------------
Its: President/CEO Charles G. Stanich
-----------------------------
<PAGE> 1
EXHIBIT 10.14
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is entered into as of this 16th day of
June, 1986, by and among S.T. Research Corporation, a Virginia corporation with
its principal office at 8419 H. Terminal Road, Newington, Virginia 22122 ("S.T.
Research"), Creative Circuits, Inc., a North Carolina corporation having its
principal office at 2407 East Kivett Drive, High Point, North Carolina 27260
("Creative Circuits") and Consolidated Leasing Co., Inc., a Virginia corporation
having its principal office at 8419 H. Terminal Road, Newington, Virginia 22122
("Consolidated Leasing") (S.T. Research, Creative Circuits and Consolidated
Leasing shall collectively be referred to as the "Borrower"), and SOVRAN BANK,
N.A., a national banking association having its principal office at Twelfth and
Main Streets, Richmond, Virginia 23261 ("Bank").
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
ARTICLE 1. LOANS.
1.1. Revolving Credit Loan. Subject to the terms and conditions set forth
in Article 3 hereof, Bank will from time to time, during the period from June
16, 1986 (the "Closing Date") until February 28, 1988, (the "Ending Date"), make
advances ("the Revolving Credit Loan") to Borrower in such amounts as Borrower
shall request by submission of a Borrowing Base Certificate in the form of the
certificate attached hereto as Exhibit A, provided that the maximum outstanding
aggregate principal amount of all such advances shall not at any time exceed an
amount which is equal to the lesser of (a) the Borrowing Base minus the
outstanding principal balance of the Term Loan (as defined in Section 1.3), and
(b) Two Million and N0/100 Dollars ($2,000,000) (the "Commitment"). Under the
Revolving Credit Loan, Borrower may borrow, repay, and reborrow, subject to the
above maximum outstanding aggregate principal amount limitation. The Revolving
Credit Loan shall be evidenced by a promissory note of Borrower (the "Revolving
Credit Note"), dated the Closing Date and in substantially the form of the
promissory note attached hereto as Exhibit B (the terms and provisions of which
Revolving Credit Note are incorporated herein by reference), and shall be
secured as hereinafter set forth.
For purposes of this Agreement; (a) "Borrowing Base" means an amount as
computed monthly, equal to (i) ninety percent (90%) of Eligible Billed
Government Accounts; plus (ii)
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eighty percent (80%) of Eligible Nongovernment Accounts; plus (iii) fifty
percent (50%) of Eligible Unbilled Government Accounts (to a maximum of
$750,000.00); (b) "Eligible Billed Government Accounts" means the net amount of
billed Government Accounts of S.T. Research and Creative Circuits for work
completed, at one hundred percent (100%) of face value after eliminating
therefrom (i) all billed Government Accounts which are more than ninety (90)
days past due under the original terms of payment, and (ii) all Government
Accounts arising under Government Contracts which contain an express prohibition
against assignment; and after deducting from the aggregate face amount of the
remaining Government Accounts all retainages, payments, adjustments, and credits
applicable thereto, and all amounts due thereon considered by Dank to be
difficult to collect or uncollectible by reason of return, rejection,
repossession, loss or damage of or to the products or goods giving rise thereto,
insolvency of the Government Account debtor, disputes, or otherwise, all as
determined by Bank in its sole discretion from time to time, which determination
shall be final and binding upon S.T. Research and Creative Circuits; provided,
however, that if any Customer of S.T. Research or Creative Circuits has more
than fifty percent (50%) of the Customer's dollar value of accounts with S.T.
Research or Creative Circuits more than ninety (90) days past due, then none of
that Customer's accounts with S.T. Research or Creative Circuits shall be
considered Eligible Billed Government Accounts; (c) "Eligible Nongovernment
Accounts" means the net amount of billed Nongovernment Accounts of S.T. Research
and Creative Circuits for work completed, at one hundred percent (100%) of face
value after eliminating therefrom all billed Nongovernment Accounts which are
intercompany (i.e., due from a Subsidiary) Nongovernment Accounts or which are
more than ninety (90) days past due under the original terms of payment; and
after deducting from the aggregate face amount of the remaining Nongovernment
Accounts all retainages, payments, adjustments, and credits applicable thereto,
and all amounts due thereon considered by Bank to be difficult to collect or
uncollectible by reason of return, rejection, repossession, loss, or damage of
or to the products or goods giving rise thereto, insolvency of the Nongovernment
Account debtor, disputes, or otherwise, all as determined by Bank in its sole
discretion from time to time, which determination shall be final and binding
upon S.T. Research and Creative Circuits; provided, however, that if any
Customer of S.T. Research or Creative Circuits has more than fifty percent (50%)
of that Customer's dollar value of Nongovemment Accounts with S.T. Research or
Creative Circuits more than ninety (90) days past due, then none of that
Customer's Nongovemment Accounts with S.T. Research or Creative Circuits shall
be considered Eligible Nongovernment Accounts; (d) "Eligible Unbilled Government
Accounts" means the net amount of unbilled Government Accounts of S.T Research
and Creative Circuits, Inc. for work completed, at one hundred percent (100%) of
face value after eliminating therefrom all Government Accounts arising under
Government Contracts which contain an express prohibition against assignment;
and after deducting from the remaining unbilled Government Accounts all
retainages, payments, adjustments and credits applicable thereto, and all
amounts due thereon considered by Bank to be difficult to collect or
uncollectible by reason of return, rejection, repossession, loss or damage of or
to the products or goods giving rise thereto, insolvency of the Government
Account debtor, disputes or otherwise, all as determined by Bank in its sole
discretion from time to time which determination shall be final and binding upon
S.T Research and Creative Circuits, Inc.; provided, however, that if any
Customer of S.T. Research or Creative Circuits has more than fifty percent (50%)
of the Customer's dollar value of billed accounts with S.T. Research or Creative
Circuits more than ninety (90) days past due, then none of that
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<PAGE> 3
Customer's unbilled accounts with S.T. Research or Creative Circuits shall be
considered an Eligible Unbilled Government Account; (e) "Government Accounts"
means all Accounts (as defined in Section 6.1 hereof) arising out of any
Government Contract; (f) "Government Contracts" means all contracts with the
United States Government or with any agency thereof, and all amendments thereto;
(g) "Nongovemment Accounts" means all Accounts other than Government Accounts;
and (h) "Customer" means any governmental entity (federal, state, county,
municipal, or the like) or business entity (corporation, association,
partnership, sole proprietorship, or the like) to which S.T. Research or
Creative Circuits provides goods or services for compensation; provided,
however, that certain individual agencies of the United States Government and
certain branches of certain major corporations, as determined by Bank in its
sole discretion, shall be treated as Customers in their own right, separate and
distinct from other such agencies or branches (whichever is applicable) and from
the United States Government or the corporation (whichever is applicable) of
which they are a part.
1.3. Term Loan. Subject to the terms and conditions set forth in Article
3 hereof, on the C1osing Date Bank will make a term loan (the "Term Loan") to
Borrower in the principal amount of Six Hundred Fifty Thousand and No/100
Dollars ($650,000.00), said Term Loan to be for a fixed term of four (4) years
commencing on the Closing Date, to be evidenced by a promissory note of Borrower
(the "Term Note"), dated the Closing Date and in substantially the form of the
promissory note attached hereto as Exhibit C (the terms and provisions of which
Term Note are incorporated herein by reference), and to be secured as
hereinafter set forth. The closing of the Term Loan (the "Closing") shall be
held on the Closing Date at the offices of Hogan, & Hartson, 8300 Greensboro
Drive, Suite 1100, McLean, Virginia 22102, or at such other time or place as may
be agreed upon by the parties.
1.4. Use of Loan Proceeds. The proceeds of the Revolving Credit Loan and
the Term Loan (the "Loans") shall be used only to finance the performance of
Borrower's Government Contracts and the acquisition of Borrower's capital
assets, and for Borrower's short term working capital purposes.
1.5. Additional Fee. Borrower agrees to pay Bank an additional fee which
shall be based on the net collected balances in Borrower 's non-interest bearing
demand deposit accounts maintained with Bank, as hereinafter referred to in this
Section 1.5, after deduction for (a) all costs and expenses customarily assessed
by Bank in connection with deposits into, withdrawals from, and the maintenance
of such accounts, (b) items deposited into Borrower's accounts but not yet
collected by Bank, and (c) required reserves, all as determined in accordance
with Bank's standard system of analysis for similar accounts (all such net
collected balances hereinafter referred to as "Free Balances"). The fee provided
for in this Section 1.5 (the "Free Balances Deficit Fee") shall be determined as
follows. If the average daily amount (the "Actual Average") of the Free Balances
during any calendar quarter (or applicable portion thereof), from the date of
this Agreement until any and all amounts payable under the Notes (as hereinafter
defined) and under this Agreement are paid in full, shall be less than an amount
(the "Required Average") equal to five percent (5%) of the amount of the
Commitment, then the Free Balances Deficit Fee shall equal the product obtained
by multiplying: (i) a fraction, the numerator of which is the number of calendar
days during such quarter (or applicable portion thereof) and the denominator
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<PAGE> 4
of which is 360, by (ii) the product determined by multiplying [the average
interest rate applicable to the Notes during such quarter] by the amount of the
difference between the required Average and the Actual Average. Borrower shall
pay such Free Balances Deficit Fee, computed as aforesaid, within ten (10)
Business Days (as defined in Section 8.14 hereof) following receipt by Borrower
from Bank of a statement of the amount of such fee applicable to the preceding
calendar quarter (or applicable portion thereof). It is understood and agreed
that nothing in this Agreement shall be deemed to require Borrower to maintain
balances in non-interest bearing demand deposit accounts with Bank and that, but
for the obligation of Borrower set forth in this Section 1.5, Borrower and Bank
would have agreed to a higher rate of interest with respect to the Notes.
Borrower acknowledges that at its request the interest rate on the Notes is
based on its agreement that it will either maintain balances in such demand
deposit accounts or in lieu thereof pay said Free Balances Deficit Fee, its
determination that the interest provisions of this Agreement as supplemented by
the obligation of Borrower set forth in this Section 1.5 represent an
arrangement more advantageous than the interest rate which would be charged
without payment of such additional fee or credit for the maintenance of balances
in such demand deposit accounts, and its election to have the interest rate
established on the basis of the payment of such additional fee or the
maintenance of balances in such demand deposit accounts.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF BORROWER.
In order to induce Bank to enter into this Agreement and to make the
Loans, Borrower hereby makes the following representations and warranties to
Bank, which representations and warranties shall survive the execution and
delivery hereof and of the Revolving Credit Note and the Term Note (the
"Notes").
2.1. Corporate Authority. Each of S.T. Research, Creative Circuits and
Consolidated Leasing (a) is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation, (b) is
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where its activities or ownership of property require such
qualification, and (c) has the full and unrestricted power and authority,
corporate and otherwise, to own, operate, and lease its properties, to carry on
its business as currently conducted, to execute and deliver and perform this
Agreement, the Notes, and any other instruments or agreements executed pursuant
hereto or thereto (this Agreement, the Notes, and such other instruments and
agreements hereinafter collectively referred to as the "Loan Documents"), to
incur the obligations provided for herein and therein, and to perform the
transactions contemplated hereby and thereby (including, without limitation, the
creation of a first lien and security interest in favor of Bank in the
Collateral (as defined in Section 6.1 hereof), all of which have been duly and
validly authorized by all proper and necessary action (all of which actions are
in full force and effect).
2.2. Approvals. No approval, consent or other action by the stockholders
of Borrower, by any governmental authority or by any other person or entity is
or will be necessary to permit the valid execution, delivery or performance by
Borrower of this Agreement or any of the other Loan Documents.
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<PAGE> 5
2.3. Binding Effect, No Violations. Each of the Loan Documents, upon its
execution and delivery, will constitute a legal, valid, and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms. The
execution, delivery, and performance of the Loan Documents will not (a) violate,
conflict with, or constitute a default under, any law, regulation, order or any
other requirement of any court, tribunal, arbitrator, or governmental authority,
any terms of the Articles or Certificate of Incorporation or Bylaws of Borrower,
or any contract, agreement or other arrangement binding upon or affecting
Borrower or any of its properties, or (b) result in the creation, imposition or
acceleration of any indebtedness or any mortgage, pledge, lien, charge,
reservation, covenant, restriction, security interest, or other encumbrance (an
"Encumbrance") of any nature upon, or with respect to, Borrower or any of its
properties.
2.4. Litigation. Except as set forth in Exhibit D attached hereto, there
is no claim, litigation, proceeding, or investigation pending, threatened or
reasonably anticipated against or affecting Borrower, its properties or
business, this Agreement, any of the other Loan Documents, or any of the
transactions contemplated hereby or thereby, before or by any court, tribunal,
arbitrator, or governmental authority.
2.5. Title to Assets. As of the date hereof, Borrower has good, valid,
and marketable title to all of its properties and assets (whether real or
personal), and there exist no Encumbrances on any of Borrower's properties or
assets, including, without limitation, the Collateral (as defined in Section 6.1
hereof), other than those set forth in Exhibit E attached hereto. All personal
property of Borrower is in good operating condition and repair, and is suitable
and adequate for the uses for which it is being used. All inventory of Borrower
consists of items which are good and merchantable and of a quality and quantity
presently usable or salable in the ordinary course of business. Upon the
execution and delivery of this Agreement, and upon the filing of financing
statements as referred to in Section 6.5 hereof and/or the taking by Bank of
possession of the Collateral on or prior to the date hereof, as the case may be,
Bank will have a good, valid, and perfected first lien and security interest in
the Collateral, subject to no Encumbrance in favor of any other person or
entity.
2.6. Loan Application. The statements made and the documents (including
the financial statements of Borrower for the periods ending September 30, 1985
and March 31, 1985) delivered by Borrower to Bank in connection with its
application for the Loans and in connection with this Agreement and the other
Loan Documents are true, correct and complete in all material respects; omit no
material facts and are not misleading, and present fairly the condition
(financial or otherwise) of Borrower.
2.7. No Change. No change in the business, operations, properties or
condition (financial or otherwise) of Borrower, or any other event, has occurred
since the date of the most recent balance sheet submitted to Bank by Borrower as
described in Section 2.6 hereof, which change might adversely affect the ability
of Borrower to perform or comply with all terms, conditions, and agreements to
be performed or complied with by Borrower under this Agreement or under any of
the other Loan Documents, or to perform the transactions contemplated hereby and
thereby.
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<PAGE> 6
2.8. Taxes. Borrower has filed all tax returns and reports required by
any governmental authority to be filed by Borrower, and such returns and reports
are true and correct. Borrower has paid all taxes, assessments, and other
government charges imposed upon it or its income, profits or properties, or upon
any part thereof, other than those presently payable without penalty or
interest.
2.9. No Default. No Event of Default, (as defined in Section 7.1 hereof),
and no event which with notice, lapse of time or other condition would
constitute an Event of Default, has occurred and is continuing.
2.10. Compliance with Laws. Borrower has complied and is in full
compliance with all applicable laws, regulations, orders, and other requirements
of any governmental authority or arbitrator, and with all terms of Borrower's
Articles or Certificate of Incorporation and Bylaws and each agreement or other
arrangement binding upon or affecting Borrower or any of its properties.
2.11. Licenses and Contracts. All franchises, licenses, permits,
certificates, consents, approvals, authorizations, agreements, and contracts
necessary to operate Borrower's business as it currently is being operated have
been obtained, are in effect, and are free from challenge.
ARTICLE 3. CONDITIONS PRECEDENT.
3.l. Conditions Precedent to Term Loan. The obligation of Bank to make
the Term Loan is subject to the satisfaction (in the sole judgment of Bank), at
or before the Closing, of the following conditions precedent:
3.1(a). Representation and Warranties: Compliance. All representations
and warranties made by Borrower in or in connection with this Agreement or any
of the other Loan Documents or otherwise made in writing in connection herewith
or therewith shall be true and correct on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date. All of the agreements, terms, covenants, and
conditions required by this Agreement to be complied with and performed prior to
the Closing by Borrower shall have been complied with and performed. Borrower
shall deliver a certificate dated the Closing Date executed by a duly authorized
officer of Borrower certifying, in form and substance satisfactory to Bank, as
to the foregoing matters.
3.1(b). Documents. Borrower shall deliver to Bank copies of all documents
requested by Bank, including a complete and correct copy of the Articles or
Certificate of Incorporation of Borrower, as currently in effect, certified by
the Secretary of State of its state of incorporation, a complete and correct
copy of its Bylaws, as currently in effect, certified by Borrower's corporate
secretary, a complete and correct copy of all resolutions of Borrower's Board of
Directors authorizing the execution, delivery, and performance of this Agreement
and of the other Loan Documents, certified by Borrower's corporate secretary,
and appropriate certificates of
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<PAGE> 7
incumbency for those officers of Borrower executing this Agreement or any of the
other Loan Documents, certified by Borrower's corporate secretary.
3.1(c). Executed Notes and Other Documents. Borrower shall deliver to
Bank the fully executed Notes, and fully executed copies of all documents
required by Bank with respect to the Collateral.
3.1(d). Financing Statements. All Financing Statements deemed necessary
by Bank under Article 6 hereof shall have been properly filed and shall be
effective as required by Bank.
3.l(e). Legal Opinion. Borrower shall deliver to Bank a favorable written
opinion of Mark B. Sandground and Associates, counsel for Borrower, dated the
Closing Date and addressed to Bank, substantially in the form of the opinion
attached hereto as Exhibit F.
3.2. Conditions Precedent to Revolving Credit Loan Advances. The
obligation of Bank to make any Revolving Credit Loan advance is subject to the
satisfaction (in the sole judgment of Bank), as of the date of such Revolving
Credit Loan advance (the "Borrowing Date"), of the conditions precedent
specified in Section 3.1 hereof (substituting "Borrowing Date" for "Closing
Date" or "Closing" in Section 3.1(a), and including receipt by Bank of such
update of the opinion of Borrower's counsel referred to in Section 3.1(e) as
Bank may request and of a Borrowing Base Certificate dated the Borrowing Date
and executed by a duly authorized officer or attorney-in-fact of Borrower).
ARTICLE 4. AFFIRMATIVE COVENANTS OF BORROWER.
Until all obligations of Borrower under this Agreement and the other Loan
Documents are paid in full and performed, Borrower (and each of them) hereby
covenants and agrees that it shall, except as provided in Section 4.13 and
unless Bank otherwise consents in advance in writing;
4.1. Payment of Notes. Punctually pay the principal of and interest on
the Notes at the times and places and in the manner specified therein.
4.2. Corporate Existence. Preserve, maintain, and keep in full force and
effect its corporate existence in the jurisdiction of its incorporation.
4.3. Corporate Rights and Franchises; Qualification; Orderly Conduct of
Business. Preserve, maintain, and keep in full force and effect all franchises,
licenses, permits, certificates, consents, approvals, authorizations,
agreements, and contracts material to the operation of Borrower's business as it
currently is being conducted, whether now existing or hereafter granted to or
obtained by Borrower; qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its activities and ownership of property; continue to engage in a business of
the same general type as now
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<PAGE> 8
conducted by it; and conduct such business in an orderly, efficient, and regular
manner consistent with the conduct of its business prior to the date of this
Agreement.
4.4. Taxes, Charges, and Obligations. Pay and discharge all taxes,
assessments, and governmental charges or levies imposed upon it or upon its
income, profits, properties or any part thereof, prior to the date on which
penalties attach thereto, as well as all claims which, if unpaid, might become
an Encumbrance upon any properties of Borrower, and pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of the indebtedness and other obligations of whatever nature of
Borrower; provided, however, that Borrower shall not be required to pay any such
tax, assessment, charge, levy, claim, indebtedness or obligation so long as (a)
the validity thereof is being contested by Borrower in good faith and by proper
proceedings, (b) Borrower sets aside on its books adequate reserves therefor,
and (c) in the case where any such tax, assessment, charge, claim or levy might
become an Encumbrance upon any item of the Collateral or any part thereof,
Borrower makes arrangements acceptable to Bank to secure the payment thereof.
4.5. Maintenance of Property. Keep all property used or useful in its
business, including, without limitation, the Collateral, in good repair, working
order, and condition, and from time to time make all necessary or desirable
repairs, renewals, and replacements thereof.
4.6. Insurance. Maintain and keep in full force and effect, with
financially sound and reputable insurance companies acceptable to Bank,
insurance in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which Borrower operates, all such insurance policies to be
in form and substance satisfactory to Bank. Bank shall be named as an additional
insured with Borrower on all policies insuring any of the Collateral, and the
proceeds of all such insurance policies shall be payable to Bank directly and
may be applied to payment of any unpaid obligations under the Loan Documents as
Bank may direct.
4.7. Contract Obligations. Perform in accordance with its terms every
contract, agreement, or other arrangement to which Borrower is a party or by
which it or any of its property is bound.
4.8. Compliance with Laws. Comply with all applicable laws, regulations,
orders, and other requirements of any court, tribunal, arbitrator, or
governmental authority, non-compliance with which could have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of Borrower.
4.9. Books and Records. Keep and maintain adequate and proper records and
books of account, in which complete entries are made in accordance with
generally accepted accounting principles consistently applied and in accordance
with all laws, regulations, orders, and other requirements of any court,
tribunal, arbitrator, or governmental authority, reflecting all financial and
other transactions of Borrower normally and customarily included in records and
books of account of companies engaged in the same or similar businesses and
activities as Borrower.
4.10. Access to Borrower's Employees, Properties, and Books and Records.
Permit
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<PAGE> 9
Bank and any agents or representatives thereof to visit and inspect the
properties of Borrower, to examine and make abstracts from any of Borrower's
books and records at any and all reasonable times and as often as the Bank or
such agents or representatives may desire, and to discuss the business,
operations, properties, and condition (financial or otherwise) of Borrower with
any of the officers, directors, employees, agents or representatives (including,
without limitation, the independent certified public accountants) of Borrower.
4.11. Financial and Other Statements Furnish to Bank (a) as soon as
available and in any event within one hundred twenty (120) days after the end of
each fiscal year of Borrower, the audited balance sheet of Borrower as of the
end of such fiscal year and the related audited statements of income, changes in
stockholders' equity and changes in financial position of Borrower for such
fiscal year, all prepared in reasonable detail and in accordance with generally
accepted accounting principles consistently applied, and certified without
qualification by an independent certified public accountant of recognized
standing and acceptable to Bank; (b) as soon as available, and in any event
within sixty (60) days after the end of each quarter of each fiscal year of
Borrower, a balance sheet and related statement of income, changes in
stockholders' equity, and changes in financial position of Borrower, as of the
end of such quarter, certified by Borrower's chief financial officer as having
been prepared in accordance with generally accepted accounting principles
consistently applied; (c) not later than twenty (20) days after each calendar
month end, a listing and aging of Borrower's Accounts (as defined in Section 6.l
hereof) for that month; and (e) such additional information, reports or
statements as Bank may from time to time reasonably request.
4.12. Collateral. Execute, deliver, and file, or cause the execution,
delivery, and filing of, any and all documents (including, without limitation,
financing statements and continuation statements), necessary or desirable for
Bank to create, perfect, preserve, validate, or otherwise protect a first lien
and security interest in the Collateral; maintain, or cause to be maintained, at
all times Bank's first lien and security interest in the Collateral; immediately
upon learning thereof, report to Bank any reclamation, return or repossession of
any goods forming a part of the Collateral, any claim or dispute asserted by any
debtor or other obligor owing an obligation to Borrower, and any other matters
affecting the value or enforceability or collectibility of any of the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein adverse to Bank, and pay all costs and expenses (including
attorneys' fees and expenses) incurred in connection with such defense; at
Borrower's sole cost and expense (including legal costs and attorneys' fees and
expenses), settle any and all stock claims, demands, and disputes, and indemnify
and protect Bank against any liability, loss or expense arising from any such
claims, demands, or disputes or out of any such reclamation, return or
repossession of goods forming a part of the Collateral; provided, however, that
if Bank shall so elect, Bank shall have the right at all times to settle,
compromise, adjust or litigate all claims and disputes directly with the debtor
or other obligor owing an obligation to Borrower upon such terms and conditions
as Bank deems advisable, and all costs and expenses thereof (including
attorneys' fees and expenses) shall be made for the account of Borrower and
shall constitute a part of the obligations owed to Bank and secured pursuant to
this Agreement; and continue to maintain its places of business and its chief
executive office only in the locations set forth in Exhibit G attached hereto.
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<PAGE> 10
4.13. Financial Requirements. Borrower shall maintain the following
financial position as determined on a consolidated basis (accounting for
Consolidated Leasing on the equity method) in accordance with generally accepted
accounting principles consistently applied: (a) a debt to net worth ratio of not
greater than 3.5 to 1; (b) a ratio of net income (after taxes and interest
expense) plus depreciation expense to the sum of all payments due within the
next twelve months under long-term debt obligations of not less than 1.5 to 1;
(c) a ratio of net income (before interest expenses and taxes) to interest
expenses of not less than 2 to 1; and (d) a ratio of current assets to current
liabilities of not less than 1.3 to 1. For purposes of this Section 4.13: (a)
"current assets" means all assets of Borrower (determined on a consolidated
basis) which would be classified, in accordance with generally accepted
accounting principles consistently applied, as current assets of a corporation
conducting a business the same as or similar to the business conducted by
Borrower; (b) "current 1iabilities" means all liabilities of Borrower
(determined on a consolidated basis) which would be classified, in accordance
with generally accepted accounting principles consistently applied, as current
liabilities of a corporation conducting a business the same as or similar to the
business conducted by Borrower; (c) "net worth" means the excess of total assets
over total liabilities of Borrower (determined on a consolidated basis), total
assets and total liabilities to be determined in accordance with generally
accepted accounting principles consistently applied; (d) "debt" means any and
all liabilities of Borrower (determined on a consolidated basis) which would be
classified, in accordance with generally accepted accounting principles
consistently applied, as liabilities of a corporation conducting a business the
same as or similar to the business conducted by Borrower, and all indebtedness
secured by any Encumbrance to which any property of Borrower is subject; (e)
"long-term debt obligations" means all debt of Borrower (determined on a
consolidated basis) which does not become due and payable in full within twelve
(12) months; (f) "net income (before interest expenses and taxes)" for any
period means the net income of Borrower (determined on a consolidated basis)
during such period, determined in accordance with generally accepted accounting
principles consistently applied for such period taken as a single accounting
period, plus the interest expenses and income taxes of Borrower for such period;
(9) "net income (after taxes and interest expense) plus depreciation expense"
for any period means the net income of Borrower (determined on a consolidated
basis) during such period after the payment of income taxes and interest
expenses for such period, plus depreciation expenses of Borrower for such
period, as determined in accordance with generally accepted accounting
principles consistently applied for such period taken as a single accounting
period.
4.14. Notice of Default and Loss. Give immediate notice to Bank upon the
occurrence of any Event of Default or event which with notice or lapse of time
or otherwise would constitute an Event of Default and of any loss or damage to
any of the Collateral.
ARTICLE 5. NEGATIVE COVENANTS OF BORROWER.
Until all obligations of Borrower under the Loan Documents are paid in
full and performed, Borrower (and each of them) hereby covenants and agree: that
it shall not, unless Bank otherwise consents in advance in writing (which
consent in the case of Section 5.6 shall not be unreasonably withheld):
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<PAGE> 11
5.1. Indebtedness and Contingent Obligations. Create, incur, assume, or
suffer to exist any indebtedness, or agree to assume, guarantee, endorse or
otherwise in any way be or become responsible or liable, directly or indirectly,
for any Contingent obligation, except for (a) indebtedness under the Loan
Documents; (b) indebtedness or contingent obligations existing on the date
hereof and reflected in the financial statements referred to in Section 2.6
hereof; or (c) indebtedness incurred in the normal course of business and
payable by its terms within one (1) year after the incurrence thereof, provided
Borrower would be in compliance with Section 4.13 hereof after giving effect
thereto. For purposes of this Agreement, "contingent obligation" means, as to
any entity, any obligation of such entity guaranteeing or in effect guaranteeing
any indebtedness, leases, dividends or other obligations (" primary
obligations") of any other entity (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
entity, whether or not contingent: (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) otherwise
to assure the owner of such primary obligation against loss in respect thereof;
provided, however, that the term "contingent obligation" shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.
5.2. Encumbrances. Create, incur, assume or suffer to exist any
Encumbrance upon any of its properties or assets (including, without limitation,
the Collateral), whether now owned or hereafter acquired, except for those
Encumbrances set forth in Exhibit E attached hereto provided, however, that none
of the encumbrances set forth in Exhibit E which secure obligations reflected in
the financial statements referred to in Section 2.6 hereof may be spread to
cover other or additional indebtedness or property of Borrower; and provided,
further, however, that Borrower may enter into equipment lease transactions,
which, unless Bank provides prior written consent (which consent shall not be
unreasonably withheld), shall not involve total payments over the term of the
lease in excess of $25,000 in any one such transaction or $250,000 in the
aggregate for all such transactions;
5.3. Fundamental Chances. Amend its Articles or Certificate of
Incorporation by any amendment which would adversely affect Borrower's ability
to perform or comply with any of the terms, conditions or agreements to be
performed or complied with by Borrower hereunder or to perform any of the
transactions contemplated hereby, change its name, consolidate or merge with any
other corporation, or purchase, lease or otherwise acquire all or substantially
all of the assets of any other entity, including shares of stock of other
corporations, except that Borrower may own notes and other receivables acquired
in the ordinary course of business.
5.4. Transfer of Assets. Sell, lease, assign, pledge or otherwise dispose
of any of its properties or assets (including, without limitation, the
Collateral), whether now owned or hereafter acquired, except in the ordinary
course of business and for fair market value.
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<PAGE> 12
5.5. Investments. Make or commit itself to make any advance, loan or
capital contribution to, or other investment in, any other person or entity
except for investments in bank deposits and other securities issued by banks,
short-term securities of the United States of America or any agency thereof, and
such other investments as Bank shall approve.
5.6. Repurchase of Securities. Purchase, redeem or otherwise acquire any
of its own capital stock or purchase, acquire, redeem, retire, or make any
payment on account of the principal of any indebtedness of Borrower, except at
the stated maturity of such indebtedness, except where payment is required by
mandatory sinking fund or prepayment provisions relating thereto, and except
payments with respect to the indebtedness created by this Agreement.
5.7. Dividends. Declare or pay any dividends (other than stock dividends)
on its capital stock.
5.8. Use of Proceeds. Use, or allow the use of, the proceeds of the Loans
for any purpose which would cause this Agreement to violate Regulations G, U, T,
or X of the Board of Governors of the Federal Reserve System; for any purpose
other than "business purposes" within the meaning of Section 6.1-330.44 of the
Code of Virginia (1950); or for any purpose other than that specified in Section
1.4 hereof.
5.9 Other Agreements. Enter into any agreement or undertaking containing
any provision which would be violated or breached by Borrower's performance of
its obligations under the Loan Documents.
ARTICLE 6. SECURITY.
6.1. Collateral. As security (a) for the punctual payment of the
principal of the Notes, together with the interest and premium, if any, thereon,
including all advances thereunder, and all modifications, renewals, extensions,
and re-amortizations thereof or any part thereof, however evidenced, (b) for the
punctual payment of all other sums and interest, if any, thereon, becoming due
or payable to Bank under the provisions hereof or of any other Loan Document or
any other agreement or document executed in connection with the transactions
contemplated hereby or thereby, including, without limitation, any future
advances, (c) for the punctual payment of any and all other indebtedness of
Borrower to Bank now existing or hereafter incurred, matured or unmatured,
direct or contingent, and whether or not such other indebtedness is related to
the transactions contemplated by this Agreement or was contemplated by Borrower
or Bank on the date hereof, including. without limitation, any extension,
renewal, modification, or re-amortization of said indebtedness, and (d) the due
performance and observance by Borrower of all of the covenants, conditions and
other provisions hereof and of the other Loan Documents and any other agreement
or document executed in connection with the transactions contemplated hereby or
thereby (all of the indebtedness and other obligations of Borrower described in
this Section 6.1 being hereinafter referred to collectively as the
"Obligations"), Borrower hereby grants to Bank a security interest (as that term
is defined in the Uniform Commercial Code as in effect in Virginia on the date
hereof) in, and assigns and pledges to Bank all of the following (the
"Collateral"): (i) all receivables now owned or hereafter acquired by Borrower;
(ii) all equipment (including items of equipment which are or become fixtures)
now owned or hereafter acquired by
12
<PAGE> 13
Borrower; and (iii) any and all products and proceeds (including insurance
proceeds) of the foregoing, including, without limitation, all Government
Contracts and all related Government Accounts now owned or hereafter acquired by
Borrower, and the proceeds (including insurance proceeds) thereof; provided,
however, that Bank shall not have a security interest in any Government Contract
of Borrower or in the related Government Account where the taking of such
security interest would violate an express prohibition in such Government
Contract. For purposes of this limitation, the fact that a Government Contract
is subject to, or otherwise refers to, Title 31, S 3727 or Title 41, S 15 of the
United States Code, as amended, shall not be deemed an express prohibition
against assignment thereof. For purposes of this Agreement: "receivables" means
accounts, chattel paper, documents, general intangibles, and instruments; and
the terms "accounts," "chattel paper," "documents," "general intangibles,"
"instruments," "inventory," "fixtures" and "equipment" have the meanings
ascribed to them in Article 9 of the Uniform Commercial Code as in effect in the
Commonwealth of Virginia on the date hereof. The terms "Accounts" and "accounts"
as used in this Agreement mean "accounts" as defined in this Section 6.1.
6.2. Assignment of Payments Under Certain Government Contracts and
Government Accounts. On the Closing Date, and thereafter upon Bank's request,
Borrower agrees to execute and deliver to Bank specific assignments, in
substantially the form of the Assignment attached hereto as Exhibit H, of
payments under those Government Contracts described on Exhibit I (and the
related Government Accounts of Borrower) and under those Government Contracts
(and the related Government Accounts of Borrower) which call for total payments
of more than One Million and No/100 Dollars ($1,000,000), for the purpose of
better evidencing Bank's security interest therein. Payments on Government
Contracts or Government Accounts which have been specifically assigned to Bank
by means of a direct assignment, as provided for in this Section 6.2, shall be
made directly to the operating account of Borrower at Bank and shall be credited
to payment of the Revolving Credit Loan within one (1) Business Day (as defined
in Section 8.14) after receipt.
The separate assignment of specific Government Contracts to Bank, as
contemplated under this Section 6.2, shall not be deemed to limit Bank's
security interest to those particular Government Contracts and the related
Government Accounts, but rather Bank's security interest shall, as stated above,
extend to any and all Government Contracts and the related Government Accounts
and proceeds thereof, now or hereafter owned or acquired by Borrower, other than
those which expressly prohibit assignment.
6.3 Copies of Government Contracts. Borrower will furnish to Bank, at the
request of Bank, a copy of each Government Contract of Borrower in which Bank
has a security interest and a copy of each amendment thereto or modification
thereof which changes the price of such contract or the amount funded to pay for
such contract, except to the extent that furnishing such copies may be
prohibited by government security regulations.
6.4. Certain Rights of Bank. Bank shall have the right, but not the
obligation, to pay any taxes or levies on the Collateral or any costs to repair
or to preserve the Collateral, which payment shall be made for the account of
Borrower and shall constitute a part of the obligations
13
<PAGE> 14
owed to Bank and secured pursuant to this Agreement.
6.5. Financing Statements. At the request of Bank, Borrower will join
with Bank in executing financing statements, continuation statements, and other
documents with respect to the Collateral pursuant to the Uniform Commercial Code
and otherwise, in form satisfactory to Bank, and Borrower will pay the cost of
filing the same in all public offices wherever Bank deems filing to be necessary
or desirable. Borrower grants Bank the right, at Bank's option, to file any or
all such financing statements, continuation statements, and other documents
pursuant to the Uniform Commercial Code and otherwise, without Borrower's
signature, and irrevocably appoints Bank as Borrower's attorney-in-fact to
execute any such statements and documents in Borrower's name and to perform all
other acts which Bank deems appropriate to perfect and continue the security
interests conferred by this Agreement.
6.6. No Release. No injury to, or loss or destruction of, any item of the
Collateral shall relieve Borrower of any obligation under this Agreement or
under any of the other Loan Documents.
ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES.
7.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder: (a) Borrower
shall fail to pay, when due, any sum payable under the Notes; or (b) any
representation or warranty made by or on behalf of Borrower herein or in any
other Loan Document shall prove to have been incorrect or misleading or breached
in any respect on or as of any date as of which made; or (c) Borrower shall at
any time fail to observe, satisfy or perform any of the covenants or agreements
contained in Article 4 or 5 hereof; or (d) Borrower shall fail to observe or
perform any other term, covenant or agreement contained in this Agreement or in
any other Loan Document to be observed or performed on its part; or (e) Borrower
shall default in the payment of principal of or interest on any indebtedness
(other than the Notes) or shall default in the payment of any contingent
obligation, or shall default in the observance or performance of any other
agreement contained in any instrument or agreement evidencing, securing, or
relating to any indebtedness or contingent obligation of Borrower; or (f) any
Event of Default under any of the Loan Documents shall occur; or (g) a decree or
order for relief of Borrower shall be entered by a court of competent
jurisdiction in any involuntary case involving Borrower under any bankruptcy,
insolvency, or similar law now or hereafter in effect, or a receiver,
liquidator, or other similar agent for Borrower or for any substantial part of
Borrower's assets or property shall be appointed, or the winding up or
liquidation of Borrower's affairs shall be ordered, or any action by any
creditor (other than Bank) of Borrower preparatory to or for the purpose of
commencing any such involuntary case, appointment, winding up or liquidation
shall be taken; or (h) Borrower shall commence a voluntary case under any
bankruptcy, insolvency, or similar law now or hereafter in effect, or Borrower
shall consent to the entry of an order for relief in an involuntary case under
any such law or to the appointment of or taking possession by a receiver,
liquidator or other similar agent for Borrower or for any substantial part of
Borrower's assets or property, or Borrower shall make any general assignment for
the benefit of creditors, or Borrower shall take any action preparatory to or
otherwise in furtherance of any of the foregoing, or Borrower shall fail
generally to pay its
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<PAGE> 15
debts as such debts come due; or (i) one or more judgments or decrees shall be
entered against Borrower involving in the aggregate a liability (not paid or
fully covered by insurance) of $25,000 or more, and all such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within sixty (60) days from the entry thereof; or (j) any material change
in the business, operations, prospects, property, assets, or condition
(financial or otherwise) of Borrower shall occur which adversely affects the
ability of Borrower to meet and carry out its obligations under this Agreement
or any of the other Loan Documents or to perform the transactions contemplated
herein or thereby.
7.2. Rights and Remedies of Bank. Upon the occurrence of any Event of
Default, Bank may, at its option, exercise any one or more of the following
rights and remedies: (a) declare the Commitment and Bank's obligation to make
the Loans to be terminated, and declare the entire unpaid principal amount of
the Notes, all interest accrued and unpaid thereon, and all other accounts
payable under this Agreement and the other Loan Documents to be accelerated, and
to be immediately due and payable, whereupon the Notes, all such accrued
interest, and all such amounts shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by Borrower, anything contained herein or in any of
the other Loan Documents to the contrary notwithstanding; (b) take possession or
control of, store, lease, operate, manage, sell or otherwise dispose of all or
any part of the Collateral; (c) notify all parties under the contracts and
accounts forming all or any part of the Collateral to make any payments due to
Borrower from such parties directly to Bank; (d) in Bank's own name, or in the
name of Borrower, demand, collect, receive, sue for, and give receipts and
releases for, any and all amounts due under such contracts and accounts; (a)
endorse as the agent of Borrower any chattel paper, documents, or instruments
forming all or any part of the Collateral; (f) make formal application for the
transfer of all of Borrower's permits, licenses, approvals, agreements, and the
like relating to the Collateral or to Borrower's business to Bank or to any
assignee of Bank or to any purchaser of any of the Collateral; (g) take any
other action which Bank deems necessary or desirable to protect and realize upon
its security interest in the Collateral; and (h) in addition to the foregoing,
and not in substitution therefor, exercise any one or more of the rights and
remedies exercisable by Bank under other provisions of this Agreement, under the
Notes, under any of the other Loan Documents, or provided by applicable law
(including, without limitation, the Uniform Commercial Code as in effect in
Virginia).
7.3. Application of proceeds. Any proceeds from the collection or sale or
other disposition of the Collateral shall be applied in the following order of
priority: First, to the payment of all expenses of collecting, storing, leasing,
operating, managing, selling, or disposing of the Collateral, and to the payment
of all sums which Bank may be required or may elect to pay, if any, for taxes,
assessments, insurance, and other charges upon such Collateral or any part
thereof, and of all other payments which Bank may be required or authorized to
make under any provision of this Agreement or of any other Loan Document
(including in each such case legal costs and attorneys' fees and expenses);
Second, to the payment of all obligations under this Agreement, the Notes, and
the other Loan Documents and to the payment of all other obligations; and Third,
to the payment of any surplus then remaining to Borrower, unless otherwise
provided by law or directed by a court of competent jurisdiction; provided that
Borrower shall be liable for
15
<PAGE> 16
any deficiency if the proceeds are insufficient to satisfy all of the
Obligations.
ARTICLE 8. MISCELLANEOUS PROVISIONS
8.1. Additional Actions and Documents. Borrower shall take or cause to be
taken such further actions, shall execute, deliver, and file or cause to be
executed, delivered, and filed such further documents and instruments, and shall
obtain such consents as may be necessary or as Bank may reasonably request in
order fully to effectuate the purposes, terms, and conditions of this Agreement
and the other Loan Documents, whether before, at or after the closing of
transactions contemplated hereby and thereby or the occurrence of an Event of
Default hereunder.
8.2. Expenses. Borrower shall, whether or not the transactions
contemplated hereby shall be consummated, (a) reimburse Bank and save Bank
harmless against liability for the payment of all out-of-pocket expenses arising
in connection with the preparation, execution, delivery, administration or
enforcement of or the preservation or exercise or any rights (including the
right to collect and dispose of the Collateral) under, this Agreement or any of
the other Loan Documents, including, without limitation, the fees and expenses
of counsel to Bank arising in such connection; and (b) pay, and hold Bank and
each subsequent holder of the Notes harmless from and against, any and all
present and future stamp taxes or similar document taxes or recording taxes and
any and all charges with respect to or resulting from any delay in paying, or
failure to pay, such taxes.
8.3. Notices. All notices, demands, requests, or other communications
provided for herein or in the other Loan Documents shall be in writing and shall
be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram or hand delivery,
addressed as follows:
(a) If to Borrower:
S.T. Research Corporation
8419 H. Terminal Road
Newington, Virginia 22122
Attention: Robert Bower
with a copy (which shall not constitute notice) to:
Mark D. Sandground and Associates
1025 Connecticut Avenue, N.W.
Suite 1015
Washington, D.C. 20036
Attention: Mark B. Sandground
(b) If to Bank:
Sovran Bank, N.A.
16
<PAGE> 17
8300 Greensboro Drive
Suite 640
McLean, Virginia 22102
Attention: Paula G. Mahan
with a copy (which shall not constitute notice) to:
Hogan & Hartson
8300 Greensboro Drive
Suite 1100
McLean, Virginia 22102
Attention: Duncan S. Klinedinst, Esq.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication which shall be mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given
served, sent or received for all purposes at such time as it is delivered to the
addressee, (with the return receipt, the delivery receipt, or affidavit of
messenger being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
8.4. Severability. If fulfillment of any provision of the Loan Documents
or performance of any transaction related thereto, at the time such fulfillment
or performance shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled or performed shall be
reduced to the limit of such validity; and if any clause or provision contained
in any Loan Document operates or would operate prospectively to invalidate any
Loan Document, in whole or in part, then such clause or provision only shall be
held ineffective, as though not herein or therein contained, and the remainder
of the Loan Documents shall remain operative and in full force and effect.
8.5. Survival. It is the express intention and agreement of the parties
hereto that all covenants, agreements, statement, representations, warranties,
and indemnities made by Borrower in the Loan Documents shall survive the
execution and delivery of the Loan Documents and the making of all advances and
extensions of credit thereunder.
