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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file NO. 0-5351
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EIP MICROWAVE, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer as specified in its charter)
Delaware 95-2148645
- ---------------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
3 Civic Plaza, Suite 265, Newport Beach, California 92660
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (714) 720-1766
--------------
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Issuer's net revenues for the fiscal year ended September 30, 1995, were
$6,721,000. The aggregate market value of the voting stock held by non-
affiliates of the Issuer, computed by reference to the average bid and asked
prices as of December 18, 1995, was approximately $666,000. For purposes of
this determination only, directors and officers of the Issuer have been assumed
to be affiliates. There were a total of 423,307 shares of the Issuer's common
stock outstanding as of December 18, 1995.
The number of sequentially numbered pages is 102. Exhibit Index on page 13
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Issuer's Annual Report to Stockholders for Fiscal Year
ended September 30, 1995 - Parts I and II.
(2) Portions of the Definitive Proxy Statement filed with Securities and
Exchange Commission relating to the Company's 1996 annual meeting of
Stockholders - Part III.
Transitional Small Business Disclosure Format
(check one): Yes [ ] No [X]
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PART I
ITEM 1. BUSINESS
In addition to the information set forth below, the information set forth
under the caption "Management's Discussion and Analysis of Operations and
Financial Condition" which appears on pages 8 to 9 of the Company's 1995 Annual
Report to Stockholders is incorporated herein by reference.
GENERAL/PRODUCTS
The Company was incorporated under the laws of the State of Delaware in
1987 under the name EIP Microwave, Inc. The predecessor corporation was
organized under the laws of California in 1961, and merged with the Company in
1987.
The Company is engaged in a single industry segment - the designing,
developing, manufacturing and marketing of high frequency microwave and radio
frequency (RF) test instruments. These instruments include microwave
heterodyne-type automatic frequency counters, microwave and RF pulse counters,
microwave and RF synthesized signal generators, pulse generators, and
downconverters. All of these products are electronic devices which are used in
the design, manufacture and maintenance of microwave and RF products and systems
throughout the world.
Microwave frequency counters represented 64% of sales in 1995, 75% of
sales in 1994, and 83% of sales in 1993. The Company also designs and
manufactures its own YIG (Yitrium iron garnet) filters, which are a key feature
of EIP microwave products. Additionally, the Company manufactures hybrid
microwave integrated circuits (MICs) and proprietary microwave subassemblies
used in its microwave products. The Company's YIG and MIC capabilities provide
its microwave products with competitively superior performance, protection from
overload, and compact size.
During fiscal 1995, the Company obtained rights to hardware, circuitware
and software for VXI-based multipurpose data modulators from SRI International.
The Company also introduced a narrow band RF synthesizer in the VXIbus standard.
During fiscal 1994, the Company introduced a microwave pulse counter with peak
power measurement capability.
MARKETS/PRINCIPAL CUSTOMERS
The Company has a variety of customers worldwide for its microwave
products, including the military, government agencies, government
subcontractors, the telecommunications industry, the aerospace industry, and
research and development facilities. The primary customers for the Company's RF
products are telecommunication companies. The Company's principal customers
include the Federal Aviation Administration, McDonnell Douglas Aerospace,
Grumman Aerospace Corp., and SRI International.
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The Company sells its microwave products to approximately 1,000 customers,
of which sales to the United States Government and its subcontractors comprised
approximately 36%, 44%, and 18% of net sales for fiscal years 1995, 1994, and
1993, respectively. Foreign sales through Marconi Instruments represented 19%
of net sales in fiscal 1995, 16% in fiscal 1994, and 14% of net sales in fiscal
1993.
METHODS OF DISTRIBUTION
Since November 1992, the Company's products have been distributed in the
majority of countries outside the United States through an exclusive
distribution agreement with Marconi Instruments, a subsidiary of The General
Electric Company, Plc. of England. The Company expects that the distribution
agreement with Marconi Instruments will terminate effective December 31, 1995,
and plans to use independent manufacturers' representatives for countries
previously covered by Marconi Instruments. The Company does not expect any
significant reduction in sales or orders as a result of this change. The
Company uses independent manufacturers' representatives for distribution in the
United States and in foreign countries not covered by Marconi Instruments. The
Company provides service and technical support to Marconi Instruments, its
domestic and foreign manufacturers' representatives, and directly to its
customers.
COMPETITION
The Company believes there are three to six competitors in the respective
markets in which the Company competes, however reliable data on sales and
profits of most of the Company's competitors is not readily available because
the competitors are either privately held or are separate divisions of large
publicly held companies which do not separately report financial results for
competing divisions.
The markets in which the Company's frequency counters are sold are well-
defined and narrow markets which have become increasingly competitive both in
the United States and abroad. Within these narrow markets, the Company
considers it holds a significant competitive position, generally believed to be
number two or three in market share. The Company encounters competition,
however, from certain firms which are substantially larger and have greater
financial resources than the Company; the dominant competitor is believed to be
Hewlett-Packard.
The market for the microwave synthesized signal generators is considered
to be larger than the microwave frequency counter market. As the market for
this type of product is still just emerging, we are not able to determine market
share. The only other supplier of such VXIbus instruments is Giga-tronics.
The Company's VXIbus pulse generator and downconverter are sold primarily
as companion products for integrated systems. Competitors for the pulse
generator include Wavetek and Colorado Data Systems, a subsidiary of Tektronix.
There is no current direct competition for the VXIbus downconverter.
Competition is based upon performance, reliability, product design,
availability and price, and is characterized by rapid technological change.
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RESEARCH, DEVELOPMENT AND ENGINEERING
Management believes that the Company's future success is dependent to a
significant extent upon engineering and new product development. Expenditures
for research, development and engineering during the past three years have
ranged between 17% and 11% of annual net sales. Research, development and
engineering expenditures were $742,000, $620,000, and $1,022,000, for fiscal
years ended September 30, 1995, 1994 and 1993, respectively. All of the
Company's research, development and engineering activities have been Company-
funded.
RAW MATERIALS
The principal raw materials used by the Company in its manufacturing
operations include capacitors, resistors, semiconductors, transformers, printed
circuit boards, display devices, and metal and plastic cases, most of which are
purchased from outside suppliers. For the majority of materials, the Company
has access to many suppliers, and believes that it is not dependent upon any one
supplier, and that adequate alternate sources for its materials are, for the
most part, readily available. There are, however, many applications which
require specialized components currently available, in each instance, only
through a single source of supply. The loss of any of these sources, or the
inability of any such source to meet the Company's production and quality
control requirements, could be detrimental to the Company in respect to the
specific products involved.
EMPLOYEES
The Company had 52 employees at September 30, 1995, 49 of whom were full
time and 3 part time. The Company is not a party to any collective bargaining
agreements, and the Company believes its relations with employees are excellent.
PATENTS AND TRADEMARKS
The Company holds no patents, trademarks, franchises, concessions or
royalty agreements that have a material importance to or effect on its frequency
counter, pulse counter, synthesized signal generator, pulse generator,
downconverter, or frequency selective level meter product lines. The Company
has obtained a license from SRI International for certain VXI-based multipurpose
data modulator circuitware and software.
GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS
Government approval is not required for any of the Company's principal
products.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS
The Company believes it is in compliance with applicable governmental
regulations. The Company is not aware of any probable governmental regulation
which would have a detrimental or disruptive effect on the Company.
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COMPLIANCE WITH FEDERAL, STATE AND LOCAL PROVISIONS ON ENVIRONMENTAL PROTECTION
The Company does not believe that compliance with federal, state, and
local provisions which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, will have any material effect upon the capital expenditures,
earnings, or competitive position of the Company.
ITEM 2. PROPERTIES
The Company leased a 36,000 square foot, one story, concrete structure
located in Milpitas, California, which contained production, warehouse and
office facilities. The Company's lease continued through November 30, 1995,
with an option to renew for an additional five years. The annual rent under
the lease for fiscal 1995, is $305,000 (plus applicable property taxes and
insurance). The rent for the two months of fiscal 1996 is $51,000 (plus
applicable property taxes and insurance). The Company has signed a lease for
20,331 square feet in another one story, concrete structure located in
Milpitas, California, for an initial term of three years, ending October 31,
1998, which contains production, warehouse and office facilities. The lease
provides for rentals of $207,000, $226,000, and $226,000 for fiscal years
1996, 1997 and 1998, plus applicable real property taxes and insurance, and
contains one three year renewal option. The Company also leases 978 square
feet of space as the Company's corporate offices, at a monthly rate of $1,320
on a month-to-month basis, located in Newport Beach, California. The current
facilities are believed by the Company to be suitable and adequate for its
present requirements.
The Company also owns and uses machinery, equipment, and furniture with an
original cost of approximately $5,158,000. This equipment is believed to be
modern and in good operating condition. The Company's management believes the
facilities and all machinery and equipment of the Company are adequately
insured.
The Company does not have any investments in real estate, real estate
mortgages or securities of persons primarily engaged in real estate activities,
and has no present policy or limitations with respect to any such future
investments.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company or its
subsidiary is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1995 no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information set forth under the caption "Stockholders' Information" on
page 20 of the Company's 1995 Annual Report to Stockholders is incorporated
herein by reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's Discussion and Analysis of Results of Operations and
Financial Condition which appears on pages 8 - 9 of the Company's 1995 Annual
Report to Stockholders is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements, together with the notes thereto and
the report thereon of Price Waterhouse LLP appearing on pages 10 - 19 of the
Company's 1995 Annual Report to Stockholders, are incorporated herein by
reference.
With the exception of the information expressly incorporated by reference
in items 5, 6, and 7 above, the Company's Annual Report to Stockholders for the
fiscal year ended September 30, 1995, is not otherwise to be deemed "filed" as a
part of this Form 10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information set forth under the captions "ELECTION OF DIRECTORS
- -Information With Respect to the Class II Director Nominee, - Information
With Respect to other Directors, and - Information With Respect to Executive
Officers", and "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS AND
TRANSACTIONS WITH MANAGEMENT AND OTHERS - Compliance With Section 16(a) of
the Exchange Act" in the Company's definitive proxy statement (the "Proxy
Statement") for the Annual Meeting of Stockholders scheduled to be held on
February 7, 1996, is incorporated herein by reference. The Proxy Statement
will be filed with the Securities and Exchange Commission not later than 120
days after the close of fiscal year ended September 30, 1995.
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ITEM 10. EXECUTIVE COMPENSATION
The information set forth under the caption "COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS - Executive
Compensation, and - Compensation of Directors" in the Proxy Statement is
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement is incorporated herein
by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS - Certain
Transactions" in the Proxy Statement is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) Financial documents and exhibits filed as part of this report:
(1) FINANCIAL STATEMENTS: The following consolidated financial
statements of the Company, together with their related notes to consolidated
financial statements and the report of independent accountants, included in the
1995 Annual Report to Stockholders have been incorporated herein by reference in
Item 7 of this Form 10-KSB Annual Report. Page number references are to the
1995 Annual Report to Stockholders.
INDEX TO FINANCIAL STATEMENTS
PAGE(S)
Consolidated Balance Sheets at September 30, 1995 and 1994. 10
Consolidated Statements of Operations for the three years ended
September 30, 1995. 11
Consolidated Statements of Stockholders' Equity for the three years
ended September 30, 1995. 11
Consolidated Statements of Cash Flows for the three years ended
September 30, 1995. 12
Notes to Consolidated Financial Statements 13-18
Report of Independent Accountants 19
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(2) EXHIBITS:
EXHIBIT NO.
3(a) Company's Certificate of Incorporation, filed on April 29, 1987, and
Certificate of Amendment of Certificate of Incorporation, filed
February 8, 1993, previously filed on February 12, 1993, as Exhibit
3(a) to Form 10-QSB Quarterly Report for quarter ended December 31,
1992, and incorporated herein by reference.
3(b) Company's Bylaws, previously filed June 25, 1987 (File No. 0-5351), as
Exhibit 3(b) to Form 8-K, and incorporated herein by reference.
10(a) Standard Form Lease dated August 18, 1995, by and between Berg & Berg
Developers, as landlord, and the Company, as tenant, covering the
Company's manufacturing facility located at 1745 McCandless Drive,
Milpitas, California.
*10(b) Copy of the Company's medical reimbursement plan (entitled "Full
Medical Coverage") covering certain officers, previously filed on
December 23, 1981 (File No. 0-5351), as Exhibit 10(o) to Form 10-K
Annual Report for fiscal year ended September 30, 1981, and
incorporated herein by reference.
*10(c) Company's Tax and Financial Counseling reimbursement plan covering
officers, previously filed on December 23, 1981 (File No. 0-5351), as
Exhibit 10(p) to Form 10-K Annual Report for fiscal year ended
September 30, 1981, and incorporated herein by reference.
*10(d) EIP Microwave, Inc. Retirement/Savings Plan effective January 6, 1986,
as amended and adopted by the Company on September 15, 1988,
previously filed on December 1, 1988 (File No. 0-5351), as Exhibit
10(l) to Form 10-K Annual Report for fiscal year ended September 30,
1988, and incorporated herein by reference.
10(e) Month-to-Month Office Space Lease, dated February 15, 1994, by and
between the Company, as tenant, and The Irvine Company, as landlord,
covering the Company's corporate office facility located at 3 Civic
Plaza, Suite 265, Newport Beach, California, previously filed on
December 29, 1994, as Exhibit 10(e) to Form 10-KSB Annual Report for
fiscal year ended September 30, 1994 (the "1994 Annual Report"), and
incorporated herein by reference.
10(f) Loan and Security Agreement dated March 10, 1992, between the Company
and Silicon Valley Bank, previously filed on May 14, 1992, as Exhibit
10(a) to Form 10-Q Quarterly Report for quarter ended March 31, 1992,
and incorporated herein by reference.
_________________________
* Management contract or compensatory plan or arrangement.
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EXHIBIT NO.
10(g) Amendment to Loan Agreement dated May 13, 1994, between the Company
and Silicon Valley Bank, previously filed on August 11, 1994, as
Exhibit 10(a) to Form 10-QSB Quarterly Report for quarter ended June
30, 1994, and incorporated herein by reference.
10(h) Amendment to Loan Agreement dated December 20, 1994, between the
Company and Silicon Valley Bank, previously filed on December 29,
1994, as Exhibit 10(h) to the 1994 Annual Report, and incorporated
herein by reference.
10(i) Loan Modification Agreement dated as of November 27, 1995, between the
Company and Silicon Valley Bank.
*10(j) Employment Agreement dated March 1, 1994, between the Company and John
F. Bishop, previously filed on December 29, 1994, as Exhibit 10(i) to
the 1994 Annual Report, and incorporated herein by reference.
*10(k) Employment Agreement dated as of October 1, 1995, between the Company
and John F. Bishop.
10(l) Indemnification Agreement dated July 15, 1992, between the Company and
John B. Bishop, previously filed on December 20, 1992, as Exhibit
10(n) to Form 10-KSB Annual Report for fiscal year ended September 30,
1992 (the "1992 Annual Report"), and incorporated herein by reference.
10(m) Indemnification Agreement dated July 15, 1992, between the Company and
Robert D. Johnson, previously filed on December 20, 1992, as Exhibit
10(o) to the 1992 Annual Report, and incorporated herein by reference.
10(n) Indemnification Agreement dated July 15, 1992, between the Company and
James J. Shelton, previously filed on December 20, 1992, as Exhibit
10(p) to the 1992 Annual Report, and incorporated herein by reference.
10(o) Indemnification Agreement dated July 15, 1992, between the Company and
J. Sidney Webb, Jr., previously filed on December 20, 1992, as Exhibit
10(q) to the 1992 Annual Report, and incorporated herein by reference.
10(p) Indemnification Agreement dated July 15, 1992, between the Company and
John F. Bishop, previously filed on December 23, 1993, as Exhibit
10(m) to the 1993 Annual Report, and incorporated herein by reference.
*10(q) EIP Microwave, Inc. Stock Appreciation Rights Plan, adopted November
11, 1992, previously filed on December 20, 1992, as Exhibit 10(t) to
the 1992 Annual Report, and incorporated herein by reference.
_________________________
* Management contract or compensatory plan or arrangement.
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EXHIBIT NO.
*10(r) Written description of EIP Bonus Plan for Fiscal 1995 and 1996.
10(s) Distribution Agreement dated October 1, 1992, between the Company and
Marconi Instruments Limited, previously filed on December 20, 1992, as
Exhibit 10(w) to the 1992 Annual Report, and incorporated herein by
reference.
10(t) Termination letter to Marconi Instruments Ltd., dated as of June 22,
1995, terminating Cooperation Agreement, Distribution Agreement and
Technical Collaboration Agreement, effective December 31, 1995.
*10(u) 1994 Stock Option Plan, previously filed on February 14, 1995, as
Exhibit 10(a) to Form 10-QSB Quarterly Report for quarter ended
December 31, 1994, and incorporated herein by reference.
*10(v) Non-qualified Stock Option Agreement-Form.
*10(w) Incentive Stock Option Agreement-Form.
10(x) Agreement dated as of September 11, 1995, between the Company and SRI
International.
13 Copy of Company's Annual Report to Stockholders for the fiscal year
ended September 30, 1995, in the form to be disseminated to
Stockholders, but only to the extent such report is expressly
incorporated by reference herein, and such report is not otherwise to
be deemed "filed" as a part of this Form 10-KSB Annual Report.
21 Subsidiaries of the Company.
27 Financial Data Schedule
(B) No reports on Form 8-K were filed during the quarter ended September 30,
1995.
_________________________
* Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EIP MICROWAVE, INC.
December 21. 1995 By: /s/ J. Bradford Bishop
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J. Bradford Bishop
Chairman of the Board and Director
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.