8.6. Waivers. No waiver by Bank of, or consent by Bank to, a variation
from the requirements of any provision of the Loan Documents shall be effective
unless made in a written instrument duly executed on behalf of Bank by its duly
authorized officer, and any such waiver shall be limited solely to those rights
or conditions expressly waived.
8.7. Rights Cumulative. The rights and remedies of Bank described in any
of the Loan Documents are cumulative and not exclusive of any other rights or
remedies which Bank or the then holder of the Notes otherwise would have at law
or in equity or otherwise. No notice to or demand on Borrower in any case shall
entitle Borrower to any other notice or demand in similar or other
circumstances.
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<PAGE> 18
8.8. Entire Agreement; Modification; Benefit. This Agreement, the
exhibits hereto, and the other Loan Documents constitute the entire agreement of
the parties hereto with respect to the matters contemplated herein, supersede
all prior oral and written agreements with respect to the matters contemplated
herein, and may not be modified, deleted or amended except by written instrument
executed by the parties. All terms of this Agreement and of the other Loan
Documents shall be binding upon, and shall inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of Bank.
8.9. Setoff. In addition to any right or remedies of Bank provided by
law, upon the occurrence of any Event of Default hereunder, Bank is hereby
irrevocably authorized, at any time or times without prior notice to Borrower,
to set off, appropriate, and apply any and all deposits, credits, indebtedness
or claims at any time held or owing by Bank to or for the credit or the account
of Borrower, in such amounts as Bank may elect, against and on account of the
obligations and liabilities of Borrower to Bank hereunder or under any of the
other Loan Documents, whether or not Bank has made any demand for payment, and
although such obligations and liabilities may be contingent or unmatured.
8.10. Termination. This Agreement shall terminate upon payment in full of
all amounts payable and performance of all other obligations owed by Borrower to
Bank under this Agreement and under the other Loan Documents.
8.11. Construction. This Agreement and the other Loan Documents, the
rights and obligations of the parties hereto, and any claims or disputes
relating thereto shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia (excluding the choice of law rules thereof).
Each party hereto hereby acknowledges that all parties hereto participated
equally in the negotiation and drafting of this Agreement and that, accordingly,
no court construing this Agreement shall construe it more stringently against
one party than against the other.
8.12. Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.
8.13. Headings. Article, section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
8.14. Payments. If any payment or performance of the Notes or of any of
the other obligations under this Agreement or any of the other Loan Documents
becomes due on a day other than a Business Day, the due date shall be extended
to the next succeeding Business Day, and interest thereon (if applicable) shall
be payable at the then applicable rate during such extension. For the purposes
of this Agreement, "Business Day" means a day other than a
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<PAGE> 19
Saturday, Sunday or other day on which commercial banks in Virginia are
authorized by law to close.
8.15. Execution. To facilitate execution, this Agreement and any of the
other Loan Documents may be executed in as many counterparts as may be required;
and it shall not be necessary that the signatures of, or on behalf of, each
party, or the signatures of all persons required to bind any party, appear on
each counterpart; but it shall be sufficient that the signature of, or on behalf
of, each party, or the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement or any other Loan Document to produce or account for any particular
number of counterparts; but rather any number of counterparts shall be
sufficient so long as those counterparts contain the respective signatures of,
or on behalf of, all of the parties hereto.
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<PAGE> 20
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have
caused this Agreement to be duly executed on their behalf, as of the day and
year first hereinabove set forth.
BORROWER:
ATTEST: S.T. RESEARCH CORPORATION
/s/ Shirley D. Walker By: /s/ S.R. Perrino
- ---------------------------------- ------------------------------
/s/ Secretary /s/ President
- ---------------------------------- ----------------------------------
(Title)
and
ATTEST: CREATIVE CIRCUITS, INC.
/s/ Shirley D. Walker By: /s/ S.R. Perrino
- ---------------------------------- ------------------------------
/s/ Secretary /s/ President
- ---------------------------------- ----------------------------------
(Title) (Title)
and
ATTEST: CONSOLIDATED LEASING CO., INC.
/s/ Shirley D. Walker By: /s/ S.R. Perrino
- ---------------------------------- ------------------------------
/s/ Secretary /s/ President
- ---------------------------------- ----------------------------------
(Title) (Title)
LENDER:
SOVRAN BANK, N.A.
By: /s/ Paula G. Mahan
------------------------------
Assistant Vice President
----------------------------------
(Title)
20
<PAGE> 21
EXHIBIT 10.14
EIGHTH REVOLVING CREDIT NOTE MODIFICATION AGREEMENT
THIS EIGHTH REVOLVING CREDIT NOTE MODIFICATION AGREEMENT is made as of
the 30th day of September, 1998, by and between SENSYS TECHNOLOGIES INC., a
Delaware corporation, (formerly known as S.T. Research Corporation, a Virginia
corporation), with its principal office at 8419 H. Terminal Road, Newington,
Virginia 22122 ("Borrower"), and NATIONSBANK, N.A. (formerly known as
"NationsBank, N.A. (Carolinas)" and successor by merger to NationsBank, N.A.,
which was formerly known as "NationsBank of Virginia, N. A.," the successor by
merger to Sovran Bank, N.A.), a national banking association ("Bank").
WHEREAS, by a revolving credit note dated May 11, 1995, as modified by a
First Revolving Credit Note Modification Agreement dated as of April 30, 1996, a
Second Revolving Credit Note Modification Agreement dated as of December 30,
1996, a Third Revolving Credit Note Modification Agreement dated as of April 30,
1997, a Fourth Revolving Credit Note Modification Agreement dated July 29, 1997,
a Fifth Revolving Credit Note Modification Agreement dated as of July 31, 1997,
a Sixth Revolving Credit Note Modification Agreement dated as of October 23,
1997 and a Seventh Revolving Credit Note Modification Agreement dated as of June
30, 1998 (as modified, supplemented, amended and restated from time to time,
collectively, the "Note"), the Borrower has become indebted to the Lender in the
principal sum of $3,000,000 or so much thereof as has been or may be advanced
pursuant to the terms and conditions of the Loan Agreement (as defined in the
Note); and
WHEREAS, the Note has matured and the Borrower has requested an extension
of the maturity of the Note; and
WHEREAS, the Lender has agreed to extend the maturity date of the Note in
accordance with the terms set forth herein.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
That in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Lender and the Borrower covenant and agree as follows:
1. The Borrower acknowledges that the present principal balance of the
Note is due and owing, subject to the terms of repayment set forth in the Note,
as amended hereby, without counterclaim, recoupment, defense or offset.
2. All capitalized terms used herein but not defined shall have the
meaning given to such terms in the Loan and Security Agreement dated June 16,
1986 by and between the Borrower and the Lender (as modified, supplemented,
amended and restated from time to time, collectively, the "Loan Agreement").
<PAGE> 22
3. From and after the date hereof interest on the outstanding principal
balance of the Note shall accrue and be payable at the Prime Rate plus one half
of one percent (1/2%) per annum.
4. The date "September 30, 1998" contained in paragraph 1 of the Note is
hereby deleted and the date "February 28, 1999" is hereby inserted in its place.
5. The terms, provisions and covenants of the Note are in all other
respects hereby ratified and confirmed and remain in full force and effect.
6. It is expressly agreed that the indebtedness evidenced by the Note has
not been extinguished or discharged hereby. The Borrower and the Lender agree
that the execution of this Agreement is not intended to and shall not cause or
result in a novation with regard to the Note.
WITNESS the signatures and seals of the Borrower and the Lender the day
and year first above written.
WITNESS OR ATTEST: SENSYS TECHNOLOGIES INC.
/s/ Cindy J. Hruska By: /s/ R. R. Bower (SEAL)
- ---------------------------------- -------------------------
Robert R. Bower
Chief Financial Officer
/s/ Cindy J. Hruska By: /s/ S. Kent Rockwell (SEAL)
- ---------------------------------- -------------------------
S. Kent Rockwell
Vice Chairman and CEO
WITNESS: NATIONSBANK, N.A.
/s/ Marilyn Johnson By: /s/ Douglas T. Brown (SEAL)
- ---------------------------------- -------------------------
Douglas T. Brown
Vice President
<PAGE> 23
FOURTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into
as of the 30th day of September, 1998 (this "Amendment"), by and between SENSYS
TECHNOLOGIES INC., a Delaware corporation (formerly known as S.T. Research
Corporation, a Virginia corporation), with its principal office at 8419 H.
Terminal Road, Newington, Virginia 22122 ("Borrower"), and NATIONSBANK, N. A.
(formerly known as "NationsBank, N.A. (Carolinas)" and successor by merger to
NationsBank, N.A., which was formerly known as "NationsBank of Virginia, N. A.,"
the successor by merger to Sovran Bank, N.A.), a national banking association
("Bank").
WITNESSETH:
WHEREAS, Borrower, Creative Circuits, Inc., a North Carolina corporation
("Creative Circuits"), and Consolidated Leasing Co., Inc., a Virginia
corporation ("Consolidated Leasing"), as borrowers, and Sovran Bank, N.A., a
national banking association ("Sovran"), as lender, entered into a certain Loan
and Security Agreement, dated as of June 16, 1986, (the "Original Loan
Agreement"), pursuant to which Sovran agreed to make available a revolving line
of credit to the Borrower, Creative Circuits and Consolidated Leasing and to
make a term loan to the Borrower, Creative Circuits and Consolidated Leasing;
WHEREAS, Creative Circuits and Consolidated Leasing have been merged with
and into Borrower, with Borrower as the surviving corporation;
WHEREAS, Borrower and Sovran have heretofore entered into (i) the
Amendment to Loan and Security Agreement, dated as of September 1, 1991 (the
"First Amendment"), and (ii) the Second Amendment to Loan and Security
Agreement, dated as of December 31, 1991 (the "Second Amendment");
WHEREAS, Sovran has previously merged with and into NationsBank of
Virginia, N.A., with NationsBank of Virginia, N.A. as the surviving entity;
WHEREAS, Borrower and Bank (as survivor, through merger, with Sovran)
have heretofore entered into (i) the Third Amendment to Loan and Security
Agreement, dated as of April 1, 1992 (the "Third Amendment"), (ii) the Fourth
Amendment to Loan and Security Agreement, dated as of May 1, 1992 (the "Fourth
Amendment"), (iii) successive letter agreements, (iv) the Fifth Amendment to
Loan and Security Agreement, dated as of August 31, 1994 (the "Fifth
Amendment"), (v) the Sixth Amendment to Loan and Security Agreement dated as of
May 11, 1995 (the "Sixth Amendment"), (vi) the Seventh Amendment to Loan and
Security Agreement dated as of April 30, 1996 (the "Seventh Amendment"), (vii)
the Eighth Amendment to Loan and Security Agreement dated as of December 30,
1996 (the "Eighth Amendment"), (viii) the Ninth Amendment to Loan and Security
Agreement dated as of April 30, 1997 (the "Ninth Amendment"), (ix) the Tenth
Amendment to Loan and Security Agreement dated as of July 29, 1997 (the "Tenth
Amendment"; (x) the Eleventh Amendment to Loan and Security
<PAGE> 24
Agreement dated as of July 31, 1997 (the "Eleventh Amendment"); (xi) the Twelfth
Amendment to Loan and Security Agreement dated as of October 23, 1997 (the
"Twelfth Amendment") and (xii) the Thirteenth Amendment to Loan and Security
Agreement dated as of June 30, 1998 (the "Thirteenth Amendment"); such letter
agreements, together with the Original Loan Agreement, the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment, the
Ninth Amendment, the Tenth Amendment, the Eleventh Amendment, the Twelfth
Amendment and the Thirteenth Amendment, the "Loan Agreement") for the purpose of
extending the term of the Revolving Credit Loan (as defined in the Loan
Agreement);
WHEREAS, Borrower has been acquired by a public company known as Daedalus
Corporation and has merged into such company and, as the surviving corporation
has changed its name as noted in the opening paragraph of this Agreement;
WHEREAS, the Borrower has requested that Bank amend the Loan Agreement to
extend the maturity date of the Revolving Credit Loan; and
WHEREAS, Bank is willing to extend the maturity date of the Revolving
Credit Loan, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged by Borrower,
Borrower and Bank hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Loan Agreement.
2. Amendment of Section 1.1 of the Loan Agreement-Revolving Credit Loan.
The first paragraph of Section 1.1 of the Loan Agreement is hereby amended by
deleting such paragraph in its entirety and inserting the following paragraph in
its place:
"1.1. Revolving Credit Loan. Subject to the terms and conditions
set forth in Article 3 of this Agreement, the Bank will from time to time
from June 16, 1986 (the "Closing Date") until February 28, 1999 (the
"Ending Date"), make advances (the "Revolving Credit Loan") to the
Borrower in such amounts as Borrower shall request by submission of a
Borrowing Base Certificate in the form of the certificate attached hereto
as Exhibit A, provided that the maximum outstanding aggregate principal
amount of all such advances and the Outstanding Letter of Credit
Obligations (as hereinafter defined) shall not at any time exceed an
amount which is equal to the lesser of (a) the aggregate of (i) the
Borrowing Base and (b) Three Million Dollars ($3,000,000) (the
"Commitment"). Under the Revolving Credit Loan, Borrower may borrow,
repay, and reborrow, subject to the above maximum outstanding aggregate
principal amount limitation. The Revolving Credit Loan shall be evidenced
by a promissory note of Borrower (as amended, supplemented, modified or
extended from time to time, the "Revolving Credit Note"), dated the
Closing Date and in substantially the form of the promissory note
attached
<PAGE> 25
hereto as Exhibit B (the terms and provisions of which Revolving Credit
Note are incorporated herein by reference), and shall be secured as
hereinafter set forth."
3. Amendments of Section 4.13 of the Loan Agreement--Financial
Requirements.
(a) Clauses (a) and (b) of Section 4.13 of the Loan Agreement are hereby
amended by deleting such clauses in their entirety and inserting the following
clauses in substitution therefor:
"(a) a debt to net worth ratio of not greater than 2.0 to 1.0; (b)
a minimum tangible net worth of no less than $6,800,000 at any time up to
and including February 28, 1999;" and
(b) Clause (d) of Section 4.13 of the Loan Agreement is hereby amended by
deleting such clause in its entirety and inserting the following clause in
substitution therefor:
"(d) a ratio of earnings before payment of interest, taxes,
depreciation and amortization expense divided by (ii) the aggregate of
interest expense, the current maturities of long term debt and the
current payments under capitalized leases of not less than 1.5 to 1.0
measured as of the end of each fiscal quarter commencing September 30,
1998."
4. Representations, Warranties Etc. Borrower hereby represents, warrants,
acknowledges and agrees to and with Bank as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified as a
foreign corporation in good standing in every other state wherein the conduct of
its business or the ownership of its property requires such qualification;
(b) Borrower has the corporate power and authority to execute and deliver
this Amendment and perform its obligations hereunder and has taken all necessary
and appropriate corporate action to authorize the execution, delivery and
performance of this Amendment;
(c) The execution, delivery and performance by Borrower of this Amendment
will not violate the terms of any instrument, document or agreement to which
Borrower is a party, either individually or jointly, or by which Borrower or any
of the property of Borrower is bound, or be in conflict with, result in a breach
of or constitute (without giving of notice or lapse of time or both) a default
under any such instrument, document or agreement, or result in the creation or
imposition of any lien upon any of the property or assets of Borrower;
(d) The Loan Agreement, as heretofore amended and as amended by this
Amendment, and each other Loan Document remains in full force and effect, and
each constitutes the valid and legally binding obligation of Borrower,
enforceable in accordance with its terms;
<PAGE> 26
(e) No consent or approval or authorization of any governmental
authority, bureau or agency is required in connection with the execution,
delivery or performance of this Amendment by Borrower or the validity and
enforceability of this Amendment as to Borrower;
(f) All of Borrower's representations and warranties contained in the
Loan Agreement and the other Loan Documents are true and correct on and as of
the date of Borrower's execution of this Amendment; and
(g) No Event of Default and no event which, with notice, lapse of time or
both would constitute an Event of Default, has occurred and is continuing under
the Loan Agreement or the other Loan Documents which has not been waived in
writing by Bank.
5. Expenses. Borrower agrees to pay, immediately upon demand by Bank, all
costs, expenses, attorneys' fees, and other charges and expenses actually
incurred by Bank in connection with the negotiation, preparation, execution and
delivery of this Amendment and any other instrument, document, agreement or
amendment executed in connection with this Amendment.
6. Existing Defaults. The Lender hereby waives defaults under Section
4.13 (d) (debt service coverage ratio) and Section 5.10 (Profitability) that
existed prior to the execution of this Agreement; provided, however, that this
Section shall not be deemed to waive any defaults under such sections after the
date of this Agreement, or any other defaults arising out of noncompliance by
the Borrower with the Financing Agreement, whether or not the events, facts or
circumstances giving rise to such non-compliance existed on or prior to the date
hereof.
7. Defaults Hereunder. The breach of any representation, warranty or
covenant contained herein or in any document executed in connection herewith, or
the failure to observe or comply with any term or agreement contained herein or
in any document executed in conjunction herewith, shall constitute an Event of
Default under the Loan Agreement and Bank shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement, the other Loan
Documents and applicable law.
8. Effect of Amendment. Except as expressly set forth herein, this
Amendment shall not be deemed (a) to waive, amend or modify any term or
condition of the Loan Agreement or the other Loan Documents, each of which (i)
is hereby ratified, reaffirmed and reinstated; (ii) shall remain in full force
and effect; and (iii) is incorporated herein by reference, nor (b) to serve as a
consent to any matter prohibited by the terms and conditions thereof. This
Amendment is supplemental to that certain Security Agreement dated as of
February 24, 1989, that certain Security Agreement dated as of April 7, 1987,
and that certain Security Agreement dated as of December 10, 1986, each of which
is hereby ratified and reaffirmed and each of which secures the prompt payment
and performance of the Obligations.
9. No Claims, Offset. Borrower hereby represents, warrants, acknowledges
and agrees to and with Bank that (a) Borrower neither holds nor claims any right
of action, claim, cause of action or damages either at law or in equity, against
Bank which arises from, may arise from, allegedly arise from, are based upon or
are related in any manner whatsoever to the Loan
<PAGE> 27
Agreement and the other Loan Documents or which are based upon acts or omissions
of Bank in connection therewith, and (b) the Obligations are absolutely owed to
Bank, without offset, deduction or counterclaim.
10. Counterparts. This Amendment may be executed in any number of
counterparts, and any party hereto may execute any counterpart, each of which
when executed and delivered will be deemed to be an original and all of which
taken together will be deemed to be but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment under
seal as of the date first above written.
WITNESS: NATIONSBANK, N.A.
/s/ Marilyn Johnson By: /s/ Douglas T. Brown (SEAL)
- ---------------------------------- -------------------------
Douglas T. Brown
Vice President
WITNESS: SENSYS TECHNOLOGIES INC.
/s/ Cindy J. Hruska By: /s/ R. R. Bower (SEAL)
- ---------------------------------- -------------------------
Robert R. Bower
Chief Financial Officer
/s/ Cindy J. Hruska By: /s/ S. Kent Rockwell (SEAL)
- ---------------------------------- -------------------------
S. Kent Rockwell
Vice Chairman and CEO
<PAGE> 1
EXHIBIT 10.15
LEASE
RESEARCH DEVELOPMENT PROPERTIES,
A Virginia General Partnership,
Lessor
S.T. RESEARCH CORPORATION, A Virginia Corporation,
Lessee
Premises:
8419 Terminal Road
Newington, Virginia 22152
December 1, 1985
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Title Page
- ------- ----- ----
<S> <C>
I Premises: Term & Use 1
II Rent 1
III Utilities 2
IV Repairs; Alterations; Fixtures 2
V Insurance 4
VI Assignment, Subletting 6
VI Eminent Domain 7
VI Bankruptcy 8
IX Default 9
X Real Estate Taxes 14
XI Rent Adjustment 15
XI Subordination 16
XII Litigation 18
XIV Surrender of Premises 19
XV Option to Purchase and Right of First Refusal 19
XVI Successors and Assigns 21
XVII Notices 22
XVIII Waivers 23
XIX Index and Captions; Estoppel Certificates 24
XX Covenant of Quiet Enjoyment 25
XXI Memorandum of Lease 25
XXII Right of First Refusal and Option
to Purchase 8417 Terminal Road 25
XXIII Security Deposit 26
XXIV Attornment 27
</TABLE>
<PAGE> 3
FACILITY LEASE
THIS LEASE AGREEMENT dated this 1st day of December, 1985, between
Research Development Properties, as the Landlord, and S.T. RESEARCH CORPORATION
the Tenant.
ARTICLE I
PREMISES; TERM
The Landlord does hereby lease and demise to the Tenant, the Following:
The Premises known as 8419 Terminal Road, Newington, VA, as shown on attached
plat. Said demised premises are improved with a structure having approximate
dimensions of 100 Feet by 280 Feet, containing approximately 28,000 square feet,
to be used For manufacturing, warehouse and office space for a term of 10 years,
beginning December 1, 1985 and expiring December 1, 1995.
ARTICLE II
RENT
As rent for said premises, Tenant agrees to pay the Landlord a guaranteed
minimum rental of One Hundred Seventy-Seven Thousand Eight Hundred Dollars
($177,800) per annum in consecutive equal monthly installments of Fourteen
Thousand Eight Hundred Seventeen Dollars ($14,817). The parties hereto,
intending to be legally bound hereby, further covenant with each other as
follows:
All rents are payable in advance without set-off or deduction of any
kind, on the First day (1st) day of each calendar month of the tenancy at the
office of the Landlord, or such other place as the Landlord may from time to
time designate in writing, all without relief from valuation and appraisement
laws, and at the expiration of the term Tenant will peacefully yield up to the
<PAGE> 4
Landlord said premises in good order and repair, and broom clean.
The Commencement Date shall be the day Landlord shall acquire title. If
the Commencement Date shall be a date other than the first day of the calendar
month, Tenant shall on the Commencement Date pay Landlord an amount equal to
such proportion of an equal monthly installment as the number of days from the
Commencement Date to the end of the calendar month in which the Commencement
Date occurs bears to the total number of days in such calendar month, and such
payment shall represent the pro rata rent from the Commencement Date to the end
of such calendar month.
If Tenant shall fail to pay, when the same is due and payable, any rent
or any additional rent of such unpaid amounts shall bear interest from the due
date thereof to the date of payment at the rate of Twelve per cent (12%) per
annum.
ARTICLE III
UTILITIES
Tenant shall, at its own cost and expense, pay all charges when due for
water, gas, electricity, heat, sewer rentals or charges and any other utility
charges incurred by Tenant in the use of the demised premises.
ARTICLE IV
REPAIRS, ALTERATIONS, FIXTURES
The Tenant covenants: that no waste or damage shall be committed upon or
to the said demised premises; that the premises shall be used for only the
purpose hereinabove stated; that said premises shall not be used for any
unlawful purpose and no violations of law or ordinance or duly constituted
authority shall be committed thereon. Throughout said term, Tenant shall: take
<PAGE> 5
good care of the demised premises, fixtures and appurtenances and all
alterations, additions and improvements to same; make all repairs in and about
the same necessary to preserve them in good order and condition, which repairs
shall be equal in quality to the original work; promptly pay the expense of such
repairs; suffer no waste or injury to demised premises; give prompt notice to
the Landlord of any damage that may occur; execute and comply with all laws,
rules, orders, ordinances and regulations at any time issued or in force,
applicable to the demised premises or to the Tenant's use and occupancy thereof,
of the City, County, State and Federal Governments and Landlord, and of each and
every department, bureau and official thereof, and of the Board of Fire
Underwriters having jurisdiction thereof.
Landlord will keep in repair the exterior of the demised premises except
any doors or windows provided that Tenant shall give Landlord written notice of
the necessity of such repairs, and provided that the damage thereto shall not
have been caused by negligence of Tenant in which event Tenant shall be
responsible therefore. Landlord's obligation with respect to repairs to demised
premises shall be only as expressly set forth in this Paragraph.
Tenant may, at its expense, make such alterations and improvements to the
demised premises and install interior partitions as it may require, provided
that the written approval of the Landlord be first obtained and that such
improvements and alterations are done in a workmanlike manner in keeping with
all building codes and regulations and in no way harm the structure of the
demised premises, provided that at the expiration of this lease or any extension
thereof, Tenant, at its expense, restores the within demised premises to its
original condition and repairs any damage to the premises resulting from the
installation or removal of such partitions, fixtures, or equipment as may have
been installed by Tenant if requested to do so by Landlord.
The Landlord reserves the right, before approving any such changes,
additions, or alterations, to require the Tenant to furnish it a good and
sufficient bond, conditioned that it will save Landlord harmless from the
Payment of any claims either by way of damager or liens. All such changes,
additions, or alterations shall be made solely at the expense of the Tenant; and
the Tenant agrees to protect, indemnify and save harmless Landlord on account of
any
<PAGE> 6
injury to third persons or property, by reason of any such changes, additions,
or alterations, and to protect, indemnify and save harmless Landlord from the
payment of any claim of any kind or character on account of bills for labor or
material in connection therewith.
Tenant reserves the right to request improvements to the exterior of the
facilities. Any such work approved by the Landlord will be performed by the
Landlord and charged to the Tenant under terms and conditions as mutually agreed
upon.
ARTICLE V
INSURANCE
Tenant shall not do or permit to be done any act or thing in or upon the
Demised Premises which will invalidate or be in conflict with the Certificate of
Occupancy or the terms of the Virginia standard form of fire, boiler, sprinkler,
water damage, or other insurance policies covering the Building and/or the
fixtures, equipment, and property therein; and Tenant shall, at its own expense,
comply with all rules, orders, regulations, or requirements of the Southeastern
Board of Fire Underwriters or any other similar body having jurisdiction,
provided same relate to its use or occupancy of the Demised Premises.
Tenant, at Tenant's own cost and expense shall maintain insurance
protecting and indemnifying Landlord against any and all claims for injury or
damage to persons or property or for the loss of life or of property occurring
upon, in or about the Demised Premises, its employees, agents, contractors,
customers, and invitees; such insurance to afford minimum protection during the
term of this Lease, of not less than $1,000,000 in respect of bodily injury or
death in respect of any one occurrence or accident, and not less than $100,000
for property damage.
All such insurance shall be effected under valid and enforceable
policies; shall be issued by insurers of recognized responsibility acceptable by
Landlord and shall contain a
<PAGE> 7
provision whereby the insurer agrees not to cancel the insurance without
20-days' prior written notice to Landlord.
On or before the Commencement Date, Tenant shall furnish Landlord with a
certificate evidencing the aforesaid insurance coverage, and renewal
certificates shall be furnished to Landlord at least 30 days prior to the
expiration date of each policy for which a certificate was theretofore
furnished.
Tenant shall insure the Building against all-risk fire and other extended
coverage perils in an amount equal to at least ninety percent (90% of the
replacement value, as reasonably determined by Landlord from time to time, or
such other amount as may be required by the holder of the first trust
indebtedness secured by the Building. Such policy or policies shall be issued by
a company licensed to do business in Virginia and approved by Landlord and shall
name Landlord, the holder of any indebtedness, secured by a lien on the Demised
Premises, as additional insureds as their respective interests may appear.
ARTICLE VI
ASSIGNMENT, SUBLETTING
Tenant expressly covenants that it will not assign, mortgage or encumber
this agreement nor sublet or suffer or permit the demised premises or any part
of the roof to be used by others without the prior written consent of Landlord
and Noteholder (as such term is defined in the Deed of Assumption of even date
herewith between Landlord and the Fairfax County Economic Development Authority)
in each instance. In the event the Tenant hereunder shall be a corporation, any
transfer, sale, pledge or other disposition of 51% of the stock of the Tenant
shall be deemed an assignment of this lease and therefore prohibited without the
express agreement and any renewal thereof, it is hereby agreed that the
person(s) signing on behalf of the Tenant corporation shall be officers and
directors of the said Tenant corporation.
<PAGE> 8
If this lease be assigned or if the demised premises or any part thereof
be sublet or occupied by anyone other than Tenant without the expressed written
consent of Landlord and Noteholder had and obtained, Landlord may collect rent
from the assignee, under Tenant or occupant and apply the net amount collected
to all rent herein reserved but no assignment, under-letting, occupancy or
collection shall be deemed a waiver of this covenant or the acceptance of the
assignee, under-tenant or occupant as Tenant, or a release of the performance of
the covenants on Tenant's part herein contained.
In the event the Landlord's and Noteholder's written consent is given to
an assignment or subletting, the Tenant shall nevertheless, remain liable to
perform all covenants and conditions thereto and to guarantee such performance
by his assignee or subtenant.
ARTICLE VII
EMINENT DOMAIN
If l0% or more of the demised premises or 15% or more of the warehouse
project of which the demised premises are a part shall be acquired or condemned
by right of eminent domain for any public or quasi-public use or purpose, then
Landlord at its election may terminate this lease by giving notice to Tenant of
its election, and in such event minimum rent shall be apportioned and adjusted
as of the date of termination. If the term of this lease shall not be terminated
as aforesaid, then the term of this lease shall continue in full force and
effect, and Landlord shall within a reasonable time after possession is
physically taken (subject to delays due to shortage of labor, materials, or
equipment, labor difficulties, breakdown of equipment, government restrictions,
fires, other casualties or other causes beyond the reasonable control of the
Landlord) repair or rebuild what may remain of the demised premises for the
occupancy of Tenant; and a just proportion of the minimum rent shall be abated,
according to the nature and extent of the injury to the demised premises, until
what may remain of the demised premises
<PAGE> 9
shall be repaired and rebuilt as aforesaid; and thereafter a just proportion of
the minimum rent shall be abated, according to the nature and extent of the part
of demised premises acquired or condemned, for the balance of the term of the
lease.
Landlord reserves to itself, and Tenant assigns to Landlord, all rights
to damages accruing on account of any such taking or condemnation or by reason
of any act of any public or quasi-public authority for which damages are
payable. Tenant agrees to execute such instruments of assignment as may be
required by Landlord, to join with Landlord in any Petition for the recovery of
damages, if requested by Landlord, and to turn over to Landlord any such damages
that may be recovered in any such proceeding. If Tenant shall fail to execute
such instruments as may be required by Landlord, or to undertake such other
steps as may be requested as herein stated, then and in any such event, Landlord
shall be deemed the duly authorized irrevocable agent and attorney-in-fact of
Tenant to execute such instruments and undertake such steps as herein stated in
and on behalf of Tenant. It is agreed and understood, however, that Landlord
does not reserve to itself, and Tenant does not assign to Landlord, any damages
Payable for trade fixtures installed by Tenant at its own cost and expense and
which are not party of the realty.
ARTICLE VIII
BANKRUPTCY
To more effectually secure the Landlord against loss of the rent and
other payments herein provided to be made by the Tenant, it is agreed as a
further condition of this lease that the filing of any petition in bankruptcy,
insolvency or other debtors' proceedings by or against the Tenant, or the
adjudication in Bankruptcy of the Tenant or the appointment of a Receiver for
Tenant by any Court shall be deemed to constitute a breach of this lease, and
thereupon without entry or other action by the Landlord, this lease shall, at
the option of the Landlord, become and be terminated; and notwithstanding any
other provisions of this lease, the Landlord shall
<PAGE> 10
forthwith upon any such termination be entitled to recover the rent reserved in
this lease for the residue of the term hereof less the fair rental value of the
Premises for the residue of said term.
ARTICLE IX
DEFAULT
No payment by Tenant or receipt by Owner of a lesser amount than the
monthly 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 accompany any check or payment as rent be deemed in accord
and satisfaction, and Owner may accept such check or payment without prejudice
to Owner's right to recover the balance of such rent or pursue any other remedy
in this lease provided.
(a)(1) If Tenant shall default in the payment of any rent or other
payments required of Tenant, or any part thereof and if such default shall
continue five (5) days after the payment shall be due, or (2) if Tenant shall
default in the performance or observance of any other agreement or condition on
its part to be performed or observed and if Tenant shall fail to cure said
default within ten (10) days after notice of said default from Landlord, or (3)
if any person shall levy upon, take, or attempt to take this leasehold interest
or any part thereof upon execution, attachment or other process of law, or (4)
if Tenant shall make default with respect to any other lease between it and
Landlord, or (5) if the demise premises shall be deserted, vacated, abandoned,
or business operations shall not be conducted therein for a period of three or
more days, or (6) if this lease or any interest therein shall be operation of
law devolve upon or pass to any person or persons other than Tenant, or (7) if
Tenant shall fail to move into and take possession of the demised premises and
open for business within thirty (30) days after Landlord's giving notice to
Tenant that the demise premises are ready for occupancy by Tenant, then, in any
of said cases (notwithstanding any license of any former breach of agreement or
condition or waiver of the benefit hereof or consent in a former instance).
Landlord lawfully may
<PAGE> 11
immediately, or at any time thereafter, and without any further notice or demand
terminate this lease and Tenant will forthwith quit and surrender the demised
premises, but Tenant shall remain liable as hereinafter provided.
(b) If this lease shall be terminated, as provided in this paragraph: The
Landlord may immediately or at any time thereafter, re-enter and resume
possession of the demised premises and remove all persons and property therefrom
either by summary dispossess proceedings or by a suitable action or proceeding
at law or in equity, or by force or otherwise, without being liable for any
damages therefore. No re-entry by the Landlord shall be deemed an acceptance of
a surrender of this lease.
(2) The Landlord may relet the whole or any part of the demised premises
for a period equal to, or greater or less than the remainder of the then term of
this lease, at such rental and upon such terms and concessions as the Landlord
shall deem reasonable, to any tenant or tenants which it may deem suitable and
satisfactory and for any use and purpose which it may deem appropriate. In no
event shall the Landlord be liable in any respect for failure to relet the
demised premises, or in the event of such reletting, for failure to collect the
rent thereunder. Any sums received by the Landlord on a reletting in excess of
the rent reserved in this lease shall belong to the Landlord.
(c) If this lease shall be terminated as provided in this Paragraph, or
by summary Proceedings or otherwise, and whether or not the premises shall be
relet, the Landlord shall be entitled to recover from the Tenant and the Tenant
shall pay to the Landlord the following: (1)(a) An amount equal to all expenses,
including reasonable counsel fees incurred by the Landlord in recovering
Possession of the demised premises and (b) all reasonable costs and charges for
the care of the demised premises while vacant, and (c) an amount equal to all
expenses incurred by the Landlord in connection with the reletting of the
demised premises or any part thereof, including broker's commissions,
advertising expenses, and the cost of repairing, renovating or remodeling the
demised premises; which amounts set forth in this subdivision (1) shall be due
and payable by the Tenant to the Landlord at such times as the expenses, costs
and
<PAGE> 12
charges shall have been incurred; and (2) an amount equal to all minimum rent,
additional rent and other charges required to be paid by the Tenant under this
lease, less the net rent, if any collected by the Landlord on reletting the
demised premises; which amount shall be due and payable by the Tenant to the
Landlord on the several days on which such minimum rent and other charges would
have become due and payable had this lease not been terminated, and the Tenant
shall pay to the Landlord the amount of any deficiency then existing. The net
rent collected by the Landlord on reletting shall be computed by deducting from
the gross rents collected the expenses, costs and charges referred to in
subdivision (I) of this sub-paragraph. Without any previous notice or demand
separate actions may be instituted by the Landlord against the Tenant from time
to time to recover any damages which at the commencement of any such action
shall then or theretofore have become due and payable to the Landlord under any
provisions hereof without waiting until the end of the original term of this
lease, and neither the institution of suit or suits, proceeding or proceedings,
nor the entering of judgment therein shall bar the Landlord from bringing a
subsequent suit or proceeding for damages of any kind theretofore or thereafter
suffered. It is expressly agreed that the forebearance on the part of the
Landlord in the institution of any suit or entry of judgment for any part of the
rent herein reserved to the Landlord, including but not limited to the
unliquidated rent then due, shall in no way serve as a defense against nor
prejudice a subsequent action for such rent. The Tenant hereby expressly waives
Tenant's right to claim a merger of such subsequent action in any previous suit
or in the judgement entered therein. Furthermore, it is expressly agreed that
claims for liquidated or minimum annual rent and those for unliquidated rent may
be regarded by the Landlord, if it so elects, as separate claims capable of
being assigned.
The Landlord, at its election, which shall be exercised by the service of
a written notice on the Tenant, may collect from the Tenant and the Tenant shall
pay in lieu of the sums becoming due after the service of such notice under the
provisions of sub-division (2) of this sub-paragraph, an amount equal to the
difference between the minimum rent, additional rent and other charges required
to be paid by the Tenant under this lease, (from the date of the service of such
notice to
<PAGE> 13
and including the date of the expiration of the term of this lease which had
been in force immediately prior to any termination effected under this
paragraph), and the then fair and reasonable rental value of the demised
premises for the same period, discounted to the date of the service of such
notice at the rate of six (6%) per annum. In determining the rental value of the
demised premises, the rental realized by any reletting shall be deemed prime
facie evidence thereof.
(d) In the event of a breach or threatened breach by Tenant of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as
if re-entry summary proceedings and other remedies were not herein provided
for. Mention in this lease of any particular remedy, shall not preclude
Landlord from any other remedy, in law or in equity. Tenant hereby expressly
waives any and all rights or redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of demised premises, by
reason of the violation by Tenant of any of the covenants and conditions of
this lease or otherwise.
It is hereby agreed that all personal property on the premises shall be
liable to distraint for rent, and the Tenant hereby waives his homestead
exemption and the benefits of other laws exempting personal Property from levy
and sale for arrears of rent.
If after default in payment of rent or violation of any other provision
of this lease, or upon the expiration of this lease, the Tenant moves out or is
dispossessed and fails to remove any trade fixtures, signs, or other property
prior to such said default removal, expiration of lease, or prior to the
issuance of final order or execution of warrant, then and in that event, the
said fixtures, signs and property shall be deemed abandoned by Tenant and shall
become the property of the Landlord, or Landlord may notify Tenant to remove
same at Tenant's own cost and expense, and upon the failure of Tenant to do so,
Landlord may, in addition to any other remedies available to it, remove said
property as the duly authorized agent of Tenant, and store the same in the name
and at the expense of Tenant or those claiming through or under it under any
usual or proper form
<PAGE> 14
of warehouse receipt, whether or not authorizing the sale of said goods for
nonpayment of storage charges, without in any way being liable for trespass,
conversion or negligence by reason of the acts of Landlord or anyone claiming
under it or by reason of the negligence of any person in caring for such
property while: in storage and Tenant will pay to Landlord upon demand any and
all expenses and charges incurred upon such removal and storage, irrespective of
the length of time of storage.
If Tenant shall make default or defaults under this lease, Landlord may,
at its election, immediately or at any time thereafter, without waiving any
claim for breach of agreement, and without notice to Tenant, cure such default
or defaults for the account of Tenant; if the Landlord shall institute an action
or summary proceeding against the Tenant based upon such default, or if the
Landlord shall cure such default or defaults for the act of Tenant, then the
Tenant will reimburse the Landlord for the expense of attorneys' fees and
disbursements thereby incurred by the Landlord so far as the same are reasonable
in amount. The cost to Landlord shall be due and payable on demand and shall be
deemed to be additional rent and shall be added to the installment of rent next
occurring or to any subsequent installment of rent, at the election of Landlord.
Landlord shall not be responsible to Tenant for any loss or damage resulting in
any manner by reason of its undertaking any acts in accordance with the
provisions of this lease.
ARTICLE X
REAL ESTATE TAXES
The Tenant agrees when the same becomes due and payable, to pay all real
estate taxes, which are assessed against the demised premises and which are
applicable to and become due and payable during the term of this lease. All real
estate taxes, for the years in which the lease commences and terminates shall be
apportioned and adjusted. If the Tenant fails to pay any such real estate taxes,
which it is obligated to pay pursuant to this Paragraph and if such default
shall
<PAGE> 15
continue for a period of thirty (30) days after the Landlord shall have given
the Tenant notice in writing of the existence thereof, then and in such event
the Landlord may pay such real estate taxes together with the interest and
penalties thereon and the amount so paid shall be deemed additional rent due and
payable by the Tenant to the Landlord, payable together with the next regular
rental payment due thereafter.
ARTICLE XI
RENT ADJUSTMENT
Initial Term
On the fifth anniversary of this lease (December 1, 1990) and for the
sixth through ninth anniversaries thereafter, the minimum annual lease Payment
shall be adjusted if the "prime rate" at United Virginia Bank (UVB), or any
successor rate thereto, is greater than 10 percent (10%) at anytime during the
ninety (90) day period prior to December 1 (September 1 to December 1). The
annual adjustment will be determined as follows:
If at anytime during the 90 day period prior to the anniversary date the
UVB prime rate exceeds ID percent (10%), the annual minimum rental for the
ensuing one (1) year period shall be adjusted by a percentage equal to fifty
percent (50%) of the percentage increase from ten percent (10%) to the average
UVB prime rate in effect during the ninety (90) day period prior to December 1
of the respective year.
If the tenant elects to exercise its five year option from December 1,
1995 to November 30, 2000, the minimum annual rental will be adjusted as
follows:
The base rent of $l77,800 will be adjusted by an amount equal to eighty
percent (80%) of the percentage change in the United States Department of Labor,
Bureau of Labor Statistics, Cost of Living Index from June 30, 1990 to June 30,
l995.
If the tenant elects to exercise its five year option from December 1,
2000 to November
<PAGE> 16
30, 2005, the minimum annual rental will be adjusted as follows:
The minimum rental as adjusted and in effect during determined in the
first option period will be adjusted by an amount equal to eighty percent (80%)
of the percentage change in the United States Department of Labor, Bureau of
Labor Statistics, Cost of Living Index from June 30, 2000 to June 30, 2005.
ARTICLE XII
SUBORDINATION
This Lease shall be subordinate to any and all ground leases, mortgages
or deeds of trust that are now or shall be hereafter placed upon the Premises or
any portion thereof; provided, however, that in the event that, at any time and
from time to time, any mortgagee under any such mortgage or any beneficiary or
trustee under any such deed of trust or any landlord under any such ground lease
shall require this Lease to be superior and paramount to such mortgage, deed of
trust or ground lease, as applicable, Tenant agrees to execute and deliver any
instruments reasonably required for such purpose.
Tenant shall, without charge, at any time and from time to time, within
five (5) days after receipt of request therefor by Landlord, execute,
acknowledge and deliver to Landlord a written estoppel certificate certifying to
Landlord, or any mortgagee, assignee of a mortgagee, or any purchaser, of the
Premises or any portion thereof containing the Building, or any other person
designated by Landlord, as of the date of such estoppel certificate, the
following: (a) whether or not Tenant is in possession of the Premises, (b)
whether or not this Lease is unmodified and in full force and effect (or if
there has been a modification, that the Lease is in full force and effect as
modified and setting forth such modification), (c) the term of the Lease has
commenced and the full rental is now accruing, (d) that Tenant is paying the
amounts of additional rent (and, if so, specifying the same in detail), (e) that
Tenant has accepted possession of the Premises and is
<PAGE> 17
currently operating its business therein, (f) that any improvements required by
the Lease have been made by Landlord to the satisfaction of Tenant, (g) whether
or not there are then existing any set-offs, charges, liens, claims or defenses
against the enforcement of any right hereunder including rent or other charges
due (and, if so, specifying the same in detail), (h) that no rent has been paid
more than thirty (30) days in advance of its due date, (i) that Tenant has no
knowledge of any then uncured defaults on the part of Landlord of Landlord's
obligations under this Lease (or, if Tenant has knowledge of any such uncured
defaults, specifying the same in detail), (j) that Tenant has no knowledge of
any event having occurred that authorizes the termination of this Lease by
Tenant (or, if Tenant has such knowledge, specifying the same in detail), and
(k) the address to which notices to Tenant should be sent are as set forth in
the Lease (or, if not, specifying the correct address). In the event Tenant
fails to deliver such instrument within the specified time, it shall be
conclusively deemed by and upon Tenant that (i) this Lease is in full force and
effect, without modification except as may be represented by Tenant, (ii) there
are no uncured defaults in Landlord's performance and Tenant (iii) hereby has no
right of offset, counterclaim or deduction against rent, and no more than one
month's rent has been paid in advance. Tenant irrevocably appoints Landlord as
attorney-in-fact for Tenant with full power and authority to execute and deliver
in the name of the Tenant any such statements or instruments.
ARTICLE XIII
LITIGATION
In the event the Landlord or its Agents, without fault on its/their part,
become involved, through or on account of the terms of this lease, or through or
on account of the occupancy of the demised premises by the Tenant, or the
conduct of Tenant's business upon said demised premises in any controversy or
litigation, the Tenant shall upon notice from Landlord or its agents,
<PAGE> 18
immediately take all necessary steps to remove said Landlords connection with,
or liability under such controversy or litigation, and particularly if such
controversy or litigation throws any cloud or encumbrance upon the title of said
Landlord to its property provided, that if the Tenant believes it has a good and
valid defense or claim, in such controversy or litigation which Tenant desires
to set up and maintain by and throughout court procedure and litigation, the
Tenant shall have the right to do so, provided it first executes and delivers to
the Landlord, and discharges any and all final judgments, liens, costs, damages,
expenses, and obligations of Landlord whatsoever in, or arising out of the
controversy or litigation involving the Landlord or its Agents, including all
costs, expenses and attorney's fees incurred by Landlord or its Agents in
protecting their interest or defending themselves in such controversy or
litigation. Tenant hereby waives and agrees that it will waive, all rights to
trial by jury in any and all legal proceedings arising under this lease, out of
the termination of this lease, or with respect to the demised premises, or the
use thereof.
ARTICLE XIV
SURRENDER OF PREMISES
If the Tenant shall occupy said premises with the consent of the Landlord
after the expiration of this lease and rent is accepted from said Tenant, such
occupancy and payment shall be construed as an extension of this lease for the
term of one month only from the date of such expiration, and occupation
thereafter shall operate to extend the term of this lease for but one month at a
time unless other terms of such extension are endorsed hereon in writing and
signed by the parties hereto. In such event if either Landlord or Tenant desires
to terminate said occupancy at the end of any month after the termination of
this lease, the party so desiring to terminate the same shall give the other
party at least thirty (30) days written notice to that effect. Failure on the
part the Tenant to give such notice shall obligate it to pay rent for an
additional calendar month, following the month in which the Tenant has vacated
the demised premises. If
<PAGE> 19
such occupancy continues without the consent of the Landlord, Tenant shall pay
to the Landlord, as liquidated damages, double the amount of rent at the highest
rate specified in this lease for the time Tenant retains possession of the
premises or any part thereof after termination of the term by lapse of time or
otherwise.
ARTICLE XV
OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL
Provided that Tenant shall not be in default hereunder, Tenant shall have
the right and option to purchase the Demised Premises at any time during the
term hereof following the tenth anniversary of the lease commencement date. The
option herein granted shall be exercisable by notice in writing given by Tenant
to Landlord by certified or registered mail or by hand delivery at least ninety
(90) days prior to the proposed settlement date. This option is granted upon the
following terms and conditions:
The closing will be within one hundred twenty (120) days of such notice
unless extended by mutual consent of the Tenant and Landlord.
The Purchase Price shall be the appraised value of the Demised Premises
at the time of exercise of the option. In the event the parties shall not agree
upon the amount of the appraisal secured by, and at the expense of, Tenant,
which appraisal shall be submitted with the notice of exercise of the option,
Landlord shall appoint an additional qualified appraiser, at Landlord's expense,
and the values of the two appraisals shall be averaged, said average being the
purchase price applicable to the Option herein granted. Should Landlord desire a
second appraisal, such appraisal shall be made within sixty (60) days of receipt
by Landlord of Tenant's notice of election to exercise the option.
The Purchase Price as determined herein shall be paid by assumption of
the balance outstanding on the Industrial Revenue Bond financing currently
existing on the Premises subject
<PAGE> 20
to consent of the Noteholder and provided that Tenant shall have received a
written opinion of bond counsel that the Industrial Revenue Bond shall remain
non-taxable, and the payment of cash at settlement of the balance of the
Purchase Price above such deed of trust.
Tenant shall bear all costs of settlement, including all transfer taxes,
recordation fees and taxes, preparation of documents, and settlement charges,
including all charges normally paid by the seller in similar transactions. Rent
and all other costs, expenses, and obligations shall be adjusted as of the date
of settlement. Conveyance shall be by General Warranty Deed; title shall be good
of record and marketable, free from all encumbrances and liens, except as of
aforesaid. If title shall be defective, Landlord shall cause such defects to be
corrected promptly and at its expense, in which case the time for settlement
shall be extended as necessary; in the event such defects shall not be corrected
by Landlord. Tenant shall have the right of voiding the purchase or accepting
title without correction, but at no adjustment in the Purchase Price.
In addition to the foregoing option, Tenant shall have during the entire
term of this lease the right of first refusal to purchase the Demised Premises
should Landlord receive a bona fide written offer to purchase the Demised
Premises. Notice of the receipt of such offer shall be given by Landlord to
Tenant by registered or certified mail, whereupon Tenant shall have the right to
exercise this right of first refusal within sixty (60) days from the date of
receipt of such notice, as evidenced by the return receipt or written
acknowledgement of such notice, to exercise the right of first refusal herein
granted upon terms at least equal to those of such written offer. In the event
Tenant shall elect not to exercise its right of first refusal and in the further
event that Landlord shall not close the transaction of which notice was given to
Tenant within one hundred eight (180) days of such original notice, the waiver
by Tenant of its right of first refusal with regard to such notice will be
deemed to have terminated and Tenant shall be entitled to further notice from
and after one hundred eighty (180) days from the date of original notice.
ARTICLE XVI
<PAGE> 21
SUCCESSORS AND ASSIGNS
The covenants, conditions, and agreements contained in this Lease shall
bind and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and, except as otherwise provided herein,
their assigns.
The term "Landlord" wherever used in this Lease shall be limited to mean
and include only the owner or owners at the time in question of the Premises and
Building to whom this Lease may be assigned, or a mortgagee in possession, so
that in the event of any sale, assignment or transfer of the Landlord and/or
Building, such owner or mortgagee in possession shall thereupon be released and
discharged from all covenants, conditions and agreements of Landlord hereunder
thereafter accruing; but such covenants, conditions and agreements shall be
binding upon each new owner, or mortgagee in possession, of the Building, until
sold, assigned, or transferred.
ARTICLE XVII
NOTICES
Any notice, request, demand, or communication permitted or required to be
given by the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing. Unless otherwise required by such law or regulation such notice,
request, or demand shall be given, and shall be deemed to have been served and
given by Landlord and received by Tenant, when Landlord shall have deposited
such notice, request, or demand by certified or registered mail, return receipt
requested, in the United States mail addressed to Tenant (1) at the Demised
Premises, or (2) until Tenant shall have moved its offices to the Demised
Premises, addressed to Tenant at its address as stated on the first page of this
Lease. Either party may, by notice sent in like manner as aforesaid, designate a
different address or addresses for notices, requests, demands, or communications
to it.
<PAGE> 22
Any notice, request, demand, or communication permitted or required to be
given to Landlord hereunder shall also be given to the Noteholder at 515 King
Street, Alexandria, Virginia 22314, Attention: Mr. Pedro J. Vila, Assistant Vice
President, or at such other address as may be provided in writing by the
Noteholder.
ARTICLE XVIII
WAIVERS
The failure of either party to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent or payment of rent by Tenant with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been waived by either
party, unless such waiver be in writing signed by such party. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly 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 Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
This Lease contains the entire agreement between Landlord and Tenant and
any executory agreement hereafter made between Landlord and Tenant shall be
ineffective to change, modify, waive, release, discharge, terminate, or effect
an abandonment of this Lease, in whole or in part, unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, modification, waiver, release, discharge, termination, or the effecting
of the abandonment is sought.
<PAGE> 23
If any term or provision of this Lease shall, to any extent be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby and the
balance of the terms and provisions of this Lease shall be valid and enforceable
to the fullest extent either hereunder or as permitted by law.
ARTICLE XIX
INDEX AND CAPTIONS; ESTOPPEL CERTIFICATE
The index preceding this Lease and the captions of Articles in this Lease
are inserted only as a matter of convenience and for reference and they in no
way define, limit or describe the scope of this Lease or of the intent of any
provision thereof.
Each party agrees, at any time, and from time to time, upon not less than
ten days' prior notice by the other party, to execute, acknowledge, and deliver
to the other party, a statement in writing addressed to the other party
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the fixed
minimum rent, additional rent, and other charges have been paid, and stating
whether or not to the best knowledge of the signer of such certificate, there
exists any default in the performance of any covenant, agreement, term,
provision, or condition contained in this Lease, and, if so, specifying each
such default of which the signer may have knowledge, it being intended that any
such statement delivered pursuant hereto may be relied upon by the other party
and by any mortgagee or prospective mortgagee of any mortgage or deed of trust
affecting the Demised Premises or Tenant's interest in this Lease, and by any
subtenant or assignee of Tenant's interest in this Lease.
<PAGE> 24
ARTICLE XX
COVENANT OF QUIET ENJOYMENT
Landlord warrants and represents that it has full authority to execute
this Lease for the term aforesaid, and covenants that upon Tenant's paying the
rent and additional rent and performing the covenants to be observed and
performed on Tenant's part, Tenant may peaceably and quietly have, hold and
enjoy the Demised Premises, subject, nevertheless, to the terms and conditions
of this Lease. This covenant shall bind Landlord only so long as Landlord is the
owner of the premises.
ARTICLE XXI
MEMORANDUM OF LEASE
This Lease shall not be recorded. Landlord and Tenant shall, at the
Option of Tenant, execute and deliver a memorandum of this Lease in proper form
for the purpose of recording, but said memorandum of this Lease shall not in any
circumstances be deemed to modify or change any of the provisions of this Lease,
the provisions of which shall in all instances prevail.
ARTICLE XXII
RIGHT OF FIRST REFUSAL AND OPTION
TO PURCHASE 8417 TERMINAL ROAD
Whereas Landlord has represented and Tenant understands that Landlord
also owns the property known as 8417 Terminal Road. Landlord grants to Tenant
the right of first refusal to lease any or all of the space in this building
under terms and conditions similar to those at 8419 Terminal Road, providing
Tenant advises Landlord of its desire to lease such space at least six
<PAGE> 25
months prior to the termination of the existing leases or any subsequent leases.
The Landlord also grants to Tenant the first right of refusal to purchase
the property known as 8417 Terminal Road under the same terms and conditions as
those in Article XV for 8419 Terminal Road.
ARTICLE XXIII
SECURITY DEPOSIT
As security for the faithful performance by Tenant of all of the terms
and conditions upon the Tenant's part to be performed, Tenant has this day
deposited with Landlord the sum of Fourteen Thousand Eight Hundred Seventeen
Dollars ($14,817) which shall be returned to Tenant, without interest, on the
day set forth for the expiration of the term herein or any extension thereof,
whichever is later, (notwithstanding this lease may be sooner terminated)
provided, however, that Tenant has fully and faithfully carried out all of the
terms, covenants, and conditions on its part to be performed. Landlord shall
have the right to apply any part of said deposit to cure any default of Tenant
and if Landlord does so, Tenant shall upon demand deposit with Landlord the
amount so applied so that Landlord shall have the full deposit on had at all
times during the term of this lease.
In the event of a sale of the building or lease of the land on which it
stands, subject to this lease, the Landlord shall have the right to transfer
this security to the vendee or lessee and the Landlord shall be considered
released by the Tenant from all liability for the return of such security and
the Tenant shall look to the new Landlord or lessee solely for the return of the
said security, and it is agreed that this shall apply to every transfer or
assignment made of the security to a new Landlord. The security deposited under
this lease shall not be mortgaged, assigned or encumbered by the Tenant without
the written consent of the Landlord and any attempt to do so shall be void. In
the event of any rightful and permitted assignment of this lease agreement, the
<PAGE> 26
said security deposit shall be deemed to be held by Landlord as a deposit made
by the assignee and the Landlord shall have no further liability with respect to
the return of said security deposit to the assignor.
ARTICLE XXIV
ATTORNNENT
In the event of a foreclosure sale or sales of the Facility or any
portion thereof containing the Premises, or sale thereof under any deed of trust
securing mortgagee(s) by Landlord, Tenant shall, upon request, attorn to and
acknowledge the purchaser of the facility or any such portion thereof, at such
sale as Landlord hereunder, unless the beneficiary or such purchaser or
purchasers, or trustees, shall, at or prior to the time of such sale or within
sixty (60) days thereafter, notify the Tenant in writing to vacate and surrender
the Premises within ninety (90) days from the date of sale, in the event of
which notice, this Lease shall fully terminate and expire at the end of the said
period of ninety (90) days from the date of the sale, and this Lease shall be
subject to the further conditions that if this Lease shall be so continued in
full force and effect the Tenant shall not be credited as against such purchaser
or Purchasers with any rent allocable to the period after such foreclosure sale
and paid more than thirty (30) days in advance of its due date. No alteration or
modification of any of the provisions of this lease or any cancellation or
surrender of this Lease shall be valid or binding against any superior mortgagee
of the Premises or any portion thereof containing the Building unless the same
shall have been approved in writing by the holder of such superior mortgage
whose name and address shall have been furnished to Tenant in writing by notice.
<PAGE> 27
Witness the following duly authorized signatures and seals as of the date
found above written.
Landlord
Research Development Properties
By JPMS Investors, General Partner
By /s/ Paul H. Kositzka
----------------------------------
General Partner
Tenant
S.T. Research Corporation
Attest
/s/ Shirley D. Walker By /s/ S. Ronald Perrino
- ------------------------------- ----------------------------------
Secretary S. Ronald Perrino, President
<PAGE> 28
12/21/98RESEARCH DEVELOPMENT PROPERTIES
P.O BOX 11259
ALEXANDRIA, VA 22312
December 15, 1993
Robert R. Bower, V.P., Finance
S. T. Research Corporation
P.O. Box 1430
8419 Terminal Road,
Newington, VA 22122-1430
Re: Lease Agreements
Dear Mr. Bower:
Based on our discussions concerning the current and future needs of S.T.
Research Corporation's (hereinafter ST) real estate leasing requirements I would
like to extend you an offer to enter into a new lease agreement with Research
Development Properties (hereinafter RDP) for the space you currently occupy and
for additional space (the former Anning Johnson space).
Currently ST leases approximately 40,000 square feet at $6.35 per square
foot, triple net. These leases will expire on 12/1/95 unless ST exercises its
option to extend for an additional five years at a recomputed rate. The current
lease provisions do not provide for any tenant improvements at lessor cost.
According to my understanding of our discussions, ST is agreeable to the
following terms to be incorporated in a new lease agreement.
STR will enter into a temporary 60 day lease for 8417 Terminal
Road at $6.35 per square foot, triple net.
All existing leases will be cancelled, effective with and
conditioned upon the execution of the new lease by ST.
The new lease will cover the premises described as 8417 Terminal
Road and 8419 Terminal Road, a total of approximately 54,720 Rentable
Square Feet.
<PAGE> 29
S.T. Research Corporation
December 15, 1993
Page2
The base rental rate will be $6.35 per rentable square foot, triple net.
The basic lease term will cover a five year period from December 1, 1993
through December 31, 1998. ST will have an option to extend the lease for an
additional five years with the base rate adjusted by not greater than 80% of the
CPI adjustment from September 30, 1993 through September 30, 1998.
RDP will have the option, at any time during the lease term, to cancel
the lease by providing 180 days written notice and a cash payment to ST of
$250,000, paid within thirty days of the written notice.
RDP will agree to make certain repairs and improvements to 8417 Terminal
Road, at RDP's expense by April 30, 1994. The cost of these repairs and
improvements to RDP will not exceed $75,000.
All other basic terms contained in the existing leases will continue in
the new lease.
If you are in agreement with these basic terms, please sign below as an
indication of your good faith and return the original to me. I will then request
our attorney to complete the lease for our mutual review.
Research Development Properties
/s/ Paul H. Kositzka
----------------------------------------
Paul H. Kositzka, General Partner
On behalf of S.T. Research Corporation I agree
to the basic terms outlined above.
/s/ R R. Bower
- ------------------------------------------
Robert R. Bower, V.P., Finance
<PAGE> 1
EXHIBIT 10.16
LEASE AGREEMENT
BETWEEN
TERMINAL REAL ESTATE COMPANY
AND
S.T. RESEARCH CORPORATION
(Lease Agreement consists of 14 pages.)
Billy Lanier
140 Kings Landing Road
Hampstead, NC 28443
<PAGE> 2
LEASE CONTENTS
1. Rental ..................................................... 3
2. Timely Payment ............................................. 4
3. Utilities .................................................. 4
4. Use ........................................................ 4
5. Assignment ................................................. 5
6. Good Condition ............................................. 5
7. Damages .................................................... 5
8. Subordination .............................................. 5
9. Repairs, Alterations, Fixtures ............................. 6
10. Insurance .................................................. 8
11. Governmental Requirements .................................. 9
12. Eminent Domain ............................................. 10
13. Signs ...................................................... 10
14. Interior Repairs ........................................... 10
15. Default .................................................... 10
16. Legal Fees ................................................. 10
17. Real Estate Taxes .......................................... 10
18. Rent Adjustment ............................................ 11
19. Landlord's Permission ...................................... 11
20. Landlord's Maintenance Responsibilities .................... 11
21. Removal of Fixtures ........................................ 12
22. Late Charges ............................................... 12
23. No Waiver .................................................. 12
24. Tenant's Bankruptcy ........................................ 13
25. Fire ....................................................... 13
26. Tenancy by Sufferance ...................................... 13
27. Successors ................................................. 14
28. Construction ............................................... 14
<PAGE> 3
LEASE AGREEMENT
THIS LEASE AGREEMENT made this 11th day of December, 1989, by and between
TERMINAL REAL ESTATE COMPANY, a general partnership, hereinafter referred to as
the Landlord, and S.T. RESEARCH CORPORATION, a Virginia corporation, hereinafter
referred to as the Tenant.
W I T NE S S E T H:
That the Landlord hereby leases and demises to the Tenant, and the Tenant
does hereby take, lease and hold of the Landlord subject to the covenants and
agreements herein contained the premises located at 8419-H Terminal Road,
Newington, Fairfax County, Virginia, on which is situated a building containing
11,230 square feet, approximately, of heated and air-conditioned office and
laboratory space, for a term of six (6) years commencing December 15, 1989, and
ending on December 14, 1995, and for an optional three (3) years ending December
14, 1998, upon the terms and conditions hereinafter set forth.
1. Rental. The Tenant agrees and covenants to pay the Landlord a fixed
annual rent for each square foot of building space rented, and it is stipulated
by the Landlord and the Tenant that the amount of building space shall be 11,230
square feet, approximately, as set forth in the appraisal made by Thomas E.
Barlow, M.A.I. dated November 17, 1977, and the plans for additional office
space made by The Calvert Company dated August 24, 1984.
<PAGE> 4
The fixed annual rate based upon the aforesaid rental schedule shall be
paid to the Landlord in equal monthly installments in advance of the fifteenth
(15th) day of each month during the term of this lease at such place as the
Landlord designates.
As rent for said premises, Tenant agrees to pay the Landlord a guaranteed
minimum rental of Seventy-One Thousand Three Hundred and Ten Dollars ($71,310)
per annum in consecutive equal monthly installments of Five Thousand Nine
Hundred Forty-Two Dollars and Fifty Cents ($5,942.50).
The Tenant has deposited with the Landlord the sum of One Thousand One
Hundred Sixty-Three Dollars and Fifty-Nine Cents ($1,163.59) as security for the
full and faithful performance by the Tenant of all the terms of this lease
required to be performed by the Tenant. Such sum shall be returned to the Tenant
or applied to the last month's rent provided the Tenant has fully and faithfully
carried out all of the terms of this lease. In the event the Tenant defaults in
respect to any of the terms, covenants and conditions of this Lease, including
but not limited to payment of any rentals, the Landlord may use, apply or retain
the whole or part of the security so deposited for the payment of any such
rentals in default or for any other sum the Landlord may expend or be reuqired
to expend by reason of the Tenant's default, including any damages or deficiency
in the reletting of the subject property.
2. Timely Payment. The Tenant agrees that it will pay said rent at time and
place specified without demand or deduction in equal monthly payments.
3. Utilities. The Tenant agrees that it will pay all water and sewer
charges, gas and electrical bills, and utilities as the same become due.
<PAGE> 5
4. Use. The Tenant agrees that it will use said premises for the full term
hereof for engineering research and development, manufacturing and related use,
and for no other purposes whatsoever, and it will not use nor permit said
premises or any part thereof to be used, for any disorderly or unlawful purpose.
5. Assignment. The Tenant agrees that it will not transfer or assign this
lease, not let nor sublet the whole or any part of said premises without the
written consent of Landlord first obtained, which consent Landlord agrees not to
unreasonably withhold.
6. Good Condition. The Tenant agrees it will keep said premises in good
order and condition, and surrender same at the expiration of the term herein in
the same order in which they are received, usual wear and tear and damage by
fire, storm and public enemies only excepted. Upon surrender of the premises,
Tenant shall have removed all rubbish, advertisements and signs from interior,
exterior and windows thereof, and on failure to do so authorizes Landlord to
forthwith remove the same at Tenant's expense.
7. Damages. The Tenant agrees that all personal property in said premises
shall be and remain at his sole risk, and the Landlord shall not be liable for
any damage to, or loss of such personal property arising from any acts of
negligence of any other persons, nor from the leaking of the roof, nor from the
bursting, leaking or overflowing of water, sewer or steam pipes, nor from
heating or plumbing fixtures, nor from the handling of electric wires or
fixtures, nor from any other cause whatsoever, nor shall the Landlord be liable
for any injury to the person of the Tenant or other persons in or about the
premises, the Tenant expressly agreeing to save the Landlord harmless in all
such cases.
8. Subordination. The Tenant agrees that this lease is subject and
subordinate to the lien of any mortgage, or deed of trust encumbrance or
encumbrances now or at any
<PAGE> 6
time hereafter placed upon said premises, and the Tenant does hereby agree to
execute, acknowledge and record any and all instruments to effect such
subordination which the Landlord may request or require. Tenant irrevocably
appoints Landlord, his successors and assigns, as and for his attorney-in-fact
to execute any such instruments for and on his behalf.
9. Repairs, Alterations, Fixtures. The Tenant covenants: that no waste or
damage shall be committed upon or to the said Demised Premises; that the
premises shall be used for only the purposes hereinabove stated, that said
premises shall not be used for any unlawful purpose and no violations of law or
ordinance or duly constituted authority shall be committed thereon. Throughout
said term, Tenant shall: take good care of the Demised Premises, fixtures and
appurtenances and all alterations, additions and improvements to same; make all
repairs in and about the same necessary to preserve them in good order and
condition, which repairs shall be equal in quality to the original work;
promptly pay the expense of such repairs; suffer no waste or injury to Demised
Premises; give prompt notice to the Landlord of any damage that may occur;
execute and comply with all laws, rules, orders, ordinances and regulations at
any time issued or in force, applicable to the Demised Premises or to the
Tenant's use and occupancy thereof, of the City, County, State and Federal
Governments and Landlord, and of each and every department, bureau and official
thereof, and of the Board of Fire Underwriters having jurisdiction thereof.
Landlord will keep in repair the exterior of the Demised Properties
except any doors or windows provided that Tenant shall give Landlord written
notice of the necessity of such repairs, and provided that the damage thereto
shall not have been
<PAGE> 7
caused by negligence of Tenant in which event Tenant shall be responsible
therefore. Landlord's obligation with respect to repairs to Demised Premises
shall be only as expressly set forth in this paragraph.
Tenant may, at its expense, make such alterations and improvements to the
Demised Premises and install interior partitions as it may require, provided
that the written approval of the Landlord be first obtained and that such
improvements and alterations are done in a workmanlike manner in keeping with
all building codes and regulations and in no way harm the structure of the
Demised Premises, provided that at the expiration of this lease or any extension
thereof, Tenant, at its expense, restores the within Demised Premises to its
original condition and repairs any damage to the premises resulting from the
installation or removal of such partitions, fixtures, or equipment as may have
been installed by tenant if requested to do so by Landlord.
The Landlord reserves the right, before approving any such changes,
additions, or alterations, to require the Tenant to furnish it a good and
sufficient bond, conditioned that it will save Landlord harmless from the
payment of any claims either by way of damager or liens. All of such changes,
additions, or alteration shall be made solely at the expense of the Tenant; and
the Tenant agrees to protect, indemnify and save harmless the Landlord on
account of any injury to third persons or property, by reason of any such
changes, additions, or alterations, and to protect, indemnify and save harmless
Landlord from the payment of any claim of any kind of character on account of
bills for labor or material in connection therewith.
<PAGE> 8
Tenant reserves the right to request improvements to the exterior of the
facilities. Any such work approved by the Landlord will be performed by the
Landlord and charged to the Tenant under terms and conditions as mutually agreed
upon.
10. Insurance. Tenant shall not do or permit to be done any act or thing in
or upon the Demised Premises which will invalidate or be in conflict with the
Certificate of Occupancy or the terms of the Virginia standard form of fire,
boiler, sprinkler, water damage, or other insurance policies covering the
Building and/or the fixtures, equipment, and property therein; and Tenant shall,
at its own expense, comply with all rules, orders, regulations, or requirements
of the Southeastern Board of Fire Underwriters or any other similar body having
jurisdiction, provided same relate to its use or occupancy of the Demised
Premises.
Tenant at Tenant's own cost and expense shall maintain insurance
protecting and indemnifying Landlord against any and all claims for injury or
damage to persons or property or for the loss of life or of property occurring
upon, in or about the Demised Premises, its employees, agents, contractors,
customers, and invitees; such insurance to afford minimum protection during the
term of this Lease, of not less than One Million Dollars ($1,000,000) in respect
of bodily injury or death in respect of any one occurrence or accident, and not
less than One Hundred Thousand Dollars ($100,000) for property damage.
All such insurance shall be effected under valid and enforceable
policies; shall be issued by insurers of recognized responsibility acceptable by
Landlord and shall contain a provision whereby the insurer agrees not to cancel
the insurance without twenty (20) days prior written notice to Landlord.
<PAGE> 9
On or before the Commencement Date, Tenant shall furnish Landlord with a
certificate evidencing the aforesaid insurance coverage, and renewal
certificates shall be furnished to Landlord at least thirty (30) days prior to
the expiration date of each policy for which a certificate was theretofore
furnished.
Tenant shall insure the Building against all-risk fire and other extended
coverage perils in an amount equal to at least ninety percent (90%) of the
replacement value, as reasonably determined by Landlord from time to time, or
such other amount as may be required by the holder of the first trust
indebtedness secured by the Building. Such policy or policies shall be issued by
a company licensed to do business in Virginia and approved by Landlord and shall
name Landlord, the holder of any indebtedness, secured by a lien on the Demised
Premises, as additional insureds as their respective interests may appear.
11. Governmental Requirements. The Tenant agrees that it will, at its cost,
promptly comply with and carry out all orders, requirements, or conditions now
or hereafter imposed upon him by the Ordinances, Laws and/or Regulations of the
Federal Government, State of Virginia or Fairfax County, in which said premises
are located, or by any of its various departments whether required of Landlord
or otherwise, to be done or performed during the term of this agreement, insofar
as they are occasioned by or required in the conduct of the business of Tenant,
or in the Tenant's use and occupancy of said premises for the purpose permitted.
12. Eminent Domain. The Tenant agrees that in the event eminent domain
proceedings shall be instituted against the leased premises, it will be entitled
to claim for compensation for its damages in the proceedings, but agrees that
this lease shall
<PAGE> 10
terminate when title to the leased premises is taken by the condemning
authority, provided the rental is abated from such date.
13. Signs. The Tenant agrees that it will not erect nor place any signs upon
the windows, doors or outside walls of said premises without the written consent
of the Landlord first had and obtained.
14. Interior Repairs. The Tenant agrees that it will make all interior
repairs, replacements and decorations at its own cost and expense, and that it
will allow Landlord or its Agent to have access to said premises at any time for
the purpose of inspection, or in the event of fire or other property damage, or
for the purpose of making any repairs Landlord considers necessary, desirable,
or Landlord's responsibility, and will permit Landlord to place a sign on the
premises during the last three (3) months of this lease offering the property
for sale or lease.
15. Default. The Tenant agrees that should it fail to perform any of its
duties hereunder, Landlord may cause the same to be performed and paid for.
Payment of such sums, or expense of prosecuting or defending any matter or
action, by reason of its default in any wise, shall be deemed additional rent
and due from Tenant to Landlord on the first day of the month following filling
for said charges incurred.
16. Legal Fees. The Tenant agrees that in the event legal proceedings are
instituted against Tenant by the Landlord, either for payment of rent or for
possession, then Tenant agrees to pay all court costs instant to such
proceedings, together with a reasonable attorney's fee, if held liable.
17. Real Estate Taxes. The Tenant agrees when the same becomes due and
payable, to pay all real estate taxes, which are assessed against the Demised
Premises
<PAGE> 11
and which are applicable to and become due and payable during the term of this
lease. All real estate taxes, for the years in which the lease commences and
terminates shall be apportioned and adjusted. If the Tenant fails to pay any
such real estate taxes, which it is obligated to pay pursuant to this paragraph
and if such default shall continue for a period of thirty (30) days after the
Landlord shall have given the Tenant notice in writing of the existence thereof,
then and in such event the Landlord may pay such real estate taxes together with
the interest and penalties thereon and the amount so paid shall be deemed
additional rent due and payable by the Tenant to the Landlord, payable together
with the next regular payment due thereafter.
18. Rent Adjustment. If the Tenant elects to exercise its three (3) year
option from December 15, 1995 to December 14, 1998, the minimum annual rental
will be adjusted as follows: 3.0% increase per year in annual rental.
19. Landlord's Permission. The Landlord agrees that wherever its permission
is required in this Agreement that it will not be unreasonable in withholding
such permission.
20. Landlord's Maintenance Responsibilities. The Landlord agrees to maintain
and keep in good repair the structure of the building, exterior walls (excluding
doors and windows) and roof, provided that Tenant shall give Landlord sufficient
notice of the necessity of repairs and provided that such repairs are not made
necessary by the negligence or affirmative acts of Tenant, his employees,
agents, guests or servants, or any other persons not under Landlord's control,
in which event Tenant shall be responsible for such repairs and costs related
thereto. Landlord's obligation with respect
<PAGE> 12
to repairs of the Demised Premises shall be only as expressly set forth in this
paragraph and paragraph 9 hereof.
21. Removal of Fixtures. The Landlord agrees to permit Tenant to install
business fixtures and equipment in premises, and at a later date to remove them
subject to Tenant's (a) being current in its monthly installments, (b) not being
in violation of any of the herein covenants, conditions, and provisions, and (c)
restoring at its expense any damage to the premises wherever caused by the
installation of such fixtures and equipment.
22. Late Charges. If Tenant fails to pay its rent when due, then a late
charge of five percent (5%) shall be charged by the Landlord and if Tenant fails
to pay the rent payment plus the late charge within fifteen (15) days of its due
date, although there should have been no legal or formal demand made, or break
or violate any of the within covenants, conditions or agreements, then and in
any of said events, this lease and all things herein contained shall, at the
option of the Landlord cease and determine and shall operate as a Notice to
Quit, the thirty (30) days written Notice to Quit being hereby expressly waived,
and Landlord may proceed to recover possession of said premises under and by
virtue of the laws of the State of Virginia.
23. No Waiver. If proceedings shall at any time be instituted as aforesaid
and compromise or settlement shall be effected either before or after judgment
whereby Tenant shall be permitted to retain possession of said premises then
such proceedings shall not constitute a waiver of any covenant, condition or
agreement contained herein or of any subsequent breach of this agreement.
<PAGE> 13
24. Tenant's Bankruptcy. In the event Tenant is adjudicated a bankrupt or
makes an assignment for the benefit of its creditors, this agreement shall, at
the option of Landlord, cease and determine and said premises shall be
surrendered to Landlord, who hereby reserved the right, in either of said
events, to forthwith re-enter and repossess said premises.
25. Fire. If said premises, or any part thereof, shall at any time be
destroyed by fire (or other unavoidable casualty), as to be unfit for occupancy
or use, then the rents herein reserved, or a fair and just proportion thereof,
according to the nature and extent of the damage sustained, shall, until the
said premises shall have been rebuilt or restored and made fit for occupancy or
use, be suspended and cease to be payable, or these presents shall, at the
election of the Landlord thereby be determined and ended, provided however, that
in the event of partial damage to the Demised Premises from fire or other
casualty not involving the repair or reconstruction of a substantial portion
thereof, the Landlord shall promptly restore same to such condition as will
permit Tenant to use and occupy said premises for the purpose herein set forth.
26. Tenancy by Sufferance. If the Tenant shall elect and be suffered to
remain in possession of the said premises at the expiration of the term hereby
created, said Tenant shall, by virtue of this agreement, become a Tenant by the
month of the ten plus percent (10%) rental per month of the last monthly
installment of rent above provided to be paid as aforesaid, which said monthly
tenancy shall be subject to all the conditions and covenants of said lease as
though the same had been a monthly tenancy, instead of a tenancy as provided
herein, and shall give to the Landlord at least thirty (30) days written notice
of its intention to remove from said premises, and shall be entitled to a like
notice
<PAGE> 14
from Landlord in the event Landlord desires possession of said premises,
provided, however, that said Tenant by the month shall not be entitled to any
notice in event the said rent is not paid in advance without demand, the usual
thirty (30) days written notice being hereby expressly waived.
27. Successors. It is understood and agreed that the covenants, conditions
and agreements contained in the within lease to be performed by the respective
parties are binding on, and may be legally enforced by, the said parties, their
heirs, executors, administrators, successors and assigns, respectively, and that
no waiver of any breach of any covenant hereof shall be construed to be a waiver
of the covenant itself or of any subsequent breach thereof, or of this
agreement.
28. Construction. This lease shall be constricted and governed in accordance
with the laws of the State of Virginia.
ATTEST: (Tenant) S.T. RESEARCH CORPORATION
/s/ Yvonne L. Stuart /s/ R.R. Bower (SEAL)
- ------------------------- --------------------------
ATTEST: (Landlord) TERMINAL REAL ESTATE COMPANY
/s/ S.R. Perrino /s/ B.R. Lanier/Partner (SEAL)
- ------------------------- --------------------------
12-26-89
<PAGE> 1
EXHIBIT 10.17
INDUSTRIAL LEASE
between
GATEWAY 95 PARTNERS, AN ILLINOIS GENERAL PARTNERSHIP
(Landlord)
and
SENSYS TECHNOLOGIES, INC., A DELAWARE CORPORATION
(Tenant)
<PAGE> 2
TABLE OF CONTENTS
-----------------
INDUSTRIAL LEASE
----------------
<TABLE>
<CAPTION>
Article Title Page
------- ----- ----
<S> <C> <C>
1 Definitions 1
2 Premises 2
3 Term 2
4 Rental; Adjustments 2
5 Security Deposit 5
6 Use of Premises 5
7 Utilities and Services 7
8 Maintenance and Repairs 8
9 Alterations, Additions and Improvements 9
10 Indemnifications and Insurance 10
11 Damage or Destruction 12
12 Condemnation 13
13 Relocation 13
14 Assignment and Subletting 13
15 Default and Remedies 15
16 Attorneys' Fees; Costs of Suit 17
17 Subordination and Attornment 17
18 Quiet Enjoyment 18
19 Parking 18
20 Rules and Regulations 18
21 Estoppel Certificates 18
22 Entry by Landlord 19
23 Landlord's Lease Undertakings-Exculpation from
Personal Liability; Transfer of Landlord's Interest 19
24 Surrender; Holdover Tenancy 19
25 Notices 20
26 Brokers 20
27 Electronic Services 20
28 Miscellaneous 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
29 Floor Load Limits 24
30 Landlord's Lien 24
31 Uniform Commercial Code 24
</TABLE>
EXHIBITS
--------
Exhibit A Floor Plan of the Premises
Exhibit B Work Letter Agreement
Exhibit C Suite Acceptance Agreement
Exhibit D Tenant Operations Inquiry
Schedule 1 List of Permissible Hazardous Materials and
to Exhibit D Quantities for Tenant
Exhibit E List of Additional Insureds
Exhibit F Rules and Regulations
Exhibit G Guaranty (Intentionally Omitted)
2
<PAGE> 4
INDUSTRIAL LEASE
[FORM NET LEASE/MULTI-TENANT]
THIS LEASE ("Lease"), dated August _____, 1988 is made and entered into
by and between GATEWAY 95 PARTNERS, an Illinois general partnership ("Landlord")
and SENSYS TECHNOLOGIES INC. a Delaware corporation ("Tenant") upon the
following terms and conditions:
ARTICLE I - DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein;
1.01 COMPLEX/BUILDING. The term "Complex" shall mean that certain
office/warehouse building complex located in Newington, Virginia, commonly known
as Gateway 95 Business Park together with all related site land, improvements,
parking facilities, common areas, driveways, sidewalks and landscaping. If the
Complex consists of more than one office/warehouse building, the term "Building"
shall mean the office/warehouse building in the Complex in which the Premises
(as hereinafter defined) are situated.
1.02 PREMISES. The term "Premises" shall mean Space No. 1700 in the
8540 Cinderbed Road Building, as more particularly outlined on the drawing
attached hereto as Exhibit A and incorporated herein by reference.
1.03 RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
Premises" shall mean 7,634 square feet, which Landlord and Tenant have
stipulated as the Rentable Area of the Premises.
1.04 LEASE TERM. The term "Lease Term" or "Term" shall mean the period
between the Commencement Date and the Expiration Date (as such terms are
hereinafter defined), unless sooner terminated or renewed as otherwise provided
in this Lease.
1.05 COMMENCEMENT DATE. Subject to adjustment as provided in Article 3,
the term "Commencement Date" shall mean October 1, 1998.
1.06 EXPIRATION DATE. Subject to adjustment as provided in Article 3,
the term "Expiration Date" shall mean September 30, 2003.
1.07 BASE RENT. Subject to adjustment as provided in Article 4, the
term "Base Rent" shall mean Six Thousand Nine Hundred Ninety Seven and 83/100
Dollars ($6,997.83) per month.
1.08 TENANT'S PERCENTAGE SHARE. The term "Tenant's Percentage Share"
shall mean One and 7/100ths. percent (1.7%) with respect to Operating Expenses
(as hereinafter defined), Thirteen and 17/100ths percent (13.17%) with respect
to Property Taxes (as hereinafter defined), One and 7/100ths. percent (1.7%)
with respect to Insurance Expenses (as hereinafter defined) and One and
7/100ths. percent (1.7%) with respect to Tenant's law compliance obligations
under Section 6.02(C) of this Lease and for all other purposes under this Lease.
Landlord may reasonably redetermine Tenant's Percentage Share from time to time
to reflect reconfigurations, additions or modifications to the Complex.
1.09 SECURITY DEPOSIT. The term "Security Deposit" shall mean Eight
Thousand Four Hundred and Ninety Nine and 19/100 Dollars ($8,499.19).
1.10 TENANT'S PERMITTED USE. The term "Tenant's Permitted Use" shall
mean general office and no other use.
1.11 LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address for
Notices" shall mean Kennedy Wilson Virginia Management Inc., 8580 Cinderbed
Road, Suite 1900, Newington, Virginia 22122, with a copy to Kennedy Wilson
Properties Ltd., 180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601,
Attn: Property Management.
1
<PAGE> 5
1.12 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean Sensys Technologies Inc., 8419 Terminal Road, Newington, VA
22122-1430 with copy to Tenant, 8540 Cinderbed Road, Suite 1700, Newington, VA
22122.
1.13 BROKER. The term "Broker" shall mean Heitman Virginia Management
Inc.
1.14 GUARANTOR. The term "Guarantor" shall mean N/A.
1.15 AGENCY DISCLOSURE. Pursuant to Regulation 6.3B of the Virginia
Real Estate Board, Anna S. Gardiner hereby disclose(s) she is acting on behalf
of Heitman Virginia Management Inc., ("Heitman") as agent for GATEWAY 95
PARTNERS, an Illinois general partnership ("Landlord"). As such agent, Heitman
and the individuals representing Heitman are representing the interests of the
Landlord.
ARTICLE II - PREMISE
2.01 LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant,
and Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease. On the
Commencement Date described herein, Landlord shall deliver the Premises to
Tenant in the condition described in Section 2.02 below and in substantial
conformance with the Work Letter Agreement attached hereto as Exhibit B, if any.
2.02 ACCEPTANCE OF PREMISES. Tenant acknowledges that Landlord has not
made any representation or warranty with respect to the condition of the
Premises or the Building or with respect to the suitability or fitness of either
for the conduct of Tenant's Permitted Use or for any other purpose, except that
Landlord shall ensure that any existing heating, ventilating and air
conditioning ("HVAC") equipment serving the Premises is in good working order
and repair as of the Commencement Date (and Tenant shall thereafter keep such
equipment in good working order and repair as provided in Section 8.02 hereof).
Prior to Tenant's taking possession of the Premises, Landlord or its designee
and Tenant will walk the Premises for the purpose of reviewing the condition of
the Premises (and the condition of completion and workmanship of any tenant
improvements which Landlord is required to construct in the Premises pursuant to
this Lease); after such review, Tenant shall execute a Suite Acceptance Letter
in the form and content of Exhibit C attached hereto, accepting the Premises.
Except as is expressly set forth in this Section 2.02 or the Work Letter
Agreement attached hereto, if any, or as may be expressly set forth in said
Suite Acceptance Letter, Tenant agrees to accept the Premises in its "as is"
physical condition without any agreements, representations, understandings or
obligations on the part of Landlord to perform any alterations, repairs or
improvements (or to provide any allowance for same).
2.03 COMMON AREAS. Tenant and Tenant's employees and invitees may use
the common areas of the Building, on a non-exclusive basis in common with all
other parties to whom the right to use such common areas has been or is
hereafter granted. Tenant shall not interfere in any way with the use of the
common areas by such other parties, and Tenant's use of the common areas shall
be subject to the other provisions of this Lease. Landlord shall administer,
operate, clean, maintain and repair the common areas of the Building and the
Complex and the costs and expenses thereof shall be included in the definition
of "Operating Expenses" set forth below. If the Building is in a Complex
containing one or more other buildings, Landlord may designate separate common
areas for the Building, for the Complex as a whole ("Complex Common Areas"), and
for other portions of the Complex ("Other Common Areas"). In such case, Tenant
and Tenant's employees and invitees shall not use the Other Common Areas.
ARTICLE III - TERM
3.01 Except as otherwise provided in this Lease, the Lease Term shall
be for the period described in Section 1.04 of this Lease, commencing on the
Commencement Date described in Section 1.05 of this Lease and ending on the
Expiration Date described in Section 1.06 of this Lease; provided, however,
that, if, for any reason, Landlord is unable to deliver possession of the
Premises on the date described in Section 1.05 of this Lease, Landlord shall not
be liable for any damage caused thereby, nor shall the Lease be void or
voidable, but, rather, the Lease Term shall commence upon, and the Commencement
Date shall be the date that possession of the Premises is so tendered to Tenant
(except for Tenant-caused delays which shall not be deemed to delay commencement
of the Lease Term), and, unless Landlord elects otherwise, the Expiration Date
described in Section 1.06 of this Lease shall be extended by an equal number of
days.
2
<PAGE> 6
ARTICLE IV - RENTAL; ADJUSTMENTS
4.01 DEFINITIONS. As used herein,
(A) "Property Taxes" shall mean the aggregate amount of all real
estate taxes, assessments (whether they be general or special), sewer
rents and charges, transit taxes, taxes based upon the receipt of rent
and any other federal, state or local governmental charge, general,
special, ordinary or extraordinary (but not including income or franchise
taxes, capital stock, inheritance, estate, gift, or any other taxes
imposed upon or measured by Landlord's gross income or profits, unless
the same shall be imposed in lieu of real estate taxes or other ad
valorem taxes), which Landlord shall pay or become obligated to pay in
connection with the Building or any part thereof. Property Taxes shall
also include all fees and costs, including attorneys' fees, appraisals
and consultants' fees, incurred by Landlord in seeking to obtain a
reassessment, reduction of, or a limit on the increase in, any Property
Taxes, regardless of whether any reduction or limitation is obtained.