/s/ John F. Bishop Vice-Chairman, President, December 21, 1995
- ------------------------- Treasurer, Secretary,
John F. Bishop and Director
/s/ John J. Ardizzone, Jr. Chief Financial Officer, December 21, 1995
- ------------------------- Vice President of Operations
John J. Ardizzone, Jr. (Principal Financial and
Accounting Officer)
/s/ Robert D. Johnson
- -------------------------
Robert D. Johnson Director December 21, 1995
/s/ James J. Shelton
- -------------------------
James J. Shelton Director December 21, 1995
/s/ J. Sidney Webb
- -------------------------
J. Sidney Webb Director December 21, 1995
/s/ J. Bradford Bishop
- ------------------------- Chairman of the Board
J. Bradford Bishop and Director December 21, 1995
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
3(a) Company's Certificate of Incorporation, filed on
April 29, 1987, and Certificate of Amendment of
Certificate of Incorporation, filed February 8, 1993,
previously filed on February 12, 1993, as Exhibit 3(a)
to Form 10-QSB Quarterly Report for quarter ended
December 31, 1992, and incorporated herein by reference.
3(b) Company's Bylaws, previously filed June 25, 1987
(File No. 0-5351), as Exhibit 3(b) to Form 8-K, and
incorporated herein by reference.
10(a) Standard Form Lease dated August 18, 1995, by and between
Berg & Berg Developers, as landlord, and the Company, as
tenant, covering the Company's manufacturing facility
located at 1745 McCandless Drive, Milpitas, California. 17
10(b) Copy of the Company's medical reimbursement plan (entitled
"Full Medical Coverage") covering certain officers,
previously filed on December 23, 1981 (File No. 0-5351), as
Exhibit 10(o) to Form 10-K Annual Report for fiscal year
ended September 30, 1981, and incorporated herein by
reference.
*10(c) Company's Tax and Financial Counseling reimbursement plan
covering officers, previously filed on December 23, 1981
(File No. 0-5351), as Exhibit 10(p) to Form 10-K Annual
Report for fiscal year ended September 30, 1981, and
incorporated herein by reference.
*10(d) EIP Microwave, Inc. Retirement/Savings Plan effective
January 6, 1986, as amended and adopted by the Company on
September 15, 1988, previously filed on December 1, 1988
(File No. 0-5351), as Exhibit 10(l) to Form 10-K Annual
Report for fiscal year ended September 30, 1988, and
incorporated herein by reference.
10(e) Month-to-Month Office Space Lease, dated February 15, 1994,
by and between the Company, as tenant, and The Irvine
Company, as landlord, covering the Company's corporate
office facility located at 3 Civic Plaza, Suite 265, Newport
Beach, California, previously filed on December 29, 1994, as
Exhibit 10(e) to Form 10-KSB Annual Report for fiscal year
ended September 30, 1994 (the "1994 Annual Report"), and
incorporated herein by reference.
_________________________
* Management contract or compensatory plan or arrangement.
13
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SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
10(f) Loan and Security Agreement dated March 10, 1992,
between the Company and Silicon Valley Bank, previously
filed on May 14, 1992, as Exhibit 10(a) to Form 10-Q
Quarterly Report for quarter ended March 31, 1992, and
incorporated herein by reference.
10(g) Amendment to Loan Agreement dated May 13, 1994, between
the Company and Silicon Valley Bank, previously filed on
August 11, 1994, as Exhibit 10(a) to Form 10-QSB Quarterly
Report for quarter ended June 30, 1994, and incorporated
herein by reference.
10(h) Amendment to Loan Agreement dated December 20, 1994, between
the Company and Silicon Valley Bank, previously filed on
December 29, 1994, as Exhibit 10(h) to the 1994 Annual Report,
and incorporated herein by reference.
10(i) Loan Modification Agreement dated as of November 27, 1995,
between the Company and Silicon Valley Bank. 37
*10(j) Employment Agreement dated March 1, 1994, between the
Company and John F. Bishop, previously filed on
December 29, 1994, as Exhibit 10(i) to the 1994 Annual
Report, and incorporated herein by reference.
*10(k) Employment Agreement dated as of October 1, 1995, between
the Company and John F. Bishop. 40
10(l) Indemnification Agreement dated July 15, 1992, between
the Company and John B. Bishop, previously filed on
December 20, 1992, as Exhibit 10(n) to Form 10-KSB Annual
Report for fiscal year ended September 30, 1992 (the "1992
Annual Report"), and incorporated herein by reference.
10(m) Indemnification Agreement dated July 15, 1992, between the
Company and Robert D. Johnson, previously filed on
December 20, 1992, as Exhibit 10(o) to the 1992 Annual
Report, and incorporated herein by reference.
_________________________
* Management contract or compensatory plan or arrangement.
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SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
10(n) Indemnification Agreement dated July 15, 1992, between
the Company and James J. Shelton, previously filed on
December 20, 1992, as Exhibit 10(p) to the 1992 Annual
Report, and incorporated herein by reference.
10(o) Indemnification Agreement dated July 15, 1992, between
the Company and J. Sidney Webb, Jr., previously filed
on December 20, 1992, as Exhibit 10(q) to the 1992
Annual Report, and incorporated herein by reference.
10(p) Indemnification Agreement dated July 15, 1992, between
the Company and John F. Bishop, previously filed on
December 23, 1993, as Exhibit 10(m) to the 1993 Annual
Report, and incorporated herein by reference.
*10(q) EIP Microwave, Inc. Stock Appreciation Rights Plan,
adopted November 11, 1992, previously filed on
December 20, 1992, as Exhibit 10(t) to the 1992 Annual
Report, and incorporated herein by reference.
*10(r) Written description of EIP Bonus Plan for Fiscal 1995
and 1996. 50
10(s) Distribution Agreement dated October 1, 1992, between
the Company and Marconi Instruments Limited, previously
filed on December 20, 1992, as Exhibit 10(w) to the 1992
Annual Report, and incorporated herein by reference.
10(t) Termination letter to Marconi Instruments Ltd., dated
June 22, 1995, terminating Cooperation Agreement,
Distribution Agreement and Technical Collaboration
Agreement, effective December 31, 1995. 51
*10(u) 1994 Stock Option Plan, previously filed on February 14,
1995, as Exhibit 10(a) to Form 10-QSB Quarterly Report
for quarter ended December 31, 1994, and incorporated
herein by reference.
*10(v) Non-qualified Stock Option Agreement-Form. 53
_________________________
* Management contract or compensatory plan or arrangement.
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SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
*10(w) Incentive Stock Option Agreement-Form. 57
10(x) Agreement dated as of September 11, 1995, between
the Company and SRI International. 61
13 Copy of Company's Annual Report to Stockholders for the
fiscal year ended September 30, 1995, in the form to be
disseminated to Stockholders, but only to the extent such
report is expressly incorporated by reference herein, and
such report is not otherwise to be deemed "filed" as a
part of this Form 10-KSB Annual Report. 79
21 Subsidiaries of the Company. 101
27 Financial Data Schedule 102
_________________________
* Management contract or compensatory plan or arrangement.
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EXHIBIT 10(a)
STANDARD FORM LEASE
PARTIES: This Lease, executed in duplicate at Cupertino, California, on
August 18, 1995, by and between Berg & Berg Developers, a California General
Partnership, and EIP Microwave, Inc., a Delaware Corporation, hereinafter
called respectively Lessor and Lessee, without regard to number or gender.
USE: WITNESSETH: That Lessor hereby Leases to Lessee, and Lessee hires from
Lessor, for the purpose of conducting therein office, research and
development, light manufacturing, and warehouse activities, and any other
legal activity, and for no other purpose without obtaining the prior written
consent of Lessor.
PREMISES: The real property with appurtenances as shown on Exhibit A.1 (the
"Premises") situated in the City of Milpitas, County of Santa Clara, State of
California, and more particularly described as follows:
Lessee's portion of the Premises is 20,331 square feet of building,
including all improvements thereto, as shown on Exhibit A.2, including
the right to use up to 71 unreserved parking spaces. The address for
the leased portion of the Premises is 1745 McCandless Drive, Milpitas,
California. The pro-rata share of the building is 56.90%.
TERM: The term shall be for thirty-six (36) months unless extended pursuant
to Section 35 of this Lease (the "Lease Term"), commencing on the 1st day of
November, 1995 (the "Commencement Date"), and ending on the 31st day of
October, 1998.
RENT: Base rent shall be payable in monthly installments as follows:
<TABLE>
<CAPTION>
Base rent Estimated CAC Total
--------- ------------- -----
<S> <C> <C> <C>
Months 1 to 36 $14,842 $3,995* $18,837
</TABLE>
* Subject to adjustment per Common Area Charges Section below.
Base rent as scheduled above shall be payable in advance on or before the
first day of each calendar month during the Lease Term. The term "Rent," as
used herein, shall be deemed to be and to mean the base monthly rent and all
other sums required to be paid by Lessee pursuant to the terms of this Lease.
Rent shall be paid in lawful money of the United States of America, without
offset or deduction, and shall be paid to Lessor at such place or places as
may be designated from time to time by Lessor. Rent for any period less than
a calendar month shall be a pro rata portion of the monthly installment. Upon
execution of this Lease, Lessee shall deposit with Lessor the first month's
rent.
COMMON AREA CHARGES: Lessee shall pay to Lessor, as additional Rent, an
amount equal to 5.9% of the total common area charges of the Project and
56.90% of the total common area charges for the Premises as defined below
(the common area charges for the Project and the common area charges for the
Premises collectively referred to herein as ("CAC")). Lessee shall pay to
Lessor as Rent, on or before the first day of the term of this Lease and on
or before the first day of each calendar month thereafter during the term
hereof, subject to adjustment and reconciliation as provided hereinbelow, the
sum of Three Thousand Nine Hundred Ninety-Five Dollars ($3,995), said sum
representing Lessee's estimated monthly payment of Lessee's percentage share of
CAC It is understood and agreed that Lessee's obligation under this paragraph
will be prorated to reflect the Commencement Date and the end of the Lease
Term. Upon execution of this Lease, Lessee shall deposit with Lessor the
first month's estimated CAC. Lessee's CAC shall be computed as follows
Lessee's estimated monthly payment of CAC payable by Lessee during the
calendar year in which the Lease commences is set forth above. At or prior
to the commencement of each succeeding calendar year term (or as soon as
practical thereafter), Lessor shall provide Lessee with Lessee's estimated
monthly payment for CAC which Lessee shall pay as Rent. Within 120 days of
the end of the calendar year and of the termination of this Lease, Lessor
shall provide Lessee a statement of actual CAC incurred for the preceding
year or other applicable period in the case of a termination year. If such
statement shows that Lessee has paid less than its actual percentage, then
Lessee shall on demand pay to Lessor the amount of such deficiency. If such
statement shows that Lessee has paid more than its actual percentage, then
Lessor shall, at its option, promptly refund such excess to Lessee or credit
the amount thereof to the Rent next becoming due from Lessee. Lessor reserves
the right to revise any estimate of CAC if the actual or projected CAC show
an increase or decrease in excess of 10% from an earlier estimate for the
same period. In such event, Lessor shall provide a revised estimate to
Lessee, together with an explanation of the reasons therefor, and Lessee
shall revise its monthly CAC payments accordingly. Lessor's and Lessee's
obligation with respect to adjustments at the end of the Lease Term or
earlier termination of this Lease shall survive such termination or
expiration.
<PAGE>
As used in this Lease, CAC shall include but are not limited to, (i) all
items identified in Paragraphs 5(b), 6, 9, 16 and 31; (ii) utility costs
related to the common areas of the McCandless Technology Park (the "Project"
as shown on Exhibit A.3) (iii) all costs and expenses including but not
limited to supplies, materials, equipment and tools used or required in
connection with the operation and maintenance of the Project; (iv) licenses,
permits and inspection fees; (v) all other costs incurred by Lessor in
maintaining and operating the Project; and (vi) an amount equal to five
percent (5%) of the actual expenditures for the aggregate of all CAC, as
compensation for Lessor's accounting and processing services. Lessee shall
have the right to audit or review the CAC applicable to this Lease annually.
SECURITY DEPOSIT: Lessee shall deposit with Lessor the sum of Fourteen
Thousand Eight Hundred Forty-Two Dollars ($14,842) (the "Security Deposit").
The Security Deposit shall be held by Lessor as security for the faithful
performance by Lessee of all of the terms, covenants, and conditions of this
Lease applicable to Lessee. If Lessee commits a default as provided for
herein, including but not limited to a default with respect to the provisions
contained herein relating to the condition of the Premises, Lessor may (but
shall not be required to) use, apply or retain all or any part of the
Security Deposit for the payment of any amount which Lessor may spend by
reason of default by Lessee. If any portion of the Security Deposit is so
used or applied, Lessee shall, within ten days after written demand therefor,
deposit cash with Lessor in an amount sufficient to restore the Security
Deposit to its original amount. Lessee's failure to do so shall be a default
by Lessee. Any attempt by Lessee to transfer or encumber its interest in the
Security Deposit shall be null and void. Upon execution of this Lease, Lessee
shall deposit with Lessor the Security Deposit.
LATE CHARGES: Lessee hereby acknowledges that a late payment made by Lessee
to Lessor of Rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges, which may be imposed
on Lessor according to the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of Rent or any other sum due from
Lessee is not received by Lessor or Lessor's designee within ten (10) days
after such amount is due, Lessee shall pay to Lessor a late charge equal to
five (5%) percent of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of late payments made by Lessee. Acceptance of such late
charges by Lessor shall in no event constitute a waiver of Lessee's default
with respect to such overdue amount, nor shall it prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
QUIET ENJOYMENT: Lessor covenants and agrees with Lessee that upon Lessee
paying Rent and performing its covenants and conditions under this Lease,
Lessee shall and may peaceably and quietly have, hold and enjoy the Premises
for the Lease Term, subject, however, to the rights reserved by Lessor
hereunder.
LESSEE EXPANSION: Lessor shall agree to cancel this Lease at any time during
the Lease Term upon Lessee signing a new lease with Lessor on terms and
conditions acceptable to Lessor, for an amount of space exceeding 40,000
square feet in a building that Lessor owns or builds that is available for
lease by Lessor, at the then existing fair market Rent.
IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. POSSESSION: Possession will be tendered and Rent shall commence on the
Commencement Date.
2. LESSEE'S IMPROVEMENTS: As a material inducement to the execution and
delivery of this Lease by Lessor, Lessee is leasing the portion of the
Premises in an "AS IS" physical condition and in an "AS IS" state of repair.
2.1 ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER: Lessor represents that
the Premises are in good order and repair, and complies with all requirements
for occupancy as of the Commencement Date. Lessee agrees on the last day of
the Lease Term, or on the sooner termination of this Lease, to surrender the
Premises to Lessor in good condition and repair. Good condition and repair
shall not mean original condition, but shall mean that the Premises are in a
commercially acceptable condition suitable for occupancy by a reasonable
lessee. The interior walls of all office and warehouse areas, the floors of
all office and warehouse areas, all suspended ceilings and any carpeting are
to be cleaned and in good repair. Lessee also agrees to surrender unto Lessor
all alterations, additions, and improvements which may have been made in, to,
or on the Premises by Lessee, except that Lessee shall ascertain from Lessor,
within (30) days before the end of the Lease Term or earlier termination of
this Lease, whether Lessor desires to have the Premises or any part or parts
thereof restored to their condition as of the
PAGE 2
<PAGE>
Commencement Date of this Lease; if Lessor shall so desire, then Lessee shall
restore said Premises or such part or parts thereof before the end of the
Lease Term or earlier termination of this Lease at Lessee's sole cost and
expense. Lessee, on or before the end of the Lease Term or sooner termination
of this Lease, shall remove all its personal property and trade fixtures from
the Premises, and all such property not so removed shall be deemed to be
abandoned by Lessee. Lessee shall reimburse Lessor for all disposition costs
incurred by Lessor relative to Lessee's abandoned property. If the Premises
are not surrendered at the end of the Lease Term or earlier termination of
this Lease, Lessee shall indemnify Lessor against loss or liability resulting
from any delay caused by Lessee in surrendering the Premises including,
without limitation, any claims made by any succeeding Lessee founded on such
delay.
3. USES PROHIBITED: Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other tenant in or around the buildings in
which the subject Premises are located or allow any sale by auction upon the
Premises, or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, or place any loads upon the floor, walls,
or ceiling which may endanger the structure, or use any machinery or
apparatus which will in any manner vibrate or shake the Premises or the
building of which it is a part, or place any harmful liquids in the drainage
system of the building. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises outside of the building
proper. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside of the building
structure, unless approved by the local, state federal or other applicable
governing authority. Lessor consents to Lessee's use of materials which are
incidental to the normal, day-to-day operations of any office user, such as
copier fluids, cleaning materials, etc., but this does not relieve Lessee of
any of its obligations not to contaminate the Premises or related real
property or violated any hazardous materials laws.
4. ALTERATIONS AND ADDITIONS: Lessee shall not make, or suffer to be made,
any alteration or addition to said Premises, or any part thereof, without the
express, advance written consent of Lessor, any addition or alteration to
said Premises, except movable furniture and trade fixtures, shall become at
once a part of the realty and belong to Lessor at the end of the Lease Term
or earlier termination of this Lease Alterations and additions which are not
deemed as trade fixtures shall include HVAC systems, lighting systems,
electrical systems, partitioning, carpeting, or any other installation which
has become an integral part of the Premises. Lessee agrees that it will not
proceed to make such alterations or additions until all required government
permits have been obtained and after having obtained consent from Lessor to
do so, until five (5) days from the receipt of such consent, so that Lessor
may post appropriate notices to avoid any liability to contractors or
material suppliers for payment for Lessee's improvements. Lessee shall at all
times permit such notices to be posted and to remain posted until the
completion of work. At the end of the Lease Term or earlier termination of
this Lease, Lessee shall remove and shall be required to remove its special
tenant improvements and all related equipment installed by Lessee at or
during the Lease Term. Notwithstanding the above, Lessor agrees to allow any
reasonable alterations and improvements and will use its best efforts to
notify Lessee at the time of approval if such improvements or alterations are
to be removed at Lease Expiration or earlier termination of this Lease.