Property Taxes for any calendar year shall be Property Taxes which are
due for payment or paid in such year. Property Taxes shall include any
tax, assessment, levy, imposition or charge imposed upon Landlord and
measured by or based in whole or in part upon the Building or the rents
or other income from the Building to the extent that such items would be
payable if the Building was the only property of Landlord subject to same
and the income received by Landlord from the Building was the only income
of Landlord. Property Taxes shall also include any personal property
taxes imposed upon the furniture, fixtures, machinery, equipment,
apparatus, systems and appurtenances of Landlord used in connection with
the Building.
(B) "Operating Expenses" shall mean all costs, fees, disbursements
and expenses paid or incurred by or on behalf of Landlord in the
operation, ownership, maintenance, insurance, management, replacement and
repair of the Complex (excluding Property Taxes).
Operating Expenses shall not include costs of alteration of the
premises of tenants of the Complex, or depreciation charges, interest and
principal payments on mortgages, ground rental payments, real estate
brokerage and leasing commissions, expenses incurred in enforcing
obligations of tenants of the Complex, salaries and other compensation of
executive officers of the managing agent of the Complex senior to the
Complex manager, costs of any special service provided to any one tenant
of the Complex but not to tenants of the Complex generally, and costs of
marketing or advertising the Complex.
(C) "Insurance Expenses" shall mean all costs, fees, disbursements
and expenses paid or incurred by or on behalf of Landlord for premiums
for hazard, "all risk", casualty, rent interruption and liability
insurance and all other insurance, obtained by Landlord in connection
with or relating to the Complex.
For purposes of calculating the Tax Adjustment, the Operating Expense
Adjustment, and the Insurance Adjustment (as such terms are defined in Sections
4.02, B, C and D hereof), Property Taxes, Operating Expenses and Insurance
Expenses hereinabove defined shall each be increased by fifteen (15%) percent to
cover Landlord's administrative costs in connection with the Complex.
If the Building does not have one hundred percent (100%) occupancy during
an entire year, then the variable cost components of Property Taxes shall be
adjusted so that the total amount of Property Taxes equals the amount which
would have been paid or incurred by Landlord had the Building been one hundred
percent (100%) occupied for the entire calendar year.
If the Complex does not have one hundred percent (100%) occupancy during
an entire year, then the variable cost components of Operating Expenses and
Insurance Expenses shall be adjusted so that the total amount of Operating
Expenses and Insurance Expenses equals the amount which would have been paid or
incurred by Landlord had the Complex been one hundred percent (100%) occupied
for the entire calendar year.
4.02 BASE RENT. During the Lease Term, Tenant shall pay to Landlord as
rental for the Premises the Base Rent described in Section 1.07 above, subject
to the following annual adjustments (herein called the "Rent Adjustments"):
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(A) During each twelve (12) month period subsequent to the first
complete twelve (12) month period occurring during the Lease Term, the
Base Rent payable by Tenant to Landlord as described in Section 1.07
shall be increased by three percent (3%) (the "Annual Adjustment").
(B) During each calendar year during the Lease Term, the Base Rent
payable by Tenant to Landlord, as adjusted pursuant to Section 4.02(A)
above, shall be increased by Tenant's Percentage Share of the Property
Taxes for such year (the "Tax Adjustment").
(C) During each calendar year during the Lease Term, the Base Rent
payable by Tenant to Landlord, as adjusted pursuant to Section 4.02(A)
above, also shall be increased by Tenant's Percentage Share of the
Operating Expenses paid or incurred by Landlord during such year (the
"Operating Expense Adjustment").
(D) During each calendar year during the Lease Term, the Base Rent
payable by Tenant to Landlord, as adjusted pursuant to Section 4.02(A)
above, also shall be increased by Tenant's Percentage Share of the
Insurance Expenses for such year (the "Insurance Adjustment").
(E) The Tax Adjustment, the Operating Expense Adjustment and the
Insurance Adjustment are hereinafter referred to collectively as the
"Tax, Operating Expense and Insurance Adjustments").
4.03 ADJUSTMENT PROCEDURE; ESTIMATES. The Tax, Operating Expense and
Insurance Adjustments specified in Sections 4.02(B), 4.02(C) and 4.02(D) shall
be determined and paid as follows:
(A) During each calendar year during the Lease Term, Landlord
shall give Tenant written notice of Landlord's estimate of amounts
payable under Sections 4.02(B), 4.02(C), and 4.02(D) for that calendar
year. On or before the first day of each calendar month during the
calendar year, Tenant shall pay to Landlord one-twelfth (1/12th) of such
estimated amounts; provided, however, that, not more often that
quarterly, Landlord may, by written notice to Tenant, revise its estimate
for such year, and subsequent payments by Tenant for such year shall be
based upon such revised estimate.
(B) Within one hundred twenty (120) days after the close of each
calendar year in which any Rent Adjustment is made or as soon thereafter
as is practicable, Landlord shall deliver to Tenant a statement of that
year's Property Taxes, Operating Expenses and Insurance Expenses, and the
actual Tax, Operating Expense and Insurance Expense Adjustments to be
made pursuant to Sections 4.02(B), 4.02(C) and 4.02(D) for such calendar
year, as determined and certified by Landlord (the "Landlord's
Statement") and such Landlord's Statement shall be binding upon Tenant,
except as provided in Section 4.04 below. If the amount of the actual Tax
Adjustment, Insurance Adjustment or Operating Expense Adjustment is more
than the estimated payments for the Tax Adjustment, Insurance Adjustment
or Operating Expense Adjustment for such calendar year made by Tenant,
Tenant shall pay the deficiency to Landlord upon receipt of Landlord's
Statement. If the amount of the actual Tax Adjustment, Insurance
Adjustment or Operating Expense Adjustment is less than the estimated
payments for such calendar year made by Tenant, any excess shall be
credited against Rent (as hereinafter defined) next payable by Tenant
under this Lease or, if the Lease Term has expired, any excess thereof
shall be paid to Tenant. No delay in providing the statements described
in this Section 4.03(B) shall act as a waiver of Landlord's right to
payment under Sections 4.02(B), 4.02(C) or 4.02(D) above. Notwithstanding
the foregoing, Tenant's right to receive any credit or payment pursuant
to the preceding sentences of this Section 4.03(B) is conditioned on this
Lease being in full force and effect and Tenant not being in default
under this Lease on the date such credit or payment is due.
(C) If this Lease shall terminate on a day other than the end of a
calendar year, the amount of the Tax, Operating Expense and Insurance
Adjustments to be paid pursuant to Sections 4.02(B), 4.02(C) and 4.02(D)
that is applicable to the calendar year in which such termination occurs
shall be prorated on the basis of the number of days from January 1 of
the calendar year to the termination date bears to 365. The termination
of this Lease shall not affect the obligations of Landlord and Tenant
pursuant to Sections 4.03(B) and 4.03(C) to be performed after such
termination.
4.04 REVIEW OF LANDLORD'S STATEMENT. Provided this Lease is in full
force and effect and that Tenant is not then in default under this Lease and
provided further that Tenant strictly complies with the provisions of this
Section 4.04, Tenant shall have the right, once each calendar year, to
reasonably review supporting data for any portion of a Landlord's Statement that
Tenant claims is incorrect, in accordance with the following procedure:
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(A) Tenant shall, within ten (10) business days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to
be incorrect, and Tenant shall simultaneously pay to Landlord all amounts
due from Tenant to Landlord as specified in the Landlord's Statement.
Except as expressly set forth in subsection (C) below, in no event shall
Tenant be entitled to withhold, deduct, or offset any monetary obligation
of Tenant to Landlord under the Lease (including, without limitation,
Tenant's obligation to make all payments of Base Rent including the CPI
Adjustment and all payments of Tenant's Tax, Operating Expense and
Insurance Adjustments) pending the completion of and regardless of the
results of any review of records under this Section 4.04. The right of
Tenant under this Section 4.04 may only be exercised once for any
Landlord's Statement, and if Tenant fails to meet any of the above
conditions as a prerequisite to the exercise of such right, the right of
Tenant under this Section 4.04 for a particular Landlord's Statement
shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records for
the Complex at Landlord's manager's corporate offices and Tenant agrees
that any review of records under this Section 4.04 shall be at the sole
expense of Tenant and shall be conducted by an independent firm of
certified public accountants of national standing. Tenant acknowledges
and agrees that any records reviewed under this Section 4.04 constitute
confidential information of Landlord, which shall not be disclosed to
anyone other than the accountants performing the review and the
principals of Tenant who receive the results of the review. The
disclosure of such information to any other person, whether or not caused
by the conduct of Tenant, shall constitute a material breach of this
Lease.
(C) Any errors disclosed by the review shall be promptly corrected
by Landlord, provided, however, that if Landlord disagrees with any such
claimed errors, Landlord shall have the right to cause another review to
be made by an independent firm of certified public accountants of
national standing. In the event of a disagreement between the two
accounting firms, the review that discloses the least amount of deviation
from the Landlord's Statement shall be deemed to be correct. In the event
that the results of the review of records (taking into account, if
applicable, the results of any additional review caused by Landlord)
reveal that Tenant has overpaid obligations for a preceding period, the
amount of such overpayment shall be credited against Tenant's subsequent
installment obligations to pay the estimated Tax, Operating Expense and
Insurance Adjustments. In the event that such results show that Tenant
has underpaid its obligations for a preceding period, Tenant shall be
liable for Landlord's actual accounting fees, and the amount of such
underpayment shall be paid by Tenant to Landlord with the next succeeding
installment obligation of estimated Tax, Operating Expense and Insurance
Adjustment.
4.05 PAYMENT. Concurrently with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.07, as adjusted in accordance with Section
4.02, shall be payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar month, the
prepaid Base Rent for such partial month shall be prorated in the proportion
that the number of days this Lease is in effect during such partial month bears
to the total number of days in the calendar month. All Rent, and all other
amounts payable to Landlord by Tenant pursuant to the provisions of this Lease,
shall be paid to Landlord, without notice, demand, abatement, deduction or
offset, in lawful money of the United States at Landlord's office in the Complex
or to such other person or at such other place as Landlord may designate from
time to time by written notice given to Tenant. No payment by Tenant or receipt
by Landlord of a lesser amount than the correct Rent due hereunder shall be
deemed to be other than a payment on account; nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be deemed
to effect or evidence an accord and satisfaction; and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance or
pursue any other remedy in this Lease or at law or in equity provided.
4.06 LATE CHARGE; INTEREST. Tenant acknowledges that the late payment
of Base Rent or any other amounts payable by Tenant to Landlord hereunder (all
of which shall constitute additional rental to the same extent as Base Rent)
will cause Landlord to incur administrative costs and other damages, the exact
amount of which would be impracticable or extremely difficult to ascertain.
Landlord and Tenant agree that if Landlord does not receive any such payment on
or before five (5) days after the date the payment is due, Tenant shall pay to
Landlord, as additional rent, (a) a late charge equal to five percent (5%) of
the overdue amount to cover such additional administrative costs; and (b)
interest on the delinquent amounts at the lesser of the maximum rate permitted
by law if any or twelve percent (12%) per annum from the date due to the date
paid.
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4.07 ADDITIONAL RENT. For purposes of this Lease, all amounts payable
by Tenant to Landlord pursuant to this Lease, whether or not denominated as
such, shall constitute Base Rent. Any amounts due Landlord shall sometimes be
referred to in this Lease as "Rent".
4.08 ADDITIONAL TAXES. In addition to the Rent and other charges to be
paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for all
taxes payable by or imposed upon Landlord upon or with respect to: any fixtures
or personal property located in the Premises; any leasehold improvements made in
or to the Premises by or for Tenant; the Rent payable hereunder, including,
without limitation, any gross receipts tax, license fee or excise tax levied by
any governmental authority; the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the Premises
(including, without limitation, any applicable possessory interest taxes); or
this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises.
ARTICLE V - SECURITY DEPOSIT
5.01 Upon the execution of this Lease, Tenant shall deposit with
Landlord the Security Deposit described in Section 1.09 above. The Security
Deposit is made by Tenant to secure the faithful performance of all the terms,
convenants and conditions of this Lease to be performed by Tenant. If Tenant
shall default with respect to any covenant or provision hereof, Landlord may
use, apply or retain all or any portion of the Security Deposit to cure such
default or to compensate Landlord for any loss or damage which Landlord may
suffer thereby. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall immediately upon written demand deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to the full
amount hereinabove stated. Landlord shall not be required to keep the Security
Deposit separate from its general accounts and Tenant shall not be entitled to
interest on the Security Deposit. Within thirty (30) days after the expiration
of the Lease Term and the vacation of the Premises by Tenant, the Security
Deposit, or such part as has not been applied to cure the default, shall be
returned to Tenant. In the event of any bankruptcy or other proceeding initiated
by or against Tenant, it is agreed that all such Security Deposit held hereunder
shall be deemed to be applied by Landlord to Rent, sales tax and all other
charges due from Tenant to Landlord for the last month of the Term and each
preceding month until such Security Deposit if fully applied.
ARTICLE VI - USE OF PREMISES
6.01 TENANTS PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.10 above and shall not use or
permit the Premises to be used for any other purpose. Tenant shall, at its sole
cost and expense, obtain all governmental licenses and permits required to allow
Tenant to conduct Tenant's Permitted Use. Landlord disclaims any warranty that
the Premises are suitable for Tenant's use and Tenant acknowledges that it has
had a full opportunity to make its own determination in this regard.
6.02 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) Tenant shall cause the Premises to comply in all material
respects with all laws, ordinances, regulations and directives of any
governmental authority having jurisdiction including, without limitation,
any certificate of occupancy and any law, ordinance, regulation,
covenant, condition or restriction affecting the Complex or the Premises
which in the future may become applicable to the Premises (collectively
"Applicable Laws").
(B) Tenant shall not use the Premises, or permit the Premises to
be used, in any manner which: (a) violates any Applicable Law; (b) causes
or is reasonably likely to cause damage to the Complex or the Premises;
(c) violates a requirement or condition of any fire and extended
insurance policy covering the Complex and/or the Premises, or increases
the cost of such policy; (d) constitutes or is reasonably likely to
constitute a nuisance, annoyance or inconvenience to other tenants or
occupants of the Complex or its equipment, facilities or systems; (e)
interferes with, or is reasonably likely to interfere with, the
transmission or reception of microwave, television, radio, telephone or
other communication signals by antennae or other facilities located in
the Complex; or (f) violates the Rules and Regulations described in
Article XX.
(C) In addition to any other amounts payable by Tenant to Landlord
hereunder, Tenant shall pay to Landlord, as and when billed to Tenant and
as additional rental, Tenant's Percentage Share of the cost of any
improvements, capital expenditures, repairs or replacements to the
Complex, or any equipment or
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machinery used in connection with the Complex, if any such item is
required under any Applicable Law as of the date of this Lease and
throughout the Lease Term; provided, however, that any such costs which
are properly charged to a capital account (together with reasonable
financing charges) shall be amortized for purposes of this Lease over the
shorter of (i) their useful lives, or (ii) three (3) years, and only the
annual amortization amount (prorated based on the number of days of the
Lease term in the calendar year) shall be payable by the Tenant with
respect to any calendar year.
6.03 HAZARDOUS MATERIALS.
(A) No Hazardous Materials (as defined herein) shall be Handled
(as defined herein) upon, about, above or beneath the Premises or any
portion of the Building or the Complex by or on behalf of a Responsible
Party (as defined herein) unless the Hazardous Materials are listed in
Exhibit D hereto and then only in the quantities listed in the exhibit.
Any such Hazardous Materials so Handled, or the presence or migration of
which is a result of the act or omission of a Responsible Party, shall be
known as Tenant's Hazardous Materials. Notwithstanding the foregoing,
Landlord acknowledges that, due to Tenant's permitted use of the
Premises, as indicated in Paragraph 6.01 of this Lease, Tenant will
occasionally Handle Hazardous Materials on the Premises which are in
transit to their final destination; however, such presence and Handling
of Hazardous Materials shall be in compliance with all applicable
federal, state, local and environmental laws and regulations and the
following guidelines: (i) no nuclear or explosive materials will be
Handled by Tenant on the Premises, except such radioactive isotopes as
Tenant may Handle from time to time; provided that such Handling shall be
in accordance with the U.S. Department of Transportation regulations and
the International Airtransport Association Dangerous Goods regulations;
(ii) all Hazardous Materials will be Handled in a well-marked area which
is segregated from other storage and handling areas and is used
exclusively for hazardous materials; (iii) Hazardous Materials will be
Handled in such a way that any such Materials which are incompatible or
reactive to each other shall be kept separate at all times such Materials
are on the Premises; (iv) Hazardous Materials shall only be Handled on
the Premises for a maximum period of twenty-four (24) hours; (v) Tenant
shall provide written documents or other written evidence to Landlord
upon execution of the Lease that all personnel who are responsible for
the Handling or other contact with Hazardous Materials have been properly
trained, in accordance with any applicable laws and/or regulations, to
handle spills of Hazardous Materials and that the required, appropriate
spill response equipment is maintained on site; (vi) Tenant will provide
Landlord with written evidence that it is maintaining the appropriate
insurance coverage for the occasional presence of such Hazardous
Materials on the Premises upon execution of this Lease; and (vii) Tenant
will provide Landlord with written evidence that all of its employees
whose responsibilities include driving Tenant's trucks or other vehicles
are licensed in accordance with state, federal and local laws and
regulations to transport and Handle Hazardous Materials. Also,
notwithstanding the foregoing, normal quantities of those Tenant
Hazardous Materials customarily used in the conduct of general
administrative and executive office activities (e.g., copier fluids and
cleaning supplies) may be Handled at the Premises without Landlord's
prior written consent.
(B) Tenant's Hazardous Materials shall be Handled at all times in
compliance with the manufacturer's instructions therefore and all
applicable Environmental Laws (as defined herein). Tenant's Hazardous
Materials shall not be disposed of, released, discharged or permitted to
spill, leak or migrate upon about, above or beneath the Premises or any
portion of the Building.
(C) Tenant agrees to maintain only the Hazardous Materials listed
in Schedule 1 to Exhibit D in or at the Premises or the Building an only
in the quantities listed in Schedule 1 to Exhibit D. Tenant further
agrees that changes to the type and quantities of such Tenant's Hazardous
Materials may be done only with the prior written consent of the
Landlord, which consent shall not be unreasonably withheld. Tenant
further agrees that Landlord shall have the right to inspect the Building
to verify the types and quantities of the materials stored therein.
(D) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense,
promptly take all actions required by any Regulatory Authority, or
necessary for Landlord to make full economic use of the Premises or any
portion of the Building or the Complex which requirements or necessity
arises from the Handling, presence or migration of Tenant's Hazardous
Materials upon, about, above or beneath the Premises or any portion of
the Building or Complex. Such actions shall include, but not be limited
to, the investigation of the environmental condition of the Premises or
any portion of the Building or the Complex the preparation of any
feasibility studies or reports and the performance of any cleanup,
remedial, removal or restoration work. Tenant shall take all actions
necessary to restore the Premises or any portion of the Building or the
Complex to the condition
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existing prior to the introduction of Tenant's Hazardous Materials,
notwithstanding any less stringent standards or remediation allowable
under applicable Environmental Laws. Tenant shall nevertheless obtain
Landlord's written approval prior to undertaking any actions required by
this Section, which approval shall not be unreasonably withheld so long
as such actions would not potentially have a material adverse long-term
or short-term effect on the Premises or any portion of the Building or
the Complex.
(E) Tenant shall immediately notify Landlord of; (i) its knowledge
of any disposal, release, discharge, spill, leak on, about, above, or
beneath, or any migration to or from the Premises or the Building of
Hazardous Materials, (ii) any inspection, enforcement, cleanup or other
regulatory action taken or threatened by any Regulatory Authority with
respect to any Hazardous Materials on, about, above, beneath or from the
Premises or the Building or the migration thereof from or to other
property, (iii) any demands or claims made or threatened by any party
relating to any loss or injury claimed to have resulted from any
Hazardous Materials on, about, above, beneath or from the Building, and
(iv) any matters where Tenant is required by Law to give a notice to any
Regulatory Authority concerning Hazardous Materials on or from the
Premises or the Building. Landlord shall have the right but not the
obligation to notify Regulatory Authorities concerning actual and claimed
violations of this Article.
(F) Tenant agrees to execute affidavits, representations and the
like from time to time at Landlord's request stating Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in the
Premises or in or at the Building.
(G) "Environmental Laws" means and includes all now and hereafter
existing statutes, laws, ordinances, codes, regulations, rules, rulings,
orders, decrees, directives, policies and requirements by any federal,
state or local governmental authority regulating, relating to, or
imposing liability or standards of conduct concerning public health and
safety or the environment.
(H) "Hazardous Materials" means: (a) any material or substance:
(i) which is defined or becomes defined as a "hazardous substance,"
"hazardous waste," "infectious waste," "chemical mixture or substance,"
or "air pollutant" under Environmental Laws; (ii) containing petroleum,
crude oil or any fraction thereof; (iii) containing polychlorinated
biphenyls (PCB's); (iv) containing asbestos; (v) which is radioactive;
(b) any other material or substance displaying toxic, reactive, ignitable
or corrosive characteristics, as all such terms are used in their
broadest sense, and are defined, or become defined by Environmental Laws;
or (c) materials which cause a nuisance upon or waste to the Premises or
any portion of the Building or the Complex.
(I) "Handle," "handle," "Handled," "handled," "Handling," or
"handling" shall mean any installation, handling, generation, storage,
treatment, use, disposal, discharge, release, manufacture, refinement,
emission, abatement, removal, transportation, or any other activity of
any type in connection with or involving Hazardous Materials.
(J) "Responsible Party" shall mean Tenant, its subtenants and its
assignees, and their respective contractors, clients, officers,
directors, employees, agents, and invitees, or any of them, as the case
may be.
(K) "Regulatory Authority" shall mean any federal, state or local
governmental agency, commission, board or political subdivision.
ARTICLE VII - UTILITIES AND SERVICES
7.01 SERVICES. Landlord shall permit Tenant to use any existing utility
service connection into the Premises and Tenant, at its sole expense, shall
arrange with the appropriate utility company to install all necessary
connections and without fail to maintain in continuous operation during the
entire term of the Lease, all such utility service, whether or not Tenant is in
actual possession of the Premises. Tenant shall pay to the appropriate utility
company or other provider directly, or at Landlord's election as provided in
Section 7.02 below, to Landlord, for all water, gas, heat, electricity, light,
power, sweeping and other janitorial services, rubbish and trash disposal, pest
and rodent control, sewer, steam, fire protection, alarm or other security
services and any other utilities and services supplied in, about or related to
the Premises, together with any taxes thereon, connection charges and deposits,
and also shall pay for all electrical light bulbs, lamps and tubes in connection
therewith. Landlord reserves the right during the Term of this Lease to grant
easements or public utility purposes on, over, or below the Premises without any
abatement in rent, provided that said easements do not unreasonably interfere
with the normal operation of the
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business conducted by Tenant in the Premises. Landlord shall not be required to
pay for any service, supplies or upkeep in connection with the Premises. Tenant
shall arrange for and pay for all telephone and other communication services and
equipment, including any additions or alterations to the existing telephone
service boards and conduit, which shall be completed without interference to the
service and/or equipment of other tenants in the Building or the Complex, if
applicable, and which shall be appropriately labeled upon the termination of
this Lease.
7.02 SEPARATE METERING. If any utilities are not separately metered for
the Premises, Landlord may: (i) require that Tenant make reasonable arrangements
to share such utilities with the other parties whose premises are on such meter,
(ii) require that Tenant pay Landlord a share of such utilities based on the
Rentable Area of the Premises as a percentage of the total rentable area of
occupied space that is jointly metered, or (iii) require that Tenant pay
Landlord a share of such utilities based on consumption estimates of Landlord's
engineer or consultant (in which case, such engineer's or consultant's fees and
costs shall be added to the utility bills). In such case, either Landlord or
Tenant may elect to install separate meters (but the costs of installing,
maintaining and reading such meters shall be borne by Tenant). Landlord may
reasonably estimate in advance any amounts payable by Tenant to Landlord
hereunder and Tenant shall pay such amounts within ten (10) days after the same
are billed, subject to periodic adjustment (and additional payment by Tenant or
credit or refund by Landlord) after the actual amounts have been determined.
7.03 INSTALLATION, CONNECTION AND USE OF UTILITY EQUIPMENT. Tenant
shall install and connect all equipment and lines required to supply such
utilities to the extent not already available at or serving the Premises, or at
Landlord's option shall repair, alter or replace any such existing items (or
Tenant shall share the costs thereof for any equipment shared with other
tenants), subject to the terms of Section 2.02 hereof. Tenant shall maintain,
repair and replace all such items, operate the same, and keep the same in good
working order, condition and repair, as provided in Section 8.02. Tenant shall
not install any equipment or fixtures, or use the same, so as to exceed the safe
and lawful capacity of any utility equipment or lines serving the same. The
installation, alteration, replacement or connection of any utility equipment and
lines shall be subject to the requirements for Alterations of the Premises set
forth in Article 9. Tenant shall ensure that any supplemental HVAC equipment is
installed and all HVAC equipment is operated at all times in a manner to prevent
roof leaks, damage or noise due to vibrations or improper installation,
maintenance or operation. Tenant shall at all times keep the Premises
sufficiently heated to avoid freezing of pipes.
7.04 INTERRUPTION OF SERVICES. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.01, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control, and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rent required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public utility promulgates
or revises any law, ordinance, rule or regulation, or issues mandatory controls
or voluntary controls relating to the use or conservation of energy, water, gas,
light or electricity, the reduction of automobile or other emissions, or the
provision of any other utility or service, Landlord may take any reasonably
appropriate action to comply with such law, ordinance, rule, regulation,
mandatory control or voluntary guideline and Tenant's obligations hereunder
shall not be affected by any such action of Landlord. The parties acknowledge
that safety and security devices, services and programs provided by Landlord, if
any, while intended to deter crime and ensure safety, may not in given instances
prevent theft or other criminal acts, or ensure safety of persons or property.
The risk that any safety or security device, service or program may not be
effective, or may malfunction, or be circumvented by a criminal, is assumed by
Tenant with respect to Tenant's property and interests, and Tenant shall obtain
insurance coverage to the extent Tenant desires protection against such criminal
acts and other losses, as further described in this Lease. Tenant agrees to
cooperate in any reasonable safety or security program developed by Landlord or
required by Law.
Any amounts which Tenant is required to pay to Landlord pursuant to this
Article VII shall be payable upon demand by Landlord and shall constitute
additional rent or Rent under this Lease.
ARTICLE VIII - MAINTENANCE AND REPAIRS
8.01 LANDLORD'S OBLIGATIONS.
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(A) During the Lease Term, Landlord shall, at its expense,
maintain only the foundation and the structural soundness of the exterior
walls (excluding all windows, plate glass, doors and pest control and
extermination) of the portion of the Building containing the Premises in
good working order, repair and condition except for reasonable wear and
tear. Landlord also shall maintain, at its expense, subject to
reimbursement as part of Operating Expenses, the roof, downspouts and
fire safety sprinkler system of the Building. If Tenant determines that
any such repair or maintenance by Landlord is required, Tenant shall
promptly give written notice to Landlord of the need for such repair or
maintenance and unless Landlord in good faith disagrees with such
determination by Tenant, Landlord shall proceed with reasonable
promptness to perform such maintenance. Landlord shall not be liable to
Tenant, except as otherwise expressly provided in this Lease, for any
damage or inconvenience. Tenant shall not be entitled to any abatement or
reduction of Rent by reason of any repairs, alterations or additions made
by Landlord under this Lease.
(B) Tenant shall, at its sole cost, pay for any damage to the
foundation and/or external walls of the Building, or the Project, if
applicable, caused by any act, omission, negligence or fault of Tenant or
any employee, agent or contractor of Tenant.
8.02 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
risk and at its sole cost and expense, maintain all other parts of the Building
and other improvements in or on the Premises in good working order, repair and
condition (including all necessary replacements), including, but not limited to,
HVAC systems, all glass elements, doors (including dock doors), dock bumpers,
light bulbs, light fixtures, regular mowing of any grass, trimming, weed
removal, and regular removal of debris. However, in a multi-occupancy Building,
Landlord reserves the right to perform lawn and other common area maintenance
(including, without limitation, exterior painting and maintenance of any HVAC
system serving the common areas of the Building or serving the Premises as well
as other premises in the Building) and in such instance Tenant agrees to pay
Landlord for lawn and other common area maintenance (including, without
limitation, exterior painting and HVAC maintenance) based on Tenant's Percentage
Share with respect to Operating Expenses, as provided in Article IV hereof (or,
with respect to HVAC maintenance, based on the ratio of the Rentable Area of the
Premises to the rentable area of all premises served by said HVAC system).
Tenant shall take good care of all property and its fixtures, including all
landscaping, and suffer no waste. Tenant shall engage a certified pest control
firm to perform regular (not less frequent than monthly but more frequent if
Landlord determines the need therefor) extermination for pests including, but
not limited to, roaches, rodents and termites. Should Tenant neglect to keep and
maintain the Premises as required herein, the Landlord shall have the right, but
not the obligation, to have the work done and any reasonable costs plus a ten
percent (10%) overhead charge therefor shall be charged to Tenant as additional
rental and shall become payable by Tenant with the payment of the rental next
due under this Lease. In connection with Tenant's maintenance and repair of the
HVAC systems, Tenant shall provide Landlord during the Term of this Lease and
any renewal hereof with a duplicate original of a maintenance contract, in form
and substance acceptable to Landlord, with an HVAC maintenance firm acceptable
to Landlord. Further, Tenant shall be responsible for, and upon demand by
Landlord shall promptly reimburse Landlord for, any damage to any portion of the
Project, if applicable, the Building or the Premises caused by (a) Tenant's
activities in the Building or the Premises; (b) the performance or existence of
any alterations, additions or improvements made by Tenant in or to the Premises;
(c) the installation, use, operation or movement of Tenant's property in or
about the Building or the Premises; or (d) any act or omission by Tenant or its
officers, partners, employees, agents, contractors or invitees.
8.03 REPAIR DAMAGE. Tenant shall, at its own cost and expense, repair
or replace any damage or injury to all or any part of the Premises, the Building
and the Project, if applicable, caused by Tenant or Tenant's agents, employees,
invitees, licensees or visitors; provided, however, if Tenant fails to make such
repairs or replacements promptly, Landlord may, at its option, make such repairs
or replacements and Tenant shall reimburse the cost, plus a ten percent (10%)
overhead charge therefor, to Landlord on demand.
8.04 NO WASTE. Tenant shall not commit or allow any waste or damage to
be committed on any portion of the Premises.
8.05 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, at all reasonable times and upon prior oral or telephonic notice to
Tenant at the Premises, other than in the case of any emergency in which case no
notice shall be required, to enter upon the Premises to make any repairs to the
Premises or the Building reasonably required or deemed reasonably necessary by
Landlord and to erect such equipment, including scaffolding, as is reasonably
necessary to effect such repairs. During the pendency of such repairs, Landlord
shall use reasonable efforts to minimize any material interruption of Tenant's
business; provided, that if such repairs by Landlord are
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required to remedy an emergency situation or to cure a breach or default by
Tenant under this Lease, Landlord shall not be obligated to minimize such
interference.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or permit to
be made any alterations, additions, or improvements in or to the Premises
("Alterations") without the prior written consent of Landlord, which consent,
with respect to non-structural alterations, shall not be unreasonably withheld.
Landlord may impose as a condition to making any Alterations such requirements
as Landlord in its sole discretion deems necessary or desirable including
without limitation: Tenant's submission to Landlord, for Landlord's prior
written approval, of all plans and specifications relating to the Alterations;
Landlord's prior written approval of the time or times when the Alterations are
to be performed; Landlord's prior written approval of the contractors and
subcontractors performing work in connection with the Alterations; employment of
union contractors and subcontractors who shall not cause labor disharmony;
Tenant's receipt of all necessary permits and approvals from all governmental
authorities having jurisdiction over the Premises prior to the construction of
the Alterations; Tenant's delivery to Landlord of such bonds and insurance as
Landlord shall reasonably require; and Tenant's payment to Landlord of all costs
and expenses incurred by Landlord because of Tenant's Alterations, including but
not limited to costs incurred in reviewing the plans and specifications for, and
the progress of, the Alterations. Tenant is required to provide Landlord written
notice of whether the Alterations include the Handling of any Hazardous
Materials and whether these materials are of a customary and typical nature for
industry practices. Upon completion of the Alterations, Tenant shall provide
Landlord with copies of as-built plans. Neither the approval by Landlord of
plans and specifications relating to any Alterations nor Landlord's supervision
or monitoring of any Alterations shall constitute any warranty by Landlord to
Tenant of the adequacy of the design for Tenant's intended use or the proper
performance of the Alterations.
9.02 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord, all applicable laws, ordinances, rules, regulations and
directives of all governmental authorities having jurisdiction and the
requirements of all carriers of insurance on the Premises and the Complex, the
Board of Underwriters, Fire Rating Bureau, or similar organization. All work
shall be performed in a diligent, first class manner and so as not to
unreasonably interfere with any other tenants or occupants of the Building or
the Complex. All costs incurred by Landlord relating to the Alterations shall be
payable to Landlord by Tenant as additional rent upon demand. No
asbestos-containing materials shall be used or incorporated in the Alterations.
No lead-containing surfacing material, solder, or other construction materials
or fixtures where the presence of lead might create a condition of exposure not
in compliance with Environmental Laws shall be incorporated in the Alterations.
9.03 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises and
the Complex free from all liens, stop notices and violation notices relating to
the Alterations or any other work performed for, materials furnished to or
obligations incurred by or for Tenant and Tenant shall protect, indemnify, hold
harmless and defend Landlord, the Premises and the Building of and from any and
all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Further, Tenant shall
give Landlord not less then seven (7) business days prior written notice before
commencing any Alterations in or about the Premises to permit Landlord to post
appropriate notices of non-responsibility. Tenant shall also secure, prior to
commencing any Alterations, at Tenant's sole expense, a completion and lien
indemnity bond satisfactory to Landlord for such work. During the progress of
such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn
contractor's statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within ten (10) days after Landlord notifies
Tenant in writing that any such lien, stop notice, claim or encumbrance has been
filed. If Tenant fails to pay and remove such lien, claim or encumbrance within
such ten (10) days, Landlord, at its election, may pay and satisfy the same and
in such event the sums so paid by Landlord, with interest from the date of
payment at the rate set forth in Section 4.06 hereof for amounts owed Landlord
by Tenant shall be deemed to be additional rent due and payable by Tenant at
once without notice or demand.
9.04 REMOVAL OF ALTERATIONS. All Alterations shall become a part of the
Premises and shall become the property of Landlord upon the expiration or
earlier termination of this Lease, unless Landlord shall, by written
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notice given to Tenant, require Tenant to remove some or all of Tenant's
Alterations, (whether installed during the Term of this Lease or any previous
occupancy of the Premises by Tenant) in which event Tenant shall promptly remove
the designated Alterations and shall promptly repair any resulting damage, all
at Tenant's sole expense. All business and trade fixtures, machinery and
equipment, furniture, movable partitions and items of personal property owned by
Tenant or installed by Tenant at its expense in the Premises shall be and remain
the property of Tenant; upon the expiration or earlier termination of this
Lease, Tenant shall, at its sole expense, remove all such items and repair any
damage to the Premises or the Building caused by such removal. If Tenant fails
to remove any such items or repair such damage promptly after the expiration or
earlier termination of the Lease, Landlord may, but need not, do so with no
liability to Tenant, and Tenant shall pay Landlord the cost thereof upon demand.
Notwithstanding the foregoing to the contrary, in the event that Landlord gives
its consent, pursuant to the provisions of Section 9.01 of this Lease, to allow
Tenant to make an Alteration in the Premises, Landlord agrees, upon Tenant's
written request, to notify Tenant in writing at the time of the giving of such
consent whether Landlord will require Tenant, at Tenant's cost, to remove such
Alteration at the end of the Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.01 INDEMNIFICATION.
(A) Tenant agrees to protect, indemnify, hold harmless and defend
Landlord and any Mortgagee, as defined herein, and each of their respective
partners, directors, officers, agents and employees, successors and assigns,
regardless of any negligence of, or imputed to Landlord as owner of the Complex,
Premises or underlying real property, from and against:
(i) any and all loss, cost, damage, liability or
expense as incurred (including but not limited to actual
attorneys' fees and legal costs) arising out of or related to any
claim, suit or judgment brought by or in favor of any person or
persons for damage, loss or expense due to, but not limited to,
bodily injury, including death, or property damage sustained by
such person or persons which arises out of, is occasioned by or is
in any way attributable to the use or occupancy of the Premises or
any portion of the Complex by Tenant or the acts or omission of
Tenant or its agents, employees, contractors, clients, invitees or
subtenants except that caused by the sole active negligence or
willful misconduct of Landlord or its agents or employees. Such
loss or damage shall include, but not be limited to, any injury or
damage to, or death of, Landlord's employees or agents or damage
to the Premises or any portion of the Complex.
(ii) any and all environmental damages which arise
from: (i) the Handling, presence or migration of any Tenant's
Hazardous Materials, as defined in Section 6.03 or (ii) the breach
of any of the provisions of this Lease. For the purpose of this
Lease, "environmental damages" shall mean (a) all claims,
judgments, damages, penalties, fines, costs, liabilities, and
losses (including without limitation, diminution in the value of
the Premises or any portion of the Complex, damages for the loss
of or restriction on use of rentable or usable space or of any
amenity of the Premises or any portion of the Complex and from any
adverse impact of Landlord's marketing of space); (b) all
reasonable sums paid for settlement of claims, attorneys' fees,
consultants' fees and experts' fees; and (c) all costs incurred by
Landlord in connection with investigation or remediation relating
to the Handling of Tenant's Hazardous Materials, whether or not
required by Environmental Laws, necessary for Landlord to make
full economic use of the Premises or any portion of the Complex,
or otherwise required under this Lease. To the extent that
Landlord is held strictly liable by a court or other governmental
agency of competent jurisdiction under any Environmental Laws,
Tenant's obligation to Landlord and the other indemnities under
the foregoing indemnification shall likewise be without regard to
fault on Tenant's part with respect to the violation of any
Environmental Law which results in liability to the indemnitee.
Tenant's obligations and liabilities pursuant to this Section
10.01 shall survive the expiration or earlier termination of this
Lease.
(iii) any and all testing or investigation as may be
requested by any governmental agency or lender for the purpose of
investigating the presence of Tenant's Hazardous Materials that
may not be in compliance with Environmental Laws.
(B) Notwithstanding anything to the contrary contained herein,
nothing shall be interpreted or used to in any way affect, limit, reduce or
abrogate any insurance coverage provided by any insurers to either Tenant or
Landlord.
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(C) Notwithstanding anything to the contrary contained in this
Lease, nothing herein shall be construed to infer or imply that Tenant is a
partner, joint venturer, agent, employee, or otherwise acting by or at the
direction of Landlord.
10.02 PROPERTY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, "all-risk" property insurance, for damage or
other loss caused by fire or other casualty or cause including, but not limited
to, vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting of pipes, explosion, in an amount not less than one
hundred percent (100%) of the replacement cost covering (a) all leasehold
improvements in and to the Premises and (b) Tenant's trade fixtures, equipment,
business records and other personal property from time to time situated in the
Premises, including, without limitation, all floor and wall coverings. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured, except that if not so applied or if this Lease is
terminated following a casualty, the proceeds applicable to the leasehold
improvements shall be paid to Landlord and the proceeds applicable to Tenant's
personal property shall be paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and
maintain business interruption insurance in such amount as will reimburse Tenant
for direct or indirect loss of earnings attributable to all perils insured
against in Section 10.02(A).
(C) Landlord shall, at all times during the Lease Term, procure
and maintain "all-risk" property insurance in the amount not less than ninety
percent (90%) of the insurable replacement cost covering the Building in which
the Premises are located and such other insurance as may be required by a
Mortgagee or otherwise desired by Landlord.
10.03 LIABILITY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, commercial general liability insurance applying
to the use and occupancy of the Premises and the business operated by Tenant.
Such insurance shall have a minimum combined single limit of liability of at
least Two Million Dollars ($1,000,000) per occurrence and a general aggregate
limit of at least Two Million Dollars ($2,000,000). All such policies shall be
written to apply to all bodily injury, property damage, personal injury losses
and shall be endorsed to include Landlord and its agents, beneficiaries,
partners, employees, and any deed of trust holder or mortgagee of Landlord or
any ground lessor as additional insureds. (A list of the current persons and
entities to be named as additional insureds is attached hereto as Exhibit E).
Such liability insurance shall be written as primary policies, not excess or
contributing with or secondary to any other insurance as may be available to the
Landlord or additional insureds.
(B) Prior to the sale, storage, use or giving away of alcoholic
beverages on or from the Premises by Tenant or another person, Tenant, at its
own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all damages,
claims, liens, judgments, expenses and costs, including actual attorneys' fees,
arising under any present or future law, statute, or ordinance of the State of
Virginia or other governmental authority having jurisdiction of the Premises, by
reason of any storage, sale, use or giving away of alcoholic beverages on or
from the Premises. Such policy or policies of insurance shall have a minimum
combined single limit of One Million ($1,000,000) per occurrence and shall apply
to bodily injury, fatal or nonfatal; injury to means of support; and injury to
property of any person. Such policy or policies of insurance shall name the
Landlord and its agents, beneficiaries, partners, employees and any mortgagee of
Landlord or any ground lessor of Landlord as additional insureds. (A list of the
current persons and entities to be named as additional insureds is attached
hereto as Exhibit E).
(C) Landlord shall, at all times during the Lease Term, procure
and maintain commercial general liability insurance for the Building and Common
Area in which the Premises are located. Such insurance shall have minimum
combined single limit of liability of at least Two Million Dollars ($2,000,000)
per occurrence, and a general aggregate limit of at least Two Million Dollars
($2,000,000).
10.04 WORKERS' COMPENSATION INSURANCE. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of Virginia, and Employer's
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Liability insurance with a limit not less than One Million Dollars ($1,000,000)
Bodily Injury Each Accident; One Million Dollars ($1,000,000) Bodily Injury By
Disease - Each Person; and One Million Dollars ($1,000,000) Bodily Injury by
Disease - Policy Limit.
10.05 AUTOMOBILE LIABILITY INSURANCE. At all times during the Lease
Term, Tenant shall provide and maintain, at its sole expense, commercial
automobile liability insurance including owned, non-owned and hired vehicles,
applying to the use of any vehicles arising out of the operations of Tenant.
Such insurance shall apply to bodily injury and property damage in a combined
single limit of not less than One Million Dollars ($1,000,000) per accident.
10.06 PLATE GLASS INSURANCE. At any time during the Lease Term when
there is plate glass in or on the Premises, Tenant shall procure and maintain,
at its sole expense, plate glass insurance covering all the plate glass of the
Premises in amounts satisfactory to Landlord.
10.07 WAREHOUSEMAN'S INSURANCE. At any time during the Lease Term when
Tenant's use of the Premises includes or involves any activity as a bonded
agent, consignee or warehouseman, Tenant shall procure and maintain, at its sole
expense, insurance covering all goods and materials held at the Premises in such
capacity, providing protection against all damage, loss, theft, or other peril
which may occur in connection therewith in an amount not less than Five Million
Dollars ($5,000,000).
10.08 POLICY REQUIREMENTS. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of Virginia and rated not less than A-VIII in Best's
Insurance Guide or a Standard and Poor's claims paying ability rating of not
less than AA. A certificate of insurance (or, at Landlord's option, copies of
the applicable policies) evidencing the insurance required under this Article X
shall be delivered to Landlord not less than thirty (30) days prior to the
Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket policies, but only if such
blanket policies expressly provide coverage to the Premises and the Landlord as
required by this Lease.