5. MAINTENANCE OF PREMISES:
(a) Lessee shall at its sole cost and expense keep and maintain the
interior of Lessee's portion of the Premises, including, but not limited
to, all lighting systems, temperature control systems and plumbing
systems, in good and sanitary order, condition and repair, including any
required replacements. Lessee shall maintain all wall surfaces and floor
coverings in good condition and repair, free of holes, gouges, or
defacements.
(b) Lessor shall keep and maintain in good condition and repair
including replacements, at Lessee's expense, based on a pro-rata share
of cost based on square footage or costs directly related to Lessee's
use of the Premises the following, which shall be included in the
monthly CAC:
1. The exterior of the building, any appurtenances and every part
thereof, including but not limited to, glazing, sidewalks, parking
areas, electrical systems, HVAC systems, roof membrane, and painting
of exterior walls.
2. The HVAC by a service contract with a licensed air conditioning and
heating contractor which contract shall provide for a minimum of
bi-monthly maintenance of all air conditioning and heating equipment
at the Leased Premises including HVAC repairs or replacements which
are either excluded from such service contract or any existing
equipment warranties.
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<PAGE>
3. The landscaping by a landscape contractor to water, maintain, trim
and replace, when necessary, any shrubbery and landscaping at the
Premises.
4. The roof membrane by a service contract with a licensed reputable
roofing contractor which contract shall provide for a minimum of
semi-annual maintenance and repair of the roof at the Leased Premises,
including cleaning storm gutters and drains and removing debris and
trimming overhanging trees.
5. Extermination services.
6. Fire monitoring services.
(c) Lessee hereby waives any and all rights to make repairs at the
expense of Lessor as provided in Section 1942 of the Civil Code of the
State of California, and all rights provided for by Section 1941 of said
Civil Code.
(d) Lessor shall be responsible for and pay for the repair any
structural defects in the Premises including the roof structure (not
membrane), exterior walls and foundation during the Lease Term. Lessor
agrees that all such repairs will be done as expeditiously as possible
considering all building permits and any governmental requirements.
6. HAZARD INSURANCE: Lessee shall not use, or permit said Premises, or any
part thereof, to be used, for any purpose other than that for which said
Premises are hereby leased; and no use shall be made or permitted to be made
of the Premises, nor acts done, which may cause a cancellation of any
standard form insurance policy covering said building, or any part thereof,
nor shall Lessee sell or permit to be kept, used or sold, in or about said
Premises, any article which may be prohibited by a standard form fire
insurance policy. Lessee shall, at its sole cost and expense, comply with any
and all reasonable requirements, pertaining to said Premises, of any
insurance organization or company, necessary for the maintenance of
reasonable fire and general liability insurance, covering said building and
appurtenances. Lessor agrees to purchase and keep in force fire and extended
coverage insurance covering loss or damage to the Premises in amounts not to
exceed the full replacement cost of said Premises as determined by Lessor,
with proceeds payable to Lessor. Lessee acknowledges that the insurance
referenced above does not include coverage for Lessee's personal property. In
the event of a loss per the insurance provisions of this paragraph, Lessee
shall be responsible for deductibles up to a maximum of $5,000 per
occurrence. The Lessee agrees to pay to the Lessor as additional Rent, on
demand, the full cost of said insurance as evidenced by insurance billings to
the Lessor which shall be included in Lessee's monthly CAC. If said insurance
billings cover the Premises, and Lessee does not occupy the entire Premises,
the insurance premiums and deductibles shall be allocated to the portion of
the Premises occupied by Lessee on a pro-rata square footage or other
equitable basis, as determined by Lessor. It is understood and agreed that
Lessee's obligation under this paragraph will be prorated to reflect the
Commencement Date and the end of the Lease Term.
Lessor and Lessee hereby waive any rights each may have against the other
related to any loss or damage caused to Lessor or Lessee as the case may be,
or to the Premises or its contents, and which may arise from any risk
generally covered by fire and extended coverage insurance. The parties shall
provide that their respective insurance policies insuring the property or the
personal property include a waiver of any right of subrogation which said
insurance company may have against Lessor or Lessee, as the case may be.
Lessor shall maintain in full force and effect, a policy of rental loss
insurance, in an amount equal to the amount of Rent payable by Lessee
commencing on the date of loss during the next ensuing one (1) year, as
reasonably determined by Lessor with proceeds payable to Lessor ("Loss of
Rents Insurance"). Lessee shall reimburse Lessor for the full cost of said
rental loss insurance coverage.
7. ABANDONMENT: Lessee shall not vacate or abandon the Premises at any time
during the Lease Term, and if Lessee shall abandon, vacate or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor. Notwithstanding the above, the Premises
shall not be considered vacated or abandoned if Lessee maintains the Premises
in good condition, provides security and is not in default.
8. FREE FROM LIENS: Lessee shall keep the subject Premises and the property
in which the subject Premises are situated, free from any and all liens
including but not limited to liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee. However, the Lessor
shall allow Lessee to contest a lien claim, so long as the claim is
discharged prior to any foreclosure proceeding being initiated against the
property and provided Lessee provides Lessor a bond if the lien exceeds
$5,000.
PAGE 4
<PAGE>
9. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall, at its sole cost
and expense, comply with all of the requirements of all local, municipal,
state and federal authorities now in force, or which may hereafter be in
force, pertaining to Lessee's use and occupancy of the said Premises, and
shall faithfully observe in the use of the Premises all local and municipal
ordinances and state and federal statutes now in force or which may hereafter
be in force.
10. LESSEE'S INSURANCE: Lessee, as a material part of the consideration to be
rendered to Lessor, hereby waives all claims against Lessor and Lessor's
Agents for damages to goods, wares and merchandise, and all other personal
property in, upon or about said Premises, and for injuries to persons in,
upon or about said Premises, from any cause arising at any time, and Lessee
will hold Lessor and Lessor's Agents exempt and harmless from any damage or
injury to any person, or to the goods, wares and merchandise and all other
personal property of any person, arising from the use or occupancy of the
Premises by Lessee, or from the failure of Lessee to keep the Premises in
good condition and repair, as herein provided. Lessee shall secure and keep in
force a standard policy of commercial general liability insurance and
property damage policy covering the Premises, including parking areas,
insuring the Lessee. A certificate of said policy naming Lessor as an
additional insured shall be delivered to Lessor and will have a combined
single limit for both bodily injury, death and property damage in an amount
not less than two million dollars ($2,000,000.00). The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. Lessee
shall obtain a written obligation on the part of the insurer to notify Lessor
30 days in advance in writing before any cancellation thereof. Lessee shall
obtain, at Lessee's sole cost and expense, a policy of fire and extended
coverage insurance including coverage for direct physical loss special form,
and a sprinkler leakage endorsement, if applicable, insuring the personal
property of Lessee. The proceeds from any property damage policy shall be
payable to Lessee. Lessee shall, at its sole cost and expense, comply with all
of the insurance requirements of all local, municipal, state and federal
authorities now in force, or which may hereafter be in force, pertaining to
Lessee's use and occupancy of the said Premises.
11. ADVERTISEMENTS AND SIGNS: Lessee shall not place or permit to be placed,
in, upon or about the Premises any unusual or extraordinary signs, or any
signs not approved by the city, local, state, federal or other applicable
governing authority. Lessee shall not place, or permit to be placed upon the
Premises, any signs, advertisements or notices without the written consent of
the Lessor, and such consent shall not be unreasonably withheld. A sign so
placed on the Premises shall be so placed upon the understanding and
agreement that Lessee will remove same at the end of the Lease Term or
earlier termination of this Lease and repair any damage or injury to the
Premises caused thereby, and if not so removed by Lessee, then Lessor may
have the same removed at Lessee's expense.
12. UTILITIES: Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities supplied to the Premises. Any charges for sewer
usage or related fees shall be the obligation of Lessee and paid for by
Lessee. If any such services are not separately metered to Lessee, Lessee
shall pay a reasonable proportion of all charges which are jointly metered,
the determination to be made by Lessor acting reasonably and on any equitable
basis.
13. ATTORNEY'S FEES: In case suit should be brought for the possession of the
Premises, for the recovery of any sum due hereunder, or because of the breach
of any other covenant herein, the losing party shall pay to the prevailing
party reasonable attorney's fee which shall be deemed to have accrued on the
commencement of such action and shall be enforceable whether or not such
action is prosecuted to judgment.
14.1 DEFAULT: The occurrence of any of the following shall constitute a
default and breach of this Lease by Lessee: a) Any failure by Lessee to pay
Rent or to make any other payment required to be made by Lessee hereunder
when due if not cured within ten (10) days after written notice thereof by
Lessor to Lessee; b) The abandonment or vacation of the Premises by Lessee
except as provided in Section 7; c) A failure by Lessee to observe and
perform any other provision of this Lease to be observed or performed by
Lessee, where such failure continues for thirty days after written notice
thereof by Lessor to Lessee; provided, however, that if the nature of such
default is such that the same cannot be reasonably cured within such thirty
(30) day period, Lessee shall not be deemed to be in default if Lessee shall,
within such period, commence such cure and thereafter diligently prosecute
the same to completion; d) The making by Lessee of any general assignment for
the benefit of creditors, the filing by or against Lessee of a petition to
have Lessee adjudged a bankrupt or of a petition for reorganization or
arrangement under any law relating to bankruptcy, e) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's
assets or Lessee's interest in this Lease, or the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease.
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14.2 SURRENDER OF LEASE: In the event of any such default by Lessee, then in
addition to any other remedies available to Lessor at law or in equity,
Lessor shall have the immediate option to terminate this Lease before the end
of the Lease Term and all rights of Lessee hereunder, by giving written
notice of such intention to terminate. In the event that Lessor terminates
this Lease due to a default of Lessee, then Lessor may recover from Lessee:
a) the worth at the time of award of any unpaid Rent which had been earned at
the time of such termination; plus b) the worth at the time of award of
unpaid Rent which would have been earned after termination until the time of
award exceeding the amount of such rental loss; plus c) the worth at the time
of award of the amount by which the unpaid Rent for the balance of the Lease
Tenn after the time of award exceeds the amount of such rental loss; plus d)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform his obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and e) at Lessor's election, such other amounts in addition to or
in lieu or the foregoing as may be permitted from time to time by applicable
California law. As used in (a), (b) and (c) above, the "worth at the time of
award" is computed by allowing interest at the rate of Wells Fargo's prime
rate plus two (2%) percent per annum.
14.3 RIGHT OF ENTRY AND REMOVAL: In the event of any such default by Lessee,
Lessor shall also have the right, with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere
at the cost of and for the account of Lessee.
14.4 ABANDONMENT: In the event of the vacation or abandonment, except as
provided in Section 7, of the Premises by Lessee or in the event that Lessor
shall elect to re-enter as provided in paragraph 14.3 above or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, and Lessor does not elect to terminate this Lease as
provided in paragraph 14.2 above, then Lessor may from time to time, without
terminating this Lease, either recover all Rent as it becomes due or relet
the Premises or any part thereof for such term or terms and at such rental
rates and upon such other terms and conditions as Lessor, in its sole
discretion, may deem advisable with the right to make alterations and repairs
to the Premises. In the event that Lessor elects to relet the Premises, then
Rent received by Lessor from such reletting shall be applied; first, to the
payment of any indebtedness other than Rent due hereunder from Lessee to
Lessor; second, to the payment of any cost of such reletting; third, to the
payment of the cost of any alterations and repairs to the Premises; fourth,
to the payment of Rent due and unpaid hereunder, and the residue, if any,
shall be held by Lessor and applied to the payment of future Rent as the same
may become due and payable hereunder. Should that portion of such Rent
received from such reletting during any month, which is applied by the
payment of Rent hereunder according to the application procedure outlined
above, be less than the Rent payable during that month by Lessee hereunder,
then Lessee shall pay such deficiency to Lessor immediately upon demand
therefor by Lessor. Such deficiency shall be calculated and paid monthly.
Lessee shall also pay to Lessor, as soon as ascertained, any costs and
expenses incurred by Lessor in such reletting or in making such alterations
and repairs not covered by the rentals received from such reletting.
14.5 NO IMPLIED TERMINATION: No re-entry or taking possession of the Premises
by Lessor pursuant to 14.3 or 14.4 of this Article 14 shall be construed as
an election to terminate this Lease unless a written notice of such intention
is given to Lessee or unless the termination thereof is decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by
Lessor because of any default by Lessee, Lessor may at any time after such
reletting elect to terminate this Lease for any such default.
15. SURRENDER OF LEASE: The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall,
at the option of Lessor, terminate all or any existing subleases or sub
tenancies, or may, at the option of Lessor, operate as an assignment to him
of any or all such subleases or sub tenancies.
16. TAXES: Lessee shall pay and discharge punctually and when the same shall
become due and payable without penalty, all real estate taxes, personal
property taxes, taxes based on vehicles utilizing parking areas in the
Premises, taxes computed or based on rental income (other than federal,
state and municipal net income taxes), environmental surcharges, privilege
taxes, excise taxes, business and occupation taxes, school fees or
surcharges, gross receipts taxes, sales and/or use taxes, employee taxes,
occupational license taxes, water and sewer taxes, assessments (including,
but not limited to, assessments for public improvements or benefit);
assessments for local improvement districts, and all other governmental
impositions and charges of every kind and nature whatsoever, regardless of
whether now customary or within the contemplation of the parties hereto and
regardless of whether resulting from increased rate and/or valuation, or
whether extraordinary or ordinary, general or special,
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unforeseen or foreseen, or similar or dissimilar to any of the foregoing (all
of the foregoing being hereinafter collectively called "Tax" or "Taxes")
which, at any time during the Lease Term, shall be applicable or against the
Premises, or shall become due and payable and a lien or charge upon the
Premises under or by virtue of any present or future laws, statutes,
ordinances, regulations, or other requirements of any governmental authority
whatsoever. The term "Environmental Surcharge" shall include any and all
expenses, taxes, charges or penalties imposed by the Federal Department of
Energy, Federal Environmental Protection Agency, the Federal Clean Air Act,
or any regulations promulgated thereunder, or any other local, state or
federal governmental agency or entity now or hereafter vested with the power
to impose taxes, assessments or other types of surcharges as a means of
controlling or abating environmental pollution or the use of energy in regard
to the use, operation or occupancy of the premises. The term "Tax" shall
include, without limitation, all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever (i) in whole or in part on the Rent payable by Lessee under
this Lease, (ii) upon or with respect to the use, possession, occupancy,
leasing, operation or management of the Premises, (iii) upon this transaction
or any document to which Lessee is a party creating or transferring an
interest or an estate in the Premises, (iv) upon Lessee's business operations
conducted at the Premises, (v) upon, measured by or reasonably attributable
to the cost or value of Lessee's equipment, furniture, fixtures and other
personal property located on the Premises or the cost or value of any
leasehold improvements made in or to the Premises by or for Lessee,
regardless of whether title to such improvements shall be in Lessor or
Lessee, or (vi) in lieu of or equivalent to any Tax set forth in this Section
16. In the event any such Taxes are payable by Lessor and it shall not be
lawful for Lessee to reimburse Lessor for such Taxes, then the Rent payable
thereunder shall be increased to net Lessor the same net rent after
imposition of any such Tax upon Lessor as would have been payable to Lessor
prior to the imposition of any such Tax. It is the intention of the parties
that Lessor shall be free from all such Taxes and all other governmental
impositions and charges of every kind and nature whatsoever. However, nothing
contained in this Section 16 shall require Lessee to pay any Federal or State
income, franchise, estate, inheritance, succession, transfer or excess
profits tax imposed upon Lessor. If any general or special assessment is
levied and assessed against the Premises, Lessor agrees to use its best
reasonable efforts to cause the assessment to become a lien on the Premises
securing repayment of a bond sold to finance the improvements to which the
assessment relates which is payable in installments of principal and interest
over the maximum term allowed by law. It is understood and agreed that
Lessee's obligation under this paragraph will be prorated to reflect the
Commencement Date and the end of the Lease Term. It is further understood
that if Taxes cover the Premises and Lessee does not occupy the entire
Premises, the Taxes will be allocated to the portion of the Premises occupied
by Lessee based on a pro-rata square footage or other equitable basis. Taxes
billed by Lessor to Lessee shall be included in the monthly CAC.
Subject to any limitations or restrictions imposed by any deeds of trust or
mortgages now or hereafter covering or affecting the Premises, Lessee shall
have the right to contest or review the amount or validity of any Tax by
appropriate legal proceedings but which is not to be deemed or construed in
any way as relieving, modifying or extending Lessee's covenant to pay such
Tax at the time and in the manner as provided in this Section 16. However,
as a condition of Lessee's right to contest, if such contested Tax is not paid
before such contest and if the legal proceedings shall not operate to prevent
or stay the collection of the Tax so contested, Lessee shall, before
instituting any such proceeding, protect the Premises and the interest of
Lessor and of the beneficiary of a deed of trust or the mortgagee of a
mortgage affecting the Premises against any lien upon the Premises by a
surety bond, issued by an insurance company acceptable to Lessor and in an
amount equal to one and one-half (1 1/2) times the amount contested or, at
Lessor's option, the amount of the contested Tax and the interest and
penalties in connection therewith. Any contest as to the validity or amount
of any Tax, whether before or after payment, shall be made by Lessee in
Lessee's own name, or if required by law, in the name of Lessor or both Lessor
and Lessee. Lessee shall defend, indemnify and hold harmless Lessor from and
against any and all costs or expenses, including attorneys' fees, in
connection with any such proceedings brought by Lessee, whether in its own
name or not Lessee shall be entitled to retain any refund of any such
contested Tax and penalties or interest thereon which have been paid by
Lessee. Nothing contained herein shall be construed as affecting or limiting
Lessor's right to contest any Tax at Lessor's expense.
17. NOTICES: Unless otherwise provided for in this Lease, any and all written
notices or other communication (the "Communication") to be given in
connection with this Lease shall be given in writing and shall be given by
personal delivery, facsimile transmission or by mailing by registered or
certified mail with postage thereon or recognized overnight courier, fully
prepaid, in a sealed envelope addressed to the intended recipient as follows:
(a) to the Lessor at: 10050 Bandley Drive
Cupertino, California 95014
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Attention: Carl E. Berg
Fax No: (408) 725-1626
(b) to the Lessee at: 1745 McCandless Drive
Milpitas, California
Attention: John Ardizzone
Fax No:
or such other addresses, facsimile number or individual as may be designated
by a Communication given by a party to the other parties as aforesaid. Any
Communication given by personal delivery shall be conclusively deemed to have
been given and received on a date it is so delivered at such address provided
that such date is a business day, otherwise on the first business day
following its receipt, and if given by registered or certified mail, on the
day on which delivery is made or refused or if given by recognized overnight
courier, on the first business day following deposit with such overnight
courier and if given by facsimile transmission, on the day on which it was
transmitted provided such day is a business day, failing which, on the next
business day thereafter.
18. ENTRY BY LESSOR: Lessee shall permit Lessor and its agents to enter into
and upon said Premises at all reasonable times using the minimum amount of
interference and inconvenience to Lessee and Lessee's business, subject to
any security regulations of Lessee, for the purpose of inspecting the same or
for the purpose of maintaining the building in which said Premises are
situated, or for the purpose of making repairs, alterations or additions to
any other portion of said building, including the erection and maintenance of
such scaffolding, canopies, fences and props as may be required, without any
rebate of Rent and without any liability to Lessee for any loss of occupation
or quiet enjoyment of the Premises; and shall permit Lessor and his agents,
at any time within ninety (90) days prior to the end of the Lease Term, to
place upon said Premises any usual or ordinary "For Sale" or "For Lease"
signs and exhibit the Premises to prospective tenants at reasonable hours.
19. DESTRUCTION OF PREMISES: In the event of a partial destruction of the
said Premises during the Lease Term from any cause which is covered by
Lessor's property insurance, Lessor shall forthwith repair the same, provided
such repairs can be made within ninety (90) days under the laws and
regulations of State, Federal, County, or Municipal authorities, but such
partial destruction shall in no way annul or void this Lease, except that
Lessee shall be entitled to a proportionate reduction of Rent while such
repairs are being made to the extent of payments received by Lessor under
Lessor's insurance coverage. With respect to any partial destruction which
Lessor is obligated to repair or may elect to repair under the terms of this
paragraph, the provision of Section 1932, Subdivision 2, and of Section 1933,
Subdivision 4, of the Civil Code of the State of California are waived by
Lessee. In the event that the building in which the subject Premises may be
situated is destroyed to an extent greater than thirty-three and one-third
(33 1/3%) of the replacement cost thereof, Lessor or lessee may, at its sole
option, elect to terminate this Lease, whether the subject Premises are
injured or not. A total destruction of the building in which the subject
Premises are situated shall terminate this Lease. Notwithstanding the above,
Lessor is only obligated to repair or rebuild to the extent of available
insurance proceeds including any deductible amount. Should Lessor determine
that insufficient or no insurance proceeds are available for repair or
reconstruction of Premises, Lessor, at its sole option, may terminate the
Lease. Lessee shall have the option of continuing this Lease by agreeing to
pay all repair costs to the subject Premises.
20. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease, or any
interest therein, and shall not sublet the said Premises or any part thereof,
or any right or privilege appurtenant thereto, or cause any other person or
entity (a bona fide subsidiary or affiliate of Lessee excepted) to occupy or
use the Premises, or any portion thereof, without the advance written consent
of Lessor. Any such assignment or subletting without such consent shall be
void, and shall, at the option of the Lessor, terminate this Lease. This Lease
shall not, or shall any interest therein, be assignable, as to the interest
of Lessee, by operation of law, without the written consent of Lessor. If
Lessee desires to assign its rights under this Lease or to sublet, all or a
portion of the subject Premises to a party other than a bona fide subsidiary
or affiliate of Lessee, Lessee shall first notify Lessor of the proposed
terms and conditions of such assignment or subletting. Lessor shall have the
right of first refusal to enter into a direct Lessor-lessee relationship with
such party under such proposed terms and conditions, in which event Lessee
shall be relieved of its obligations hereunder to the extent of the
Lessor-lessee relationship entered into between Lessor and such third party.
Notwithstanding the foregoing, Lessee may assign this Lease to a successor in
interest, whether by merger or acquisition, provided there is no substantial
reduction in the net worth of the resulting entity.
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21. CONDEMNATION: If any part of the Premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or
private purchase in lieu thereof, and a part thereof remains which is
susceptible of occupation hereunder, this Lease shall as to the part so
taken, terminate as of the date title vests in the condemnor or purchaser,
and the Rent payable hereunder shall be adjusted so that the Lessee shall be
required to pay for the remainder of the Lease Term only that portion of
Rent as the value of the part remaining. The rental adjustment resulting will
be computed at the same Rental rate for the remaining part not taken;
however, Lessor shall have the option to terminate this Lease as of the date
when title to the part so taken vests in the condemnor or purchaser. If all
of the Premises, or such part thereof be taken so that there does not remain
a portion susceptible for occupation hereunder, this Lease shall thereupon
terminate. If a part or all of the Premises be taken, all compensation awarded
upon such taking shall be payable to the Lessor.
22. EFFECTS OF CONVEYANCE: The term "Lessor" as used in this Lease, means
only the owner for the time being of the land and building constituting the
Premises, so that, in the event of any sale of said land or building, or in
the event of a Lease of said building, Lessor shall be and hereby is entirely
freed and relieved of all covenants and obligations of Lessor hereunder, and
it shall be deemed and construed, without further agreement between the
parties and the purchaser of any such sale, or the Lessor of the building,
that the purchaser or Lessee of the building has assumed and agreed to carry
out any and all covenants and obligations of the Lessor hereunder. If any
security is given by Lessee to secure the faithful performance of all or any
of the covenants of this Lease on the part of Lessee, Lessor may transfer and
deliver the security, as such, to the purchaser at any such sale of the
building, and thereupon the Lessor shall be discharged from any further
liability.
23. SUBORDINATION: This Lease, in the event Lessor notifies Lessee in
writing, shall be subordinate to any ground lease, deed of trust, or other
hypothecation for security now or hereafter placed upon the real property at
which the Premises are a part and to any and all advances made on the
security thereof and to renewals, modifications, replacements and extensions
thereof. Lessee agrees to promptly execute any documents which may be
required to effectuate such subordination.
24. WAIVER: The waiver by Lessor of any breach of any term, covenant or
condition, herein contained shall not be construed to be a waiver of such
term, covenant or condition or any subsequent breach of the same or any other
term, covenant or condition therein contained. The subsequent acceptance of
Rent hereunder by Lessor shall not be deemed to be a waiver of Lessee's
breach of any term, covenant, or condition of the Lease.
25. HOLDING OVER: Any holding over after the end of the Lease Term shall be
construed to be a hold over tenancy from month to month. In addition to the
liabilities and obligations provided for herein, including but not limited to
in Section 2.1, Lessee shall pay to Lessor monthly base rent equal to one and
one-half (1.5) times the monthly base rent installment due in the last month
of the Lease Term and all other additional rent and all other terms and
conditions of the Lease shall apply, so far as applicable. No holding over
shall be deemed or construed to exercise any option to extend or renew this
Lease in lieu of full and timely exercise of any such option as required
hereunder.
26. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained
shall, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of all of the
parties hereto, and all of the parties hereto shall be jointly and severally
liable hereunder.
27. ESTOPPEL CERTIFICATES: Lessee shall at any time during the Lease Term,
upon not less than ten (10) days prior written notice from Lessor, execute
and deliver to Lessor a statement in writing certifying that, this Lease is
unmodified and in full force and effect (or, if modified, stating the nature
of such modification) and the dates to which the Rent and other charges have
been paid in advance, if any, and acknowledging that there are not, to
Lessee's knowledge, any uncured defaults on the part of Lessor hereunder or
specifying such defaults if they are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Lessee's failure to deliver such a statement within such time shall
be conclusive upon the Lessee that (a) this Lease is in full force and
effect, without modification except as may be represented by Lessor, (b)
there are no uncured defaults in Lessor's performance.
28. TIME: Time is of the essence of the Lease.
29. CAPTIONS: The headings on titles to the paragraphs of this Lease are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof. This instrument contains all of the
agreements and conditions made
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between the parties hereto and may not be modified orally or in any other
manner than by an agreement in writing signed by all of the parties hereto or
their respective successors in interest.
30. PARTY NAMES: Landlord and Tenant may be used in various places in this
Lease as a substitute for Lessor and Lessee respectively.
31. EARTHQUAKE INSURANCE: As a condition of Lessor agreeing to waive the
requirement for earthquake insurance, Lessee agrees that it will pay, as
additional Rent, which shall be included in the monthly CAC, an amount not to
exceed seven thousand five hundred dollars ($7,500) per year for earthquake
insurance if Lessor desires to obtain some form of earthquake insurance in
the future, if and when available, on terms acceptable to Lessor.
32. HABITUAL DEFAULT: Notwithstanding anything to the contrary contained in
Section 14 herein, Lessor and Lessee agree that if Lessee shall have
defaulted in the payment of Rent for three or more times during any twelve
month period during the Lease Term, then such conduct shall, at the option of
the Lessor, represent a separate event of default which cannot be cured by
Lessee. Lessee acknowledges that the purpose of this provision is to prevent
repetitive defaults by the Lessee under the Lease, which constitute a
hardship to the Lessor and deprive the Lessor of the timely performance by
the Lessee hereunder.
33. HAZARDOUS MATERIALS
33.1 DEFINITIONS: As used herein, the following terms shall have the
following meaning:
a. The term "Hazardous Materials" shall mean (i) polychlorinated
biphenyls; (ii) radioactive materials and (iii) any chemical, material
or substance now or hereafter defined as or included in the definitions
of "hazardous substance" "hazardous water", "hazardous material",
"extremely hazardous waste", "restricted hazardous waste" under Section
25115, 25117 or 15122.7, or listed pursuant to Section 25140 of the
California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous
Waste Control Law), (ii) defined as "hazardous substance" under Section
25316 of the California Health and Safety Code, Division 20, Chapter 6.8
(Carpenter-Presley-Tanner Hazardous Substances Account Act), (iii)
defined as "hazardous material", "hazardous substance", or "hazardous
waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Materials Release, Response, Plans
and Inventory), (iv) defined as a "hazardous substance" under Section
25181 of the California Health and Safety Code, Division 201, Chapter
6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi)
asbestos, (vii) listed under Article 9 or defined as "hazardous" or
"extremely hazardous" pursuant to Article II of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (viii) designed
as "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act, 33 U.S.C 1251 et seq. or listed pursuant to
Section 1004 of the Federal Water Pollution Control Act (33 U.S.C 1317),
(ix) defined as a "hazardous waste", pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.,
(x) defined as "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Responsibility Compensations, and Liability
Act, 42 U.S.C. 9601 et seq., or (xi) regulated under the Toxic Substances
Control Act, 156 U.S.C. 2601 et seq.
b. The term "Hazardous Materials Laws" shall mean any local, state
and federal laws, rules, regulations, or ordinances relating to the use,
generation, transportation, analysis, manufacture, installation,
release, discharge, storage or disposal of Hazardous Material.
c. The term "Lessor's Agents" as used herein shall mean Lessor's
agents, representatives, employees, contractors, subcontractors,
directors, officers and partners.
d. The term "Lessee's Agents" as used herein shall mean Lessee's
agents, representatives, employees, contractors, subcontractors,
directors, officers, partners, invitees or any other person in or about
the Premises.
33.2 LESSEE'S RIGHT TO INVESTIGATE: Lessee shall be entitled to cause such
inspection, soils and ground water tests, and other evaluations to be made of
the Premises as Lessee deems necessary regarding (i) the presence and use
of Hazardous Materials in or about the Premises, and (ii) the potential for
exposure to Lessee's employees and other persons to any Hazardous Materials
used and stored by previous occupants in or about the Premises. Lessee shall
provide Lessor with copies of all inspections, tests and evaluations. Lessee
shall indemnify, defend and hold Lessor harmless from any cost, claim or
expense arising from such entry by Lessee or from the performance of any such
investigation by such Lessee.
33.3 LESSOR'S REPRESENTATIONS: Lessor hereby represents and warrants to the
best of Lessor's knowledge that the Premises
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are, as of the date of this Lease, and have been at all times in the past, in
compliance with all Hazardous Material Laws.
33.4 LESSEE'S OBLIGATION TO INDEMNIFY: Lessee, at its sole cost and expense,
shall idemnify, defend, protect and hold Lessor and Lessor's Agents
harmless from and against any and all cost or expenses, including those
described under subparagraphs i, ii and iii herein below set forth, arising
from or caused in whole or in part, directly or indirectly by:
a. Lessee's or Lessee's Agents' use, analysis, storage,
transportation, disposal, release, threatened release, discharge or
generation of Hazardous Material to, in, on, under, about or from the
Premises; or
b. Lessee's or Lessee's Agents failure to comply with Hazardous Material
laws, or
c. Any release of Hazardous Material to, in, on, under, about,
from or onto the Premises caused by Lessee or Lessee's Agents, except
ground water contamination from other parcels where the source is from
off the Premises not arising from or caused by Lessee or Lessee's Agents.
The cost and expenses indemnified against include, but are not limited to the
following:
i. Any and all claims, actions, suits, proceedings, losses, damages,
liabilities, deficiencies, forfeitures, penalties, fines, punitive
damages, cost or expenses;
ii. Any claim, action, suit or proceeding for personal injury (including
sickness, disease, or death), tangible or intangible property damage,
compensation for lost wages, business income, profits or other economic
loss, damage to the natural resources of the environment, nuisance,
pollution, contamination, leaks, spills, release or other adverse
effects on the environment;
iii. The cost of any repair, clean-up, treatment or detoxification of the
Premises necessary to bring the Premises into compliance with all
Hazardous Material Laws, including the preparation and implementation of
any closure, disposal, remedial action, or other actions with regard to
the Premises, and expenses (including, without limitation, reasonable
attorney's fees and consultants fees, investigation and laboratory fees,
court cost and litigation expenses).
33.5 LESSEE'S OBLIGATION TO REMEDIATE CONTAMINATION: Lessee shall, at its sole
cost and expense, promptly take any and all action necessary to remediate
contamination of the Premises by Hazardous Materials as herein defined to the
extent caused by the acts or omissions specifically referred to in clauses
(a) through (c) of Paragraph 33.4.
33.6 OBLIGATION TO NOTIFY: Lessor and Lessee shall each give written notice
to the other as soon as reasonably practical of (i) any communication
received from any governmental authority concerning Hazardous Material
which related to the Premises and (ii) any contamination of the Premises by
Hazardous Materials which constitutes a violation of any Hazardous Material
Laws.
33.7 SURVIVAL: The obligations of Lessee under this Section 33 shall survive
the Lease Term or earlier termination of this Lease.
33.8 CERTIFICATION AND CLOSURE: On or before the end of the Lease Term or
earlier termination of this Lease, Lessee shall deliver to Lessor a
certification executed by Lessee stating that, to the best of Lessee's
knowledge, there exists no violation of Hazardous Material Laws resulting
from Lessee's obligation in Paragraph 33. If pursuant to local ordinance, state
or federal law, Lessee is required, at the expiration of the Lease Term, to
submit a closure plan for the Premises to a local, state or federal agency,
then Lessee shall furnish to Lessor a copy of such plan.
33.9 PRIOR HAZARDOUS MATERIALS: Lessee shall have no obligation to clean up
or to hold Lessor or Lessor's Agents harmless with respect to, any Hazardous
Material or wastes discovered on the Premises which were not introduced
into, in, on, about, from or under the Premises during the Lease Term or
ground water contamination from other parcels where the source is from off
the Premises not arising from or caused by Lessee or Lessee's Agents.
34. BROKERS: Lessor and Lessee represent that they have not utilized or
contacted a real estate broker or finder with respect to this Lease other
than Wayne Mascia Associates ("WM") and Lessee agrees to indemnify and hold
Lessor harmless against any claim, cost, liability or cause of action
asserted by any broker or finder claiming through Lessee other than WM.
Lessor shall at its sole cost and expense pay the brokerage commission per
Lessor's standard commission schedule to WM in connection with this
transaction. Lessor represents and warrants that it has not utilized or
contacted a real estate broker or finder with respect to this Lease other
than WM and Lessor agrees to indemnity and hold Lessee harmless against any
claim, cost, liability or cause of action asserted by any broker or finder
claiming through Lessor.
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35. OPTION TO EXTEND
A OPTION: Lessor hereby grants to Lessee one (1) option to extend the Lease
Term, with the extended term to be for a period of three (3) years, on the
following terms and conditions, which shall apply separately to each option
to extend:
(i) Lessee shall give Lessor written notice of its exercise of its
options to extend no earlier than twenty-four (24) calendar months, nor
later than six (6) calendar months before the Lease Term would end but
for said exercise. Time is of the essence.