10.09 WAIVER OF CLAIMS. Except for claims arising from Landlord's
intentional or grossly negligent acts that are not covered by Tenant's insurance
hereunder, Tenant waives all claims against Landlord for injury or death to
persons, damage to property or to any other interest of Tenant sustained by
Tenant or any party claiming through Tenant resulting from: (i) any occurrence
in or upon the Premises, (ii) leaking of roofs, bursting, stoppage or leaking of
water, gas, sewer or steam pipes or equipment, including sprinklers, (iii) wind,
rain, snow, ice, flooding, freezing, fire, explosion, earthquake, excessive heat
or cold, fire or other casualty, (iv) the Building, Premises, systems or
equipment therefor being defective, out of repair, or failing, and (v)
vandalism, malicious mischief, theft or other acts or omissions of any other
parties including, without limitation, other tenants, contractors and invitees.
To the extent that Tenant is required to or does carry insurance hereunder,
Tenant agrees that Tenant's property loss risks shall be borne by such
insurance, and Tenant agrees to look solely to and seek recovery only from its
insurance carriers in the event of such losses; for purposes hereof, any
deductible amount shall be treated as though it were recoverable under such
policies.
10.10 WAIVER OF SUBROGATION. Each party hereby waives any right of
recovery against the other for injury or loss due to hazards covered by
insurance or required to be covered, to the extent of the injury or loss covered
thereby. Any policy of insurance to be provided by Tenant or Landlord pursuant
to this Article X shall contain a clause denying the applicable insurer any
right of subrogation against the Landlord.
10.11 FAILURE TO INSURE. If Tenant fails to maintain any insurance which
Tenant is required to maintain pursuant to this Article X, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to maintain.
Tenant may not self-insure against any risks required to be covered by insurance
without Landlord's prior written consent.
ARTICLE XI - DAMAGE OR DESTRUCTION
11.01 TOTAL DESTRUCTION. Except as provided in Section 11.03 below, this
Lease shall automatically terminate if the Building is totally destroyed.
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11.02 PARTIAL DESTRUCTION OF PREMISES. If the Premises are damaged by
any casualty and, in Landlord's opinion, the Premises (exclusive of any
Alterations made to the Premises by Tenant) can be restored to its pre-existing
condition within two hundred seventy (270) days after the date of the damage or
destruction using only the insurance proceeds made available to Landlord,
Landlord shall, upon written notice from Tenant to Landlord of such damage,
except as provided in Section 11.03, promptly and with due diligence use
available insurance proceeds to repair any damage to the Premises (exclusive of
any Alterations to the Premises made by Tenant, which shall be promptly repaired
by Tenant at its sole expense) and, until such repairs are completed, the Rent
shall be abated from the date of damage or destruction in the same proportion
that the rentable area of the portion of the Premises which is unusable by
Tenant in the conduct of its business bears to the total rentable area of the
Premises. If such repairs cannot, in Landlord's opinion, either (i) be made
within said two hundred seventy (270) day period, or (ii) be completed using
only the insurance proceeds made available to Landlord, then Landlord may, at
its option, exercisable by written notice given to Tenant within thirty (30)
days after the date of the damage or destruction, elect to make the repairs
within a reasonable time after the damage or destruction, in which event this
Lease shall remain in full force and effect but the Rent shall be abated as
provided in the preceding sentence; if Landlord does not so elect to make the
repairs, then either Landlord or Tenant shall have the right, by written notice
given to the other within sixty (60) days after the date of the damage or
destruction, to terminate this Lease as of the date of the damage or
destruction.
11.03 EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (a) the Building in which the Premises are
located is so damaged as to require repairs to the Building exceeding twenty
percent (20%) of the full insurable value of the Building; or (b) Landlord
elects to demolish the Building in which the Premises are located; or (c) the
damage or destruction occurs less than two (2) years prior to the Expiration
Date, exclusive of option periods. In addition, Landlord's obligation to repair
as set forth in this Article XI shall be limited to the extent of insurance
proceeds made available to Landlord. Further, Tenant's Rent shall not be abated
if either (i) the damage or destruction is repaired within five (5) business
days after Landlord receives written notice from Tenant of the casualty, or (ii)
Tenant, or any officers, partners, employees, agents or invitees of Tenant, or
any assignee or subtenant of Tenant, is, in whole or in part, responsible for
the damage or destruction.
11.04 WAIVER. The provisions contained in this Lease shall supersede any
contrary laws (whether statutory, common law or otherwise) now or hereafter in
effect relating to damage, destruction, self-help or termination.
ARTICLE XII - CONDEMNATION
12.01 TAKING. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), and if Landlord, at its option, is unable
or unwilling to provide substitute premises containing at least as much rentable
area as described in Section 1.02 above, then this Lease shall terminate on the
date that title or possession to the Premises is taken by the condemning
authority, whichever is earlier.
12.02 AWARD. In the event of any Condemnation, the entire award for such
taking shall belong to Landlord. Tenant shall have no claim against Landlord or
the award for the value of any unexpired term of this Lease or otherwise. Tenant
shall be entitled to independently pursue a separate award in a separate
proceeding for Tenant's relocation costs directly associated with the taking,
provided such separate award does not diminish Landlord's award.
12.03 TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
ARTICLE XIII - RELOCATION
13.01 RELOCATION. Landlord shall have the right, at its option upon not
less than thirty (30) days prior written notice to Tenant, to relocate Tenant
and to substitute for the Premises described above other space in the
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Complex, of approximately the same dimensions and size as the Premises described
in Section 1.02 above. If Tenant is already in occupancy of the Premises, then
Landlord shall approve in advance the relocation expenses for purposes of
reimbursement and, provided said expenses were approved in advance by Landlord,
shall reimburse Tenant for Tenant's reasonable moving and telephone relocation
expenses, for fees, if any, for the transferring of utility service, for
electrical wiring, if necessary for the relocation of Tenant's computer and
security systems and for lighting system upgrades consistent with those in the
Premises, and for reasonable quantities of new stationery upon submission to
Landlord of receipts for such expenditures incurred by Tenant.
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
14.01 RESTRICTION. Without the prior written consent of Landlord, Tenant
shall not, either voluntarily or by operation of law, assign, encumber, or
otherwise transfer this Lease or any interest herein, or sublet the Premises or
any part thereof, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees (any such assignment, encumbrance, subletting,
occupation or transfer is hereinafter referred to as a "Transfer"). For purposes
of this Lease, the term "Transfer" shall also include (a) if Tenant is a
partnership, the withdrawal or change, voluntary, involuntary or by operation of
law, of a majority of the partners, or a transfer of a majority of partnership
interests, within a twelve month period, or the dissolution of the partnership,
(b) if Tenant is a closely held corporation (i.e. whose stock is not publicly
held and not traded through an exchange or over the counter) or a limited
liability company, the dissolution, merger, consolidation, division, liquidation
or other reorganization of Tenant, or within a twelve month period: (i) the sale
or other transfer of more than an aggregate of 50% of the voting securities of
Tenant (other than to immediate family members by reason of gift or death) or
(ii) the sale, mortgage, hypothecation or pledge of more than an aggregate of
50% of Tenant's net assets and (c) any change by Tenant in the form of its legal
organization under applicable state law (such as, for example, a change from a
general partnership to a limited partnership or form a corporation to a limited
liability company. An assignment, subletting or other action in violation of the
foregoing shall be void and, at Landlord's option, shall constitute a material
breach of this Lease. Notwithstanding anything contained in this Article XIV to
the contrary, Tenant shall have the right to assign the Lease or sublease the
Premises, or any part thereof, to an "Affiliate" without the prior written
consent of Landlord, but upon at least twenty (20) days' prior written notice to
Landlord, provided that said Affiliate is identical to the use in Section 1.10
of the Lease, and provided further that said Affiliate is not in default under
any other lease for space in a property that is managed by Kennedy Wilson
Properties Ltd. or any of its affiliates. For purposes of this provision, the
term "Affiliate" shall mean any corporation or other entity controlling,
controlled by, or under common control with (directly or indirectly) Tenant,
including, without limitation, any parent corporation controlling Tenant or any
subsidiary that Tenant controls. The term "control," as used herein, shall mean
the power to direct or cause the direction of the management and policies of the
controlled entity through the ownership of more than fifty percent (50%) of the
voting securities in such controlled entity. Notwithstanding anything contained
in this Article XIV to the contrary, Tenant expressly covenants and agrees not
to enter into any lease, sublease, license, concession or other agreement for
use, occupancy or utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or in part on the
net income or profits derived by any person from the property leased, used,
occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported lease, sublease,
license, concession or other agreement shall be absolutely void and ineffective
as a conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
14.02 NOTICE TO LANDLORD. If Tenant desires to assign this Lease or any
interest herein, or to sublet all or any part of the Premises, then at least
thirty (30) days but not more than one hundred eighty (180) days prior to the
effective date of the proposed assignment or subletting, Tenant shall submit to
Landlord in connection with Tenant's request for Landlord's consent:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with
respect to the proposed assignee or subtenant as Landlord shall
reasonably require; (iii) the type of use proposed for the Premises; and
(iv) all of the principal terms of the proposed assignment or subletting;
and
(B) Four (4) originals of the assignment or sublease on a form
approved by Landlord and four (4) originals of the Landlord's Consent to
Sublease or Assignment and Assumption of Lease and Consent.
14.03 LANDLORD'S RECAPTURE RIGHTS. At any time within twenty (20)
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 14.02 above, Landlord may, at its
option by written notice to Tenant, elect to: (a) sublease the Premises or the
portion thereof proposed to
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be sublet by Tenant upon the same terms as those offered to the proposed
subtenant; (b) take an assignment of the Lease upon the same terms as those
offered to the proposed assignee; or (c) terminate the Lease in its entirety or
as to the portion of the Premises proposed to be assigned or sublet, with a
proportionate adjustment in the Rent payable hereunder if the Lease is
terminated as to less than all of the Premises. If Landlord does not exercise
any of the options described in the preceding sentence, then, during the
above-described twenty (20) business day period, Landlord shall either consent
or deny its consent to the proposed assignment or subletting.
14.04 LANDLORD'S CONSENT; STANDARDS. Landlord's consent to a proposed
assignment or subletting shall not be unreasonably withheld; but, in addition to
any other grounds for denial, Landlord's consent shall be deemed reasonably
withheld if, in Landlord's good faith judgment: (i) the proposed assignee or
subtenant does not have the financial strength to perform its obligations under
this Lease or any proposed sublease; (ii) the business and operations of the
proposed assignee or subtenant are not of comparable quality to the business and
operations being conducted by other tenants in the Complex; (iii) the proposed
assignee or subtenant intends to use any part of the Premises for a purpose not
permitted under this Lease; (iv) either the proposed assignee or subtenant, or
any person which directly or indirectly controls, is controlled by, or is under
common control with the proposed assignee or subtenant occupies space in the
Complex, or is negotiating with Landlord to lease space in the Complex; (v) the
proposed assignee or subtenant is disreputable; or (vi) the use of the Premises
or the Complex by the proposed assignee or subtenant would, in Landlord's
reasonable judgment, impact the Complex in a negative manner including but not
limited to significantly increasing the pedestrian traffic, parking capacity and
requirements, and truck traffic in and out of the Complex or requiring any
alterations to the Complex to comply with applicable laws; (vii) the subject
space is not regular in shape with appropriate means of ingress and egress
suitable for normal renting purposes; (viii) the transferee is a government (or
agency or instrumentality thereof) or (ix) Tenant has failed to cure a default
at the time Tenant requests consent to the proposed Transfer.
14.05 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, all sums or other economic consideration received by Tenant in
connection with such assignment or subletting, whether denominated as rental or
otherwise, exceeds, in the aggregate, the total sum which Tenant is obligated to
pay Landlord under this Lease (prorated to reflect obligations allocable to less
than all of the Premises under a sublease) shall be paid to Landlord promptly
after receipt as additional Rent under the Lease without affecting or reducing
any other obligation of Tenant hereunder.
14.06 LANDLORD'S COSTS. If Tenant shall Transfer this Lease or all or
any part of the Premises or shall request the consent of Landlord to any
Transfer, Tenant shall pay to Landlord as additional rent Landlord's costs
related thereto, including Landlord's reasonable attorneys' fees and a minimum
fee to Landlord of Five Hundred Dollars ($500.00).
14.07 CONTINUING LIABILITY OF TENANT. Notwithstanding any Transfer,
including an assignment or sublease to an affiliate, Tenant shall remain as
fully and primarily liable for the payment of Rent and for the performance of
all other obligations of Tenant contained in this Lease to the same extent as if
the Transfer had not occurred; provided, however, that any act or omission of
any transferee, other than Landlord, that violates the terms of this Lease shall
be deemed a violation of this Lease by Tenant.
14.08 NON-WAIVER. The consent by Landlord to any Transfer shall not
relieve Tenant, or any person claiming through or by Tenant, of the obligation
to obtain the consent of Landlord, pursuant to this Article XIV, to any further
Transfer. In the event of an assignment or subletting, Landlord may collect rent
from the assignee or the subtenant without waiving any rights hereunder and
collection of the rent from a person other than Tenant shall not be deemed a
waiver of any of Landlord's rights under this Article XIV, an acceptance of
assignee or subtenant as Tenant, or a release of Tenant from the performance of
Tenant's obligations under this Lease. If Tenant shall default under this Lease
and fail to cure within the time permitted, Landlord is irrevocably authorized,
as Tenant's agent and attorney-in-fact, to direct any transferee to make all
payments under or in connection with the Transfer directly to Landlord (which
Landlord shall apply towards Tenant's obligations under this Lease) until such
default is cured.
ARTICLE XV - DEFAULT AND REMEDIES
15.01 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder as and when due.
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(B) The abandonment of the Premises by Tenant or the vacation of
the Premises by Tenant for fourteen (14) consecutive days (with or
without the payment of Rent).
(C) The making by Tenant of any assignment of this Lease or any
sublease of all or part of the Premises, except as expressly permitted
under Article XIV of this Lease.
(D) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other than
those described in Sections 15.01(A), 15.01(B) or 15.01 (C) above, if
such failure continues for thirty (30) days after written notice thereof
by Landlord to Tenant; provided, however, that if the nature of the
default is such that it cannot be cured within the thirty (30) day
period, no default shall be deemed to exist if Tenant commences the
curing of the default promptly within such thirty (30) day period and
thereafter diligently prosecutes the same to completion and achieves the
same within sixty (60) days after the occurrence of such default. The
thirty (30) day notice described herein shall be in lieu of, and not in
addition to, any notice required under law now or hereafter in effect
requiring that notice of default be given prior to the commencement of an
unlawful detainer or other legal proceeding.
(E) The making by Tenant or its Guarantor of any general
assignment for the benefit of creditors, the filing by or against Tenant
or its Guarantor of a petition under any federal or state bankruptcy or
insolvency laws (unless, in the case of a petition filed against Tenant
or its Guarantor the same is dismissed within thirty (30) days after
filing); the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets at the Premises or Tenant's interest
in this Lease or the Premises, when possession is not restored to Tenant
within thirty (30) days; the attachment, execution or other seizure of
substantially all of Tenant's assets located at the Premises or Tenant's
interest in this Lease or the Premises, if such seizure is not discharged
within thirty (30) days; or the death or the dissolution of Tenant or any
one or more of the Guarantors, if any.
(F) Any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or other
materials provided by Tenant or any Guarantor in connection with
negotiating or entering into this Lease or in connection with any
Transfer under Section 14.01.
15.02 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event of
any default by Tenant as provided in Section 15.01 above, Landlord shall have
the right to terminate this Lease and recover possession of the Premises by
giving written notice to Tenant of Landlord's election to terminate this Lease,
in which event Landlord shall be entitled to receive from Tenant:
(A) The amount of any unpaid Rent which had been earned at the
time of such termination; plus
(B) The amount Rent to be paid by Tenant under this Lease for the
balance of the original lease term, less the rental value of the Premises
for said period; plus
(C) Any other sum of money owed by Tenant to Landlord under the
terms of this Lease; plus
(D) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(E) At Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by
applicable law.
(F) Interest on the foregoing amounts from the time due to be paid
by Tenant (or, in the case of damages incurred by Landlord, from the time
incurred by Landlord) until the time actually paid to Landlord at the
lesser of the maximum rate permitted by law or twelve percent (12%) per
annum.
15.03 MITIGATION OF DAMAGES. If Landlord terminates this Lease, Landlord
shall have no obligation to mitigate Landlord's damages except to the extent
required by applicable law. If Landlord has not terminated this Lease, Landlord
shall have no obligation to mitigate under any circumstances and may permit the
Premises to remain vacant or abandoned. If Landlord is required to mitigate
damages as provided herein: (i) Landlord shall be required only to use
reasonable efforts to mitigate, which shall not exceed such efforts as Landlord
generally uses to lease other space in the Building, (ii) Landlord will not be
deemed to have failed to mitigate if Landlord or its affiliates
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lease any other portions of the Building, Complex or other projects owned by
Landlord or its affiliates in the same geographic area, before reletting all or
any portion of the Premises, and (iii) any failure to mitigate as described
herein with respect to any period of time shall only reduce the Rent and other
amounts to which Landlord is entitled hereunder by the reasonable rental value
of the Premises during such period. In recognition that the value of the
Building depends on the rental rates and terms of leases therein, Landlord's
rejection of a prospective replacement tenant based on an offer of rentals below
Landlord's published rates for new leases of comparable space at the Building at
the time in question, or at Landlord's option, below the rates provided in this
Lease, or containing terms less favorable than those contained herein, shall not
give rise to a claim by Tenant that Landlord failed to mitigate Landlord's
damages.
15.04 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
event of a default of this Lease and abandonment of the Premises by Tenant, if
Landlord does not elect to terminate this Lease as provided in Section 15.02
above, Landlord may from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease. Without limiting the foregoing,
Landlord may continue this Lease in effect after Tenant's default and
abandonment and recover Rent as it becomes due. In the event Landlord re-lets
the Premises, to the fullest extent permitted by law, the proceeds of any
reletting shall be applied first to pay to Landlord all costs and expenses of
such reletting (including without limitation, costs and expenses of retaking or
repossessing the Premises, removing persons and property therefrom, securing new
tenants, including expenses for redecoration, alterations and other costs in
connection with preparing the Premises for the new tenant, and if Landlord shall
maintain and operate the Premises, the costs thereof) and receivers' fees
incurred in connection with the appointment of and performance by a receiver to
protect the Premises and Landlord's interest under this Lease and any necessary
or reasonable alterations; second, to the payment of any indebtedness of Tenant
to Landlord other than Rent due and unpaid hereunder; third, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of other or future obligations of Tenant to
Landlord as the same may become due and payable, and Tenant shall not be
entitled to receive any portion of such revenue.
15.05 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, Landlord may, but shall not be obligated
to, make any payment or perform any such other act on Tenant's part to be made
or performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs, together
with interest thereon at the lesser of the maximum rate permitted by law if any
or twelve percent (12%) per annum from the date of such payment, shall be
payable to Landlord as additional rent on demand and Landlord shall have the
same rights and remedies in the event of nonpayment as in the case of default by
Tenant in the payment of Rent.
15.06 DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
this Lease, heretofore or hereafter made by Tenant for any space in the Building
or the Project, if applicable, shall be terminated or terminable after the
making of this Lease because of any default by Tenant under such other lease,
such fact shall empower Landlord, at Landlord's sole option, to terminate this
Lease by notice to Tenant or to exercise any of the rights or remedies set forth
in Section 15.02.
15.07 NON-WAIVER. Nothing in this Article shall be deemed to affect
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease or Tenant's right to possession of the Premises for
personal injury or property damages under the indemnification clause or clauses
contained in this Lease. No acceptance by Landlord of a lesser sum than the Rent
then due shall be deemed to be other than on account of the earliest installment
of such rent due, 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 Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or pursue any other
remedy in the Lease provided. The delivery of keys to any employee of Landlord
or to Landlord's agent or any employee thereof shall not operate as a
termination of this Lease or a surrender of the Premises, unless Landlord in
writing both accepts such surrender and acknowledges such termination.
15.08 CUMULATIVE REMEDIES. The specific remedies to which Landlord may
resort under the terms of the Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of the Lease. In addition to the other remedies provided in the Lease, including
the right to terminate this Lease or to terminate Tenant's right of possession
of the Premises and reenter and repossess the Premises and remove all persons
and property from the Premises without terminating this Lease as provided in
Section 15.02, Landlord shall be entitled to a restraint by injunction of the
violation or attempted or threatened violation of any of the covenants,
conditions or
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provisions of the Lease or to a decree compelling specific performance of any
such covenants, conditions or provisions.
15.09 DEFAULT BY LANDLORD. Landlord's failure to perform or observe any
of its obligations under this Lease shall constitute a default by Landlord under
this Lease only if such failure shall continue for a period of thirty (30) days
(or the additional time, if any, that is reasonably necessary to promptly and
diligently cure the failure) after Landlord receives written notice from Tenant
specifying the default. The notice shall give in reasonable detail the nature
and extent of the failure and shall identify the Lease provision(s) containing
the obligation(s). If Landlord shall default in the performance of any of its
obligations under this Lease (after notice and opportunity to cure as provided
herein), Tenant may pursue any remedies available to it under the law and this
Lease, except that, in no event, shall Landlord be liable for punitive damages,
lost profits, business interruption, speculative, consequential or other such
damages. In recognition that Landlord must receive timely payments of Rent and
operate the Building, Tenant shall have no right of self-help to perform repairs
or any other obligation of Landlord, and shall have no right to withhold,
set-off, or abate Rent.
ARTICLE XVI - ATTORNEYS' FEES: COSTS OF SUIT
16.01 ATTORNEYS FEES. If either Landlord or Tenant shall commence any
action or other proceeding against the other arising out of, or relating to,
this Lease or the Premises, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its actual attorneys'
fees irrespective of whether or not the action or other proceeding is prosecuted
to judgment and irrespective of any court schedule of reasonable attorneys'
fees. In addition, Tenant shall reimburse Landlord, upon demand, for all
reasonable attorneys' fees incurred in collecting Rent, resolving any actual
default by Tenant, securing indemnification as provided in Article X and
paragraphs, 16.02, 24.01 and 26.01 herein or otherwise seeking enforcement
against Tenant, its sublessees and assigns, of Tenant's obligations under this
Lease.
16.02 INDEMNIFICATION. Should Landlord be made a party to any litigation
instituted by Tenant against a party other than Landlord, or by a third party
against Tenant, Tenant shall indemnify, hold harmless and defend Landlord from
any and all loss, cost, liability, damage or expense incurred by Landlord,
including attorneys' fees, in connection with the litigation, unless a final
non-appealable judgment is rendered against Landlord in such litigation.
ARTICLE XVII - SUBORDINATION AND ATTORNMENT
17.01 SUBORDINATION. This Lease, and the rights of Tenant hereunder, are
and shall be subject and subordinate to the interest of (i) all present and
future ground leases and master leases of all or any part of the Building; (ii)
present and future mortgages and deeds of trust encumbering all or any part of
the Building or the underlying real estate; (iii) all past and future advances
made under any such mortgages or deeds of trust; and (iv) all renewals,
modifications, replacements and extensions of any such ground leases, master
leases, mortgages and deeds of trust; provided, however, that any lessor under
any such ground lease or master lease or any mortgagee or beneficiary under any
such mortgage or deed of trust ( any such lessor, mortgagee or beneficiary is
hereinafter referred to as a "Mortgagee") shall have the right to elect, by
written notice given to Tenant, to have this Lease made superior in whole or in
part to any such ground lease, master lease, mortgage or deed of trust (or
subject and subordinate to such ground lease, master lease, mortgage or deed of
trust but superior to any junior mortgage or junior deed of trust). Upon demand,
Tenant shall execute, acknowledge and deliver any instruments reasonably
requested by Landlord or any such Mortgagee to effect the purposes of this
Section 17.01. Such instruments may contain, among other things, provisions to
the effect that such Mortgagee (hereafter, for the purposes of this Section
17.01, a "Successor Landlord") shall (i) not be liable for any act or omission
of Landlord or its predecessors, if any, prior to the date of such Successor
Landlord's succession to Landlord's interest under this Lease; (ii) not be
subject to any offsets or defenses which Tenant might have been able to assert
against Landlord or its predecessors, if any, prior to the date of such
Successor Landlord's succession to Landlord's interest under this Lease; (iii)
not be liable for the return of any security deposit under the Lease unless the
same shall have actually been deposited with such Successor Landlord; (iv) be
entitled to receive notice of any Landlord default under this Lease plus a
reasonable opportunity to cure such default prior to Tenant having any right or
ability to terminate this Lease as a result of such Landlord default; (v) not be
bound by any rent or additional rent which Tenant might have paid for more than
the current month to Landlord; (vi) not be bound by any amendment or
modification of the Lease or any cancellation or surrender of the same made
without Successor Landlord's prior written consent; (vii) not be bound by any
obligation to make any payment to Tenant which was required to be made prior to
the time such Successor Landlord succeeded to Landlord's interest and (viii) not
be bound by any obligation under the Lease to perform any work or to make any
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improvements to the demised Premises. Any obligations of any Successor Landlord
under its respective lease shall be non-recourse as to any assets of such
Successor Landlord other than its interest in the Premises and improvements.
17.02 ATTORNMENT. If requested to do so, Tenant shall attorn to and
recognize as Tenant's landlord under this Lease any superior Mortgagee or other
purchaser or person taking title to the Building by reason of the termination of
any superior lease or the foreclosure of any superior mortgage or deed of trust,
and Tenant shall, upon demand, execute any documents reasonably requested by any
such person to evidence the attornment described in this Section 17.02.
17.03 MORTGAGEE AND GROUND LESSOR PROTECTION. Tenant agrees to give any
Mortgagee, by registered or certified mail, a copy of any notice of default
served upon Landlord by Tenant, provided that prior to such notice Tenant has
been notified in writing (by way of service on Tenant of a copy of Assignment of
Rents and Leases, or otherwise) of the address of such Mortgagee (hereafter the
"Notified Party"). Tenant further agrees that if Landlord shall have failed to
cure such default within twenty (20) days after such notice to Landlord (or if
such default cannot be cured or corrected within that time, then such additional
time as may be necessary if Landlord has commenced within such twenty (20) days
and is diligently pursuing the remedies or steps necessary to cure or correct
such default), then the Notified Party shall have an additional thirty (30) days
within which to cure or correct such default (or if such default cannot be cured
or corrected within that time, then such additional time as may be necessary if
the Notified Party has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default). Until
the time allowed, as aforesaid, for the Notified Party to cure such default has
expired without cure, Tenant shall have no right to, and shall not, terminate
this Lease on account of Landlord's default.
ARTICLE XVIII - QUIET ENJOYMENT
18.01 Provided that Tenant performs all of its obligations hereunder,
Tenant shall have and peaceably enjoy the Premises during the Lease Term free of
claims by or through Landlord, subject to all of the terms and conditions
contained in this Lease.
ARTICLE XIX - PARKING
19.01 Tenant, its employees and invitees, are hereby granted the
non-exclusive privilege to use parking spaces in Gateway 95 Business Park.
Tenant shall abide by all rules and regulations regarding the use of the parking
area as may now exist or as may hereinafter be promulgated by Landlord. Landlord
reserves the right to modify, restripe and otherwise change the location of
drives, parking spaces and parking area in Gateway 95 Business Park. Landlord
may, but shall have no obligation to, designate certain parking spaces for
trucks, handicapped persons or designated tenants as Landlord, in its sole
discretion, may deem necessary for the professional and efficient operation of
the parking area and the Complex. Landlord shall have the right to reasonably
restrict the number and location of truck/tractor trailers for the overall
benefit of all tenants, it being agreed by Tenant that it is not the intent of
this Lease to provide unrestricted parking for truck/tractor trailers. Tenant
agrees not to overburden the parking facilities and agrees to cooperate with
Landlord and other tenants in the use of the parking facilities. Tenant will
reimburse Landlord upon demand for any damage caused to the parking surfaces or
facilities caused by Tenant's or any of its employees', agents' or invitees'
trucks/tractor trailers or any other vehicles. Landlord reserves the right in
its absolute discretion to determine whether parking facilities are becoming
crowded and, in such event, to allocate parking spaces among Tenant and other
tenants. At no time shall the parking of any vehicle be permitted in the fire
lanes or handicapped parking areas servicing the Complex.
ARTICLE XX - RULES AND REGULATIONS
20.01 The Rules and Regulations attached hereto as Exhibit F are hereby
incorporated by reference herein and made a part hereof. Tenant shall abide by,
and faithfully observe and comply with the Rules and Regulations and any
reasonable and non-discriminatory amendments, modifications and/or additions
thereto as may hereafter be adopted and published by written notice to tenants
by Landlord for the safety, care, security, good order and/or cleanliness of the
Premises and/or the Complex. Landlord shall not be liable to Tenant for any
violation of such rules and regulations by any other tenant or occupant of the
Complex.
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ARTICLE XXI - ESTOPPEL CERTIFICATES
21.01 Tenant agrees at any time and from time to time upon not less than
ten (10) days' prior written notice from Landlord to execute, acknowledge and
deliver to Landlord a statement in writing addressed and certifying to Landlord,
to any current or prospective Mortgagee or any assignee thereof, to any
prospective purchaser of the land, improvements or both comprising the Building,
and to any other party designated by Landlord, that this Lease is unmodified and
in full force and effect (of if there have been modifications, that the same is
in full force and effect as modified and stating the modifications); that Tenant
has accepted possession of the Premises, which are acceptable in all respects,
and that any improvements required by the terms of this Lease to be made by
Landlord have been completed to the satisfaction of Tenant; that Tenant is in
full occupancy of the Premises; that no rent has been paid more than thirty (30)
days in advance; that the first month's Base Rent has been paid; that Tenant is
entitled to no free rent or other concessions except as stated in this Lease;
that Tenant has not been notified of any previous assignment of Landlord's or
any predecessor landlord's interest under this Lease; the dates to which Base
Rent, additional rental and other charges have been paid; that Tenant, as of the
date of such certificate, has no charge, lien or claim of setoff under this
Lease or otherwise against Base Rent, additional rental or other charges due or
to become due under this Lease; that Landlord is not in default in performance
of any covenant, agreement or condition contained in this Lease; or any other
matter relating to this Lease or the Premises or, if so, specifying each such
default. If there is a Guaranty under this Lease, said Guarantor shall confirm
the validity of the Guaranty by joining in the execution of the Estoppel
Certificate or other documents so requested by Landlord or Mortgagee. In
addition, in the event that such certificate is being given to any Mortgagee,
such statement may contain any other provisions customarily required by such
Mortgagee including, without limitation, an agreement on the part of Tenant to
furnish to such Mortgagee, written notice of any Landlord default and a
reasonable opportunity for such Mortgagee to cure such default prior to Tenant
being able to terminate this Lease. Any such statement delivered pursuant to
this Section may be relied upon by Landlord or any Mortgagee, or prospective
purchaser to whom it is addressed and such statement, if required by its
addressee, may so specifically state. If Tenant does not execute, acknowledge
and deliver to Landlord the statement as and when required herein, Landlord is
hereby granted an irrevocable power-of-attorney, coupled with an interest, to
execute such statement on Tenant's behalf, which statement shall be binding on
Tenant to the same extent as if executed by Tenant (and such grant shall not be
in limitation of Landlord's other remedies for such failure by Tenant).
ARTICLE XXII - ENTRY BY LANDLORD
22.01 Landlord may enter the Premises at all reasonable times to:
inspect the same; exhibit the same to prospective purchasers, Mortgagees or
tenants; determine whether Tenant is complying with all of its obligations under
this Lease; supply janitorial and other services to be provided by Landlord to
Tenant under this Lease; post notices of non-responsibility; and make repairs or
improvements in or to the Building or the Premises; provided, however, that all
such work shall be done as promptly as reasonably possible and so as to cause as
little interference to Tenant as reasonably possible. Tenant hereby waives any
claim for damages for any injury or inconvenience to, or interference with,
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or
any other loss occasioned by such entry. As provided for in clause (xii) of
Section 28.19 of this Lease, Landlord shall at all times have the right, but not
the obligation, to obtain from Tenant and retain a key with which to unlock all
of the doors in, on or about the Premises (excluding Tenant's vaults, safes and
similar areas designated by Tenant in writing in advance), and Landlord shall
have the right to use any and all means by which Landlord may deem proper to
open such doors to obtain entry to the Premises, and any entry to the Premises
obtained by Landlord by any such means, or otherwise, shall not under any
circumstances be deemed or construed to be a forcible or unlawful entry into or
a detainer of the Premises or an eviction, actual or constructive, of Tenant
from any part of the Premises. Such entry by Landlord shall not act as a
termination of Tenant's duties under this Lease. If Landlord shall be required
to obtain entry by means other than a key provided by Tenant, the cost of such
entry shall by payable by Tenant to Landlord as additional rent.
ARTICLE XXIII
LANDLORD'S LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORD'S INTEREST
23.01 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly
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understood and agreed by and between the parties hereto that: (a) the recourse
of Tenant or its successors or assigns against Landlord with respect to the
alleged breach by or on the part of Landlord of any representation, warranty,
covenant, undertaking or agreement contained in any of the Lease Documents or
otherwise arising out of Tenant's use of the Premises or the Complex
(collectively, "Landlord's Lease Undertakings") shall extend only to Landlord's
interest in the real estate of which the Premises demised under the Lease
Documents are a part ("Landlord's Real Estate") and not to any other assets of
Landlord or its constituent partners; and (b) except to the extent of Landlord's
interest in Landlord's Real Estate, no personal liability or personal
responsibility of any sort with respect to any of Landlord's Lease Undertakings
or any alleged breach thereof is assumed by, or shall at any time be asserted or
enforceable against, Landlord, Heitman Capital Management Corporation, Heitman
Properties Ltd. or Heitman Virginia Management Inc., or against any of their
respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
23.02 TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of
Landlord's interest in the Building, Landlord shall be automatically freed and
relieved from all applicable liability with respect to performance of any
covenant or obligation on the part of Landlord, provided any deposits or advance
rents held by Landlord are turned over to the grantee and said grantee expressly
assumes, subject to the limitations of this Section 23, all the terms, covenants
and conditions of this Lease to be performed on the part of Landlord, it being
intended hereby that the covenants and obligations contained in this Lease on
the part of Landlord shall, subject to all the provisions of this Section 23, be
binding on Landlord, its successors and assigns, only during their respective
periods of ownership.
ARTICLE XXIV - SURRENDER; HOLDOVER TENANCY
24.01 CONDITION OF PREMISES AND REMOVAL OF PROPERTY. At the expiration
or earlier termination of this Lease or Tenant's right to possession of the
Premises, Tenant shall: (a) surrender possession of the Premises in broom-clean
condition and good repair, free of debris, and otherwise in the condition
required under Section 8.02, ordinary wear and tear excepted, (b) ensure that
all signs, movable trade fixtures and personal property (except items originally
provided by Landlord) have been removed from the Premises as required under
Section 9.04 hereof (subject to Article XXIX hereof), (c) ensure that all
Alterations required to be removed from the Premises pursuant to Section 9.04
have been removed from the Premises, (d) ensure that any damage caused by such
removal has been repaired in a good and workmanlike manner as required under
Section 9.04 hereof (and Landlord may deny permission to remove items where such
removal may damage the structural integrity of the Building), and (e) ensure
that all actions required under the Rules and Regulations set forth in Exhibit F
to this Lease have been taken. Tenant understands that "ordinary wear and tear"
does not mean Tenant shall be relieved of performing its obligations under this
Lease relating to maintenance, repairs and replacements as provided for in the
Lease. The cost and expense of any repairs necessary to restore the condition of
the Premises shall be borne by Tenant, and if Landlord undertakes to restore the
Premises, it shall have a right of reimbursement against Tenant.
24.02 ABANDONED PROPERTY. If Tenant shall fail to perform any repairs or
restoration, or fail to remove any items from the Premises as required
hereunder, Landlord may do so at Tenant's expense as provided in Sections 9.04
and 15.04 hereof and Tenant shall pay Landlord's charges therefor upon demand.
All property removed from the Premises by Landlord hereunder may be handled,
discarded or stored by Landlord at Tenant's expense, and Landlord shall in no
event be responsible for the value, preservation or safekeeping thereof. All
such property shall at Landlord's option be conclusively deemed to have been
conveyed by Tenant to Landlord as if by bill of sale without payment by
Landlord. If Landlord arranges for storage of any such property, Landlord shall
have a lien against such property for costs incurred in removing and storing the
same.
24.03 HOLDOVER TENANCY. If Tenant holds possession of the Premises after
the expiration or termination of the Lease Term, by lapse of time or otherwise,
Tenant shall become a tenant at sufferance upon all of the terms contained
herein, except as to Lease Term and Rent. During such holdover period, Tenant
shall pay to Landlord a monthly rental equivalent to one hundred and fifty
percent (150%) of the Rent Payable by Tenant to Landlord with respect to the
last month of the Lease Term. The monthly rent payable for such holdover period
shall in no event be construed as a penalty or as liquidated damages for such
retention of possession. Without limiting the foregoing, Tenant hereby agrees to
indemnify, defend and hold harmless Landlord, its beneficiary, and their
respective agents, contractors and employees, from and against any and all
claims, liabilities, actions, losses, damages (including without limitation,
direct, indirect, incidental and consequential) and expenses (including, without
limitation, court costs and reasonable attorneys' fees) asserted against or
sustained by any such party and arising from or by reason of such retention of
possession, which obligations shall survive the expiration or termination of the
Lease Term.
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ARTICLE XXV - NOTICES
25.01 All notices which Landlord or Tenant may be required, or may
desire, to serve on the other may be served, as an alternative to personal
service, by mailing the same by registered or certified mail, postage prepaid,
or may be sent by overnight courier, addressed to Landlord at the address for
Landlord set forth in Section 1.11 above and to Tenant at the address for Tenant
set forth in Section 1.12 above, or, from and after the Commencement Date, to
Tenant at the Premises whether or not Tenant has departed from, abandoned or
vacated the Premises, or addressed to such other address or addresses as either
Landlord or Tenant may from time to time designate to the other in writing. Any
notice shall be deemed to have been given and served when delivered personally
or otherwise at the time the same was posted, except that any notice given by
overnight courier shall be deemed given on the first business day following the
date such notice is delivered by such courier provided such courier verifies
delivery proof.
ARTICLE XXVI - BROKERS
26.01 The parties recognize as the broker(s) who procured this Lease the
firm(s) specified in Section 1.13 and agree that Landlord shall be solely
responsible for the payment of any brokerage commissions to said Broker(s), and
that Tenant shall have no responsibility therefor unless written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing, subleasing or renting
space in the Building or the Project, if applicable, Tenant shall be solely
responsible for the payment of any fee due said person or firm and Tenant shall
protect, indemnify, hold harmless and defend Landlord from any liability in
respect thereto.
ARTICLE XXVII - ELECTRONIC SERVICES
27.01 TENANT'S LINES. Tenant may, in a manner consistent with the
provisions and requirements of this Lease, install, maintain, replace, remove or
use any communications or computer or other electronic service wires, cables and
related devices (collectively the "Lines") at the Building in or serving the
Premises, provided: (a) Tenant shall obtain Landlord's prior written consent,
which consent may be conditioned as required by Landlord, (b) if Tenant at any
time uses any equipment that may create an electromagnetic field exceeding the
normal insulation ratings of ordinary twisted pair riser cable or cause
radiation higher than normal background radiation, the Lines therefor (including
riser cables) shall be appropriately insulated to prevent such excessive
electromagnetic fields or radiation, and (c) Tenant shall pay all costs in
connection therewith. Landlord reserves the right to require that Tenant remove
any Lines which are installed in violation of these provisions. Tenant shall
not, without the prior written consent of Landlord in each instance, grant to
any third party a security interest or lien in or on the Lines, and any such
security interest or lien granted without Landlord's written consent shall be
null and void.
27.02 DEFINITION OF ELECTRONIC SERVICES. As used herein "Electronic
Services Provider" means a business which provides telephone, telegraph, telex,
video, other telecommunications or other services which permit Tenant to receive
or transmit information by the use of electronics and which require the use of
wires, cables, antennas or similar devices in or on the Building. The services
of Electronic Services Providers are sometime referred to herein as "Electronic
Services."
27.03 NO RIGHT TO SPECIFIC SERVICES. Landlord shall have no obligation
(i) to install any Electronic Services equipment or facilities, (ii) to make
available to Tenant the services of any particular Electronic Services Provider,
(iii) to allow any particular Electronic Services Provider access to the
Building, (iv) to continue to grant access to an Electronic Services Provider
once such provider has been given access to the Building. Landlord may (but
shall not have the obligation to): (x) install new Lines at the property, (y)
create additional space for Lines at the property, and (z) adopt reasonable and
uniform rules and regulations with respect to Lines.
27.04 LIMITATION OF LANDLORD'S RESPONSIBILITY. Tenant acknowledges and
agrees that all Electronic Services desired by Tenant shall be ordered and
utilized at the sole expense of Tenant. Unless Landlord otherwise requests or
consents in writing, all of Tenant's Electronic Services equipment shall be and
remain solely in the Tenant's premises and the telephone closet(s) on the
floor(s) on which the Tenant's premises is located, in accordance with rules and
regulations adopted by Landlord from time to time. Unless otherwise specifically
agreed to in writing, Landlord shall have no responsibility for the maintenance
of Tenant's Electronic Services equipment, including
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Lines; nor for any Lines or other infrastructure to which Tenant's Electronic
Services equipment may be connected. Tenant agrees that, to the extent any
Electronic Services are interrupted, curtailed or discontinued, Landlord shall
have no obligation or liability with respect thereto and it shall be the sole
obligation of Tenant at its own expense to obtain substitute service. Except to
the extent arising from the intentional or grossly negligent acts of Landlord or
Landlord's agents or employees, Landlord shall have no liability for damages
arising from, and Landlord does not warrant that Tenant's use of any Lines will
be free from the following (collectively called "Line Problems"): (x) any
eavesdropping or wire-tapping by unauthorized parties, (y) any failure of any
Lines to satisfy Tenant's requirements, or (z) any shortages, failures,
variations, interruptions, disconnections, loss or damage caused by the
installation, maintenance, replacement, use or removal of Lines by or for other
tenants or occupants at the property. Under no circumstances shall any Line
Problems be deemed an actual or constructive eviction of Tenant, render Landlord
liable to Tenant for abatement of Rent, or relieve Tenant from performance of
Tenant's obligations under this Lease. Landlord in no event shall be liable for
damages by reason of loss of profits, business interruption or other
consequential damage arising from any Line Problems.
27.05 NECESSARY SERVICE INTERRUPTIONS. Landlord shall have the right,
upon reasonable prior notice to Tenant, to interrupt or turn off Electronic
Services facilities in the event of emergency or as necessary in connection with
maintenance, repairs or construction at the Building or installation of
Electronic Services equipment for other Tenants of the Building or on account of
violation by the Electronic Services Provider or owner of the Electronic
Services equipment of any obligation to Landlord or in the event that Tenant's
use of the Electronic Services infrastructure of the Building materially
interferes with the Electronic Services of other tenants of the Building.
27.06 REMOVAL OF EQUIPMENT, WIRING AND OTHER FACILITIES. Any and all
Electronic Services equipment installed in the Tenant's Premises or elsewhere in
the Building by or on behalf of Tenant, including Lines, or other facilities for
Electronic Services reception or transmittal, shall be removed prior to the
expiration or earlier termination of the Lease term, by Tenant at its sole cost
or, at Landlord's election, by Landlord at Tenant's sole cost, with the cost
thereof to be paid as additional rent. Landlord shall have the right, however,
upon written notice to Tenant given no later than thirty (30) days prior to the
expiration or earlier termination of the Lease term (except that the notice
period shall extend to thirty (30) days beyond the date of termination of the
Lease if it is terminated by either party due to a default by the other), to
require Tenant to abandon and leave in place, without additional payment to
Tenant or credit against rent, any and all Electronic Services Lines and related
infrastructure, or selected components thereof, whether located in the Tenant's
premises or elsewhere in the Building.