(ii) Lessee may not extend the Lease Term pursuant to any option
granted by this section 35 if Lessee is in default as of the date of the
exercise of one of its options. If Lessee has committed a default by
Lessee as defined in Section 14 or 32 that has not been cured or waived
by Lessor in writing by the date that any extended term is to commence,
then Lessor may elect not to allow the Lease Term to be extended,
notwithstanding any notice given by Lessee of an exercise of this option
to extend.
(iii) All terms and conditions of this Lease shall apply during the
extended term, except that the Rent and rental increases for each
extended term shall be determined as provided in Section 35 (B) below.
(iv) Once Lessee delivers a notice of exercise of one of its options to
extend the Lease Term, Lessee may not withdraw such exercise and
Subject to the provisions of this Section 35, such notice shall operate
to extend the Lease Term. Upon any extension of the Lease Term pursuant
to this Section 35, the term "Lease Term" as used in this Lease shall
thereafter include the then extended term.
(v) The option rights of EIP Microwave, Inc. granted under this Section
35 are granted for EIP Microwave, Inc.'s personal benefit and may not be
assigned or transferred by EIP Microwave, Inc. or exercised if EIP
Microwave, Inc. is not occupying the Premises at the time of exercise.
B. EXTENDED TERM RENT -- OPTION PERIOD: The monthly Rent for the Premises
during the extended term shall equal ninety-five percent (95%) of the fair
market monthly Rent for the Premises as of the commencement date of the
extended term, but in no case, less than the Rent during the last month of
the prior Lease term. Promptly upon Lessee's exercise of the option to
extend, Lessee and Lessor shall meet and attempt to agree on the fair market
monthly Rent for the Premises as of the commencement date of the extended
term. In the event the parties fail to agree upon the amount of the monthly
Rent for the extended term prior to commencement thereof, the monthly Rent
for the extended term shall be determined by appraisal in the manner
hereafter set forth, provided, however, that in no event shall the monthly
Rent for the extended term be less than in the immediate preceding period.
Annual base rent increases during the extended term shall be a minimum of
three percent (3%) per year. In the event it becomes necessary under this
paragraph to determine the fair market monthly Rent of the Premises by
appraisal, Lessor and Lessee each shall appoint a real estate appraiser who
shall be a member of the American Institute of Real Estate Appraiser
("AIREA") and such appraisers shall each determine the fair market monthly
Rent for the Premises taking into account the value of the Premises and the
amenities provided by the Outside Areas, the Common Areas, and the Building,
and prevailing comparable Rentals in the area. Such appraisers shall, within
twenty (20) business days after their appointment, complete their appraisals
and submit their appraisal reports to Lessor and Lessee. If the fair market
monthly Rent of the Premises established in the two (2) appraisals varies by
five percent (5%) or less of the higher Rent, the average of the two shall be
controlling. If said fair market monthly Rent varies by more than five
percent (5%) of the higher Rental, said appraisers, within ten (10) days
after submission of the last appraisal, shall appoint a third appraiser who
shall be a member of the AIREA and who shall also be experienced in the
appraisal of Rent values and adjustment practices for commercial properties
in the vicinity of the Premises. Such third appraiser shall, within twenty
(20) business days after his appointment, determine by appraisal the fair
market monthly Rent of the Premises taking into account the same factors
referred to above, and submit his appraisal report to Lessor and Lessee. The
fair market monthly Rent determined by the third appraiser for the Premises
shall be controlling, unless it is less than that set forth in the lower
appraisal previously obtained, in which case the value set forth in said
lower appraisal shall be controlling, or unless it is greater than that set
forth in the higher appraisal previously obtained in which case the Rent set
for in said higher appraisal shall be controlling. If either Lessor or Lessee
fails to appoint an appraiser, or if an appraiser appointed by either of them
fails, after his appointment to submit his appraisal within the required
period in accordance with the foregoing, the appraisal submitted by the
appraiser properly appointed and
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timely submitting his appraisal shall be controlling. If the two appraisers
appointed by Lessor and Lessee are unable to agree upon a third appraiser
within the required period in accordance with the foregoing, application
shall be made within twenty (20) days thereafter by either Lessor or Lessee
to AIREA, which shall appoint a member of said institute willing to serve as
appraiser. The cost of all appraisals under this subparagraph shall be borne
equally be Lessor and Lessee.
36. APPROVALS: Whenever in this Lease the Lessor's or Lessee's consent is
required, such consent shall not be unreasonably or arbitrarily withheld or
delayed. In the event that the Lessor or Lessee does not respond to a request
for any consents which may be required of it in this Lease within ten
business days of the request of such consent in writing by the Lessee or
Lessor, such consent shall be deemed to have been given by the Lessor or
Lessee.
37. AUTHORITY: Each party executing this Lease represents and warrants that
he or she is duly authorized to execute and deliver the Lease. If executed on
behalf of a corporation, that the Lease is executed in accordance with the
by-laws of said corporation (or a partnership that the Lease is executed in
accordance with the partnership agreement of such partnership), that no other
party's approval or consent to such execution and delivery is required, and
that the Lease is binding upon said individual, corporation (or partnership)
as the case may be in accordance with its terms.
38. INDEMNIFICATION OF LESSOR: Except to the extent caused by the sole
negligence or willful misconduct of Lessor or Lessor's Agents, Lessee shall
defend, indemnify and hold Lessor harmless from and against any and all
obligations, losses, costs, expenses, claims, demands, attorney's fees,
investigation costs or liabilities on account of, or arising out of the use,
condition or occupancy of the Premises or any act or omission to act of
Lessee or Lessee's Agents or any occurrence in, upon, about or at the
Premises, including, without limitation, any of the foregoing provisions
arising out of the use, generation, manufacture, installation, release,
discharge, storage, or disposal of Hazardous Materials by Lessee or Lessee's
Agents subject to the limitations of Paragraph 33. It is understood that
Lessee is and shall be in control and possession of the Premises and that
Lessor shall in no event be responsible or liable for any injury or damage or
injury to any person whatsoever, happening on, in, about, or in connection
with the Premises, or for any injury or damage to the Premises or any part
thereof. This Lease is entered into on the express condition that Lessor
shall not be liable for, or suffer loss by reason of injury to person or
property, from whatever cause, which in any way may be connected with the
use, condition or occupancy of the Premises or personal property located
herein. The provisions of this Lease permitting Lessor to enter and inspect
the Premises are for the purpose of enabling Lessor to become informed as the
whether Lessee is complying with the terms of this Lease and Lessor shall be
under no duty to enter, inspect or to perform any of Lessee's covenants set
forth in this Lease. Lessee shall further indemnify, defend and hold harmless
Lessor from and against any and all claims arising from any breach or default
in the performance of any obligation to Lessee's part to be performed under
the terms of this Lease. The provisions of Section 38 shall survive the Lease
Term or earlier termination of this Lease with respect to any damage, injury
or death occurring during the Lease Term.
39. LESSOR'S LIABILITY: If Lessee should recover a money judgment against
Lessor arising, in connection with this Lease, the judgment shall be satisfied
only out of the Lessor's interest in the Premises and neither Lessor or any
of its partners shall be liable personally for any deficiency.
40. MISCELLANEOUS PROVISIONS: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law and are in
addition to all other rights or remedies in law and in equity.
41. CHOICE OF LAW: This Lease shall be construed and enforced in accordance
with the substantive laws of the State of California. The language of all
parts of this lease shall in all cases be construed as a whole according to
its fair meaning and not strictly for or against either Lessor or Lessee.
42. ENTIRE AGREEMENT: This Lease is the entire agreement between the parties,
and there are no agreements or representations between the parties except as
expressed herein. Except as otherwise provided for herein, no subsequent
change or addition to this Lease shall be binding unless in writing and
signed by the parties hereto.
PAGE 13
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee leave executed these presents, the day
and year first above written.
LESSOR LESSEE
BERG & BERG DEVELOPERS EIP MICROWAVE, INC.
By: /s/ CARL E. BERG By: /s/ JOHN ARDIZZONE
----------------------------------- -----------------------------------
signature of authorized representative signature of authorized representative
Carl E. Berg John Ardizzone
----------------------------------- -----------------------------------
printed name printed name
G.P. CFO
----------------------------------- -----------------------------------
title title
August 18, 1995 August 18, 1995
----------------------------------- -----------------------------------
date date
PAGE 14
<PAGE>
[SITE PLAN]
EXHIBIT A.1
<PAGE>
[SITE PLAN]
EXHIBIT A.2
<PAGE>
[SITE PLAN]
EXHIBIT A.3
<PAGE>
August 15, 1995
Mr. John Ardizzone
EIP Microwave, Inc.
1745 McCandless Drive
Milpitas, California
re: Agreement for Early Occupancy
Dear Mr Ardizzone:
The purpose of this letter is to advise you that upon execution of the
attached lease and the deposit of the sum of $33,679 with Berg & Berg
Developers, consisting of the first month's rent, the first month's estimated
CAC charge, and the security deposit per the referenced lease, EIP Microwave,
Inc. may move into 1745 McCandless Drive, Milpitas on October 15, 1995.
EIP Microwave, Inc. shall not be responsible for base rent or pro-rata
maintenance costs incurred until November 1, 1995 as provided for in the
lease, but EIP Microwave, Inc. shall be responsible effective on the earlier
of occupancy or October 15, 1995 for all utility charges. EIP Microwave,
Inc. shall be responsible for all other terms and conditions contained in the
referenced lease except for the items specified in this paragraph effective
on the earlier of occupancy or October 15, 1995.
Sincerely,
/s/ Carl E. Berg
Carl E. Berg
for Berg & Berg Developers
Accepted and Agreed
/s/ John Ardizzone
---------------------------------
John Ardizzone
EIP Microwave, Inc.
<PAGE>
8/17/95 Lease Attachment __________
NEW EIP FACILITY
1745 McCANDLESS DRIVE
Summary Of EIP-Provided Tenant Improvement Cost For 1745 McCandless Drive:
DESCRIPTION ESTIMATED COST
- -------------------------------------------------------------------------------
Electrical 23,000.
- -------------------------------------------------------------------------------
HVAC -0-
- -------------------------------------------------------------------------------
Hazardous Waste Pad (12' x 12') concrete 9,291.
- -------------------------------------------------------------------------------
One Drain 3,600.
- -------------------------------------------------------------------------------
Pad for Compressor See Haz. Waste Pad Above
- -------------------------------------------------------------------------------
Compressed Air Lines 15,600.
- -------------------------------------------------------------------------------
Ducting (for wire solder, surface mount machine,
ovens, flammable storage, CNC machine.) 5,000.
- -------------------------------------------------------------------------------
Computer Wiring and Installation -
(VAX and Ethernet) 20,000.
- -------------------------------------------------------------------------------
Telephone Wiring and Installation See computer wiring above
- -------------------------------------------------------------------------------
Door for CNC 1,000.
- -------------------------------------------------------------------------------
Security 4,000.
- -------------------------------------------------------------------------------
Other
- -------------------------------------------------------------------------------
TOTAL ESTIMATED COST: 81,491.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO] EIP MICROWAVE, INC. 1589 CENTRE POINTE DRIVE, MILPITAS, CA 95035
August 18, 1995
Mr. Carl E. Jones
Berg & Berg Enterprises
10050 Bandley Drive
Cupertino, CA 95014
Re: 1745 McCandless Drive Lease
---------------------------
Dear Carl:
Attached are two execution copies of the Lease, as signed and initialed by
EIP Microwave, Inc. We have made one change to the Lease which Mark Kousnetz
may have mentioned to you. Paragraph 19 has been modified, and initialed, to
permit either the lessor or the lessee to terminate the Lease if a partial
destruction (greater than one-third of replacement cost) occurs.
We also note that several points we discussed and which were agreed by you
are not reflected in the Lease. This letter will also confirm our mutual
agreement on the following points:
1. Although we are leasing a portion of the premises in an "AS IS"
physical condition and state of repair, we are doing so in reliance on your
representation that the premises, including the HVAC, electrical, plumbing,
roof, etc., will be in good order and repair on the commencement date.
2. As discussed, we use certain hazardous materials in the ordinary
course of our business. So long as our use is in accordance with law, this
will not be a violation of the Lease.
3. The proposed alterations which we plan to make at our cost (a list
of the material alterations is attached) are approved by you. You will
provide us a completely demised space (which includes secure separation
between our portion of the building and the remainder) before the
commencement date at your cost.
4. Taxes for which we are responsible do not include taxes unrelated
to the building (e.g., a lien on the building relating to unpaid property
taxes on other buildings).
Finally, as Mike Johnson discussed with you, the word "Premises" is defined
as the entire building even though we are only leasing a portion of it. This
term is used in some places when the correct reference should be to that
portion of the Premises which we are leasing. Rather than making changes
throughout the document to reflect this, the Lease will be interpreted in a
common sense fashion so that "Premises" refers to the entire building or to
our portion of the building, as appropriate.
We would appreciate your verbal acceptance of the Lease by end of business
day today, and a fully executed document returned to us by Monday, August 21,
1995.
Very truly yours,
EIP MICROWAVE, INC.
/s/ John Ardizzone
John Ardizzone
Vice President-Finance & CFO
TELEPHONE: (408) 945-1477 TOLL FREE: (800) 232-3471 FAX: (408) 945-0977
<PAGE>
Exhibit 10(i)
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of November 27, 1995,
by and between EIP Microwave, Inc. ("Borrower") whose address is 1589 Centre
Point Drive, Milpitas, CA 95035, and Silicon Valley Bank ("Silicon") whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to,
among other documents, a Loan and Security Agreement, dated March 10, 1992
(including the Schedule thereto), as such agreement may be amended from time to
time (the "Loan Agreement"). The Loan Agreement provides for, among other
things, a Credit Limit in the original principal amount of Five Hundred Thousand
and 00/100 Dollars ($500,000.00) (the "A/R Facility"). The Loan Agreement has
been amended pursuant to Amendments to Loan Agreement dated August 9, 1993,
November 30, 1993, May 13, 1994 and December 20, 1994. Defined terms used but
not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the indebtedness is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the indebtedness is guaranteed by EIP International, Inc. (the
"Guarantor"), pursuant to a Continuing Guaranty (the "Guaranty"). The Guaranty
is secured by the Collateral as described in the Security Agreement (the
"Security Agreement"), executed by Guarantor. The Security Agreement and the
Guaranty shall be released herein.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security Documents,
together with all other documents evidencing or securing the indebtedness shall
be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to the Schedule to Loan Agreement.
1. The first paragraph of Section 1.1 entitled "Credit
Limit" is hereby amended to read, in its entirety:
An amount not to exceed the lesser of: (i) $500,000.00
at any one time outstanding; or (ii) 70% of the Net
Amount of Borrower's accounts, which Silicon in its
discretion deems eligible for borrowing.
2. Notwithstanding anything to the contrary provided in
the third paragraph of Section 1.1 entitled "Credit
Limit," accounts receivable with respect to which the
account debtor is a federal, state, or local
governmental entity or any department, agency, or
instrumentality thereof shall be deemed eligible for
borrowing; provided, however, any such account which
exceeds $150,000.00 shall be formally assigned to
Silicon pursuant to the Assignment of Claims Act of
1933, as amended, prior to being deemed eligible.
3. Section 5.1 entitled "Maturity Date" is hereby amended
to mean November 15, 1996.
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4. Section 1.2 entitled "Interest Rate" is hereby amended
in part to provide that the interest rate shall be
decreased, effective as of the date hereof, to two
(2.000) percentage points over the Prime Rate (as
provided therein).
5. The covenants as provided in Section 4.1 entitled
"Financial Covenants" are hereby amended to read, in
their entirety:
Borrower shall comply with all the following covenants.
Compliance shall be determined at the end of each
month, beginning with the month ended September 30,
1995, except as specifically provided below.
QUICK ASSET RATIO. Borrower shall maintain a ratio of
"Quick Assets" to current liabilities of not less than
.90 to 1.00.
TANGIBLE NET WORTH. Borrower shall maintain a tangible
net worth of not less than $1,375,000.00.
DEBT TO TANGIBLE
NET WORTH RATIO. Borrower shall maintain a ratio of
total liabilities to tangible net worth of not more
than 1.00 to 1.00.
PROFITABILITY. Borrower shall achieve profitability on
a quarterly basis; with allowance for losses for the
quarters ending December 31, 1995 and March 31, 1996,
not to exceed $155,000.00 and $140,000.00,
respectively; provided Borrower achieves profitability
for the fiscal year end.
B. RELEASE OF GUARANTY AND SECURITY AGREEMENT.
1. Silicon, by its acceptance hereof, agrees to
release the Guaranty and the Security Agreement of
EIP International, Inc., provided no Event of
Default has occurred under the Existing Loan
Documents and is continuing.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay Silicon a fee in the amount
of Four Thousand Two Hundred Seventy Seven and 00/100 Dollars ($4,277.00) (the
"Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that it has no defenses against the obligations to pay any
amounts under the indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing indebtedness,
Silicon is relying upon Borrower's representations, warranties, and agreements,
as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Silicon's agreement to
modifications to the existing indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Silicon to make any fur modifications to the
indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the indebtedness. It is the intention of Silicon and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this
2
<PAGE>
Paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: SILICON:
EIP Microwave, Inc. SILICON VALLEY BANK
By: /s/ John Ardizzone By: /s/ Christine L. Caywood
---------------------------- ------------------------------
Name: John Ardizzone Name: Christine L. Caywood
-------------------------- ----------------------------
Title: CFO, V.P. of Operations Title: Asst. Vice President
-------------------------- -----------------------------
3
<PAGE>
EXHIBIT 10(K)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made as of October 1, 1995
by and between EIP Microwave, Inc., a Delaware corporation ("COMPANY"), and John
F. Bishop ("Employee").
AGREEMENT
In consideration of the provisions hereinafter set forth, the parties agree
as follows:
1. TERM. Company hereby employs Employee for a term (the "TERM")
commencing on the date of this Agreement and continuing for an initial period of
two years from the date hereof; provided that (unless either party notifies the
other in writing of his or its desire not to extend the Term) on the first day
of each month after the date of this Agreement, the Term shall be automatically
extended for an additional month so that following each such extension the
remaining Term shall be two years. Employee hereby accepts such employment for
the Term.