27.07 NEW PROVIDER INSTALLATIONS. In the event that Tenant wishes at any
time to utilize the services of an Electronic Services Provider whose equipment
is not then servicing the Building, no such Electronic Services Provider shall
be permitted to install its Lines or other equipment within the Building without
first securing the prior written approval of the Landlord. Landlord's approval
shall not be deemed any kind of warranty or representation by Landlord,
including, without limitation, any warranty or representation as to the
suitability, competence, or financial strength of the Electronic Services
Provider. Without limitation of the foregoing standard, unless all of the
following conditions are satisfied to Landlord's satisfaction, it shall be
reasonable for Landlord to refuse to give its approval: (i) Landlord shall incur
no current expense or risk or future expense whatsoever with respect to any
aspect of the Electronic Services Provider's provision of its Electronic
Services, including without limitation, the costs of installation, materials and
services; (ii) prior to commencement of any work in or about the Building by the
Electronic Services Provider, the Electronic Services Provider shall supply
Landlord with such written indemnities, insurance, financial statements, and
such other items as Landlord reasonably determines to be necessary to protect
its financial interests and the interests of the Building relating to the
proposed activities of the Electronic Services Provider; (iii) the Electronic
Services Provider agrees to abide by such rules and regulations, Building and
other codes, job site rules and such other requirements as are reasonably
determined by Landlord to be necessary to protect the interests of the Building,
the Tenants in the Building and Landlord, in the same or similar manner as
Landlord has the right to protect itself and the Building with respect to
proposed alterations as described in Article IX of this Lease; (iv) Landlord
reasonably determines that, considering other potential uses for space in the
Building, there is sufficient space in the Building for the placement of all of
the provider's equipment, conduit, Lines and other materials; (v) the Electronic
Services Provider agrees to abide by Landlord's requirements, if any, that
provider use existing Building conduits and pipes or use Building contractors
(or other contractors approved by Landlord); (vi) Landlord receives from the
Electronic Services Provider such compensation as is reasonably determined by
Landlord to compensate it for space used in the Building for the storage and
maintenance of the Electronic Services Provider's equipment, for the fair market
value of a Electronic Services Provider's access to the Building, for the use of
common or core space within the Building and the costs which may reasonably be
expected to be incurred by Landlord; (vii) the provider agrees to deliver to
Landlord detailed "as built" plans immediately after the installation of the
provider's equipment is complete; and (viii) all of the foregoing matters are
documented in a written license agreement between Landlord and the provider, the
form and content of which is reasonably satisfactory to Landlord."
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27.08 LIMIT OF DEFAULT OR BREACH. Notwithstanding any provision of the
proceeding paragraphs to the contrary, the refusal of Landlord to grant its
approval to any prospective Electronic Services Provider shall not be deemed a
default or breach by Landlord of its obligation under this Lease unless and
until Landlord is adjudicated to have acted recklessly or maliciously with
respect to Tenant's request for approval, and in that event, Tenant shall still
have no right to terminate the Lease or claim an entitlement to rent abatement,
but may as Tenant's sole and exclusive recourse seek a judicial order of
specific performance compelling Landlord to grant its approval as to the
prospective provider in question. The provisions of this paragraph may be
enforced solely by Tenant and Landlord, are not for the benefit of any other
party, and specifically but without limitation, no telephone or other Electronic
Services Provider shall be deemed a third party beneficiary of this Lease.
27.09 INSTALLATION AND USE OF WIRELESS TECHNOLOGIES. Tenant shall not
utilize any wireless Electronic Services equipment (other than usual and
customary cellular telephones), including antennae and satellite receiver
dishes, within the Tenant's premises, within the Building or attached to the
outside walls or roof of the Building, without Landlord's prior written consent.
Such consent may be conditioned in such a manner so as to protect Landlord's
financial interests and the interests of the Building, and the other tenants
therein, in a manner similar to the arrangements described in the immediately
preceding paragraphs.
27.10 LIMITATION OF LIABILITY FOR EQUIPMENT INTERFERENCE. In the event
that Electronic Services equipment, Lines and facilities or satellite and
antennae equipment of any type installed by or at the request of Tenant within
the Tenant's premises, on the roof, or elsewhere within or on the Building
causes interference to equipment used by another party, Tenant shall cease using
such equipment, Lines and facilities or satellite and antennae equipment until
the source of the interference is identified and eliminated and Tenant shall
assume all liability related to such interference. Tenant shall cooperate with
Landlord and other parties, to eliminate such interference promptly. In the
event that Tenant is unable to do so, Tenant will substitute alternative
equipment which remedies the situation. If such interference persists, Tenant
shall, at Landlord's sole discretion, remove such equipment.
ARTICLE XXVIII - MISCELLANEOUS
28.01 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement of
the parties.
28.02 AMENDMENTS. This Lease shall not be amended, changed or modified
in any way unless in writing executed by Landlord and Tenant. Landlord shall not
have waived or released any of its rights hereunder unless in writing and
executed by Landlord.
28.03 SUCCESSORS. Except as expressly provided herein, this Lease and
the obligations of Landlord and Tenant contained herein shall bind and benefit
the successors and assigns of the parties hereto.
28.04 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for Landlord to perform any of Landlord's obligations shall
be extended by the amount of time Landlord is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
28.05 SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
to the expiration of the Lease shall survive the expiration or earlier
termination of the Lease, and Tenant shall promptly perform all such obligations
whether or not this Lease has expired or been terminated.
28.06 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
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28.07 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Virginia.
28.08 SEVERABILITY. In the event any provision of this Lease is found to
be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
28.09 CAPTIONS. All captions, headings, titles, numerical references and
computer highlighting are for convenience only and shall have no effect on the
interpretation of this Lease.
28.10 INTERPRETATION. Tenant acknowledges that it has read and reviewed
this Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a fair and reasonable
interpretation in accordance with the meaning of its terms and the intent of the
parties.
28.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of the
Lease.
28.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
28.13 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
28.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder. If Tenant comprises more than one person or
entity and fewer than all of the persons or entities comprising Tenant abandon
the Premises, Landlord, at its sole option, may treat the abandonment by such
person or entities as an event of default and exercise with respect to such
persons the rights and remedies provided in Article XV without affecting the
right or obligations of the persons or entities comprising Tenant which have not
abandoned the property.
28.15 EXHIBITS. Exhibits A (Outline of Premises), B (Work Letter
Agreement), C (Suite Acceptance Letter), D (Tenant Operations Inquiry), E (List
of Additional Insureds), F (Rules and Regulations), Schedule 1 to Exhibit D
(List of Permissible Hazardous Materials and Quantities) and Rider are
incorporated into this Lease by reference and made a part hereof.
28.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed and
delivered by Tenant to Landlord and (b) it is fully reviewed and executed by
Landlord; provided, however, that, upon execution of this Lease by Tenant and
delivery to Landlord, such execution and delivery by Tenant, shall, in
consideration of the time and expense incurred by Landlord in reviewing the
Lease and Tenant's credit, constitute an offer by Tenant to lease the Premises
upon the terms and conditions set forth herein (which offer to Lease shall be
irrevocable for twenty (20) business days following the date of delivery).
28.17 WAIVER; NO COUNTERCLAIM; CHOICE OF LAWS. To the extent permitted
by applicable law, Tenant hereby waives the right to a jury trial in any action
or proceeding regarding this Lease and the tenancy created by this Lease. It is
mutually agreed that in the event Landlord commences any summary proceeding for
non-payment of Rent, Tenant will not interpose any counterclaim of whatever
nature or description in any such proceeding. In addition, Tenant hereby submits
to local jurisdiction in the State of Virginia and agrees that any action by
Tenant against Landlord shall be instituted in the State of Virginia and that
Landlord shall have personal jurisdiction over Tenant for any action brought by
Landlord against Tenant in the State of Virginia. To the extent permitted by
applicable law, Tenant hereby waives any and all rights of redemption granted by
any present or future laws.
28.18 ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in Section
7.01 or elsewhere in this Lease to the contrary notwithstanding, electricity to
the Premises shall not be furnished by Landlord, but shall be furnished by the
approved electric utility company serving the Building. Landlord shall permit
Tenant to receive such service
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directly from such utility company at Tenant's cost (except as otherwise
provided herein) and shall permit Landlord's wire and conduits, to the extent
available, suitable and safely capable, to be used for such purposes.
28.19 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for
set-off or abatement of Rent: (i ) to change the name or street address of the
Building; (ii) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (iii) to designate and/or approve prior to
installation, all types of signs, window shades, blinds, drapes, awnings or
other similar items, and all internal lighting that may be visible from the
exterior of the Premises; (iv) to change the arrangement of entrances, doors,
corridors, elevators and/or stairs in the Building, provided no such change
shall materially adversely affect access to the Premises; (v) to grant any party
the exclusive right to conduct any business or render any service in the
Building, provided such exclusive right shall not operate to prohibit Tenant
from using the Premises for the purposes permitted under this Lease; (vi) to
prohibit the placement of vending or dispensing machines of any kind in or about
the Premises other than for use by Tenant's employees; (vii) to prohibit the
placement of video or other electronic games in the Premises; (viii) to have
access for Landlord and other tenants of the Building to any mail chutes and
boxes located in or on the Premises according to the rules of the United States
Post Office; (ix) to close the Building after normal business hours, except that
Tenant and its employees and invitees shall be entitled to admission at all
times under such rules and regulations as Landlord prescribes for security
purposes; (x) to install, operate and maintain security systems which monitor,
by close circuit television or otherwise, all persons entering or leaving the
Building; (xi) to install and maintain pipes, ducts, conduits, wires and
structural elements located in the Premises which serve other parts or other
tenants of the Building; and (xii) to retain at all times master keys or pass
keys to the Premises.
28.20 TENANT OPERATIONS INQUIRY. As a material inducement to Landlord to
enter into this Lease (i) Tenant has completed Exhibit D hereto, and (ii) Tenant
represents and warrants to Landlord that Exhibit D is true and correct in all
material respects and is not misleading.
ARTICLE XXIX - FLOOR LOAD LIMITS
29.01 FLOOR LOAD LIMITS. Tenant shall not place a load upon any floor of
the Premises exceeding the floor load per square foot area which it was designed
to carry and which is allowed by law. Landlord reserves the right to prescribe
the weight and position of all safes, business machines and mechanical equipment
in the Building. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Landlord's judgment, to absorb and
prevent vibration, noise and annoyance to occupants of the Building, Complex or
any adjacent property.
ARTICLE XXX - LANDLORD'S LIEN
30.01 LANDLORD'S LIEN. As security for Tenant's payment of Rent, damages
and all other payments required to be made by this Lease, Tenant hereby grants
to Landlord a lien upon all property of Tenant now or subsequently located upon
the Premises. If Lessee abandons or vacates any substantial portion of the
Premises or is in default in the payment of any rentals, damage or other
payments required to be made by this Lease, Landlord may take any action it
deems necessary and may be available to it under the laws of the State of
Virginia. The proceeds of the sale of the personal property shall be applied by
Landlord toward the cost of the sale and then toward the payment of all sums
then due by Tenant to Landlord under the terms of this Lease.
ARTICLE XXXI - UNIFORM COMMERCIAL CODE
31.01 UNIFORM COMMERCIAL CODE. To the extent, if any, this Lease grants
Landlord any lien or lien rights greater than provided by the laws of the State
of Virginia pertaining to "Landlord's Liens", this Lease is intended as and
constitutes a security agreement within the meaning of the Uniform Commercial
Code as in effect in the State of Virginia. Landlord, in addition to the rights
prescribed in this Lease, shall have a lien upon, and Tenant grants to Landlord
an interest in, all of Tenant's property now or hereafter located upon the
Premises, including without limitation all of Tenant's equipment, inventory,
fixtures, accounts, general intangibles and other items of personal property or
fixtures located upon the Premises whether now owned or hereafter acquired, and
all additions, substitutions, replacements and accessions thereto, and all
proceeds of the foregoing, to secure the payment to
28
<PAGE> 32
Landlord of the various amounts provided in this Lease. The Tenant agrees to and
shall execute and deliver to Landlord such "Financing Statements", continuation
statements, and provide such further assurances as Landlord may from time to
time consider necessary or desirable to create, perfect and preserve the lien
and security interest described above and all additions, substitutions,
replacements and accessions thereto, and all proceeds of its or their sale or
other disposition. The Landlord, at the expense of Tenant, may cause such
Financing Statements, continuation statements, and assurances to be recorded and
re-recorded, filed and re-filed, and renewed or continued, at such times and
places as may be required or permitted by law to create, perfect and preserve
such liens and security interests. In the event Tenant fails to promptly execute
and return to Landlord such Financing Statements or continuation statements as
Landlord may request to create, preserve and perfect its lien, Tenant shall and
does hereby designate Landlord to act as Tenant's agent for the sole and limited
purpose of executing and filing such Financing Statements or continuation
statements and any such execution by Landlord pursuant to this Lease shall be
effective and binding upon Tenant as though executed originally by Tenant, and
under such circumstances Tenant authorizes Landlord to sign such financing and
continuation statements. Tenant's designation of Landlord as agent hereunder
shall not be subject to revocation until this Lease is terminated.
NOTE: Need to file UCC-1 Financing Statement describing such collateral
in Secretary of State's office and county recorder
AND UCC-2 Financing Statement (fixtures), with legal description
attached, with the county recorder.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of the
date first above written.
<TABLE>
<CAPTION>
TENANT: LANDLORD:
- ------ --------
<S> <C>
SENSYS TECHNOLOGIES INC., a Delaware corporation GATEWAY 95 PARTNERS, an Illinois general partnership
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation, its duly
authorized agent and attorney-in-fact
By: By:
-------------------------------- -----------------------------------
Its: Its:
-------------------------------- -----------------------------------
ATTEST:
- ------------------------------------
- ------------------------------------
WITNESSES: WITNESSES:
- ------------------------------------ ----------------------------------------------------
- ------------------------------------ ----------------------------------------------------
</TABLE>
29
<PAGE> 33
EXHIBIT A
FLOOR PLAN OR LAYOUT OF PREMISES
(Approximately 7,634 Sq.Ft.)
(Office 7,634 Sq.Ft.)
(Warehouse 0 Sq.Ft.)
TENANT: SENSYS TECHNOLOGIES INC., A DELAWARE CORPORATION
1
<PAGE> 34
EXHIBIT B
WORK LETTER AGREEMENT
[LANDLORD PERFORMS WORK]
[ALLOWANCE]
This Work Letter Agreement ("Work Letter") is executed simultaneously
with that certain Lease (the "Lease") between SENSYS TECHNOLOGIES, INC., a
Delaware corporation as "Tenant", and GATEWAY 95 PARTNERS, an Illinois general
partnership, as "Landlord", relating to demised premises ("Premises") at the
building commonly known as 8540 Cinderbed Road, Newington, Virginia (the
"Building"), which Premises are more fully identified in the Lease. Capitalized
terms used herein, unless otherwise defined in this Work Letter, shall have the
respective meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual convenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. TENANT'S INITIAL PLANS; THE WORK. Tenant desires Landlord to
perform certain leasehold improvement work in the Premises in substantial
accordance with the plan or plans (collectively, the "Initial Plan") to be
prepared and attached hereto as Schedule 1. Such work, as shown in the Initial
Plan and as more fully detailed in the Working Drawings (as defined and
described in Paragraph 2 below), shall be hereinafter referred to as the "Work".
Not later than August 15, 1998, Tenant shall furnish to Landlord such additional
plans, drawings, specifications and finish details as Landlord may reasonably
request to enable Landlord's architects and engineers to prepare mechanical,
electrical and plumbing plans and to prepare the Working Drawings, including a
final telephone layout and special electrical connection requirements, if any.
All plans, drawings, specifications and other details describing the Work which
have been or are hereafter furnished by or on behalf of Tenant shall be subject
to Landlord's approval, which Landlord agrees shall not be unreasonably
withheld. Landlord shall not be deemed to have acted unreasonably if it
withholds its approval of any plans, specifications, drawings or other details
or of any Additional Work (as defined in Paragraph 7 below) because, in
Landlord's reasonable opinion, the work, as described in any such item, or the
Additional Work, as the case may be: (a) is likely to adversely affect Building
systems, the structure of the Building or the safety of the Building and/or its
occupants; (b) might impair Landlord's ability to furnish services to Tenant or
other tenants in the Building; (c) would increase the cost of operating the
Building; (d) would violate any governmental laws, rules or ordinances (or
interpretations thereof); (e) contains or uses hazardous or toxic materials or
substances; (f) would adversely affect the appearance of the Building; (g) might
adversely affect another tenant's premises; (h) is prohibited by any ground
lease affecting the Building or any mortgage, trust deed or other instrument
encumbering the Building; or (i) is likely to be substantially delayed because
of unavailability or shortage of labor or materials necessary to perform such
work or the difficulties or unusual nature of such work. The foregoing reasons,
however, shall not be the only reasons for which Landlord may withhold its
approval, whether or not such other reasons are similar or dissimilar to the
foregoing. Neither the approval by Landlord of the Work or Initial Plan or any
other plans, drawings, specifications or other items associated with the Work
nor Landlord's performance, supervision or monitoring of the Work shall
constitute any warranty by Landlord to Tenant of the adequacy of the design for
Tenant's intended use of the Premises. Landlord shall be entitled to a payment
of 5% of the cost associated with the completion of Tenant's buildout, which
cost shall include architectural and engineering and similar fees and all costs
associated with the construction of the space as charged by the general
contractor selected to perform the work. This payment is for the coordination
and day to day supervision performed by Landlord's staff in completing Tenant's
buildout. This payment will be part of the Tenant Allowance package.
2. WORKING DRAWINGS. If necessary for the performance of the Work
and not included as part of the Initial Plan attached hereto, Landlord shall
prepare or cause to be prepared final working drawings and specifications for
the Work (the "Working Drawings") based on and consistent with the Initial Plan
and the other plans, drawings, specifications, finish details and other
information furnished by Tenant to Landlord and approved by Landlord pursuant to
Paragraph 1 above. So long as the Working Drawings are consistent with the
Initial Plan, Tenant shall
1
<PAGE> 35
approve the Working Drawings within three (3) days after receipt of same from
Landlord by initialing and returning to Landlord each sheet of the Working
Drawings or by executing Landlord's approval form then in use, whichever method
of approval Landlord may designate.
3. PERFORMANCE OF THE WORK; ALLOWANCE. Except as hereinafter
provided to the contrary, Landlord shall cause the performance of the Work using
(except as may be stated or shown otherwise in the Working Drawings) building
standard materials, quantities and procedures then in use by Landlord ("Building
Standards"). Landlord shall pay for a portion of the "Cost of Work" (as defined
below) in an amount not to exceed $38,170 (such amount being $5 per rentable
square foot of the Premises which is to be improved, as described in the Working
Drawings) (the "Allowance"), and Tenant shall pay for the entire Cost of the
Work in excess of the Allowance. Tenant shall not be entitled to any credit,
abatement or payment from Landlord in the event that the amount of the Allowance
specified above exceeds the Cost of the Work. For purposes of this Agreement,
the term "Cost of the Work" shall mean and include any and all costs and
expenses of the Work, including, without limitation, the cost of the Working
Drawings and of all labor (including overtime) and materials constituting the
Work.
4. PAYMENT. Prior to commencing the Work, Landlord shall submit to
Tenant a written statement of the total Cost of the Work (which shall include
the amount of any overtime projected as necessary to substantially complete the
Work by the Commencement Date specified in the Lease) as then known by Landlord,
and such statement shall indicate the amount, if any, by which the total Cost of
the Work exceeds the Allowance (the "Excess Costs"). Tenant agrees, within three
(3) days after submission to it of such statement, to execute and deliver to
Landlord, in the form then in use by Landlord, an authorization to proceed with
the Work, and Tenant shall also then pay to Landlord an amount equal to the
Excess Costs. No Work shall be commenced until Tenant has fully complied with
the preceding provisions of this Paragraph 4. In the event, and each time, that
any change order by Tenant, unknown field condition, delay caused by acts beyond
Landlord's control or other event or circumstance causes the Cost of the Work to
be increased after the time that Landlord delivers to Tenant the aforesaid
initial statement of the Cost of the Work, Landlord shall deliver to Tenant a
revised statement of the total Cost of the Work, indicating the revised
calculation of the Excess Costs, if any. Within three (3) days after submission
to Tenant of any such revised statement, Tenant shall pay to Landlord an amount
equal to the Excess Costs, as shown in such revised statement, less the amounts
previously paid by Tenant to Landlord on account of the Excess Costs, and
Landlord shall not be required to proceed further with the Work until Tenant has
paid such amount. Delays in the performance of the Work resulting from the
failure of Tenant to comply with the provisions of this Paragraph 4 shall be
deemed to be delays caused by Tenant.
5. SUBSTANTIAL COMPLETION. Landlord shall cause the Work to be
"substantially completed" on or before the scheduled date of commencement of the
term of the Lease as specified in Section 1.05 of the Lease, subject to delays
caused by strikes, lockouts, boycotts or other labor problems, casualties,
discontinuance of any utility or other service required for performance of the
Work, unavailability or shortages of materials or other problems in obtaining
materials necessary for performance of the Work or any other matter beyond the
control of Landlord (or beyond the control of Landlord's contractors or
subcontractors performing the Work) and also subject to "Tenant Delays" (as
defined and described in Paragraph 6 of this Work Letter). The Work shall be
deemed to be "substantially completed" for all purposes under this Work Letter
and the Lease if and when Landlord's architect issues a written certificate to
Landlord and Tenant, certifying that the Work has been substantially completed
(i.e., completed except for "punchlist" items listed in such architect's
certificate) in substantial compliance with the Working Drawings, or when Tenant
first takes occupancy of the Premises, whichever first occurs. If the Work is
not deemed to be substantially completed on or before the scheduled date of the
commencement of the term of the Lease as specified in Section 1.05 of the Lease,
(a) Landlord agrees to use reasonable efforts to complete the Work as soon as
practicable thereafter, (b) the Lease shall remain in full force and effect, (c)
Landlord shall not be deemed to be in breach or default of the Lease or this
Work Letter as a result thereof and Landlord shall have no liability to Tenant
as a result of any delay in occupancy (whether for damages, abatement of Rent or
otherwise), and (d) except in the event of Tenant Delays, and notwithstanding
anything contained in the Lease to the contrary, the Commencement Date of the
Lease Term as specified in Section 1.05 of the Lease shall be extended to the
date on which the Work is deemed to be substantially completed and the
Expiration Date of the Lease Term as specified in Section 1.06 of the
2
<PAGE> 36
Lease shall be extended by an equal number of days. At the request of either
Landlord or Tenant in the event of such extensions in the commencement and
expiration dates of the term of the Lease, Tenant and Landlord shall execute and
deliver an amendment to the Lease reflecting such extensions. Landlord agrees to
use reasonable diligence to complete all punchlist work listed in the aforesaid
architect's certificate promptly after substantial completion.
6. TENANT DELAYS. There shall be no extension of the scheduled
commencement or expiration date of the term of the Lease (as otherwise
permissibly extended under Paragraph 5 above) if the Work has not been
substantially completed on said scheduled commencement date by reason of any
delay attributable to Tenant ("Tenant Delays"), including without limitation:
(i) the failure of Tenant to furnish all or any plans, drawings,
specifications, finish details or the other information required under Paragraph
1 above on or before the date stated in Paragraph 1;
(ii) the failure of Tenant to grant approval of the Working
Drawings within the time required under Paragraph 2 above;
(iii) the failure of Tenant to comply with the requirements of
Paragraph 4 above;
(iv) Tenant's requirements for special work or materials,
finishes, or installations other than the Building Standards or Tenant's
requirements for special construction staging or phasing;
(v) the performance of any Additional Work (as defined in
Paragraph 7 below) requested by Tenant or the performance of any work in the
Premises by any person, firm or corporation employed by or on behalf of Tenant,
or any failure to complete or delay in completion of such work; or
(vi) any other act or omission of Tenant that causes a delay.
7. ADDITIONAL WORK. Upon Tenant's request and submission by Tenant
(at Tenant's sole cost and expense) of the necessary information and/or plans
and specifications for work other than the Work described in the Working
Drawings ("Additional Work") and the approval by Landlord of such Additional
Work, which approval Landlord agrees shall not be unreasonably withheld,
Landlord shall perform such Additional Work, at Tenant's sole cost and expense,
subject, however, to the following provisions of this Paragraph 7. Prior to
commencing any Additional Work requested by Tenant, Landlord shall submit to
Tenant a written statement of the cost of such Additional Work, which cost shall
include a fee payable to Landlord in the amount of 15% of the total cost of such
Additional Work as compensation to Landlord for monitoring the Additional Work
and for administration, overhead and field supervision associated with the
Additional Work and an additional charge payable to Landlord in the amount of 5%
of the total Cost of the Additional Work as compensation for Landlord's general
conditions (such fee and additional charge being hereinafter referred to
collectively as "Landlord's Additional Compensation"), and, concurrently with
such statement of cost, Landlord shall also submit to Tenant a proposed tenant
extra order (the "TEO") for the Additional Work in the standard form then in use
by Landlord. Tenant shall execute and deliver to Landlord such TEO and shall pay
to Landlord the entire cost of the Additional Work, including Landlord's
Additional Compensation (as reflected in Landlord's statement of such cost),
within five (5) days after Landlord's submission of such statement and TEO to
Tenant. If Tenant fails to execute or deliver such TEO or pay the entire cost of
such Additional Work within such 5-day period, then Landlord shall not be
obligated to do any of the Additional Work and may proceed to do only the Work,
as specified in the Working Drawings.
8. TENANT ACCESS. Landlord, in Landlord's reasonable discretion and
upon request by Tenant, may grant to Tenant a license to have access to the
Premises prior to the date designated in the Lease for the commencement of the
term of the Lease to allow Tenant to do other work required by Tenant to make
the Premises ready for Tenant's use and occupancy (the "Tenant's Pre-Occupancy
Work"). It shall be a condition to the grant by Landlord and continued
effectiveness of such license that:
3
<PAGE> 37
(a) Tenant shall give to Landlord a written request to have such
access to the Premises not less than five (5) days prior to the date on which
such access will commence, which written request shall contain or shall be
accompanied by each of the following items, all in form and substance reasonably
acceptable to Landlord: (i) a detailed description of and schedule for Tenant's
Pre-Occupancy Work; (ii) the names and addresses of all contractors,
subcontractors and material suppliers and all other representatives of Tenant
who or which will be entering the Premises on behalf of Tenant to perform
Tenant's Pre-Occupancy Work or will be supplying materials for such work, and
the approximate number of individuals, itemized by trade, who will be present in
the Premises; (iii) copies of all contracts, subcontracts and material purchase
orders pertaining to Tenant's Pre-Occupancy Work; (iv) copies of all plans and
specifications pertaining to Tenant's Pre-Occupancy Work; (v) copies of all
licenses and permits required in connection with the performance of Tenant's
Pre-Occupancy Work; (vi) certificates of insurance (in amounts satisfactory to
Landlord and with the parties identified in, or required by, the Lease named as
additional insureds) and instruments of indemnification against all claims,
costs, expenses, damages and liabilities which may arise in connection with
Tenant's Pre-Occupancy Work; and (vii) assurances of the ability of Tenant to
pay for all of Tenant's Pre-Occupancy Work and/or a letter of credit or other
security deemed appropriate by Landlord securing Tenant's lien-free completion
of Tenant's Pre-Occupancy Work.
(b) Such pre-term access by Tenant and its representatives shall
be subject to scheduling by Landlord.
(c) Tenant's employees, agents, contractors, workmen, mechanics,
suppliers and invitees shall work in harmony and not interfere with Landlord or
Landlord's agents in performing the Work and any Additional Work in the
Premises, Landlord's work in other premises and in common areas of the Building,
or the general operation of the Building. If at any time any such person
representing Tenant shall cause or threaten to cause such disharmony or
interference, including labor disharmony, and Tenant fails to immediately
institute and maintain such corrective actions as directed by Landlord, then
Landlord may withdraw such license upon twenty-four (24) hours' prior written
notice to Tenant.
(d) Any such entry into and occupancy of the Premises by Tenant or
any person or entity working for or on behalf of Tenant shall be deemed to be
subject to all of the terms, convenants, conditions and provisions of the Lease,
specifically including the provisions of Section IX thereof (regarding Tenant's
improvements and alterations to the Premises), and excluding only the covenant
to pay Rent. Landlord shall not be liable for any injury, loss or damage which
may occur to any of Tenant's Pre-Occupancy Work made in or about the Premises or
to property placed therein prior to the commencement of the term of the Lease,
the same being at Tenant's sole risk and liability. Tenant shall be liable to
Landlord for any damage to the Premises or to any portion of the Work or
Additional Work caused by Tenant or any of Tenant's employees, agents,
contractors, workmen or suppliers. In the event that the performance of Tenant's
Pre-Occupancy Work causes extra costs to Landlord or requires the use of
elevators during hours other than ___________a.m. to __________ p.m. on Monday
through Friday (excluding holidays) or of other Building services, Tenant shall
reimburse Landlord for such extra cost, and/or shall pay Landlord for such
elevator service or other building services at Landlord's standard rates then in
effect.
9. LEASE PROVISIONS. The terms and provisions of the Lease, insofar
as they are applicable to this Work Letter are hereby incorporated herein by
reference. All amounts payable by Tenant to Landlord hereunder shall be deemed
to be additional Rent under the Lease and, upon any default in the payment of
same, Landlord shall have all of the rights and remedies provided for in the
Lease.
10. MISCELLANEOUS.
(a) This Work Letter shall be governed by the laws of the state in
which the Premise are located.
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<PAGE> 38
(b) This Work Letter may not be amended except by a written
instrument signed by the party or parties to be bound thereby.
(c) Any person signing this Work Letter on behalf of Tenant
warrants and represents he/she has authority to sign and deliver this Work
Letter and bind Tenant.
(d) Notices under this Work Letter shall be given in the same
manner as under the Lease.
(e) The headings set forth herein are for convenience only.
(f) This Work Letter sets forth the entire agreement of Tenant and
Landlord regarding the Work.
(g) In the event that the final working drawings and
specifications are included as part of the Initial Plan attached hereto, or in
the event Landlord performs the Work without the necessity of preparing working
drawings and specifications, then whenever the term "Working Drawings" is used
in this Agreement, such term shall be deemed to refer to the Initial Plan and
all supplemental plans and specifications approved by Landlord.
11. EXCULPATION OF LANDLORD AND HEITMAN. Notwithstanding anything to
the contrary contained in this Work Letter, it is expressly understood and
agreed by and between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against
Landlord with respect to the alleged breach by or on the part of Landlord of any
representation, warranty, covenant, undertaking or agreement contained in this
Work Letter (collectively "Landlord's Work Letter Undertakings") shall extend
only to Landlord's interest in the real estate, of which the Premises demised
under the Lease are a part (hereinafter, "Landlord's Real Estate") and not to
any other assets of Landlord or its constituent partners; and
(b) Except to the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, its constituent partners, Heitman Capital Management Corporation,
Heitman Properties Ltd. or Heitman Virginia Management Inc., or against any of
their respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
_______________ day of August, 1998.
<TABLE>
<CAPTION>
TENANT: LANDLORD:
- ------ --------
<S> <C>
SENSYS TECHNOLOGIES INC., a Delaware GATEWAY 95 PARTNERS, an Illinois general
corporation partnership
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation, its
duly authorized agent and attorney-in-fact
By:
----------------------------------
By:
----------------------------------
Its: Its:
--------------------------------- ----------------------------------
</TABLE>
5
<PAGE> 39
SCHEDULE 1
INITIAL PLAN
Landlord agrees to perform the following items of work (the "Work") in
the Premises subject to Exhibit B:
1. Repaint the Premises.
2. Recarpet the Premises.
3. Thicken and extend to the roof deck conference room walls so as to
create a secured compartmental information facility (SCIF).
4. Create a lunchroom
5. Complete all building code requirements necessary to separate
suite 1700 from suite 1600 including but not limited to drywall,
HVAC, electrical and sprinkler work.
<PAGE> 40
EXHIBIT C
SUITE ACCEPTANCE AGREEMENT
BUILDING NAME/ADDRESS: _________________________________________________________
TENANT NAME: ___________________________________________________________________
TENANT CODE: __________________________________ SUITE NUMBER: _________________
MANAGEMENT'S TENANT CONTACT: __________________________ PHONE: _________________
Gentlemen:
As a representative of the above referenced tenant, I/we have physically
inspected the suite noted above and its improvements with ______________________
_____, a representative of _________________________________ (name of HPL
Corporation). I/we accept the suite improvements as to compliance with all the
requirements indicated in our lease, also including the following verified
information below:
<TABLE>
<S> <C>
Lease Commencement Date: ___________________________, Occupancy Date _____________________
Lease Rent Start Date*: ____________________________, Actual Rent Start*: _________________
Lease Expiration Date: _____________________________, Actual Expiration Date: _____________
Date Keys Delivered: ______________________________
</TABLE>
Items requiring attention:
-----------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*If these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
Very truly yours,
- -----------------------------------------
By:
----------------------------------
Its:
----------------------------------
Date:
----------------------------------
Distribution
<PAGE> 41
Tenant
Tenant Lease File
Leasing Manager:
-----------------------------
HPL Document Control:
-----------------------------
Regional Construction Manager:
-----------------------------
Regional Engineering Manager:
-----------------------------
2
<PAGE> 42
EXHIBIT D
TENANT OPERATIONS
INQUIRY FORM
<PAGE> 43
SCHEDULE 1 TO EXHIBIT D
LIST OF PERMISSIBLE
HAZARDOUS MATERIALS AND QUANTITIES
<PAGE> 44
EXHIBIT E
ADDITIONAL INSUREDS
Additional insureds pursuant to the requirements outlined in Article X of the
Lease:
Gateway 95 Partners, an Illinois general partnership;
Heitman Capital Management Corporation, an Illinois corporation;
Heitman Properties Ltd., an Illinois corporation;
Heitman Virginia Management Inc., a Delaware corporation;
and their respective partners, agents and employees
The Insurance Certificate should be sent to:
Heitman Virginia Management Inc.
8580 Cinderbed Road, Suite 2300
Newington, Virginia 22122
Attn: Property Manager
<PAGE> 45
EXHIBIT F
RULES AND REGULATIONS
0.0.1 No storage outside the Premises of any material, pallets, disabled
vehicles, showcases or other items will be permitted, including but not limited
to trash, except in containers approved by Landlord. Tenant, its officers,
agents, servants and employees shall not allow anything to remain in any common
area passageway, hallway, stairway, sidewalk, court, corridor, ramp, entrance,
exit, loading area, or other area outside the Premises, or permit such areas to
be used at any time except for ingress or egress of Tenant, its officers,
agents, servants, employees, patrons, licensees, customers, visitors or
invitees. Common utility closets, telephone closets, and other such closets,
rooms and areas shall be used only for the purposes and in the manner designated
by Landlord, and may not be used by Tenant, or its contractors, agents,
employees, or other parties without Landlord's prior written consent.
0.0.2 The movement of furniture, equipment, machines, merchandise or
materials within, into or out of the Premises or the Building not in the
ordinary course of Tenant's business as permitted herein, shall be restricted to
time, method and routing of movement as determined by Landlord upon request from
Tenant and Tenant shall assume all liability and risk to property, the Premises,
the Building and, if applicable, the Complex in such movement. The movement of
furniture, equipment, machines, merchandise or materials within, into or out of
the Premises in the ordinary course of Tenant's permitted business shall also be
at Tenant's sole risk and responsibility and shall be conducted in such a
fashion as not to cause damage or injury to the Premises or the Building or to
disturb other occupants thereof. Tenant shall not move furniture, machines,
equipment, merchandise or materials within, into or out of the Premises or the
Building not in the ordinary course of Tenant's permitted business without
having first obtained a written permit from Landlord twenty-four (24) hours in
advance. Safes and other heavy fixtures, equipment or machines intended to be
kept permanently in the Premises shall be moved into the Premises or the
Building only with Landlord's written consent and placed where directed by
Landlord.
0.0.3 Landlord will not be responsible for lost or stolen personal
property, equipment, money or any article taken from Premises, regardless of how
or when loss occurs.
0.0.4 Tenant, its officers, agents, servants and employees shall not
install or operate any refrigerating or HVAC apparatus or carry on any
mechanical operation without written permission of Landlord. Tenant shall give
Landlord prompt notice of all damage to or defects in HVAC equipment, plumbing,
electric facilities or any part of appurtenance of the Premises.
0.0.5 Tenant, its officers, agents, servants or employees shall not use
the Premises for housing, lodging or sleeping purposes or for the cooking or
preparation of food without written permission of Landlord.
0.0.6 Tenant, its officers, agents, servants, employees, patrons,
licensees, customers, visitors or invitees shall not bring into the Premises or
keep on Premises any fish, fowl, reptile, insect or animal without the prior
written consent of the Landlord.
0.0.7 No locks shall be placed on any door in the Building without the
prior written consent of Landlord. Landlord will furnish two keys to each lock
on doors in the Premises and Landlord, upon request of Tenant, shall provide
additional duplicate keys at Tenant's expense. Tenant, its officers, agents,
servants and employees shall, before leaving the Premises unattended, close and
lock all doors and shut off all lights, business equipment and machinery. Damage
resulting from failure to do so shall be paid by Tenant.
0.0.8 Tenant, its officers, agents, servants or employees shall do no
painting or decorating in the Premises; or mark, paint or cut into, drive nails
or screw into nor in any way deface any part of the Premises or the Building
without the prior written consent of Landlord. If Tenant desires signal,
communication, alarm or other utility or service connection installed or
changed, such work shall only be done at expense of Tenant, with the written
approval and under the direction of Landlord. Tenant, without the prior written
consent of Landlord, shall
1
<PAGE> 46
not lay linoleum or other similar floor covering within the Premises. Tenant
shall not install any antenna, satellite dish or aerial wires, radio or
television equipment or any other type of equipment inside or outside of the
Building, without Landlord's prior approval in writing. No showcases, awnings or
other articles or projections shall be affixed to any part of the exterior of
the Building, without the prior written consent of Landlord.
0.0.9 Tenant, its officers, agents, servants and employees shall not
permit the operation of any musical or sound-producing instruments or device
which may be heard outside the Premises, or which may emanate electrical waves
or x-rays or other emissions which will be hazardous to health, well-being or
condition of persons or property.
0.0.10 All plate and other glass now in the Premises or Building which is
broken through cause attributable to Tenant, its officers, agents, servants,
employees, patrons, licensees, customers, visitors or invitees shall be replaced
by and at expense of Tenant under the direction of Landlord.
0.0.11 The plumbing facilities (including, without limitation, toilet
rooms, urinals, wash bowls, drains and sewers) shall not be used for any other
purpose than that for which they are constructed, and no foreign substance of
any kind shall be thrown therein, and the expense of any breakage, stoppage or
damage resulting from a violation of this provision shall be borne by Tenant,
who shall, or whose officers, employees, agents, servants, patrons, customers,
licensees, visitors or invitees shall, have caused it. Landlord shall not be
responsible for any damage due to stoppage, backup or overflow of the drains or
other plumbing fixtures.
0.0.12 All contractors and/or technicians performing work for Tenant
within the Premises, Building or Complex shall be referred to Landlord for
written approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephones, telegraph equipment,
electrical devices and attachments, and all installations affecting floors,
walls, windows, doors, ceilings, equipment or any other physical feature of the
Building, the Premises or the Complex. None of this work shall be done by Tenant
without Landlord's prior written approval.
0.0.13 Neither Tenant nor any officer, agent, employee, servant, patron,
customer, visitor, licensee or invitee of any Tenant shall go upon the roof of
the Building, without the written consent of the Landlord.
0.0.14 Canvassing, soliciting, distribution of hand-bills or any other
written material peddling in the Building or the Complex are prohibited, and
Tenant shall cooperate to prevent the same. Tenant shall not advertise the
business, profession or activities of Tenant in any manner which violates the
letter or spirit of any code of ethics adopted by any recognized association or
organization pertaining thereto, use the name of the Building for any purpose
other than that of the business address of Tenant or use any picture or likeness
of the Building or the Complex name in any letterheads, envelopes, circulars,
notices, advertisements, containers or wrapping material without Landlord's
express consent in writing.
0.0.15 Tenant shall not conduct its business and/or control its officers,
agents, employees, servants, patrons, customers, licensees and visitors in such
a manner as to commit waste or suffer or permit waste to be committed in
Premises. Tenant shall not do or permit anything in or about the Premises that
is immoral, obscene, pornographic, disreputable or dangerous to life, limb or
property, or do any act tending to injure the reputation of the Complex. No
activity creating dust or fumes that may be hazardous shall be performed in the
Premises except in an environment controlled by air-handling equipment properly
and lawfully designed and utilized, which shall be maintained and operated at
all times to prevent hazardous accumulations of pollutants in the atmosphere
within the Premises or Complex.
0.0.16 Tenant shall not install in the Premises any equipment which uses
a substantial amount of electricity without the advance written consent of the
Landlord. The Tenant shall ascertain from the Landlord the maximum amount of
electrical current which can safely be used in the Premises, taking into account
the capacity of the electric wiring in the Building and the Premises and the
needs of other tenants in the Building and the Complex
2
<PAGE> 47
and shall not use more than such safe capacity. The Landlord's consent to the
installation of electric equipment shall not relieve the Tenant from the
obligation not to use more electricity than such safe capacity.
0.0.17 Tenant shall not use, or permit any other party to use, the
Premises for any distress, fire, bankruptcy, close-out, "lost our lease" or
going-out-of-business sale or auction. Tenant shall not display any signs
advertising the foregoing anywhere in or about the Premises. This prohibition
shall also apply to Tenant's creditors.
0.0.18 Tenant agrees to park in only those parking stalls designated as
tenant parking. Tenant shall hold Landlord harmless for the removal and charges
related thereto when Tenant, or its employees, park in spaces designated as
reserved parking (other than reserved for Tenant), visitor parking, handicapped
parking, or red or yellow curb areas. Tenant shall not park or allow to be kept
any vehicle on the Premises, either company or personnel, which is not being
used on a daily basis.
0.0.19 Tenant shall not maintain armed security in or about the Premises
nor possess any weapons, explosives, combustibles or other hazardous devices in
or about the Building and/or Premises.
0.0.20 All of Tenant's signs shall: (i) be professionally designed,
prepared and installed, (ii) not advertise any product, (iii) comply with any
sign criteria developed by Landlord from time to time, and (iv) be subject to
all Applicable Laws and any covenants, conditions and restrictions applicable to
the Complex or Building. Tenant shall maintain all signs hereunder in good
repair and sightly first class condition. Tenant shall not use strobe or
flashing lights in or on the Premises or in any signs therefor.
0.0.21 Tenant shall conduct its labor relations and relations with
employees so as to avoid strikes, picketing, and boycotts of, on or about the
Premises or Complex. If any employees strike, or if picket lines or boycotts or
other visible activities objectionable to Landlord are established, conducted or
carried out against Tenant, other occupants of the Premises or their employees,
agents, transferees or contractors in or about the Premises or Complex, Tenant
shall immediately close the Premises and remove or cause to be removed all such
occupants, employees, agents, transferees and contractors until the dispute has
been settled.
0.0.22 Upon expiration or earlier termination of this Lease, in addition
to the requirements under Article 24 of this Lease, Tenant shall ensure that:
a. All interior and exterior lights and bulbs are operational.
b. All exhaust, ceiling and overhead fans are operational.
c. Warehouse floor areas are broom swept and clean of all trash and
materials.
d. Warehouse floor areas are cleaned of oils, fluids and other
foreign materials.
e. All electrical, plumbing and other utilities which are terminated
are disconnected, capped and/or terminated according to applicable
building codes and all other governmental requirements.
f. All electrical and telecommunications conduit and wiring installed
by or for Tenant specifically for Tenant's equipment is removed to
the originating panel if Landlord so requires.
g. Overhead interior and exterior doors are operational and in good
condition.
h. Any bolts secured to the floor are cut off flush and sealed with
epoxy.
i. Warehouse fencing or partitions are removed if Landlord so
requires.