2. DUTIES. Employee shall be and remain employed as Vice Chairman,
Secretary and Treasurer of Company. Employee shall, subject always to
applicable law and to the policies of the Board of Directors, use his best
efforts to take such actions and do all things as he, in his discretion deems
necessary and advisable to perform the duties required of the Vice Chairman,
Secretary and Treasurer as specifically set forth in Company's Bylaws, and to
perform such other duties as the Board of Directors may from time to time
direct.
3. PERFORMANCE. Notwithstanding anything in this Agreement to the
contrary:
(a) Employee agrees to devote so much of his time to the duties
described in Paragraph 2 above as is reasonably appropriate and necessary
to discharge the duties and responsibilities of his offices.
(b) Employee may, directly or indirectly, as an employee, employer,
agent, consultant, partner, shareholder, officer, director, or in any other
individual or representative capacity, organize and participate in any
other business or personal undertaking during the Term; PROVIDED, HOWEVER,
that no such business or undertaking shall be competitive with the business
conducted by Company.
4. COMPENSATION.
(a) SALARY. Company shall pay Employee a salary of Six Thousand Five
Hundred Dollars ($6,500) per month, which salary shall be payable in advance on
the first day of each calendar month during the Term.
(b) AUTOMOBILE.
(i) USE OF AUTOMOBILE. Employee shall be entitled to the full
and unrestricted use of the 1989 Mercedes Benz Model 560 automobile,
VIN WDBCA9E6LA534854 owned by Company and currently provided to
Employee
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<PAGE>
for his business and personal use, or any successor replacement
automobile mutually agreed by Company and Employee (the "AUTOMOBILE").
(ii) RIGHT TO PURCHASE AUTOMOBILE. In consideration of
Employee's prior agreement to reduce his monthly base salary to $1.00
a month for the period February 1992 through July 1992, and the
deduction of $217 per month from his monthly salary for the period
from August 1992 through October 1995, Company has irrevocably granted
Employee, and does hereby confirm such grant of, the right to purchase
the Automobile with the foregone salary of $56,846 (6 months x $8,100
per month plus 38 months x $217 per month) being credited toward
payment for the purchase price of the Automobile. The difference in
the Automobile's Kelly Blue Book value and $56,846 (if any) is to be
paid as follows: If the Automobile's Kelly Blue Book value is more
than $56,846 at time of transfer, the difference is to be paid by
Employee to Company at the time title is transferred to him, or if the
Automobile's Kelly Blue Book value is less than $56,846 at time of
transfer, the difference is to be paid by Company to Employee at the
time title is transferred to him. Employee shall be entitled to
exercise his right to purchase the Automobile at any time commencing
two months prior to the last day of the Term and terminating on the
last day of the Term (the "EXERCISE PERIOD"); PROVIDED, HOWEVER, that
Employee or his estate may exercise the right to purchase the
Automobile without regard to the Exercise Period in the event the
provisions of subparagraph 4(b)(iv) are applicable. Company shall
deliver title to the Automobile to Employee free and clear of any
liens, security interests or encumbrances within five (5) business
days after Company's receipt of Employee's written exercise of his
option to purchase the Automobile. The Automobile will be valued as
of the first day of the month in which title is to be transferred from
Company to Employee using the most current Kelly Blue Book quotation
for a vehicle substantially similar to the Automobile, taking model
year, model number, accessories and mileage into consideration, and
Company shall be responsible for the payment of the sales tax and any
fees charged by the Department of Motor Vehicles to process the
transfer.
(iii) AUTOMOBILE EXPENSE. During the Term (whether Company
continues to own the Automobile or whether Employee exercises his
option to purchase the Automobile), Company shall pay (or reimburse
Employee) the costs for all gasoline, maintenance, and repair for the
Automobile, shall maintain insurance coverages on the Automobile
substantially similar to the coverages currently in effect and shall
make an Automobile expense deduction of $217 per month from Employee's
salary.
(iv) ELECTION TO PURCHASE AUTOMOBILE OR RECEIVE CASH FOLLOWING
TERMINATION. If Employee's employment with Company is terminated at
any time pursuant to Paragraph 6, then notwithstanding the reason for
or manner of such termination, Employee or his estate shall be
entitled to elect either (1) to exercise his option to purchase the
Automobile in accordance with the provisions of subparagraph 4(b)(ii),
or (2) to receive the previously foregone salary of $56,846 in cash.
Employee shall make such election by delivering a written notice of
election to Company within ninety (90) days after any termination due
to the death of
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Employee or within ten (10) days after termination for any reason
other than death; provided, however, that if Employee or his estate
fails to deliver a written election notice to Company within the
applicable period, then Employee or his estate shall conclusively be
deemed to have elected to receive payment of the previously foregone
salary of $56,846 in cash. If Employee or his estate elects (or is
deemed to have elected) to receive cash rather than the Automobile,
then such cash payment shall be made by Company within thirty (30)
days of such election (or deemed election), and simultaneously with
receipt of such payment by Company, Employee or his estate shall
deliver physical possession of the Automobile to Company.
(c) DISABILITY. Notwithstanding anything in Paragraph 4 to the
contrary, if Employee becomes Permanently Disabled (as hereinafter defined in
this subparagraph 4(c)), the monthly salary payable to Employee pursuant to
subparagraph 4(a) shall be reduced by 50% for the remainder of the Term and the
obligations of the Company under subparagraphs 4(d) and 4(g) shall be
terminated. Employee's monthly salary and other benefits under this Paragraph 4
shall continue to be paid and provided to Employee during all periods in which
he is Temporarily Disabled (as hereinafter defined in this subparagraph 4(c)).
All salary and other benefits payable or to be provided to Employee while he is
Permanently Disabled or Temporarily Disabled shall be paid or provided as and
when such salary or benefits would otherwise have been paid or provided to
Employee had Employee not become disabled.
For purposes of this Agreement, Employee (i) shall be considered
to be "TEMPORARILY DISABLED" if Employee is unable to discharge substantially
all of his obligations hereunder due to any mental or physical impairment and
(ii) shall be considered to be "PERMANENTLY DISABLED" if Employee has been
substantially absent from work for a period of 180 consecutive days and is
unable to discharge substantially all of his obligations hereunder due to any
mental or physical impairment.
(d) OFFICE FACILITIES AND LOCATION. Company shall provide Employee
with a private office, secretarial and administrative assistance, office
equipment, supplies and other facilities and services suitable to Employee's
position and located at 3 Civic Plaza, Suite 265, Newport Beach, California
92660 (or a comparable location in the City of Newport Beach). In no event
shall the quality or quantity of any of the foregoing be less than that provided
or available to any other employee, agent, consultant or officer of Company, or
less than that currently provided to Employee. Employee shall not be required
to travel and shall render his services to Company in Orange County, California.
(e) EMPLOYEE BENEFITS. Employee shall be entitled to receive all
employee benefits provided to Company's senior management personnel to the
fullest extent provided to any other employee of Company, including, without
limitation, vacation, sick leave and medical, dental and health insurance
benefits.
(f) EXECUTIVE BENEFIT PLANS. Employee shall be entitled to
participate in Company's Medical Reimbursement Plan which is supplemental to the
group medical plan covering all employees (EIP Microwave Policy No. 9008.2), the
tax and financial counseling reimbursement plan (EIP Microwave Policy No.
9010.1), and the legal
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<PAGE>
reimbursement plan (EIP Microwave Policy No. 9012). Employee also shall be
entitled to have premiums for the following term life insurance policy paid by
Company: Policy No. 0360792 issued by UNUM.
(g) BUSINESS EXPENSES. Company shall promptly pay or reimburse
Employee for all expenses incurred by Employee in relation to Company's
business, including, without limitation, expenses pertaining to the use and
maintenance of the Automobile described in subparagraph 4(b) above, travel,
lodging, meals, entertainment, seminars, periodicals and professional
credentials, memberships and societies ("Business Expenses"). Employee shall
provide Company with reasonable documentation substantiating each item of all
Business Expenses.
(h) TAX WITHHOLDING. Company shall have the right to deduct and
withhold from the compensation payable to Employee hereunder such amounts as may
be necessary to satisfy Company's obligations to federal, state and local
authorities to withhold taxes from compensation otherwise payable to Employee.
5. CONFIDENTIALITY AND NON-COMPETITION.
(a) NON-DISCLOSURE. Employee shall not, during the Term or at any time
thereafter, use or disclose, or cause to be disclosed, to any person, firm or
corporation (other than in the performance of his duties to Company) any
information concerning Company's business, inventions, discoveries, suppliers,
customers, prices, marketing strategies or technology which constitutes trade
secrets of Company, which he acquired in the course of, of incident to, his
employment by Company.
(b) EXCEPTIONS. The obligations of confidentiality and non-use set forth
in subparagraph 5(a) shall not apply to (i) information which is or becomes a
part of the public domain without breach of the aforementioned obligations by
Employee; (ii) disclosure which is required by law, including, without
limitation, response to legal process or compliance with governmental
regulations, rules or orders; or (iii) disclosure made with the prior or
contemporaneous approval of Company.
(c) NON-SOLICITATION. As a material inducement for Company to enter into
this Agreement, and expressly in exchange for the performance of Company's
obligations under this Agreement, Employee hereby covenants and agrees that, he
will not, either on his own account or directly or indirectly in conjunction
with or on behalf of any person, firm or company do any of the following:
(i) During the Term and for a one (1) year period following the last
day of the Term, solicit or employ, or attempt to solicit or employ, any
person who is then, or within twelve (12) months prior thereto has been, an
officer, manager or employee of Company (excepting, however, Employee's
son, John Bradford Bishop, and Employee's personal secretary, either of
whom Employee may solicit or employ);
(ii) During the Term and for a one (1) year period following the last
day of the Term, solicit the business of any person, firm or company which
is then,
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<PAGE>
or within twelve (12) months prior thereto has been, a customer of Company
(other than the solicitation of business for the benefit of the Company);
or
(iii) During the Term, carry on or be engaged, concerned or
interested in, give advice to or devote any material time to the affairs
of, any trade or business competing with the business of Company.
(d) EQUITABLE RELIEF. Employee acknowledges that Company is relying for
its protection upon the existence and validity of the provisions of this
Paragraph 5, and that irreparable injury will result to Company from any
violation or continuing violation of the provisions of this Paragraph 5 for
which damages may not be an adequate remedy. Accordingly, Employee hereby
agrees that in addition to the remedies available to Company at law or under
this Agreement, Company shall be entitled to obtain such equitable relief as may
be permitted by a court of competent jurisdiction including, without limitation,
injunctive relief from any violation or continuing violation by Employee of any
term or provision of this Paragraph 5, and that Company may take application for
such equitable relief without submitting the matter to binding arbitration under
Paragraph 14 hereof.
6. TERMINATION.
(a) BY COMPANY. The employment of Employee (including without limitation
the obligation of Employee to perform and to otherwise comply with Paragraphs 2
and 3 and the obligation of Company to pay provide the compensation and other
benefits pursuant to Paragraph 4 (other than subparagraph 4(b)(iv)) may be
terminated by Company, at its option, upon written notice to Employee or his
estate after the occurrence of any of the following:
(i) Employee becomes convicted of a felony.
(ii) Employee's willful failure or refusal to perform his duties
hereunder after receipt of written notice from the Board of Directors and a
reasonable opportunity to so perform such duties.
(iii) Employee's gross negligence in the performance of his duties
hereunder after receipt of written notice from the Board of Directors and a
reasonable opportunity to remedy his gross negligence.
(iv) Employee's intentional misappropriation of significant funds or
assets of Company.
(v) Employee's death.
(b) BY EMPLOYEE. The employment of Employee (including without limitation
the obligation of Employee to perform and to otherwise comply with Paragraphs 2
and 3 and the obligation of Company to pay or provide the compensation and other
benefits pursuant to Paragraph 4 (other than subparagraph 4(b)(iv)) may be
terminated by Employee at any time upon thirty (30) days' prior written notice.
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<PAGE>
(c) CHANGE OF CONTROL OR FAILURE OF COMPANY TO EXTEND TERM. If a
Change of Control occurs or Company notifies Employee in writing of its
desire not to extend the Term (the date of a Change of Control or any such
notice being the "TRANSITION DATE"), the obligation of Employee to perform
and to otherwise comply with Paragraphs 2 and 3 shall be terminated three
months following the Transition Date. Notwithstanding the preceding
sentence, the obligation of Company to pay or provide the compensation and
other benefits pursuant to Paragraph 4 shall continue from the Transition
Date until the end of the Term, without regard to whether Employee
continues to be employed by Company,
For purposes of this Agreement, the term "CHANGE OF CONTROL" means any
of the following:
(i) the acquisition after the date of this Agreement by any
person or group of associated persons acting in concert (within the
meaning of the Securities Exchange Act of 1934), of more than 20% of
the outstanding shares of voting stock of Company (whether by tender
offer, merger, purchase or other acquisition) coupled with or followed
by the exercise of the voting power pertaining to those shares by the
election of one or more directors of Company in any election (whether
or not such election is supported by the management of Company); or
(ii) as a result of a tender offer, merger, consolidation, sale
of assets or contested election, or any combination of the foregoing
transactions (each, a "Transaction"), persons who were directors of
Company immediately before the Transaction shall cease to constitute a
majority of the Board of Directors of Company or of any successor to
Company within two years subsequent to such Transaction; or
(iii) any sale or liquidation of all or substantially all of
the assets of Company or any merger, consolidation, or reorganization
to which Company is a party and pursuant to which Company or an entity
controlled by Company is not a surviving entity.
(d) SURVIVAL. The obligations of the parties set forth in
subparagraph 4(b)(iv), Paragraph 5 and Paragraph 7 shall survive
termination of this Agreement and termination of Employee's employment with
Company.
7. INDEMNIFICATION. Company shall, to the maximum extent permitted by
the Delaware General Corporation Law (or the laws of any other state in which
Company may then be incorporated) or any other applicable law, defend, indemnify
and hold Employee harmless from and against all expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that Employee is or was acting
as an employee, agent, consultant, officer or director of Company. For purposes
of this paragraph, a "proceeding" means any contemplated, threatened, pending or
completed action, proceeding or inquiry, whether civil, criminal, administrative
or investigative, and "expenses" includes, without limitation, the fees and
costs of attorneys, accountants, experts and other professionals, as well as any
other reasonable expense attendant to establishing a right to
6
<PAGE>
indemnification from Company. This Paragraph 7 shall be cumulative with any
other indemnification right to which Employee is entitled under Company's Bylaws
or pursuant to a separate indemnification contract between Company and Employee.
In the event that applicable law allows the purchase of insurance covering
officers, directors or agents of a corporation, Company shall, at the request of
Employee, purchase and maintain insurance on behalf of Employee against any
liability asserted against or incurred by Employee in Employee's capacity as
employee, agent, consultant, officer or director of Company, whether or not
Company would have the power to indemnify Employee against such liability under
the provisions of Company's Certificate of Incorporation, Bylaws or applicable
law.
8. AUTHORITY. The individual executing this Agreement on behalf of
Company represents and warrants to Employee that the performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized by all requisite action and that he or she has the power and
authority to execute this Agreement.
9. NOTICES. All notices and other communications to any party hereunder
shall be in writing and shall be made by hand-delivery, certified mail, return
receipt requested, or overnight air courier guaranteeing next day delivery:
(a) If to Company:
EIP Microwave, Inc.
1589 Centre Pointe Drive
Milpitas, California 95035
Attn: Chief Executive Officer
(b) If to Employee:
John F. Bishop
2 Inverness Lane
Newport Beach, California 92660
All such notices and communications shall be deemed to have been duly
given when received or when delivery is refused. Either party may change the
address to which notices are to be given to it by giving five (5) days' prior
notice of such change in accordance herewith.
10. FURTHER DOCUMENTS AND ACTS. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12. ATTORNEYS' FEES. In any action, litigation or proceeding between the
parties arising out of or in relation to this Agreement, the prevailing party in
such action shall be awarded, in addition to any damages, injunctions or other
relief, and without regard to whether or
7
<PAGE>
not such matter be prosecuted to final judgment, such party's costs and
expenses, including without limitation, reasonable attorneys' accountants' and
experts' fees and expenses in connection with such action and any enforcement
thereof.
13. CHOICE OF LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws. Any dispute, action, litigation or other
proceeding concerning this Agreement shall be instituted, maintained, heard and
decided in Orange County, California.
14. DISPUTE RESOLUTION. Except as provided in subparagraph 5(d), any
dispute, controversy or disputed claim arising under, in connection with or
relating to, this Agreement or to any amendment, purported amendment or
termination, or any breach or violation hereof or thereof, shall be finally
settled and determined by binding arbitration conducted by the Judicial
Arbitration and Mediation Service located in Santa Ana, California ("JAMS") in
accordance with the California Arbitration Act, Code of Civil Procedure ("CCP")
Sections 1280 et. seq., and JAMS applicable commercial arbitration rules and
procedures then in effect (as modified hereby). If the JAMS rules and
procedures then in effect should conflict with the terms of this Paragraph, this
Paragraph shall be controlling. The arbitration shall be held in Orange County,
California. The dispute shall be submitted to an arbitrator selected by the
parties from a JAMS-approved panel; provided, however, that if the parties
cannot agree on a single arbitrator within forty-five (45) days of the date that
the dispute, controversy or claim is submitted to arbitration, then JAMS shall
select an arbitrator. The arbitrator shall have no prior or present affiliation
or relationship with any of the parties or their counsel and shall be a retired
judge of the Courts of the State of California. Any award or decision rendered
pursuant to such rules and procedures shall be final and binding on each of the
parties hereto and their respective heirs, administrators, executors, successors
and assigns. Such decision or award shall be in writing signed by the
arbitrator and shall state the reasons upon which the decision or award is
based. The arbitrator, in deciding any dispute, controversy or claim arising
under this Agreement shall render his or her decision based upon the record
established during the arbitration and shall look to the substantive laws, and
not the laws of conflicts, of the State of California for the resolution of the
dispute, controversy or claim. The parties may obtain discovery in aid of the
arbitration in accordance with CCP Section 1283.05; provided, however, that the
arbitrator's permission shall not be required to take a discovery deposition and
discovery by means of interrogatories and requests for admissions shall not be
permitted. The arbitrator may award damages or may order specific performance,
but in no event shall the arbitrator have the authority to assess consequential,
special or punitive damages against any party. Judgment on any decision or
award pursuant hereto may be entered in any court having jurisdiction thereof.
The prevailing party in any such arbitration shall be awarded, in addition to
any damages or other relief, such party's costs and expenses, including without
limitation reasonable attorneys', accountants' and experts' fees and expenses,
in connection with such arbitration and any enforcement thereof, as the
arbitrator shall determine. Each of the parties reserves the right to file with
a court of competent jurisdiction an application for provisional remedies,
including, without limitation, an application for temporary or preliminary
injunctive relief, on the grounds that (i) provisional remedies are necessary to
enforce the confidentiality and non-competition provisions of Paragraph 5 of
this Agreement, or (ii) that the arbitration award to which the applicant may be
entitled may be rendered ineffectual in the absence of such provisional
remedies.
8
<PAGE>
15. AMENDMENTS/WAIVER. This Agreement may be amended, supplemented,
modified and/or rescinded only through an express written instrument signed by
all the parties or their respective successors and assigns. Either party may
specifically and expressly waive in writing any portion of this Agreement or any
breach hereof, but no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other provision.
The consent by one party to any act for which such consent was required shall
not be deemed to imply consent or waiver of the necessity of obtaining such
consent for the same or similar acts in the future.
16. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all the rights and privileges shall be enforceable to the
fullest extent permitted by law.
17. ENTIRE AGREEMENT.
(a) This Agreement contains the entire and complete understanding
between the parties concerning its subject matter and all representations,
agreements, arrangements and understandings between or among the parties,
whether oral or written, have been fully merged herein and are superseded
hereby.
(b) The parties intend that this Agreement supersede that certain
Employment Agreement between Company and Employee dated as of March 1, 1994, and
upon execution of this Agreement by both parties hereto, such Employment
Agreement shall be terminated.
18. REMEDIES. All rights, remedies, undertakings, obligations, options,
covenants, conditions and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
19. ASSIGNMENT. Neither this Agreement nor any interest herein shall be
assignable (voluntarily, involuntarily, by judicial process or otherwise) by any
party to any entity without the prior written consent of both parties hereto.
Any attempt at such an assignment without such consent shall be void and, at the
option of the party whose consent is required, shall be an incurable breach of
this Agreement.
20. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, legatees, legal
representatives, personal representatives, successors and permitted assigns.
21. INTERPRETATION. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not strictly for
or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa, and
each gender will include any other gender. The captions of the Paragraphs of
this Agreement are for convenience only and shall not affect the construction or
interpretation of any of the provisions herein.
9
<PAGE>
22. BENEFIT OF AGREEMENT. This Agreement is for the sole and exclusive
benefit of the signators hereto and nothing in this Agreement shall be construed
to give any person or entity other than the signators hereto any legal or
equitable right, claim or remedy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMPANY: EIP MICROWAVE, INC.,
a Delaware corporation
By: /s/ J. Sidney Webb
--------------------------------
J. Sidney Webb
Authorized Representative
EMPLOYEE: By: /s/ John F. Bishop
--------------------------------
John F. Bishop
10
<PAGE>
EXHIBIT 10(r)
WRITTEN DESCRIPTION OF
EIP BONUS PLAN FOR FISCAL 1995 AND 1996
EIP Microwave, Inc. (the "Company") has adopted the EIP Bonus Plan for the 1995
and 1996 fiscal years of the Company. The EIP Bonus Plan is designed to provide
employees of the Company with annual financial incentives to achieve specified
orders, sales, pre-tax profit and product development goals through the
successful accomplishment of Company and/or individual performance objectives.
John Ardizzone and Ivan Andres participate in the EIP Bonus Plan and are
eligible for maximum annual bonus awards of $25,000 and $36,000, respectively.
<PAGE>
Exhibit 10(t)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
J. Bradford Bishop, Chief Executive Officer
EIP Microwave, Inc. 5335 S.W. Meadows Road, Suite 275, Lake Oswego, OR
97305
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
June 22, 1995
REGISTERED, PRE-PAID DELIVERY
Marconi Instruments Ltd.
Longacres
St. Albans
Herts, England ALR OJN
Attention: Peter Smith
Re: Termination of Cooperation Agreement, Distribution
Agreement and Technical Collaboration Agreement
------------------------------------------------
Gentlemen:
EIP Microwave, Inc. ("EIP") and Marconi Instruments Ltd. ("Marconi") are
parties to the following agreements:
1. Agreement dated September 3, 1992 relating to cooperation between EIP and
Marconi (the "Cooperation Agreement").
2. Agreement dated October 1, 1992 relating to EIP's appointment of Marconi
as its distributor (the "Distribution Agreement").
3. Agreement dated October 1, 1992 relating to technical collaboration
between EIP and Marconi (the "Technical Collaboration Agreement").
The purpose of this letter is to provide Marconi with written notice that
EIP has elected to terminate the Cooperation Agreement (pursuant to Section
(J)(1) of the Cooperation Agreement), the Distribution Agreement (pursuant to
Section 6(a) of the Distribution Agreement) and the Technical Collaboration
Agreement (pursuant to Section 8(a) of the Technical Collaboration Agreement).
The termination of these agreements will be effective December 31, 1995.
EIP reserves the right to accelerate the termination of these agreements
as a result of any prior or future breach of these agreements by Marconi. In
particular, EIP reserves the right to accelerate the termination of the
Distribution Agreement pursuant to Section 6(d) thereof as a result of Marconi's
failure to meet the cumulative equivalent order targets set forth therein.
Pursuant to Section 7(b) of the Distribution Agreement, EIP hereby
requests that Marconi return to EIP on the effective date of termination all
price books and lists, quotations, discount
Telephone (503) 684-4590 Fax: (503) 682-9462
<PAGE>
Marconi Instruments Ltd.
June 22, 1995
Page 2
sheets, technical particulars and all other documents which Marconi has received
from EIP except those distributed in the normal course of trade. Pursuant to
Section (C)(4) of the Cooperation Agreement, EIP further requests that Marconi
return to EIP on the effective date of termination all other proprietary and
confidential information which Marconi has received form EIP and all copies
thereof.
The confidentiality Agreement dated April 4, 1995 between EIP and Marconi
relating to nondisclosure and restricted use of information superseded certain
provisions of, and will not be affected by the termination of, the Cooperation
Agreement, the Distribution Agreement and the Technical Collaboration Agreement.
Very truly yours,
EIP MICROWAVE, INC.
By: /s/ J. Bradford Bishop
-----------------------------
J. Bradford Bishop
Chairman
<PAGE>
EXHIBIT 10(V)
NON-QUALIFIED STOCK OPTION AGREEMENT--FORM
THE FOLLOWING IS A FORM OF AGREEMENT PRESCRIBED BY THE STOCK OPTION COMMITTEE OF
THE BOARD OF DIRECTORS FOR USE IN CONNECTION WITH THE ISSUANCE OF NONSTATUTORY
OPTIONS (AS DEFINED IN THE EIP MICROWAVE, INC. 1994 STOCK OPTION PLAN) TO
DIRECTORS. THIS FORM IS BEING FILED IN LIEU OF THE INDIVIDUAL AGREEMENTS WITH
PARTICIPATING DIRECTORS.
THE STOCK OPTION COMMITTEE MAY PRESCRIBE A DIFFERENT FORM OF AGREEMENT, AND MAY
MODIFY PREVIOUSLY EXECUTED INDIVIDUAL AGREEMENTS. ANY SUCH DIFFERENT FORM AND
ANY SUCH MODIFICATION MAY ELIMINATE OR ACCELERATE VESTING PROVISIONS, MAY MODIFY
OPTION PRICE PAYMENT PROVISIONS, MAY EXTEND THE TERMINATION DATE AND MAY ADOPT
OTHER PROVISIONS MORE BENEFICIAL TO THE OPTIONEE, PROVIDED THAT SUCH TERMS AND
CONDITIONS ARE CONSISTENT WITH THE 1994 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
EIP MICROWAVE, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR THE
1994 STOCK OPTION PLAN
(DIRECTORS)
WHEREAS, _______________ (the "Optionee") is a Director of EIP Microwave,
Inc. (the "Company"); and
WHEREAS, the execution of a Stock Option Agreement in the form hereof has
been duly authorized by a resolution of the Board of Directors of the Company
duly adopted on ________, 19__ and incorporated herein by reference;
WHEREAS, the option granted hereby is intended as a nonqualified stock
option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, the Company hereby grants to the Optionee an option
pursuant to the Company's 1994 Stock Option Plan (the "Plan") to purchase ______
shares of common stock, $.01 par value per share (the "Common Stock"), of the
Company at the price of ________ Dollars ($__________ ) per share, and agrees to
cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the purchase price in full, all subject, however, to
the terms and conditions hereinafter set forth.
1. (a) This option (until terminated as hereinafter provided) shall
be exercisable only to the extent of one-third of the shares hereinabove
specified after the Optionee shall have continuously served as a Director of the
Company or any Subsidiary for one year from the date hereof and to the extent of
an additional one-third of such shares after each of the next two successive
periods of one year thereafter during which the Optionee shall have continuously
served as a Director of the Company or any Subsidiary. For the purposes of this
paragraph, leaves of absence approved by the Stock Option Committee of the
Company for illness, military or governmental service, or other cause, shall be
considered as service as a Director. To the extent exercisable, this option may
be exercised in whole or in part from time to time.
1
<PAGE>
(b) Upon a filing pursuant to any federal or state law in
connection with any tender offer for shares of the Company (other than a tender
offer by the Company) or upon the signing of any agreement for the merger or
consolidation of the Company with another corporation or for sale of all or
substantially all of the assets of the Company or upon adoption of any
resolution of reorganization or dissolution of the Company by the stockholders
or upon the occurrence of any other event or series of events, which tender
offer, merger, consolidation, sale, reorganization, dissolution or other event
or series of events, in the opinion of the Board of Directors, will, or is
likely to, if carried out, result in a change of control of the Company, or if
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Directors of the Company cease for any reason to
constitute a majority thereof (unless the election, or the nomination for
election by the Company's stockholders, of each Director of the Company first
elected during such period was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors of the Company at the
beginning of any such period), the option granted hereby shall, notwithstanding
the provisions of paragraph (a) above, become immediately exercisable in full.
If any such tender offer, merger, consolidation, sale, reorganization,
liquidation or other event or series of events mentioned in the immediately
preceding sentence shall be abandoned, the Board of Directors may by notice to
the Optionee nullify the effect thereof and reinstate the provisions of
paragraph (a) above, but without prejudice to any exercise of this option that
may have occurred prior to such nullification. Notwithstanding anything to the
contrary in this Agreement, in the event of a merger or consolidation in which
the Company is not the surviving corporation and the agreement of merger or
consolidation provides for the assumption of options granted, and the Company's
obligations, under the Plan, the date of exercisability of each outstanding
option granted hereby shall not be accelerated as referenced above and the
shares of common stock or securities of the successor corporation may be issued
under the Plan in lieu of shares of Common Stock, subject to all the adjustments
which the Stock Option Committee may determine is equitably required under
Paragraph 6 of the Plan and Paragraph 7 of this Agreement; in such event the
Optionee hereby consents to the substitution of such successor corporation's
securities.
2. The option price shall be payable (a) in cash or by check acceptable
to the Company, (b) by transfer to the Company of shares of Common Stock which
have been owned by the Optionee for more than six months prior to the date of
exercise equal to the option price which have a fair market value on the date of
exercise equal to the option price, or (c) by a combination of such methods of
payment. The requirement of payment in cash shall be deemed satisfied if the
Optionee shall have made arrangements satisfactory to the Company with a broker
who is a member of the National Association of Securities Dealers, Inc. to sell
a sufficient number of the shares being purchased so that the net proceeds of
the sale transaction will at least equal the option exercise price, plus
interest at the applicable Federal rate for the period from the exercise date to
the date of payment, and pursuant to which the broker undertakes to promptly
deliver the full option exercise price plus such interest to the Company.
3. This option shall terminate on the earliest of the following dates:
(a) Three months after the date on which the Optionee ceases to
be a Director of the Company or a Subsidiary, unless he ceases to be such a
Director by reason of death or disability;
(b) Three months after the date of a qualified domestic
relations order, as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, requiring the transfer of all or a
portion of this option to the spouse of the Optionee (a "Qualified Domestic
Relations Order");
(c) One year after the death or disability of the Optionee if
the Optionee dies or becomes disabled while a Director of the Company or a
Subsidiary; or
(d) Ten years from the date on which this option was granted.
2
<PAGE>
In the event the Optionee shall intentionally commit an act materially inimical
to the interests of the Company or Subsidiary, and the Stock Option Committee
shall so find, this option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in Section 3 hereof shall be construed to modify or enlarge
the rights of the Optionee as set forth in Section 1(a) hereof and at no time
shall any right to exercise any installment of this option accrue to the
Optionee unless and to the extent that he shall have continuously served as a
Director of the Company or Subsidiary for the period specified with respect to
such installment in Section 1(a) hereof. In the event the Optionee's service as
a Director of the Company or Subsidiary is terminated for any reason whatsoever,
all rights of the Optionee (except the right to purchase in accordance with
Section 2 hereof any installments of this option which have theretofore accrued
pursuant to Section 1(a) hereof) shall cease and terminate as of the date of
such termination of service as a Director and under no circumstances shall the
Optionee have or acquire any rights with respect to any installment of this
option which would have become exercisable subsequent to the date of such
termination of service as a Director. Nothing contained in this option shall
limit whatever right the Company or Subsidiary might otherwise have to terminate
Optionee's service as a Director and the terms of this option shall not be
affected in any manner by any employment or other agreement between the Optionee
and the Company or any Subsidiary.
For purposes of this Paragraph 3, "disability" shall mean the
condition of an Optionee who is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve months.
4. This option is not transferable by the Optionee otherwise than (i)
by will or the laws of descent and distribution or (ii) pursuant to a Qualified
Domestic Relations Order.
5. This option is exercisable, during the lifetime of the Optionee only
by him or his guardian or legal representative.
6. This option shall not be exercisable if such exercise would involve
a violation of any applicable Federal or state securities law, and the Company
hereby agrees to make reasonable efforts to comply with such securities laws.
7. The Stock Option Committee shall make such adjustments in the option
price and in the number or kind of shares of Common Stock or other securities
covered by this option as such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of the Optionee that otherwise would result from (i)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (ii) any merger,
consolidation, reorganization, separation, or partial or complete liquidation,
or (iii) any other corporate transaction or event having an effect similar to
any of the foregoing (including, without limitation, a merger or consolidation
in which the Company is not the surviving corporation and the agreement of
merger or consolidation provides for the assumption of the options granted
pursuant to the Plan by the successor to the Company).
8. If the Company shall be required to withhold any federal, state,
local or foreign tax in connection with exercise by this option, it shall be a
condition to such exercise that the Optionee pay or make provision satisfactory
to the Company for payment of all such taxes.
9. The term "Subsidiary" as used in this Agreement means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. For purposes of this Agreement, the Optionee's
continuous service as a Director of the Company or Subsidiary shall not be
deemed
3
<PAGE>
interrupted, and the Optionee shall not be deemed to have ceased to be a
Director of the Company or any Subsidiary, by reason of the transfer of his
service as a Director among the Company and its Subsidiaries.
10. This Agreement shall be subject to the terms and conditions of the
Plan.
EXECUTED at ___________, _________ this __ day of __________ 199_.
EIP MICROWAVE, INC.
By: _____________________________
Its:______________________
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Stock Option Agreement and accepts the option granted
thereunder.
_____________________________
Optionee
4
<PAGE>
EXHIBIT 10(W)
INCENTIVE STOCK OPTION AGREEMENT--FORM
THE FOLLOWING IS A FORM OF AGREEMENT PRESCRIBED BY THE STOCK OPTION COMMITTEE OF
THE BOARD OF DIRECTORS FOR USE IN CONNECTION WITH THE ISSUANCE OF INCENTIVE
OPTIONS (AS DEFINED IN THE EIP MICROWAVE, INC. 1994 STOCK OPTION PLAN) TO
OFFICERS AND OTHER KEY EMPLOYEES. THIS FORM IS BEING FILED IN LIEU OF THE
INDIVIDUAL AGREEMENTS WITH PARTICIPATING OFFICERS AND KEY EMPLOYEES.