3
<PAGE> 48
j. All furniture, trash and debris are removed.
k. All signs and pictures, posters, signage, stickers and all similar
items of Tenant and any other occupant of the Premises are removed
from all walls, windows, doors and all other interior and exterior
surfaces of the Premises and other locations of the Complex.
l. All carpet areas are vacuumed.
m. All uncarpeted office floors are swept, and any excess wax
build-up on tile and vinyl floors is properly removed.
n. All computer cable and conduit installed by or for Tenant is
removed to point of origin.
o. All windows and miscellaneous hardware are operational and in good
condition.
p. All HVAC and mechanical systems and equipment are operational and
in good condition.
q. Ceiling tiles, grid, light lenses, air grills and diffusers are in
place with no holes or stains.
r. There are no broken windows or other glass items.
s. Bathroom walls, floors, and fixtures are clean and in good
condition.
t. All plumbing fixtures are intact, operational free of leaks and in
good condition.
u. All gutters and downspouts are undamaged and operational.
v. Walls (internal and external) are clean and any holes are properly
and permanently patched.
w. All keys to all locks to or within the Premises, any key cards and
parking stickers, the combination to any vaults that Landlord
permits or requires Tenant to leave on the Premises, all plans and
specifications for all leasehold improvements made to the
Premises, and all reports, studies and other materials relating to
Hazardous Materials that were ever on the Premises, shall be
turned over to Landlord.
x. If Tenant is the only occupant of the Building, all lawns have
recently been mowed and edged and shrubbery trimmed; all plants, trees
and shrubbery are intact and healthy; all lawn sprinkler equipment is
operational with no water leaks; and the roof is in good condition and
repair (in accordance with NRCA guidelines) with no apparent leaks.
0.0.23 Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular tenant or landlords, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in favor
of any other tenant or landlords, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all of the tenants of the Complex.
0.0.24 These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease on premises in the Building or
the Complex. Tenant shall be responsible for ensuring compliance with these
Rules and Regulations as they may be amended, by Tenant's employees and as
applicable, by Tenant, any other occupant of the Premises and their respective
agents, employees, invitees, transferees and contractors.
4
<PAGE> 49
RIDER TO LEASE DATED AS OF AUGUST, 1998 BY
AND BETWEEN GATEWAY 95 PARTNERS, AN ILLINOIS GENERAL PARTNERSHIP ("LANDLORD"),
AND SENSYS TECHNOLOGIES INC., A DELAWARE CORPORATION ("TENANT")
This Rider and the Lease shall, for any and all purposes, be deemed to be one
instrument. In the event of any conflict or inconsistency between the terms and
provisions of the Lease and the terms and provisions of this Rider, the terms
and provisions of this Rider shall, in all instances, control and prevail.
Except as expressly defined or modified in this Rider, all words and phrases
which are defined in the Lease shall have the same meaning in this Rider as is
ascribed to such words and phrases in the Lease.
32.01 RENEWAL OPTION. Tenant shall have one (1) option (the "Renewal Option")
to renew the initial term with respect to all (but not less than all) of the
Premises demised under or pursuant to this Lease as of the expiration date of
the Term for one additional term (the "Renewal Term") of five (5) years,
commencing on the day immediately following the expiration date of the initial
Term, under the following terms and conditions and subject to credit approval by
Landlord:
(1) Tenant gives Landlord written notice of its election to exercise the
Renewal Option no earlier than the date which is three hundred sixty-five (365)
days prior to the expiration date of the initial Term and no later than the date
which is two hundred seventy (270) days prior to the expiration date of the
initial Term;
(2) Tenant is not in breach or default under this Lease either on the date
Tenant exercises the Renewal Option or at any time through and including the
proposed commencement date of the Renewal Term.
32.02 TERM. If Tenant timely and properly exercises the Renewal Option in
accordance with the provisions of Section 32.01:
(1) The Rent payable for the Renewal Term shall be based on the then
prevailing rent for similar space in this property, but in no event shall the
rental rate be less than the adjusted rental rate payable under this Lease on
the expiration date of the initial Term. For purposes of the preceding sentence,
"prevailing rental rate" shall mean the total rental then being quoted by
Landlord to third party tenants for reasonably comparable space in the Building
for leases approximately as long, and commencing at approximately the same time,
as the Renewal Term, subject to reasonable adjustment for the desirability of
the applicable floor or area of the Building. If Landlord is not then quoting
rental rates for comparable space, the rates used for purposes of this provision
shall be those rates Landlord would have used if Landlord had quoted such rates.
Landlord's good faith determination of the "prevailing rental rate" shall be
conclusive and binding as to Landlord and Tenant. If Tenant timely and properly
exercises the Renewal Option, Landlord agrees to give Tenant written notice
setting forth the prevailing rental rate, which notice shall be given prior to
the commencement date of the Renewal Term.
(2) Tenant shall have no further options to renew the initial Term of this
Lease beyond the expiration date of the Renewal Term.
<PAGE> 50
(3) Landlord will not be required to give any economic concession in
connection with the exercise of this option. Without limiting the generality of
the foregoing, Landlord will not be obligated to perform or give an allowance
for leasehold improvements.
(4) Except as otherwise provided herein, all of the terms and provisions of
this Lease shall remain the same and in full force and effect during the Renewal
Term.
32.03 AMENDMENT. If Tenant exercises the Renewal Option, Landlord and Tenant
shall execute and deliver an amendment to this Lease (or, at Landlord's option,
a new lease on the form then in use for the Building) reflecting the lease of
the Premises by Landlord to Tenant for the Renewal Term on the terms provided
above, which amendment (or new lease, as the case may be) shall be executed and
delivered prior to the commencement date of the Renewal Term.
32.04 TERMINATION. The Renewal Option shall automatically terminate and become
null and void and of no force or effect upon the earlier to occur of (1) the
expiration or termination of this Lease, (2) the termination of the Tenant's
right to possession of the Premises, (3) the assignment of this Lease by Tenant,
(4) the sublease by Tenant of all or part of the Premises, or (5) the failure of
Tenant to timely or properly exercise the Renewal Option or (6) the occurrence
of an Event of Default by Tenant under the Lease.
32.05 ANTENNAE/SATELLITE DISH. Landlord shall permit Tenant to install on the
Building roof above Tenant's Premises, at Tenant's expense, one (1) mast mounted
antenna, two (2) satellite VSAT earth terminal antennae and three (3)
operational antennae for use in connection with Tenant's business during the
Lease Term under the following general conditions:
a) The diameter of the satellite dish or antennae does not exceed
10' and the overall height does not exceed 12' above the roof
deck;
b) Tenant submits to Landlord for approval within thirty (30)
days of Lease execution construction drawings prepared by a
licensed structural engineer that detail the method of
affixing the dish and the antennae to the roof deck;
c) Notification of approval or notice of required modifications
shall be given to Tenant within seven business days of
submittal to Landlord;
d) Tenant agrees to abide by reasonable specific conditions for
installation which Landlord will forward following review and
approval;
e) Tenant restores the Building roof to its original condition
upon Tenant's vacating the Premises;
f) Landlord's roof contractor makes the necessary roof
penetrations in order to insure that the Building roof
warranty, if any, remains intact;
g) Tenant bears all costs related to the installation and
maintenance of the satellite dish and antennae during the
Lease Term;
h) Tenant conforms to all other requirements stated in the Lease;
i) Tenant shall be responsible for procuring whatever license(s)
or permit(s) may be required from third persons for the use or
operation of the antennae/satellite dish, and Landlord makes
no warranties or representations as to the permissibility of
the antenna under applicable laws.
2
<PAGE> 51
Tenant warrants that the antennae/satellite dish shall not constitute a nuisance
or unreasonably interfere with the operations of the Landlord or other tenants.
IN WITNESS WHEREOF, the parties have caused this Rider to be executed on the
same date as the form lease to which it is attached.
LANDLORD:
GATEWAY 95 PARTNERS, AN ILLINOIS
GENERAL PARTNERSHIP
By:
----------------------------
Its:
----------------------------
TENANT:
SENSYS TECHNOLOGIES INC., A DELAWARE
CORPORATION
By:
----------------------------
Its:
----------------------------
3
<PAGE> 1
EXHIBIT 10.18
LEASE AGREEMENT
300 PARKLAND PLAZA
ANN ARBOR, MI 48103
LANDLORD: 300 PARKLAND PLAZA L.L.C.
2038 S. SEVENTH STREET
ANN ARBOR, MI 48103
TENANT: SENSYS TECHNOLOGIES, INC.
8419 TERMINAL ROAD
NEWINGTON, VA 22122
PREMISES: South 12,500 square feet of 1st story building
300 Parkland Plaza
ANN ARBOR, MI 48103
(See Attached)
Revised 9/30/98
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
1.0. LEASE TERMS 1
- ---- -----------
1.1. Tenant 1
1.2. Tenant Address 1
1.3. Tenant Telephone 1
1.4. Landlord 1
1.5. Landlord Address 1
1.6. Landlord Telephone 1
1.7. Premises 1
1.8. Use 1
1.9. Date of Lease 1
1.10. Term of Lease 1
1.10.1. Start 1
1.10.2. End 1
1. 11. Rent 1
1.11.1. Total Base Rent 1
1.11.2. Monthly Base Rent 1
1.11.3. Due Date of First Monthly Base Rent 1
1.12. Complex Costs 1
1.12.1. Tenant Complex Cost Percentage 1
1.12.2. First Monthly Complex Cost Due 1
1.12.3. First Monthly Escrow Amount 1
1.13. Security Deposit 1
1.13.1. Security Deposit 1
2.0 PREMISES 3
- --- --------
2.1. Complex 3
2.2. Premises 3
2.3. Improvements 3
3.0. TERM 4
- ---- ----
3.1. Term 4
3.2. Holding Over 4
4.0. RENT 5
- --- ----
4.1. Base Rent 5
4.2. Tenant Complex Costs 5
5.0. SECURITY DEPOSIT 8
- ---- ----------------
5.1. Security Deposit 8
5.2. Holding of Security Deposit 8
5.3. Landlord Assignment of Security Deposit 8
5.4. Tenant Assignment of Security Deposit 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.5. Refund 8
PAGE
NUMBER
------
6.0. USE 9
- ---- ---
6.1. Use of Premises 9
6.2. Delivery and Refuse 9
6.3. Parking 9
6.4. Right of Entry by Landlord 9
6.5. Rules and Regulations 10
6.6. Rights Reserved to Landlord 10
7.0. MAINTENANCE, REPAIR, ALTERATION 12
- ---- -------------------------------
7.1. Landlord's Obligations 12
7.2. Utilities 13
7.3. Exterior Lighting 13
7.4. Tenant's Obligations 13
7.5. Plumbing 14
7.6. Signs 14
7.7. Alterations 14
8.0. INSURANCE AND INDEMNITY 14
- ---- -----------------------
8.1. Indemnity 14
8.2. Landlord's Insurance 15
8.3. Tenant Insurance 15
8.4. Tenant Public Liability Insurance 15
8.5. Glass Insurance 15
8.6. Insurance Policies 16
8.7. Waiver of Subrogation 16
9.0. ASSIGNMENT 16
- ---- ----------
9.1. Tenant Assignment 16
9.2. Landlord Assignment 17
10.0. EMINENT DOMAIN 17
- ----- --------------
10.1. Total Condemnation 17
10.2. Partial Condemnation 17
10.3. Damages From Condemnation 17
11.0. DESTRUCTION OR DAMAGE TO PREMISES 18
- ----- ---------------------------------
11.1. Casualty Loss 18
12.0. TENANT BANKRUPTCY 18
- ----- -----------------
12.1. Tenant's Interest Not Transferab1e 18
12.2. Landlord's Option To Terminate 18
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
13.0. TENANT DEFAULT 19
- ----- --------------
13.1. Right to Re-Enter 19
13.2. Right to Re-Let 19
13.3. Legal Expenses 20
13 4. Receipt of Money After Termination of Lease 20
13.5. Self-Help 20
14.0. TENANT'S PROPERTY 21
- ----- -----------------
14.1. Taxes on Leasehold 21
14.2. Notice By Tenant 21
15.0. QUIET ENJOYMENT 21
- ----- ---------------
15.1. Landlord's Covenant 21
15.2. Tenant's Covenant 21
16.0. LEASE SUBORDINATE 22
- ----- -----------------
16.1. Subordination 22
16.2 Attornment 22
16.3. Tenant Off-Set Statement 22
MISCELLANEOUS 22
-------------
17.1. Successors 22
17.2. Waiver 23
17.3. Notice 23
17.4. Relationship 23
17.5. Consent Not Unreasonably Withheld 23
17.6. Accord and Satisfaction 23
17.7. Headings 24
17.8. Partial Invalidity 24
17.9. Reservation 24
17.10. Liens 24
17.11. Liability of Landlord 24
17.12. Force Majeure 25
17.13. Entire Agreement 25
17.14. Estoppel 25
17.15. Attorney Approval 25
RIDER A MODIFICATIONS OF LEASE 26
- ----- - ----------------------
RA.1. Terms 26
RA.2. Option To Renew 26
RA.3. Utilities Agreement 26
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE 1.0 LEASE TERMS
----------- -----------
<S> <C>
Section 1.1 Tenant : SENSYS Technologies Inc. "Tenant"
----------- ------------------------
Section 1.2 Tenant Address: 8419 Terminal Drive
----------- -------------------
Newington, VA 22122
-------------------
Section 1.3 Tenant Telephone: (703) 550-7000
----------- --------------
Section 1.4 Landlord: 300 parkland Plaza, LLC, a limited liability corporation ("Landlord")
-----------
Section 1.5 Landlord Address: 2038 S. Seventh St.
----------- -------------------
Ann Arbor, MI 48103
-------------------
Section 1.6 Landlord Telephone: (734) 663-5032
----------- --------------
Section 1.7 Premises: South 12, 419 S.F. of 1-story at 300 Parkland Plaza
----------- ---------------------------------------------------
Ann Arbor, MI 48103
---------------------------------------------------
Section 1.8 Use: Office, Engineering Labs, and Model Shop
----------- ----------------------------------------
Section 1.9 Date of Lease: December 1, 1998
----------- ----------------
Section 1.10 Term of Lease: Five (5) Years
------------ --------------
1.10.1. Start: December 1, 1998
----------------
1.10.2. End: November 31, 2003
-----------------
Section 1.11 Rent
------------
1.11.1 Total Base Rent: $558,855.00
-----------
1.11.2 Monthly Base Rent: $9,314.25
---------
1.11.3 Due Date of First Monthly Base Rent: December 1, 1998
----------------
Section 1.12 Complex Costs
------------
1.12.1. Tenant Complex Cost Percentage: 50%
---
1.12.2 First Monthly Complex Cost Due: December 1, 1998
----------------
1.12.3 First Monthly Escrow Amount: $3,200.00
---------
Section 1.13 Security Deposit
------------
1.13.1. Security Deposit: $12,575.00
----------------
1.13.2. Other Collateral: N/A
----------------
1.13.3. Guarantors: N/A
----------------------
</TABLE>
WITNESSETH: Landlord, in consideration of the rents to be paid and
the covenants and agreements to be performed by Tenant, does hereby lease unto
Tenant, and Tenant hereby accepts this Lease of, the Premises upon the terms and
conditions of this lease, including pages 1 through 26 and all Riders and
Exhibits hereto, all of which are incorporated herein by this reference. Dated
the date first above written.
Witnesses: Landlord: 300 Parkland Plaza, LLC, a limited
- --------- -------- liability corporation, of Michigan
/s/ Ronald D. Marten
- ------------------------
- ------------------------
By:
------------------------------
Its: Managing Member
---------------
/s/ Cindy Hruska Tenant: SENSYS Technologies Inc.
- ------------------------ ------------------------
Assistant Secretary By:/s/ R. R. Bower
- ------------------------ ---------------
Its: Senior Vice President of Finance
----------------------------------
<PAGE> 6
STATE OF MICHIGAN
COUNTY OF WASHTENAW
On this 19th day of November, 1998, before me, a Notary Public in and
for said County, appeared Noraldeen M. Ridha, to me personally known, who being
by me duly sworn did say that he is an authorized general partner of 300
Parkland plaza L.L.C. a Michigan limited partnership, the partnership that
executed the within and foregoing instruments and as a general partner of said
limited partnership by authority of the other partners, acknowledged said
instruments to be the free act and deed of said limited partnership.
--------------------------------
Notary Public
County of Washtenaw
----------------------
My Commission expires: 03/09/01
------------
STATE OF VIRGINIA
COUNTY OF Prince William
On this 13th day of November, 1998, before me, a Notary in and for
said County, appeared Robert R. Bower to me personally known, who being by me
duly sworn, did acknowledge for himself and say that he is the Senior VP of
Finance of Sensys Technologies Inc., the entity described herein as Tenant, who
execute the within instrument as the duly authorized agent of Tenant with full
power to bind Tenant hereby who signed this Lease on behalf of Tenant and who
acknowledges said instrument to be the free act and deed of Tenant.
/s/ Cindy J. Hruska
--------------------------------
Notary Public
County of Prince William
----------------------
My Commission expires: December 31, 2002
-------------------------
<PAGE> 7
ARTICLE 2.0. PREMISES
Section 2.1. Complex.
Landlord is the owner of fee title to the commercial real estate
complex known as 300 Parkland Plaza which includes all common areas, parking
areas and sidewalks.
Section 2.2. Premises.
Subject to all terms and conditions of this Lease, Landlord hereby
leases to Tenant the space(s) within the Complex described in Section 1.7.
hereof, more fully described in Exhibit B hereto (the "Premises"), as well as
reasonable rights of uses in and to all common areas of the complex.
Section 2.3. Improvements.
The Premises are being leased to Tenant in an "as is" condition and
Tenant's taking possession shall be conclusive evidence against Tenant that the
Premises were in good order and satisfactory condition when Tenant took
possession except as to latent defects. Landlord has not made any promise to
Tenant to alter, remodel, or improve the Premises, the Complex, or any adjacent
area nor made any representation regarding the condition of the Premises or the
Complex except those provisions explicitly set forth in this Lease. Tenant may
make permanent or temporary alternations, additions, changes or improvements
(hereinafter "alternations") on or to the Premises upon receiving Landlord's
prior written consent in each instance. Such consent not be unreasonably
withheld, conditioned, or delayed. If Landlord consents to such alternations
by Tenant, Tenant shall pay the cost of such alternations, and before
commencement of the work or delivery of any materials to the Premises or
Complex, Tenant shall furnish Landlord with the following: (I) plans and
specifications, (ii) names and addresses of all contractors, (iii) copies of
contracts, (iv) necessary permits, (v) indemnification of Landlord in form and
mount reasonably satisfactory to Landlord against any and all claims, loss,
costs, damages, liabilities, and expenses which may arise in connection with
such alternations, (vi) waivers of lien for any and all labor, material or
equipment to e supplied or rendered in connection with such alternations, and
(vii) certificates of insurance from all contractors performing labor or
furnishing materials insuring Landlord against any an all liabilities which may
arise out of such alternations. All alterations shall be installed in a good,
workmanlike manner and only new materials shall be used. Whether tenant
furnishes Landlord the foregoing or not, Tenant hereby agrees to hold Landlord
harmless from and against any and all liabilities of every kind and nature
which may arise out of or be connected with said alterations. Upon completing
any alternations or additions, Tenant shall furnish Landlord with contractors'
affidavits and full and final waivers of lien and receipted bills covering all
labor and materials expended and used in or for such alternations. All
alterations shall comply with all ordinances and regulations of the City of Ann
Arbor and any department or agency thereof and with the requirements of all
federal, state, and local statutes and regulations of the State of Michigan and
any department thereof. All alterations and all improvements, temporary or
permanent, in or
<PAGE> 8
upon the Premises, placed there by Tenant shall become the property of Landlord
and shall remain upon the Premises at the termination of this Lease, by lapse
of time or otherwise, without compensation or credit to Tenant. If at the
expiration or earlier termination of this Lease and upon Landlord's request,
Tenant does not remove said additions and improvements, Landlord may remove the
same and Tenant shall pay the cost of such removal and damages occasioned
thereby to Landlord upon fifteen (15) days prior written notice. Tenant shall
remove its office furniture, machinery, medical and other property of every
kind and description (hereinafter "personal property") from the Premises within
a reasonable time of the termination of this lease, whether by lapse of time or
otherwise. If such personal property is not so removed, Landlord may request
its removal, and if Tenant does not remove it, Landlord may do so, and Tenant
shall pay the cost of such removal upon fifteen (15) days prior written notice.
ARTICLE 3.0. TERMS
Section 3.1. Term.
Tenant's right to occupy all or any part of the Premises shall
commence on 12:01 a.m. Eastern Standard Time on the date in Section 1.10.1
hereof and shall cease upon the earlier of:
1. 11:59 p.m. Eastern Standard Time on the date in Section 1.10.2
hereof, or
2. Tenant's default as described in Article 13.0 hereof.
Section 3.2. Holding Over.
If Tenant or anyone claiming under Tenant shall remain in possession
of the Premises or any part thereof after the expiration of the term of this
Lease without any agreement in writing between the Landlord and Tenant with
respect thereto, the person remaining in possession shall be deemed a
month-to-month tenant at a rental rate equal to one hundred and fifty percent
(150%) of the rent in effect upon the date of such expiration or termination
until tenancy is terminated in a manner provided by law.
ARTICLE 4.0. RENT
Section 4.1. Base Rent.
Tenant shall and hereby agrees to pay Landlord at the address set
forth in Section 1.5 hereof, or such other place or such other places as
Landlord may direct from time to time by notice to Tenant, payable monthly on
the first day of each month in advance in the amount set forth in Section
1.11.2 hereof ("Monthly Base Rent") commencing on the date described in Section
1.11.3 hereof and on the first day of every month thereof for the term of this
Lease. Tenant shall pay Additional Base Rent (described in Section 4.2 hereof)
and Tenant Complex Costs (described in Section 4.3 hereof) in addition to the
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Total Base Rent for the term of this Lease (the Total Base Rent, Additional
Base Rent and Tenant Complex Costs being sometimes hereinafter referred to as
"Rent"). Tenant's obligation to pay Rent shall be independent of every other
covenant in or regarding this Lease and Tenant hereby agrees to and shall pay
all Rent without notice or demand and without abatement, deduction, discount,
counterclaim or offset. If the term of this Lease shall commence on other than
the first day of a calendar month, then the Monthly Base Rent for such month
shall be prorated upon the number of days in that calendar month.
Section 4.2. Tenant Complex Costs.
(a) In addition to the payment of Total Base Rent and Additional
Base Rent, Tenant shall pay its proportionate share of the costs of operating
the Complex as such are computed in accordance with this Section 4.2 (such rent
herein referred to as "Tenant Complex Costs").
(b) On or before each Adjustment Date, or within ninety (90) days
thereafter, during the term of this Lease Landlord shall notify Tenant of the
expected Complex Costs (defined below) for the forthcoming calendar year based
upon contracts, union scales, tax information and other material available to
Landlord. Tenant shall pay, in advance, monthly installments equal to
one-twelfth (1/12) of the total amount of the projected Complex Costs
multiplied by the percentage described in Section 1.12.1 hereof. If Tenant is
notified of such estimate after the Adjustment Date, or if at any time during
the term of this Lease Landlord notifies Tenant that Landlord has determined
Complex Costs for such calendar year will be more or less than previously
estimated, upon the submission to Tenant of an adjusted estimate, the monthly
installments of Tenant Complex Costs to be paid by Tenant during such calendar
year shall be adjusted upward or downward, as the case may be, which adjustment
shall be made retroactive to the Adjustment Date for that calendar year. In
this event, Tenant shall pay Landlord within thirty (30) days of Landlord's
notice of increase the amount necessary to reflect an increase or Landlord
shall allow Tenant a credit against the next installment(s) of Tenant Complex
Costs due in such amounts as are necessary to reflect such decrease.
(c) "Complex Costs" shall consist of all reasonable costs,
expenses and disbursements of every kind, nature and description which Landlord
pays or is required to pay in connection with the ownership, management,
operation, maintenance and repair of the Complex, the land upon which the
Complex is located and of the personal property (related to the building),
fixtures, machinery, equipment, systems and apparatus located therein or used
in connection therewith. To the extent that any major repair or general
maintenance item is not done on a periodic basis, the cost thereof may be
amortized over the estimated life of such item and then only the amortized
amount applicable to any calendar year shall be included in Complex Costs in
such calendar year. Complex Costs shall include, but not be limited to, all
costs incurred by landlord for the maintenance, repair, and upkeep of parking
areas, access roads and facilities which may be furnished by Landlord within
the Complex, employee parking areas, driveways, lighting fixtures and
facilities, landscaped and planted areas, retaining walls, and all other areas
and improvements which may be provided by Landlord for the general use of
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improvements which may be provided by Landlord for the general use of all
tenants, their officers, agents, employees and customers. Costs also include
all real estate taxes, like assessments (whether they be general or special),
sewer rents, rates and charges, transit taxes, taxes based upon government
charges, and general, special, ordinary or extraordinary taxes (but not
including income or franchise taxes or any other taxes imposed upon or measured
by income or profits), which may be levied or assessed against any or all of
the Complex, the land on which it is located or the fixtures, machinery,
equipment, systems and apparatus located therein or used in connection
therewith (herein and collectively referred to as "Taxes"). In case of special
taxes or like assessments which may be payable in installments, only the amount
of each installment paid during a calendar year shall be included as Taxes for
that year. There shall be included in Taxes for any calendar year the amount
of all reasonable fees, costs and expenses (including attorneys' fees) paid
during such year in obtaining any refund or reduction thereof. If at any time
the method of taxation then prevailing shall be altered so that any new tax,
like assessment, levy, imposition, charge or any part thereof shall be imposes
in place therein, and shall be measured by or be based in whole or in part upon
the value of the Complex or land on which it is located, then all such new
taxes, like assessments levies, impositions or charges or part thereof, to the
extent that they are some measured or based, shall be included in Taxes to the
extent that such items would be payable if the value of the Complex and such
land were the only property of the Landlord subject thereto.
(d) Complex Costs shall not include Landlord's income taxes, costs
of alterations of any space in the Complex for tenants of costs, repair of
damages caused by insurable casualties or condemnation, depreciation, costs of
capital improvements to the Complex (provided, however, to any extent the
capital improvements, including the use of automobiles, reflects a reduction in
Complex cost, the amount of such capital costs shall be included as Complex
Costs amortized over the expected life of such capital improvements), interest
and principal payments on mortgages and other debt and ground rental payments
advertising and promotional expenditures, management or administrative fees
(except fees for a property management service), and any other expense which
under generally accepted accounting principles would not be considered a normal
maintenance or operating expense. Repairs or expenses scheduled less often
than annually may, at Landlord's election, be prorated over the period to which
such expenses are applicable.
(e) Landlord will cause to be kept books and records showing the
Complex Costs in accordance with the system of accounts and accounting, and in
accordance with generally accepted accounting principles and practices
consistently being maintained by Landlord for its properties. As soon as is
available after each Adjustment date, Landlord shall submit to Tenant a
computation of Complex Costs, if any, for the preceding calendar year to
reflect Tenant's proportionate share of the Complex Costs for the preceding
calendar year. Within thirty (30) days after the receipt of such statement.
Tenant shall pay any amount necessary to reflect any increase in Complex Costs
not previously paid because of the increase in Complex Costs for the preceding
calendar year, or Landlord shall pay or credit against the next monthly
installment of Complex Costs an amount necessary to reflect any excess payment
previously paid during the preceding
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year. Tenant shall have the right to inspect Landlord's books with respect to
the calculation of Complex Costs at reasonable times and upon reasonable
notice.
(f) Should this Lease commence or terminate for any
portion of the Premises at any time other than the first day
of a calendar year, the Complex Costs adjustment referred to
in this Section 4.2 shall be prorated for said space so that
said adjustment shall only apply for the days of the Lease
term for the partial year. This amount shall be computed by
the formula: Number of days of the lease term for such
partial year divided by 365, times the Complex Cost
Percentage, equals Complex Costs adjustment for the partial
year.
ARTICLE 5.0. SECURITY DEPOSIT
Section 5.1. Security Deposit.
Tenant agrees to deposit with Landlord the sum specified in Section
1.13.1 hereof, (the "Security Deposit"), as a deposit to secure the full faith
and faithful and timely performance by Tenant of all terms, conditions and
agreements of Tenant in this Lease. Tenant hereby agrees that in the event
Tenant defaults in any respect in any term, provision, covenant, agreement, or
condition of this Lease, including, but not limited to, the payment of any
Rent, without prior notice to Tenant, Landlord may use, apply, or retain the
whole or any part of the Security Deposit to the extent required for the
payment of any Rent and/or payment of any other sum in satisfaction of any
term, covenant, provision, agreement or condition to which the Tenant is in
default or for any sum which Landlord may have to expend or may be required to
expend by reason of Tenant's default.
Section 5.2. Holding of Security Deposit.
Landlord shall not be obligated to keep all or any portion of the
Security Deposit as a separate fund, but may mix the Security deposit with
Landlord's own funds.
Section 5.3. Landlord Assignment of Security Deposit.
In the event of a sale or transfer of the Complex, or any part
thereof, of which the Premises forms a part, Landlord shall transfer the
Security Deposit to the vendee or transferees and Landlord shall thereupon be
fully released by Tenant from all liability for the return of said Security
Deposit and Tenant agrees to look solely to the vendee or transferee for the
return of the Security Deposit.
Section 5.4. Tenant Assignment of Security Deposit.
Tenant covenants and agrees it will not assign or encumber the
Security Deposit and that neither Landlord, nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance made by Tenant of the Security Deposit, unless such assignment is
pursuant to Section 9.1. hereof.
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Section 5.5. Refund.
In the event Tenant shall fully; and faithfully comply with all of the
terms, covenants, provisions, agreements and conditions of this Lease, the
Security Deposit shall be returned to the Tenant, without interest, after
inspection of the Premises by the Landlord, immediately following the end of
the term of this Lease.
ARTICLE 6.0. USE
Section 6.1. Use of Premises.
It is understood and agreed between the parties hereto that during the
term of this Lease and all extensions thereof the Premises shall be used and
occupied only for the use described in Section 1.8 hereof and for no other
purpose of purposes without the prior written consent of Landlord, such consent
not to be unreasonably withheld, conditioned or delayed. Tenant shall promptly
comply with all laws, ordinances and lawful orders and regulations affecting
Tenant's use of the Premises, including, but not limited to Landlord's
reasonable rules and regulations for the Complex.
Section 6.2. Delivery and Refuse.
All receiving, delivery and removal of goods, supplies, equipment,
garbage and refuse shall be made only by way of the areas provided therefore by
Landlord. Tenant and Tenant's employees, agents and invitees shall have the
right, during the term hereof, to use such areas, in common with other entitled
to use thereof, subject to such regulations as Landlord shall make from time to
time.
Section 6.3. Parking.
Landlord agrees to supply Tenant with sufficient parking in accordance
with all laws, ordinances and regulations. Tenant agrees to use their best
efforts to have long term parking concentrated in areas in the southerly
location of the Complex.
Section 6.4. Right of Entry by Landlord.
Landlord shall have the right to enter upon the Premises or any part
thereof with the least possible inconvenience to Tenant or its customers
without charge to Landlord at all reasonable times and upon reasonable notice,
and in case of emergency at any time, to inspect the Premises, show the
Premises to prospective purchasers, during the last sixty (60) days of the
Lease term show the Premises to prospective tenants, to make or facilitate any
repairs, alterations, additions or improvements to the Premises or any other
part of the Complex.
Section 6.5. Rules and Regulations.
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Tenant agrees that Tenant, Tenant's employees, agents, customers and
guests will at all times fully abide by, keep and observe all reasonable rules
and regulations which Landlord may from time to time make or promulgate and
which are applicable to all lessees, or to Tenant and other similar tenants, of
the Complex concerning the management, safety, care and cleanliness of the
Complex and for the preservation of good order and convenience of other lessees
and occupants of the Complex, including, without limitation, the Rules and
Regulations attached hereto and made an integral part hereof.
Any violation by Tenant of any of the rules and regulations contained
in the Rules and Regulations attached to this Lease or other Sections of this
Lease, or as may hereafter be adopted by Landlord pursuant to this Lease, may
be restrained; but, whether or not so restrained, Tenant acknowledges and
agrees that Tenant shall be and remain liable for all damages, loss, costs and
expenses resulting from any violation by Tenant or its employees, agents,
customers or quests, or any combination thereof, of any of said rules and
regulations. Except as provided in Section 15.1 hereof, nothing in this Lease
shall be construed to impose upon Landlord any duty or obligation to enforce
said rules and regulations, or the terms, covenants and conditions of any other
lease against any other tenant or any other persons, and Landlord shall not be
liable to Tenant for violation of the same by any other tenant, its employees,
agents, customers, guests or by any other person.
Section 6.6. Rights Reserved to Landlord.
Landlord reserves the following rights, exercisable without notice and
without liability of Landlord for damage or injury to property, person or
business and without regard to the effect, and without effecting, any eviction
or disturbance of Tenant's use or possession and without giving rise to any
claim for setoff or abatement of rent or affecting any of Tenant's obligations
under this Lease:
(a) To change the name or street address of the
Complex.
(b) To install and maintain signs on the exterior
and interior of the Complex.
(c) To prescribe the location and style of the
suite number and identification sign or lettering for
the Premises occupied by the Tenant.
(d) To retain at all times, and to use in
appropriate instances as described in the Lease, pass
keys to the Premises.
(e) To grant to anyone the right to conduct any
business or render any service in the Complex whether
or not it is the same as or similar to the use
expressly permitted to Tenant hereunder (except as
regarding kidney dialysis.
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(f) To exhibit the Premises at reasonable hours
and upon reasonable notice and to return the Premises
to its condition as of the commencement of the term
of this Lease, at any time after Tenant abandons the
Premises.
(g) To have access for Landlord and other tenants
or occupants of the Complex to all mail drops
according to the rules of the United States Postal
Service.
(h) To enter the Premises at reasonable hours and
upon reasonable notice for reasonable purposes,
including inspection or service to be provided to
Tenant hereunder.
(i) To require all persons entering or leaving
the Complex, during such hours as Landlord may from
time to time reasonably determine, to identify
themselves to watchmen by registration or otherwise
and to establish their right to enter or leave in
accordance with the security and safety rules adopted
by Landlord. Landlord shall have the right to
establish and change from time to time a security
control and locking system with respect to entry to
and exit from the Complex. Landlord shall not be
liable in damages for any reasonable error with
respect to admission to or eviction or exclusion from
the Complex of any person. In case of fire,
invasion, insurrection, mob, riot, civil disorder,
public excitement or other commotion, or threat
thereof, Landlord reserves the right to limit or
prevent access to the Complex during the continuance
of the same, shut down elevator service, activate
elevator emergency controls, or otherwise take such
action or preventive measures deemed necessary by
Landlord for the safety of the tenants or other
occupants of the Complex or the protection of the
Complex and the property in the Complex. In addition
to agreeing specifically to the terms of this Lease,
Tenant also agrees to cooperate with any reasonable
safety or security program developed by Landlord.
(j) To control and prevent access to common areas
and other non-general public areas of the Complex.
(k) Provided that access to the Premises shall be
maintained and the business of Tenant shall not be
interfered with, to rearrange, relocate, enlarge,
reduce or change corridors, exits and entrances in or
to the Complex and the land and to decorate and to
make repairs, alterations, additions and
improvements, structural or otherwise, in or to the
Complex, the land or any part thereof, and any
adjacent building, land, street or alley, including
for the purpose of connection with or entrance into
or use of the Complex and the land in conjunction
with any adjoining or adjacent building or buildings,
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now existing or hereafter constructed, and may for
such purposes erect scaffolding and other structures
reasonable required by the character of the work to
be performed and during such operations may enter
upon the Premises and take into and upon or through
any part of the Complex, including the Premises, all
materials that may be required to make such repairs,
alterations, improvements or additions, and in that
connection, Landlord may temporarily close public
entry ways, other public spaces, stairways or
corridors and interrupt or temporarily suspend any
services or facilities agreed to be furnished by
Landlord, all without the same constituting an
eviction of Tenant in whole or in interruption of the
business of Tenant, or otherwise, or relieving Tenant
from performance of Tenant's obligation under this
Lease provided that Landlord shall at all such
instances, use its best efforts to minimize
disruption to Tenant's business.
(l) To designate certain parking spaces and
parking areas on the land or on adjacent land for the
exclusive use of one or more tenants in the Complex
or any adjoining or adjacent building or buildings
now existing or hereafter constructed, to install
gates, traffic regulating devices, directional
signage, security systems, make and adopt such
reasonable rules and regulations in addition to, or
other than, or by way of amendment or modification of
the rules and regulations attached to this Lease
relating to use of parking spaces and parking areas,
including, but not limited to vehicle size, direction
of traffic and loading and unloading of vehicles.
(m) To designate and select agents, employees and
contractors to perform services in the Complex and on
the land, whether or not affiliated with Landlord, at
competitive rates.
(n) To install and designate areas for
installation of vending machines and collect all
revenue derived from the use thereof.
(o) To take any and all measures, including
inspection, repairs, alterations, additions and
improvements to the Premises or to the Complex, as
may be necessary or desirable for the safety,
protection or preservation of the Premises or the
Complex or the Landlord's interest, or as may be
necessary or desirable in the operation of the
Complex.
(p) To sell, lease, transfer, encumber or pledge
Landlord's interest in the Complex, Premises and/or
this Lease at any time without notice to Tenant,
without requiring Tenant's consent, subject to all of
Tenant's rights as set forth in this Lease. Nothing
in
<PAGE> 16
this Section 6.6 (q) shall be deemed to supersede any
provision of Section 16.1 hereof.
<PAGE> 17
ARTICLE 7.0. MAINTENANCE, REPAIR, ALTERATION
Section 7.1. Landlord's Obligations.
Landlord shall, at its sole expense, keep and maintain the foundation
structure, and the four outer walls of the Premises in good repair, except that
Landlord shall not be called on to make any repairs necessary which arise from
the act or negligence of Tenant, its agents, employees, invitees, customers or
guests, (except to the extent that Landlord is reimbursed therefor under any
policy of insurance permitting waiver of subrogation in advance of loss).
Landlord shall maintain all landscaping, sidewalks, parking areas and other
common areas in good condition as well as supply all snow removal and common
area janitorial services, the expenses of which shall be included as Complex
Costs. However, Landlord may, in its sole discretion, provide additional
services on such terms and conditions as may be then agreed upon between
Landlord and Tenant. All charges for such additional services shall be due and
payable within fifteen (15) days of the billing therefor. In the event Tenant
shall fail to pay the full amount of such billing when due, the unpaid balance
shall be considered Rent currently due in full, in addition to the next
installment Rent. Failure by Tenant to pay any portion of Rent may be deemed a
Tenant default under this Lease.
Section 7.2. Utilities.
Landlord shall, at its sole cost and expense, provide and maintain the
necessary mains and conduits in order that water and sewer facilities, gas and
electricity may be available to the Premises and the Complex. If Tenant shall
use water, gas and/or electricity for any purpose in the Premises and Landlord
shall elect to supply the water gas and/or electricity, Tenant shall accept and
use the same as tendered by Landlord and pay therefor at the applicable rates
filed with the proper regulating authority and in effect from time to time
covering such services. In the event Tenant separately contracts for the
provision of any utilities to the Premises, Tenant hereby agrees to promptly
pay for its use.
Section 7.3. Exterior Lighting.
Landlord shall provide facilities for the lighting of the parking area
located adjacent to the Premises during appropriate hours of darkness.
Section 7.4. Tenant's Obligations.
The interior of the Premises and all facilities and equipment within
and serving the Premises shall at all times be kept in good order, condition
and repair by Tenant, and shall also be kept in a clean, sanitary and safe
condition in accordance with the laws of the State of Michigan and all
reasonable directions, rules and regulations of Landlord and the health
officer, fire Marshall, building inspector or other proper officers of the
governmental agencies having jurisdiction, at the sole cost and expense of
Tenant, unless the same arise from any act or negligence of Landlord, its
agents, employees, invites or
<PAGE> 18
guests. Tenant shall comply with all requirements of law, ordinance and
otherwise regarding Tenant's use and occupancy of the Premises, providing,
however, that Tenant shall not be so required to make any structural or other
substantial change to the Premises. Tenant shall cause no waste, damage or
injury to the Premises. Tenant shall at its own cost and expense replace any
glass windows and doors in the Premises which may be broken or cracked, unless
the same arise out of any act or negligence of Landlord, its agents, employees,
invitees or guests. Tenant shall at its own cost and expense maintain in good
operating condition all heating and air conditioning equipment located within
and serving the Premises as required by the manufacturers of such equipment or
as reasonable required by Landlord, provide janitorial services for the
Premises and wash the interior and exterior windows of the Premises. Tenant
hereby waives all rights to make any repairs or incur any maintenance costs at
Landlord's expense. At the expiration of this Lease, Tenant shall surrender
the Premises in good condition, reasonable wear and tear and loss by fire or
other unavoidable casualty excepted. Nothing within this Section shall create
an obligation on the part of Tenant to comply with any of the laws, directions,
repairs, modifications, alterations or rules and regulations referred to which
may require structural additions, unless such compliance is required due to any
act or work performed by Tenant, in which event Tenant shall comply at its sole
expense.
Section 7.5. Plumbing.
The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be thrown therein, and expense of any breakage, stoppage, or damage resulting
from a violation of this provision by Tenant shall be borne by Tenant.
Section 7.6. Signs.
Tenant shall not erect or install any exterior signs, interior window
or door signs, window or door lettering without the prior written consent of
Landlord, such consent not to be unreasonably withheld, conditioned or delayed.
Tenant shall pay any and all cost and expense relating to the installation and
removal of Tenant's signs.
Section 7.7. Alterations.
Tenant, its employees or agents shall not alter or deface any walls,
ceilings, partitions, floors, wood, stone, or iron work without the Landlord's
prior written consent, such consent not to be unreasonably withheld,
conditioned or delayed. All alterations, additions or improvements, which may
be made or installed by either of the parties hereto upon the Premises and
which in any manner are attached to the floors, walls or ceilings shall remain
upon and be surrendered with the Premises as a part thereof, without
disturbance, molestation or injury. Any linoleum or other floor covering of
similar character which may be cemented or otherwise adhesively affixed to the
floor of the Premises shall be and become the property of the Landlord
absolutely.
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ARTICLE 8.0. INSURANCE AND INDEMNITY
Section 8.l. Indemnity.
Tenant agrees to indemnify and hold Landlord harmless against all
claims, demands, costs and expenses, including reasonable attorney's fees for
the defense thereof, arising from Tenant's conduct, occupancy or management of
Tenant's business, its use of the Premises, from construction of improvements
by Tenant, from any breech on the part of the Tenant of any conditions of this
Lease, or from any negligence of Premises. Notwithstanding anything to the
contrary contained herein, the foregoing provision shall not be construed to
make Tenant responsible for loss, damage, liability or expense resulting from
injuries caused by any negligence or intentional misconduct of Landlord, its
agents, servants, contractors or employees. In case of any action or
proceeding brought against Landlord by reason or such claims as is described in
the initial sentence of this Paragraph 10. Tenant, upon notice from Landlord,
covenants to defend such action or proceeding by counsel reasonably acceptable
to Landlord.
Section 8.2. Landlord's Insurance.
Landlord covenants and agrees that throughout the term of this Lease
it will insure the Complex (including the building of which the Premises are a
part) and the building improvements (excluding any property with respect to
which tenants are obligated to insure) against damage by fire including
extended coverage, vandalism and malicious mischief and comprehensive general
liability insurance in such amounts as would be carried by a prudent owner of a
similar building in the geographic area.
Section 8.3. Tenant Insurance.
(a) Tenant shall not do anything in or about the Premises
which will in any way tend to increase the insurance rates on
the Premises and/or Complex.
(b) Tenant shall carry, naming Tenant as insured and
Landlord as additional insured, fire insurance with extended
coverage in an amount equal to the full replacement value of
the insurable improvements to the Premises based upon the fire
rating required by the insurance underwriters for the Complex.
(c) For the term of this Lease, Tenant shall pay as
additional rent any increase in premium of Landlord for
insurance against loss by fire or other casualty resulting
from the business carried on in the Premises by Tenant,
whether or not Landlord has consented to the same. If Tenant
installs any electrical equipment that overloads the lines in
the Premises, Tenant shall at its own expense make whatever
changes are necessary to comply with the requirements of the
insurance underwriters and governmental authorities having
jurisdiction.
<PAGE> 20
Section 8.4. Tenant Public Liability Insurance.
Tenant shall, during the entire term hereof, keep in full force and
effect a policy of public liability insurance with respect to the Premises and
the business operated by Tenant, Tenant shall be named as insured and Landlord
as additional insured parties covered thereby, and in which the limits of
liability shall be not less than One Million Dollars ($1,000,000.00) for each
accident or occurrence for bodily injury and One Million Dollars
($1,000,000.00) for property damage. Tenant shall furnish Landlord with a
certificate or certificates evidencing such insurance, that such insurance is
in force at all times during the term of this Lease.
Section 8.5. Glass Insurance.
The Tenant shall be responsible for all damage to glass on the
Premises with regard to breakage and the replacement of same, unless due to the
negligence or intentional misconduct of Landlord, its agents, servants,
contractors or employees. Tenant shall maintain such insurance as may be
necessary, and will assume full responsibility, for all such glass during the
term of this Lease.
Section 8.6. Insurance Policies.
Insurance policies required of Tenant pursuant to this Article shall
name Landlord as additional insured and shall be with insurance companies
licensed to do business within the State of Michigan. Said certificates of
insurance shall be delivered to Landlord, and such insurance carrier shall
endeavor to provide at least thirty (30) days notice to Landlord prior to any
cancellation or amendment thereof. If Tenant fails to keep the required
insurance in full force and effect, Landlord may, at its option, obtain such
insurance and pay the cost thereof with all such costs deemed Rent currently
due in full, in addition to the next installment of Rent; the failure of Tenant
to pay any portion of Rent may be deemed a default by Tenant under this Lease.
Section 8.7. Waiver of Subrogation.
Landlord and Tenant hereby mutually waive their respective rights of
recovery against each other for any loss insured by fire, extended coverage and
other property insurance policies existing for the benefit of the respective
parties. Each party shall obtain any special endorsements, if required by
their insurer to evidence compliance with the aforementioned waiver.
ARTICLE 9.0. ASSIGNMENT
Section 9.1. Tenant Assignment.
Tenant shall not assign or sublet the whole or any part of the
Premises without prior written consent of the Landlord, such consent not to be
unreasonably withheld, conditioned or delayed. In the event of any such
assignment, Tenant shall deliver to
<PAGE> 21
Landlord within a reasonable time thereafter, a written agreement from the
assignee agreeing with Landlord to perform the term, covenants, and conditions
of Tenant contained in this Lease.
Notwithstanding anything contained anything contained herein to the
contrary, Tenant may assign this Lease, or sublease the Premises, in whole or
in part, without the consent of Landlord, to:
(a) any corporation into which or with which Tenant has merged or
consolidated;
(b) any parent, subsidiary, successor, or wholly-owned
affiliate corporation of Tenant;
(c) any corporation which acquires all or substantially
all of the assets or issued and outstanding shares of capital
stock of Tenant;
(d) any partnership, the majority interest of which shall
be owned by Tenant or a parent, subsidiary, successor or
wholly-owned affiliate corporation of Tenant; or
(e) any purchaser with assets equal to or greater than
Tenant provided that any such assignee or successor shall
agree in writing to assume and perform all of the terms and
conditions of this Lease on Tenant's part to be performed from
and after the effective date of such assignment or subletting.
Section 9.2. Landlord Assignment.
In the event of any sale, lease or transfer of Lessor's interest, by
agreement or by the operation of law, in the Premises, Complex or any portion
thereof, or other interest therein or thereunder, then, in any such event,
Landlord shall be free and relieved of all future liability (I) under any and
all of its covenants and obligations contained in or arising from or under this
Lease, and (ii) arising out of any act, occurrence or omission occurring after
the consummation of said sale, lease or transfer.
ARTICLE 10.0. EMINENT DOMAIN
Section 10.1. Total Condemnation.
If the whole of the Premises shall be taken by any public authority
under the power of eminent domain then the term of this Lease shall cease as of
the day possession shall be taken by such public authority and the Rent shall
be paid up to that day with a proportionate refund by Landlord of any Rent
which had been paid in advance.
Section 10.2. Partial Condemnation.
<PAGE> 22
If less than the whole, but more than twenty percent (20%) of the
Premises are taken under the power of eminent domain, Landlord and Tenant shall
each have the right to terminate this Lease upon ten (10) days prior written
notice to the other and in such event such termination shall be effective upon
the day possession of the Premises shall be required for public use. Such
notice shall be given within thirty (30) days after such taking for public use.
In the event (I) neither party hereto shall elect to terminate this Lease, or
(ii) less than twenty percent (20%) of the Premises are so taken, Landlord
shall, at its own cost and expense, make all necessary repairs and alterations
to the Complex necessary to constitute the remaining Premises a complete
architectural unit. In the event Tenant elects, pursuant to the terms of this
Section 10.2, to remain in possession of the Premises, all the terms herein
provided shall continue in effect, except that the Rent shall be reduced in
proportion to the amount of the square footage of the Premises taken.
Section 10.3. Damages From Condemnation.
All damages awarded for a taking under the power of eminent domain,
whether for the whole or part of the Premises, shall belong to and be the sole
property of Landlord, whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the Premises or Complex;
provided, however, that Landlord shall not be entitled to any award made
directly to Tenant for loss of business, depreciation to, and cost of removal
of stock and fixtures.
ARTICLE 11.0. DESTRUCTION OR DAMAGE TO PREMISES.
Section 11.1. Casualty Loss.
In the event that the Premises are damaged by fire or other casualty,
Landlord shall forthwith proceed to repair and restore the Premises to the end
that space of the same size and utility are available as expeditiously as
possible. Tenant's rent shall be abated in just proportion during the period
of impaired use of the Premises. If more than fifty (50%) percent of the
inside space of the Building or the Premises is so damaged, either Landlord or
Tenant may cancel this Lease on thirty (30) days' notice and rent shall be
apportioned as of the date of the casualty. If a registered engineer or
architect jointly acceptable to Landlord and Tenant shall notify them within
thirty (30) days after such fire or casualty that, in his opinion, the damage
to the Premises cannot be repaired so as to substantially restore the Premises
to their former condition within one hundred eighty (180) days after such fire
or casualty, or if the Premises are in fact not restored to substantially the
same condition as prior to such fire or casualty within one hundred eighty
(180) days after such occurrence, then this Lease may be terminated by either
Landlord or Tenant, and rent shall be apportioned as of the termination date.
The rights of cancellation and termination afforded to the parties by this
Paragraph 14 shall not be affected or extended by reason of the happening of
any event described in Paragraph 21.
<PAGE> 23
ARTICLE 12.0. TENANT BANKRUPTCY
Section 12.1. Tenant's Interest Not Transferable.
Neither this Lease, nor any interest herein nor any estate hereby
created, shall pass to any trustee or receiver or assignee for the benefit of
creditors or otherwise due to Tenant's bankruptcy.
Section 12.2. Landlord's Option To Terminate.
In the event the estate created hereby shall be taken in execution or
by other process of law, or if Tenant shall be adjudicated insolvent or
petition for relief under any bankruptcy act, or if a receiver or trustee of
the property of Tenant shall be appointed by reason of Tenant's insolvency or
inability pay its debts, or if any assignment shall be made of Tenant's
property for the benefit of creditors, then and in any such events, Landlord
may at its option by notice to Tenant terminate this Lease and all rights of
Tenant hereunder as of the date of such event.
ARTICLE 13.0. TENANT DEFAULT
Section 13.1. Right to Re-Enter.
If Tenant defaults in the payment of any Rent due or other charge
payable by Tenant and Tenant does not cure the default within seven (7) days
after receipt of written notice thereof shall have been given to Tenant, or if
Tenant defaults in the prompt and full performance of any other term, condition
or covenant of this Lease to be observed or performed by Tenant, and Tenant
does not cure the default within thirty (30) days or such additional time as is
reasonably required to cured such default after receipt of written notice
thereof by Tenant; or if the leasehold interest of Tenant be levied upon under
execution or be attached by the process of law; or if Tenant makes an
assignment for the benefit of creditors or admits its inability to pay its
debts; or if Tenant abandons the Premises before the end of the term hereof;
then Tenant shall be in breach of this Lease and Landlord may elect to either
terminate this Lease, or, without terminating this Lease, terminate Tenant's
right to possession of the Premises. Besides any and other rights and remedies
Landlord may have by law or otherwise, it shall have the immediate right of
re-entry and may remove all persons and property from the Premises and
Landlord's entry upon and taking possession of the Premises shall not in any
way terminate this Lease or release the Tenant in whole or in part from
Tenant's obligation to pay the Rent or other charges payable hereunder for the
full lease term or discharge Tenant from any loss or damage sustained by
Landlord on account of Tenant's breach of the Lease, unless Landlord elects to
terminate the Lease.
Section 13.2. Right to Re-Let.
Should Landlord elect to re-enter as provided in Section 13.1 hereof,
or should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided
<PAGE> 24
for by law, Landlord may either terminate this Lease or Landlord may from time
to time without terminating this Lease make such alterations and repairs as may
be necessary in order to return the Premises to its condition as of the
commencement of the term of this Lease, and Landlord shall then have the right
to re-let the Premises or any part thereof for such term or terms (which may be
for a term extending beyond the term of this Lease) and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole and
absolute discretion may deem advisable. Upon each such re-letting, rental
income, if any, shall be applied: first to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment
of any costs and expenses of such re-letting, including brokerage fees and
reasonable attorney's fees and costs of such restoration as provided above,
third to the payment of Rent due and unpaid hereunder, and the residue, if any,
shall be held by Landlord and applied in payment of future Rent as the same may
become due and payable hereunder. If such rentals received from such
re-letting during any month be less than the Rent to be paid by Tenant during
the month, Tenant shall pay any such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly in advance on or before the first day of
such month. No such re-entry or taking possession of the Premises by Landlord
shall be construed as an election on Landlord's part to terminate this Lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any re-letting without termination, Landlord may at
any time thereafter elect to terminate this Lease for any previous breach of
any term or provision of this Lease. Should Landlord at any time terminate
this Lease for any breach, in addition to any other remedies it may have, it
may recover from Tenant all damages it may incur by reason of such breach,
including the cost of recovering possession of the Premises, and reasonable
attorneys' fees incidental thereto.
Section 13.3. Legal Expenses.
If suit shall be brought for Landlord's recovery of possession of the
Premises, for Landlord's recover of Rent or any other amount due Landlord or
Tenant under any provision (s) of this Lease, or because of the breach of any
other covenant herein contained on the part of Landlord or Tenant to be kept or
performed, the defaulting party shall pay to the non-defaulting party all
expenses incurred therefor, including all reasonable attorneys' fees and court
costs.
Section 13.4. Receipt of Money After Termination of Lease.
No receipt of money by the Landlord from the Tenant after the
termination of this Lease shall reinstate, continue or extend the term, nor
waive or affect any notice given by the Landlord to the Tenant prior to such
receipt of money.
Section 13.5. Self-Help.
<PAGE> 25
If Tenant shall default in the performance or observance of any
agreement or condition in this Lease contained on its part to be performed or
observed, other than an obligation to pay money, and shall not cure such
default as provided herein, Landlord may, at its option, without waiving any
claim for damages for breach of this Lease, at any time thereafter, cure such
default for the account of Tenant and any amount paid or any liability incurred
by Landlord in so doing shall be deemed paid or incurred for the account of
Tenant, and Tenant agrees to reimburse Landlord thereafter and save Landlord
harmless therefrom.
If Landlord shall default in the performance or observance of any
agreement or condition in this Lease contained on its part to be performed or
observed and shall not cure such default as provided herein, Tenant may, at its
option, without waiving any claim of damages for breach of lease, at any time
thereafter, cure such default for the account of Landlord and any amount paid
or any liability incurred by Tenant in so doing shall be3 deemed paid or
incurred for the account of Landlord and Landlord agrees to reimburse Tenant
thereafter and save Tenant harmless therefrom. Tenant may, at its option,
offset the amount owed it by Landlord by deducting such amount from future
rental payments.
ARTICLE 14.0. TENANT'S PROPERTY
Section 14.1. Taxes on Leasehold.
Tenant shall be responsible for and shall pay before delinquency all
municipal, county or state taxes assessed during the term of this Lease against
any leasehold interest or personal property of any kind, owned by or placed in,
upon or about the Premises by Tenant.
Section 14.2. Notice By Tenant.
Tenant shall give immediate notice to Landlord in case of fire or
accidents in the Premises or in the Complex, or of defects herein or any
defects in any fixtures or equipment of which Tenant is or shall have been
aware.
ARTICLE 15.0. QUIET ENJOYMENT
Section 15.1. Landlord's Covenant.
Upon timely payment by Tenant of all Rents as herein provided, and
upon the observance and performance of all covenants, terms, and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the Premises for the term hereof without hindrance or
interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under Landlord, subject, nevertheless, to the terms and
conditions of this Lease.
Section 15.2. Tenant's Covenant.
<PAGE> 26
Tenant shall not commit in or about the Premises or the Complex any
public or private nuisance or other act or thing which may disturb the quiet
enjoyment of any other lessee, or customer, agent or employee of any other
tenant of the Complex. Without limiting the generality of the foregoing,
Tenant shall not allow the Premises to be used (a) for any purposed which, in
Landlord's reasonable opinion, is improper, immoral, unlawful, unethical or
objectionable, (b) for unlawfully selling harmful drugs or intoxicating liquor,
or (c) for keeping, preparing, manufacturing or mixing anything which emits
and odor outside of the Premises. Tenant shall not use any apparatus,
machinery or device in or about the Premises which makes or sets-up any noise,
vibration or other disturbance which adversely affects any other tenant in the
Complex. Tenant shall at its sole cost and expense, comply with all health,
safety, use and occupancy requirements of all municipal, state and federal
authorities now or from time to time during the term hereof in force pertaining
to Tenant's use and occupancy of the Premises.
ARTICLE 16.0. LEASE SUBORDINATE
Section 16.1. Subordination.
(a) This Lease shall be subordinate to any
mortgage or deeds of trust that may now be upon or
hereafter be placed upon the Premises or the Complex by
Landlord or its assigns or transferees, and to any and all
advances to be made thereunder, and to the interest
thereon, and all renewals, replacements and extensions
thereof, provided the mortgagee or trustee, named in said
mortgages or trust deeds shall agree to recognize the
Lease of Tenant, the Tenant's rights thereunder and shall
not disturb Tenant's possession of the Premises.
(b) Tenant also agrees that any mortgagees or
trustees may elect to have this Lease a prior lien to its
mortgage or deed of trust, and in the event of such
election and upon notification by such mortgagee or
trustee to Tenant to that effect, this Lease shall be
deemed prior in lien to the said mortgage or deed of
trust, whether this Lease is dated prior to or subsequent
to the date of said mortgage or deed of trust. Tenant
agrees that upon thirty (30) days prior written request of
Landlord or any mortgagee or any trustee, Tenant shall
execute reasonable instruments which may be required to
carry out the intent of this Section 16.1.
Section 16.2. Attornment.
Tenant shall, in the event any proceedings are brought for the
foreclosure of or in the event of exercise of the power of sale under any
mortgage or deed of trust made by Landlord covering the Premises, attorn to the
purchaser upon any such foreclosure or sale
<PAGE> 27
and recognize such purchaser as the Landlord under this Lease, and any such
purchaser shall recognize Tenant as the tenant under this Lease.
<PAGE> 28
Section 16.3. Tenant Off-Set Statement.
Tenant agrees, within thirty (30) days of a written request therefor
by Landlord, to execute in recordable form and deliver to Landlord a statement,
in writing, certifying (I) that this Lease is in full force effect, (ii) the
date of commencement of the term of this Lease is as set forth in Section
1.10.1, (iii) that all Rent is paid currently without any off-set or defense
thereto, (iv) the amount of Rent, if any, paid in advance, and (v) that there
are no incurred defaults by Landlord or stating those claimed by Tenant.
ARTICLE 17.0. MISCELLANEOUS
Section 17.1. Successors.
All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the respective heirs,
executors, administrators, successors and assigns of the said parties. If
there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants, and agreements herein. No rights, however,
shall inure to the benefit of any assignee of any Tenant unless the assignment
to such assignee has been previously approved by Landlord in writing as
provided in Section 9.1
Section 17.2. Waiver.
One or more waivers of any covenant or condition by Landlord shall not
be construed as a waiver of any subsequent breach of the same or other covenant
or condition and the consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or
render unnecessary Landlord's consent or approval to or of any subsequent
similar act by Tenant. No breach of a covenant, term or condition or provision
of this Lease shall be deemed to have been waived by Landlord unless such
waiver (I) is in writing signed by the Landlord, (ii) identifies the breach,
and (iii) expressly states that it is a waiver of the identified breach.
Section 17.3. Notice.
Whenever under this Lease a provision is made for notice of any kind,
it shall be deemed sufficient notice and service thereof if such notice to
Tenant is in writing, addressed to Tenant at the Premises, and copy to: R.
Bower, Senior V.P. of Finance, Sensys Technologies, P.O. Box 1430, Newington,
VA 22122, and sent by registered or certified mail with postage prepaid, return
receipt requested; and if such notice to Landlord is in writing, addressed as
noted in Section 1.5 of this Lease or to the last known post office address of
which Tenant has received written notice. Prepaid and return receipt
requested.
Section 17.4. Relationship.
<PAGE> 29
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it
being understood and agreed that neither the herein, shall be deemed to create
any relationship between the parties hereto the singular number is used, the
same shall include the plural, and the masculine gender shall include the
feminine and neuter genders where appropriate.
Section 17.5. Consent Not Unreasonably Withheld.
Landlord shall not unreasonably withhold its written consent or
approval when Tenant is requires to obtain such consent or approval by the
terms of this Lease.
Section 17.6. Accord and Satisfaction.
No payment by Tenant or receipt by Landlord of a lesser amount than
the full 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 or other payment
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's rights to recover the balance of Rent
or pursue any other remedy in this Lease.
Section 17.7. Headings.
The headings, captions, article and section numbers, and index
appearing in this Lease are inserted only as a matter of convenience and in no
way define, limit, construe or describe the scope of intent of such articles or
sections of this Lease nor in any way affect this Lease.
Section 17.8. Partial Invalidity.
If any term, covenant or condition of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant extent permitted by law.
Section 17.9. Reservation.
The submission of this Lease for examination does not constitute a
reservation of or option for the Premises, and this Lease becomes effective
only upon execution and delivery thereof by Landlord and Tenant.
Section 17.10. Liens.
In the event a mechanic's lien shall be filed against the Premises or
Tenant's interest therein as the result of the work undertaken by Tenant to
ready the Premises for
<PAGE> 30
Tenant's occupancy or any time subsequently thereto or as a result of any
repairs or alterations made by Tenant or at Tenant's request except as to
repairs made by Landlord on Tenant's behalf, Tenant shall, within thirty (30)
days after receiving notice of such lien, discharge such lien either by payment
of the indebtedness due the mechanic's lien claimant or by filing a bond with
Landlord reasonably satisfactory to Landlord as security therefor. In the
event Tenant shall fail to discharge such lien, Landlord shall have the right
to procure such discharge by filing such bond and Tenant shall pay the cost of
such bond to Landlord as additional rent upon the first day that Rent shall be
due thereafter.
Section 17.11. Liability of Landlord.
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed, and if as a consequence of
such default Tenant shall recover a money judgement against Landlord, such
judgement shall be satisfied only out of the proceeds of sale received upon
execution of such judgement and levied thereon against the right, title and
interest of Landlord in the Complex and out of rents or other income from such
property receivable by Landlord, or out of the consideration of Landlord's
right, title and interest in the Complex and the partners comprising the
partnership which is Landlord shall not be personally liable for any
deficiency.
Section 17.12. Force Majeure.
In the event that either party hereto shall be delayed or hindered in
or prevented from the performance of any act required hereunder by reason of
restrictive governmental laws or regulations, riots, insurrection, war or other
reason of like nature not the fault of the party delayed in performing work or
doing acts required under the terms of this Lease, then performance of such act
shall be excused for the period of the delay and the period for the performance
of any such act shall be extended for a period equivalent to the period of such
delay. The provisions of this Section 17.14 shall not operate to excuse tenant
from prompt payment of rent, or any other payments required by the terms of
this Lease.
Section 17.13. Entire Agreement.
This Lease, all Exhibits and Riders, if any, attached hereto and
forming a part hereof, set forth all the covenants, promises, agreements,
conditions and understandings between Landlord and Tenant concerning the
Premises and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than those herein
set forth. No alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by each
party.
Section 17.14. Estoppel.
The parties agree that they shall rely solely upon the terms of this
Lease to govern their relationship. They further agree upon the terms of this
Lease to govern their relationship. They further agree that reliance upon any
representation, act or omission
<PAGE> 31
outside the terms of this Lease shall be deemed unreasonable, and shall not
establish any rights or obligations on the part of either party.
Section 17.18. Attorney Approval.
ALL PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED TO SEEK THE ADVICE
OF AN ATTORNEY.
<PAGE> 32
RIDER A
The terms and provisions of this rider shall supersede any contrary or
inconsistent provisions of the Lease.
Section RA.1. Terms.
The term of the Lease as described in Section 1.10.1 of the Lease
shall commence upon December 1, 1998.
Section RA.2. Option to Renew.
Subject to all terms and provisions of the Lease, if Tenant is not in
default past any applicable cure period of any term or provision of the Lease
as of the date specified in Section 1.10.2., upon notice to Landlord at least
ninety (90) days prior to the date specified in Section 1.10.2 hereof, Tenant
shall have the right to extend the term of this Lease until November 30, 2008
(the Option Term.) Based on the following rent:
Months 1-12 $9,656 p.m.
Months 13-24 $9,946 p.m.
Months 24-36 $10,245 p.m.
Months 37-48 $10,552 p.m.
Months 49-60 $10,868 p.m.
For a Total Base Rental ate during the Option Term of $615,204.00, plus Taxes,
Insurance and C.A.M. charges.
Section RA.3. Utilities Agreement.
Tenant agrees to pay 100% of the utilities until such time as the
remaining 50% of the building is leased. Tenant will be responsible for 50% of
the utilities at that time. If it is deemed the new tenant has excessive
utility, usage the proration of utilities will be reallocated to provide for
said excessive use.
<PAGE> 1
EXHIBIT 10.19
STANDARD
SALES CONTRACT
ANN ARBOR AREA BOARD OF REALTORS(R)
Page 1 of 3
<TABLE>
<S> <C>
Listing office SWISHER REALTY Selling office MARTEN/DAVIS, LTD.
------------------------ ------------------------
Address 208 E. WASHINGTON ST. Address 2360 E. STADIUM BLVD. #16
------------------------------- -------------------------------
ANN ARBOR, MI 48104 ANN ARBOR, MI 48104
- --------------------------------------- ---------------------------------------
Telephone 734-663-0501 Fax 734-663-0316 Telephone 734-973-3185 Fax 734-973-3188
------------ ------------ ------------ ------------
Listing Agent ROBERT BLISS Selling Agent RONALD D. MARTEN, CCIM
----------------------- ------------------------
- --------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
Agency Status: Agency's Status:
<S> <C> <C> <C> <C> <C> <C>
[X] Seller's [ ] Dual [ ] Transaction Coordinator [ ] Sub [X] Buyer's [ ] Dual [ ] Transaction Coordinator
</TABLE>
<TABLE>
<S> <C> <C> <C>
RE: THE PROPERTY KNOWN AS 300 PARKLAND PLAZA ANN ARBOR 48103
----------------------------------------------------------------
(Street) (City) (Zip Code)
</TABLE>
THIS CONTRACT, dated this 28 day of August, 1998 is between
SELLER: SENSYS TECHNOLOGIES INC.
------------------------
Address: 8419 Terminal Road, Newington, VA 22122-1430 and
------------------------------------------------
PURCHASER: NORALDEEN M. RIDHA & DR. SALAM JAFFAR (FOR AN LLC TO BE FORMED)
---------------------------------------------------------------
Address: 2038 S. SEVENTH, ANN ARBOR, MI 48103
------------------------------------------------
Seller agrees to sell and convey, subject to easements and
restrictive covenants of record, and subject to the lien of taxes
not yet due and payable at time of closing, and Purchase agrees
to purchase the property situated in the City Twp of
SCIO County of WASHTENAW, State of Michigan, commonly known as
300 PARKLAND PLAZA
LEGAL DESCRIPTION:COM AT N. 25 COR OF SEC 26 TH N85/0.95 W/097 ETC. 8.86 ACRES
--------------------------------------------------------------
And as will be completed described in the title insurance
commitment.
SALE PRICE:One Million Five Hundred Seventy Five Thousand Dollars($1,575,000.00)
---------------------------------------------------------------------
EARNEST MONEY: Seller acknowledges Twenty Five Thousand Dollars ($225,000.00)
-------------------------------------------
Paid by Purchaser as earnest money upon signing of this contract
by Purchaser. This money will be deposited and held in selling
broker's escrow account until closing of sale, at which time it
will be credit to Purchaser. If this contract is not accepted,
the earnest money deposit will be returned in full to Purchaser.
TERMS: Balance of One Million Five Hundred Fifty Thousand Dollars
($1,550,000.00) To be paid as follows: CASH IN FULL AT TIME OF
CLOSING. THIS OFFER IS SUBJECT TO AND CONTINGENT UPON THE
PURCHASER OBTAINING A SATISFACTORY MORTGAGE COMMITMENT IN THE
AMOUNT OF $1,000,000.00 (ONE MILLION DOLLARS) FROM A FINANCIAL
INSTITUTION OF PURCHASERS
<PAGE> 2
CHOISE ON OR BEFORE 11/15/98. THIS FINANCING CONTINGENCY TO BE
REMOVED IN WRITING ON OR BEFORE 11/15/98.
CASH FUNDS: Purchaser confirms that cash or certified funds will be available
to meet the requirements for down payment, closing costs and
escrow deposits.
OTHER CONDITIONS:
THE SELLER HEREBY AGREES TO LEASE BACK 12,500 S.F. +/- FROM THE
PURCHASE FOR FIVE (5) YEARS ON THE FOLLOWING TERMS: $9.00 P.S.F.
(PURE NET). SELLER TO PAY 50% OF TAXES, INSURANCE, AND ALL
UTILITIES THAT CAN NOT BE SEPARATELY METERED (100% OF ALL
UTILITIES THAT CAN BE SEPARATELY METERED AT A REASONABLE COST).
ALL OTHER TERMS AND CONDITIONS TO BE AGREED UPON ON OR BEFORE
11/1/98.
INCLUSIONS: This contract includes all fixtures, improvements and
appurtenances attached to the property as of this date, including
but not limited to: all lighting and plumbing fixtures, shades,
louvered blinds, curtains, curtain rods, drapes, drapery
hardware, wall-to-wall carpeting, purchased water softeners,
automatic garage door equipment, storm windows and doors,
screens, awnings and antennas, including rotor equipment, if any,
as well as the following personal property for which a bill of
sale will be given, namely: ALL INTERIOR MOVABLE PARTITIONS,
DOORS, KITCHEN EQUIPMENT INCLUDING STOVES, REFRIGERATORS,
MICROWAVES, CABINETS, COUNTERS AND LUNCH ROOM FURNITURE (I.E.
TABLES AND CHAIRS ETC.)
EXCLUSIONS:
---------------------------------------------------------------------
PURCHASERS' INITIALS /s/ N.M.D. / /s/ S.J. SELLERS' INITIALS /s/ R.R.B. /
------------------------- ------------
(Date) 8/28/98 / 8-28-98 (Date) 9/2/98 /
------------------- ---------------------
<PAGE> 3
ALL SALES CONTRACTS
ANN ARBOR AREA BOARD OF REALTORS(R)
Page 2 of 3
RE: THE PROPERTY KNOWN AS 300 PARKLAND PLAZA ANN ARBOR 48103
---------------------------------------------------
(Street) (City) (Zip Code)
WARRANTY: Seller warrants that all equipment and improvements, except those
excluded below or otherwise disclosed in writing, are in working condition
at the time of possession, and that premises will be free and clear of
trash and debris and will be left in broom-clean condition. Purchase
agrees to accept the property in "as is" condition. Excluded from this
warranty:_________________________________________________________________
________________________ PURCHASER ACKNOWLEDGES HAVING BEEN ADVISED TO
HAVE A CONTRACTOR'S INSPECTION OF THE PROPERTY. Both parties agree that
neither party has relied on any representation of broker or broker's
agents concerning the fitness and condition of the property. Broker and
agents assume no responsibility for the condition of the property or for
the performance of the contract by any or all parties.
PURCHASER [ ] DOES [x] DOES NOT ACKNOWLEDGE RECEIPT OF THE SELLER'S
DISCLOSURE STATEMENT.
SPECIAL ASSESSMENTS: All special assessments that have been assessed and are a
lien on the property at the date of closing will be paid by Seller. The
cost of duly authorized improvements that are subject to future
assessments against the property assessed after the date of closing will
be paid by Purchaser.
BENEFIT CHARGES: Any benefit charges against the property made by any government
authority for installation of, or tap-in fees for, water service, sanitary
sewer, and/or storm sewer service, for which charges have been made,
incurred and/or billed before the date of closing, will be paid by Seller.
Any charges incurred after closing will be paid by Purchaser.
PRORATION: Rents, fuel, insurance, interest, or association fees, where
applicable, are to be prorated as of the date of closing. Taxes will be
prorated as if paid in advance on a 30-day-month, 360-day-year basis to
date of closing, based on the due date of the taxing authority. Seller
represents that if Seller acquired title after January 1, 1995, Seller has
complied with 1994 PA 415/MCLA 211.27, requiring the disclosure of
purchase price to the local assessor. Listing broker will retain from
Seller $ TEN THOUSAND DOLLARS ($10,000.00) to be applied to final billing
for municipal utility charges. After payment, any balance remaining will
be remitted to Seller and any balance due will be paid by Seller.
CLOSING: Purchase to be closed on or before December 01, 1998 Purchaser will
have the right to walk through property within forty-eight (48) hours
prior to closing.*subject to tenant rights.
POSSESSION: Possession to be given on or before December 01, 1998 *. From and
including the date of closing, up to but not including the date of
vacating property as agreed, Seller will pay the sum of $ N/A per
day. Listing broker will retain in escrow from Seller at closing the
sum of $ N/A for occupancy between the time of closing and delivery
of keys by Seller to listing broker or Purchaser. Within fourteen
(14) days after delivery of keys by Seller, broker will disburse
escrow according to the terms of the escrow agreement.
FORM OF CONVEYANCE: Seller agrees to grant and convey, as above required, by
[x] warranty deed [ ]current Washtenaw County Bar Association form
of land contract of a_____________________ marketable title to the
property. Seller will pay transfer tax when title passes.
TITLE INSURANCE: Seller will provide an owner's policy of title insurance,
including a policy commitment prior to closing, in the amount of the sale
price, at Seller's expense. Title insurance shall be issued[ ] with [x}
without standard exceptions at no additional cost to the[ ] Seller [x]
Purchaser, provided that any special exception improved by the Title
Company shall be subject to Purchaser's approval. [x] Seller [ ]Purchaser
shall provide any stake survey and/or mortgage report required by the
title insurance company.
CASUALTY LOSS: Until delivery of deed/land contract, risk of loss by fire,
windstorm or otherwise is assumed by Seller.
<PAGE> 4
CONTINGENCIES: If any contingency in this contract is not removed in writing by
the required date, this contract becomes voidable. After the required
date, and until the contingency is removed, either party may terminate the
contract by written notice to the other at which time the earnest money
will be returned in full to Purchaser.
BINDING CONTRACT AND ASSIGMENT: Contract binds Purchaser, Seller, their heirs
and personal representatives, and anyone succeeding to their interest in
the property. Purchaser will not assign contract without Seller's prior
written permission. Unless modified or waived in writing, all covenants,
warranties and representations contained herein shall survive the closing.
FACSIMILE/FAX AUTHORITY: Offers, acceptances, and notices required by this
contract can be delivered by Facsimile/FAX.
DEFAULT: If Purchaser defaults, Seller may pursue legal remedies, or may cancel
the contract and claim the deposit as liquidated damages. If Seller
defaults, Purchaser may enforce this contract, demand a refund of the
deposit in termination of this contract or pursue legal remedies. TIME IS
OF THE ESSENCE FOR THE PERFORMANCE OF THIS CONTRACT.
DISPUTE RESOLUTION: The Michigan Association of REALTORS(R) and the American
Arbitration Association have established an arbitration service for
resolving disputes arising from real estate transactions. Seller and
Purchaser acknowledge that they are advised that the MAR/AAA Dispute
Resolution Agreement exists. This program is one of several alternatives
for resolving disputes.
ALL PARTIES ARE ADVISED TO SEEK THE ADVICE OF AN ATTORNEY.
WITNESS: /s/ Ronald D. Marten PURCHASER: /s/ Noraldeen M. Ridha 8/28/98
- ----------------------------- --------------------------------
Noraldeen M. Ridha (Date)
/s/ S. Jaffar 8/28/98
- ----------------------------- --------------------------------
Dr. Salam Jaffar (Date)
WITNESS: SELLER: /s/ R. R. Bower 9/2/98
- ----------------------------- --------------------------------
Robert R. Bower (Date)
- ----------------------------- --------------------------------
(Date)
I HAVE RECEIVED A FULLY EXECUTED COPY OF THIS CONTRACT.
PURCHASERS' INITIALS / SELLERS' INITIALS /s/ RRB /
----- ----- -------------------
(Date) / (Date) 9/2/98 /
------- ------- --------------------
<PAGE> 5
Page 3 of 3
ADDENDUM
THIS CONTRACT is subject to and contingent upon completion of the
following items. All contingencies will be removed in writing by the date
specified below. If any contingency in this contract is not removed in writing
by the required date, this contract becomes voidable. After the required
contingency removal date, and until the contingency is removed, either party may
terminate the contract by written notice to the other party, at which time the
earnest money will be returned to the Purchaser in full.
1. A contractor's inspection of the property at Purchasers expense,
resulting in a report satisfactory to Purchaser. This contingency is
to be removed on or before October 1, 1998.
2. Phase I environmental report at Purchasers expense, resulting in a
satisfactory report to Purchaser and Purchasers financing
institution. This contingency is to be removed on or before November
1, 1998.
3. Seller providing a complete set of as-built blue prints along with
any and all environmental reports in Sellers possession to Purchaser.
This contingency to be removed on or before September 10, 1998.
4. Seller agrees to install 11/2" Public Water service to the building.
Installation and all required fees for tap-in permits and contractors
are to be paid for by the Seller. Installation and unconditional
waivers of liens to be completed and certified to the title instance
company before closing.
<PAGE> 6
WITNESS
/s/ Ronald D. Marten Purchasers: /s/ Noraldeen M. Ridha 8/28/98
- --------------------- -------------------------------------
/s/ S. Jaffar 8/28/98
- --------------------- -------------------------------------
Sellers: /s/ R.R. Bower
- --------------------- -----------------------
-------
Sr. VP Finance 9/2/98
- --------------------- -------------------------------------
<PAGE> 1
EXHIBIT 10.20
June 26, 1998
Mr. Donald Reiser
5657 Ravenel Lane
Springfield, VA 22151
Dear Don:
As the result of our discussions this week, the Company has accepted your
resignation. We sincerely appreciate your contribution to the Company for the
past sixteen years. Because of the circumstances discussed, the Company has
agreed to the following:
1. Your termination as an employee of Sensys Technologies is effective at the
end of the regular work day on July 17, 1998. All authority to discharge
contracts, agreements, personnel activities, or to perform any duties as an
employee will be terminated at that time.
2. You will receive severance pay for the period from July 20, 1998 through
January 15, 1999 at your regular bi-weekly salary of $5,577.60 less the
required deductions, payable in accordance with Sensys Technologies Inc.
normal payroll practices. During this period I ask that you agree to work
from time to time when reasonably available.
3. You will receive payment for your excess vacation hours in two equal
payments on July 15, 1998 and September 15, 1998. Your will be paid for the
balance of your accrued vacation leave in your final severance check on
January 29, 1999. In accordance with Company policy, your unused personal
leave and sick leave have no cash value at separation.
4. Your health insurance coverage will continue through January 1999 through
normal payroll deductions. After January 1999, you will be eligible to
extend coverage at your own expense pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA).
5. If you wish, you may continue your contributions to the 401(k) through
January 15, 1999. However, a 401(k) Company match will be made only on
contributions which you have made through July 17, 1998. If the Company
makes a discretionary profit sharing contribution this year, it will be
based on your compensation through July 17, 1998.
6. Effective July 17, 1998, your vacation and sick leave accruals will cease,
and group life insurance, and long-term and short-term disability insurance
coverage will be terminated.
7. You may continue to use the Company car through September 30, 1998.
However, you will be responsible for gasoline and telephone expenses after
July 17, 1998. If you elect to keep the car, the lease must be transferred
by October 1, 1998.
<PAGE> 2
Mr. Donald Reiser
June 26, 1998
Page 2
8. A Consulting Agreement will be executed for a one year period starting on
January 18, 1999 and ending on January 18, 2000, at a daily rate of $700.
Your security clearances will remain active during this period.
9. You shall return any telephone and credit cards, building keys, card keys,
records, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, documents, property,
or reproductions of any aforementioned items belonging to Sensys
Technologies Inc. on July 17, 1998.
10. You shall complete and submit any expense reports by July 17, 1998.
11. You have previously signed an Agreement with respect to inventions, patents
and secrecy with the Company. We anticipate that you will continue to abide
by that agreement. If you should need a copy of this agreement, one will be
provided to you by Connie Knoernschild.
In order to qualify for the severance pay and continued insurance coverage, you
must complete the attached Release and Settlement Agreement. Please read this
agreement carefully before signing. The agreement advises you to consult with an
attorney before signing. The law under which this release is issued specifies
that you must be granted 21 days in which to sign the agreement and an
additional 7 days in which the agreement may be revoked. You are not required to
wait 21 days before signing the agreement. The severance pay will not begin to
be paid until 7 days after you have signed the agreement.
Sincerely,
SENSYS TECHNOLOGIES INC.
/s/ S.R. Perrino
S.R. Perrino
President
Attachment - Release and Settlement Agreement
<PAGE> 3
RELEASE AND SETTLEMENT AGREEMENT
THIS AGREEENT is made this 17th day of July, 1998 between Donald Reiser
(hereinafter "Employee") and Sensys Technologies, Inc. (hereinafter "Employer").
The Agreement sets forth:
RECITALS
A. Employee is employed by Employer; and
B. Effective July 17, 1998, Employee's employment with Employer
will be retired due to the Employer's decision to request that
the Employee retire (hereinafter "retirement date"); and
C. Employee and Employer recognize that severance pay would be of
assistance to Employee; and
In consideration of the foregoing and of the promises and the mutual
covenants contained herein, it is hereby agreed between Employee and
Employer as follows:
1. Employer agrees to pay Employee severance pay from July 20, 1998
through January 15, 1999 (less appropriate withholdings).
2. Employer also agrees to pay the Employer's cost of medical premiums
through January 31, 1999.
3. Employee recognizes that the amounts to be paid pursuant to Paragraphs
1 and 2 above are in excess of any earned wages or benefits due and
owing Employee through his retirement date.
4. In exchange for the good and valuable consideration set forth in
Paragraphs 1 and 2, Employee agrees to release, waive and discharge any
and all manner of action, causes of action, claims, rights, charges,
suits, damages, debts, demands, obligations, attorneys fees, or any and
all other liabilities or claims of whatsoever nature, whether in law or
in equity, known or unknown, including, but not limited to any claim
and/or claim of damages or other relief for tort, breach of contract,
personal injury, negligence, age discrimination under The Age
Discrimination In Employment Act of 1967 (as amended), employment
discrimination prohibited by other federal, state or local laws
including sex, race, national origin, marital status, age, handicap,
height, weight, or religious discrimination, and any other claims for
unlawful employment practices which Employee has claimed or may claim
or could claim in any local, state or federal forum, against Employer,
its directors, officers, employees, successors and assigns and its
parent affiliates and subsidiaries, and all others, as a result of
Employee's employment at and separation of employment from Employer.
5. Employee understands that he does not waive rights or claims that may
arise after the date this Agreement is executed.
6. Employee further agrees that he has read this Agreement carefully and
understands all of its terms.
7. Employee understands and agrees that he is advised to consult with an
attorney prior to executing this Agreement.
8. Employee understands and agrees that he has been given 21 days within
which to consider this Agreement.
9. Employee understands and agrees that he may revoke this Agreement for a
period of seven calendar days following the execution of this
Agreement. The Agreement is not effective until this revocation period
has expired. Employee understands that any revocation, to be effective,
must be in writing and either (a) postmarked within seven days of
execution of this Agreement and addressed to the Human Resources
Department to the attention of Connie Knoernschild or (b) hand
delivered to Ms. Knoernschild. Employee understands that if revocation
is made by mail, mailing by certified mail, return receipt requested is
recommended to show proof of mailing.
<PAGE> 4
Release and Settlement Agreement
Donald Reiser
Page 2
10. In agreeing to sign this Release and Settlement Agreement, Employee is
doing so completely voluntarily and agrees that he has not relied on
any oral statements or explanations made by Employer or its
representatives.
11. Both parties agree to keep the facts, terms, and amount of this
Agreement confidential and neither party will hereafter disclose any
information concerning this Agreement to anyone, except to legal and
accounting advisors and except as may be required by law and as is
necessary for legitimate enforcement or compliance purposes.
12. The execution of this Agreement shall not be construed as an admission
of a violation of any statute or law or a breach of and duty or
obligation by either party to this agreement.
13. Both parties agree that this Agreement shall be governed by, and
interpreted in accordance with the laws of the State of Virginia.
14. In the event that a provision of this Agreement, or any portion
thereof, is judicially determined to be unenforceable as written, such
provision shall be construed so as to give it the maximum effect
permitted under applicable law.
15. This agreement, (including the terms set forth in the attached letter
dated June 26, 1998) constitutes the entire agreement between Sensys
Technologies Inc. and Donald Reiser with respect to the subject matter
of this Agreement and supersedes all prior negotiations and agreements,
whether written or oral. This Agreement may not be altered or amended
except by a written document executed by all of the parties.
EMPLOYEE:
/s/ C. Knoernschild /s/ Donald Reiser
- --------------------------------- ------------------------------------
Witness Donald Reiser
Date 6-29-98
- ---------------------------------
SENSYS TECHNOLOGIES INC.:
/s/ C. Knoernschild /s/ S.R. Perrino
- --------------------------------- ------------------------------------
Witness By:
Title: President
------------------------------------
Date 6-9-98
- ---------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 112,000
<SECURITIES> 0
<RECEIVABLES> 5,082,000
<ALLOWANCES> 0
<INVENTORY> 536,000
<CURRENT-ASSETS> 10,244,000
<PP&E> 3,733,000
<DEPRECIATION> 2,086,000
<TOTAL-ASSETS> 14,424,000
<CURRENT-LIABILITIES> 7,013,000
<BONDS> 2,426,000
0
0
<COMMON> 40,000
<OTHER-SE> 7,267,000
<TOTAL-LIABILITY-AND-EQUITY> 14,424,000
<SALES> 21,927,000
<TOTAL-REVENUES> 21,927,000
<CGS> 18,522,000
<TOTAL-COSTS> 23,042,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197,000
<INCOME-PRETAX> (1,312,000)
<INCOME-TAX> 490,000
<INCOME-CONTINUING> (822,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (822,000)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