THE STOCK OPTION COMMITTEE MAY PRESCRIBE A DIFFERENT FORM OF AGREEMENT, AND MAY
MODIFY PREVIOUSLY EXECUTED INDIVIDUAL AGREEMENTS. ANY SUCH DIFFERENT FORM AND
ANY SUCH MODIFICATION MAY ELIMINATE OR ACCELERATE VESTING PROVISIONS, MAY MODIFY
OPTION PRICE PAYMENT PROVISIONS, MAY EXTEND THE TERMINATION DATE AND MAY ADOPT
OTHER PROVISIONS MORE BENEFICIAL TO THE OPTIONEE, PROVIDED THAT SUCH TERMS AND
CONDITIONS ARE CONSISTENT WITH THE 1994 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
EIP MICROWAVE, INC.
INCENTIVE STOCK OPTION AGREEMENT
FOR THE
1994 STOCK OPTION PLAN
WHEREAS, _______________ (the "Optionee") is _______________ [title] of EIP
Microwave, Inc.. (the "Company"); and
WHEREAS, the execution of a Stock Option Agreement in the form hereof has
been duly authorized by a resolution of the Board of Directors of the Company
duly adopted on ________, 19___ and incorporated herein by reference;
WHEREAS, the option granted hereby is intended as an "incentive stock
option" within the meaning of that term under Section 422A of the Internal
Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, the Company hereby grants to the Optionee an option
pursuant to the Company's 1994 Stock Option Plan (the "Plan") to purchase ______
shares of common stock, $.01 par value per share (the "Common Stock"), of the
Company at the price of ________ Dollars ($__________ ) per share, and agrees to
cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the purchase price in full, all subject, however, to
the terms and conditions hereinafter set forth.
1. (a) This option (until terminated as hereinafter provided) shall
be exercisable only to the extent of one-fifth of the shares hereinabove
specified after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary for one year from the date hereof and to the extent of
an additional one-fifth of such shares after each of the next four successive
periods of one year thereafter during which the Optionee shall have been in the
continuous employ of the Company or any Subsidiary. For the purposes of this
paragraph, leaves of absence approved by the Stock Option Committee of the
Company for illness, military or governmental service, or other cause, shall be
considered as employment. To the extent exercisable, this option may be
exercised in whole or in part from time to time.
1
<PAGE>
(b) Upon a filing pursuant to any federal or state law in
connection with any tender offer for shares of the Company (other than a tender
offer by the Company) or upon the signing of any agreement for the merger or
consolidation of the Company with another corporation or for sale of all or
substantially all of the assets of the Company or upon adoption of any
resolution of reorganization or dissolution of the Company by the stockholders
or upon the occurrence of any other event or series of events, which tender
offer, merger, consolidation, sale, reorganization, dissolution or other event
or series of events, in the opinion of the Board of Directors, will, or is
likely to, if carried out, result in a change of control of the Company, or if
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Directors of the Company cease for any reason to
constitute a majority thereof (unless the election, or the nomination for
election by the Company's stockholders, of each Director of the Company first
elected during such period was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors of the Company at the
beginning of any such period), the option granted hereby shall, notwithstanding
the provisions of paragraph (a) above, become immediately exercisable in full.
If any such tender offer, merger, consolidation, sale, reorganization,
liquidation or other event or series of events mentioned in the immediately
preceding sentence shall be abandoned, the Board of Directors may by notice to
the Optionee nullify the effect thereof and reinstate the provisions of
paragraph (a) above, but without prejudice to any exercise of this option that
may have occurred prior to such nullification. Notwithstanding anything to the
contrary in this Agreement, in the event of a merger or consolidation in which
the Company is not the surviving corporation and the agreement of merger or
consolidation provides for the assumption of options granted, and the Company's
obligations, under the Plan, the date of exercisability of each outstanding
option granted hereby shall not be accelerated as referenced above and the
shares of common stock or securities of the successor corporation may be issued
under the Plan in lieu of shares of Common Stock, subject to all the adjustments
which the Stock Option Committee may determine is equitably required under
Paragraph 6 of the Plan and Paragraph 7 of this Agreement; in such event the
Optionee hereby consents to the substitution of such successor corporation's
securities.
2. The option price shall be payable (a) in cash or by check acceptable
to the Company, (b) by transfer to the Company of shares of Common Stock which
have been owned by the Optionee (i) more than one year if previously acquired
upon exercise of an incentive stock option or (ii) more than six months if
previously acquired otherwise which have a fair market value on the date of
exercise equal to the option price, or (c) by a combination of such methods of
payment. The requirement of payment in cash shall be deemed satisfied if the
Optionee shall have made arrangements satisfactory to the Company with a broker
who is a member of the National Association of Securities Dealers, Inc. to sell
a sufficient number of the shares being purchased so that the net proceeds of
the sale transaction will at least equal the option exercise price, plus
interest at the applicable Federal rate for the period from the exercise date to
the date of payment, and pursuant to which the broker undertakes to promptly
deliver the full option exercise price plus such interest to the Company.
3. This option shall terminate on the earliest of the following dates:
(a) On the date on which the Optionee ceases to be an employee
of the Company or Subsidiary, unless he ceases to be such employee by reason of
death or disability or in a manner described in (b) below;
(b) Three months after the Optionee ceases to be an employee of
the Company or Subsidiary by reason of termination of employment under
circumstances determined by the Stock Option Committee to be for the convenience
of the Company;
(c) Three months after the date of a qualified domestic
relations order, as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, requiring the transfer of all or a
portion of this option to the spouse of the Optionee (a "Qualified Domestic
Relations Order");
2
<PAGE>
(d) One year after the death or disability of the Optionee if
the Optionee dies or becomes disabled while an employee of the Company or a
Subsidiary or within the three-month period referred to in (b) above; or
(e) Ten (or Five if Optionee owns more than 10% of the voting
power of the Company or a Subsidiary) years from the date on which this option
was granted.
In the event the Optionee shall intentionally commit an act materially inimical
to the interests of the Company or Subsidiary, and the Stock Option Committee
shall so find, this option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in Section 3 hereof shall be construed to modify or enlarge
the rights of the Optionee as set forth in Section 1(a) hereof and at no time
shall any right to exercise any installment of this option accrue to the
Optionee unless and to the extent that he shall have been in the continuous
employ of the Company or Subsidiary for the period specified with respect to
such installment in Section 1(a) hereof. In the event the employment of the
Optionee by the Company or Subsidiary is terminated for any reason whatsoever,
all rights of the Optionee (except the right to purchase in accordance with
Section 2 hereof any installments of this option which have theretofore accrued
pursuant to Section 1(a) hereof) shall cease and terminate as of the date of
such termination of employment and under no circumstances shall the Optionee
have or acquire any rights with respect to any installment of this option which
would have become exercisable subsequent to the date of such termination of
employment. Nothing contained in this option shall limit whatever right the
Company or Subsidiary might otherwise have to terminate the employment of the
Optionee and the terms of this option shall not be affected in any manner by any
employment or other agreement between the Optionee and the Company or any
Subsidiary.
For purposes of this Paragraph 3, "disability" shall mean the
condition of an Optionee who is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve months.
4. This option is not transferable by the Optionee otherwise than (i)
by will or the laws of descent and distribution or (ii) pursuant to a Qualified
Domestic Relations Order.
5. This option is exercisable, during the lifetime of the Optionee (i)
only by him or, in the event of his legal incapacity to do so, by his guardian
or legal representative acting in a fiduciary capacity under state law on behalf
of the Optionee and under court supervision or (ii) in the case of the transfer
of all or a part of this option pursuant to a Qualified Domestic Relations
Order, by the spouse of the Optionee.
6. This option shall not be exercisable if such exercise would involve
a violation of any applicable Federal or state securities law, and the Company
hereby agrees to make reasonable efforts to comply with such securities laws.
7. The Stock Option Committee shall make such adjustments in the option
price and in the number or kind of shares of Common Stock or other securities
covered by this option as such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of the Optionee that otherwise would result from (i)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (ii) any merger,
consolidation, reorganization, separation, or partial or complete liquidation,
or (iii) any other corporate transaction or event having an effect similar to
any of the foregoing (including, without limitation, a merger or consolidation
in which the Company is not the surviving corporation and the agreement of
merger or consolidation provides for the assumption of the options granted
pursuant to the Plan by the successor to the Company); provided, however,
3
<PAGE>
that without the prior written consent of the Optionee no such adjustment shall
be made if it would constitute a "modification" of this option within the
meaning of Section 425(h) of the Code.
8. If the Company shall be required to withhold any federal, state,
local or foreign tax in connection with exercise by this option, it shall be a
condition to such exercise that the Optionee pay or make provision satisfactory
to the Company for payment of all such taxes.
9. The term "Subsidiary" as used in this Agreement means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. For purposes of this Agreement, the continuous
employ of the Optionee with the Company or Subsidiary shall not be deemed
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary, by reason of the transfer of his
employment among the Company and its Subsidiaries.
10. This Agreement shall be subject to the terms and conditions of the
Plan.
EXECUTED at ______________, _________ this __ day of __________ 199_.
EIP MICROWAVE, INC.
By: _____________________________
Its:_____________________
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Stock Option Agreement and accepts the option granted
thereunder.
_____________________________
Optionee
4
<PAGE>
EXHIBIT 10(x)
AGREEMENT
Between
EIP MICROWAVE, INC.
And
SRI INTERNATIONAL
Dated as of September 11, 1995
<PAGE>
EXHIBIT 10(x)
AGREEMENT
THIS AGREEMENT made as of this 11th day of September, 1995.
BETWEEN: EIP MICROWAVE, INC.
1589 Centre Point Drive
Milpitas, California 95030
Facsimile: 408-945-6312
Attention: President
SRI INTERNATIONAL
333 Ravenswood Avenue
Menlo Park, California 94025
Facsimile No.: 415-859-3156
Attention: Office of Technology Commercialization
WITNESSETH
WHEREAS, SRI International, a California nonprofit public benefit
corporation ("SRI"), designs, manufacturers (or has manufactured for it) and
sells VXI-based Multipurpose Data Modulators (also known as Simcards) and the
other products identified on Schedule 1 hereto (collectively, the "PRODUCTS"),
and desires to supply the Products pursuant to the terms hereof;
WHEREAS, SRI has developed the Product-related software and circuitware
identified on Schedule 2 hereto (the "SOFTWARE/CIRCUITWARE") and has developed
the Product-related and Software/Circuitware-related documentation identified on
Schedule 3 hereto (the "DOCUMENTATION"), and desires to license the
Software/Circuitware and Documentation pursuant to the terms hereof;
WHEREAS, EIP Microwave, Inc., a Delaware corporation ("EIP"), desires to
purchase quantities of the Products from time to time pursuant to the terms
hereof for resale throughout the world (the "TERRITORY"), either as individual
products or as component parts of other products of EIP;
WHEREAS, EIP desires to license the Software/Circuitware and Documentation
for reproduction and sublicensing to EIP's direct and indirect customers
throughout the Territory; and
WHEREAS, SRI and EIP each believes that resale of the Products and
sublicensing of the Software/Circuitware and the Documentation throughout the
Territory can best be accomplished through the efforts of EIP on an exclusive
basis, subject to the exceptions set forth herein with respect to certain SRI
customers;
NOW, THEREFORE, the parties hereto covenant and agree as follows:
RIGHT TO PURCHASE PRODUCTS
1. SRI hereby grants to EIP the exclusive (subject to Article 4) right to
purchase the Products for its own use and for resale throughout the Territory,
either as individual products or as component parts of other products of EIP.
<PAGE>
SOFTWARE/CIRCUITWARE LICENSE
2. Subject to payment of the transfer prices pursuant to Article 7(b) and
8(b), SRI hereby grants to EIP an exclusive (subject to Article 4),
worldwide license
a. to use, reproduce and sublicense the Software/Circuitware provided to
EIP in object code form; and
b. to use and modify the source code identified as Item 1 of Schedule 2.
SRI will promptly deliver to EIP the items identified on Schedule 2.
DOCUMENTATION LICENSE
3. SRI hereby grants to EIP an exclusive (subject to Article 4), royalty-free,
worldwide license to use, modify, reproduce and sublicense the
Documentation. SRI will promptly deliver the Documentation to EIP upon
execution of this Agreement.
EXCEPTIONS TO EXCLUSIVITY
4. a. Notwithstanding the exclusive rights granted to EIP in Articles 1, 2
and 3, SRI shall retain the right to sell the Products and sublicense the
Software/Circuitware and the Documentation directly to the customers
identified on Schedule 4 hereto (the "SRI CUSTOMERS") for their own use and
not for resale. EIP shall have the right to sell the Products and
sublicense the Software/Circuitware and the Documentation to the SRI
Customers on a nonexclusive basis.
b. SRI shall not sell or otherwise transfer the Products and shall not
license or otherwise transfer the Software/Circuitware or the Documentation
to any third party, other than sales of the Products and licenses of the
Software/Circuitware or the Documentation (i) to SRI Customers for their
own use and (ii) to EIP for its own use and for resale and sublicense by
EIP. Except as set forth in this Article, SRI will not independently or in
association with others, sell, license or otherwise transfer, or assist in
the sale, license or other transfer, of any new or used products, software,
circuitware or documentation which are improvements to or competitive with
the Products, Software/Circuitware or Documentation (the "SRI
IMPROVEMENTS"). SRI shall refer to EIP all inquiries related to the
Products, Software/Circuitware or Documentation, other than inquiries from
SRI Customers.
c. In addition, SRI reserves the right to incorporate the Products as
component parts of systems sold by SRI to customers of its existing systems
development and integration services for their own use and not for resale,
PROVIDED that the Products are packaged in a unique manner so that they
cannot be identified by such customers or other third parties as SimCards
or other Products identified on Schedule 1 and that the Products
incorporated by SRI into such systems are only ancillary (rather than
fundamental) components of such systems.
IMPROVEMENTS
5. a. If SRI designs or develops SRI improvements, then such SRI
Improvements shall be deemed to be Product, Software/Circuitware and
Documentation, as applicable, subject to this Agreement, and SRI will
prepare and submit to EIP a revised Schedule 1, Schedule 2 or Schedule 3,
as applicable, which identifies such SRI Improvements. Such SRI
Improvements shall be the sole property of SRI, subject to the terms of
this Agreement. For purposes of this Agreement, "IMPROVEMENT" includes any
change which makes the Products, Software/Circuitware or Documentation more
effective or more useful or more valuable or in any way makes them
preferable articles of commerce.
<PAGE>
b. If EIP designs or develops any product, software, circuitware or
documentation (including any additional version of the Products, the
Software/Circuitware or the Documentation) which is an improvement to, or
is competitive with the Products, the Software/Circuitware or the
Documentation (the "EIP IMPROVEMENTS"), the EIP Improvements shall be the
sole property of EIP, provided that SRI shall have the option to license
the right to use such EIP Improvements on such terms and conditions as the
parties mutually agree.
c. Without SRI's prior written consent, EIP shall not reverse engineer,
decompile or disassemble the Products or the Software/Circuitware for the
purpose of manufacturing, or subcontracting the manufacture of, the
Products or Software/Circuitware in contravention of this Agreement,
PROVIDED that reverse engineering, decompiling and disassembly of the
Products or the Software/Circuitware for the purpose of designing or
developing EIP Improvements shall not be deemed to contravene this
Agreement.
PRODUCT ORDERS
6. a. SRI shall fill with all reasonable dispatch all orders for Products
submitted by EIP under this Agreement. All Products shall be fully tested
by SRI prior to shipment to EIP. Products shall be supplied without logos
and without the SimCard designation.
b. All Products will be sold upon EIP's terms and conditions of purchase
in force at the date of acceptance of the relevant order, subject only to
the provisions of this Agreement which shall prevail in the event of any
inconsistency between this Agreement and those terms and conditions. The
terms and conditions currently in force are attached hereto as Schedule 5.
EIP shall give SRI prompt written notice of any change to Schedule 5.
c. EIP may request a specific and reasonable time of shipment for any
Products ordered.
PRODUCT PRICES AND SOFTWARE/CIRCUITWARE TRANSFER PRICES
7. a. The transfer prices for Products sold by SRI to EIP are indicated on
Schedule 1 hereto; provided that if any third party manufacturer to whom
SRI subcontracts the manufacture of any such Product increases or decreases
the cost to SRI for such manufacture, then the transfer price for such
Product shall be adjusted by a corresponding dollar amount. SRI shall
promptly deliver to EIP a revised Schedule 1 reflecting any such adjustment
in transfer prices. Any such adjustment shall be effective for orders
submitted more than 30 days after SRI delivers the revised Schedule 1 to
EIP. In addition, SRI agrees to negotiate reduced transfer prices to EIP
for each order of more than ten (10) units of any Product. EIP shall
reimburse SRI for any additional costs incurred by SRI if orders are
changed or canceled by EIP after acceptance by SRI.
b. EIP shall pay to SRI a transfer price per title in the amount set
forth on Schedule 2 hereto for each Software/Circuitware title sublicensed
by EIP to third parties.
<PAGE>
PAYMENTS
8. a. Upon delivery of Products, SRI shall invoice EIP for the applicable
transfer price. EIP shall make all payments due under this Agreement by
check received within 30 days from the date of invoice.
b. EIP shall furnish SRI, within 30 days after each calendar quarter, a
written report setting forth (i) the quantity of each Software/Circuitware
title sublicensed by EIP to third parties during such calendar quarter and
(ii) the total transfer price payment due SRI with respect to the
Software/Circuitware titles sublicensed by EIP during such calendar
quarter. Each report shall be accompanied by a check payable to SRI in the
amount of such total transfer price payment.
DELIVERY, TITLE, AND RISK
9. All shipments of Products by SRI shall be C.I.P., EIP'S premises in
Milpitas, California . EIP shall take title to Products when delivered and
accepted at EIP's premises and all risks of loss and expenses incurred
prior thereto shall rest upon SRI, including without limitation, all risks
and expenses incurred in the transportation of the Products, and all
insurance, fees, charges, taxes and governmental charges. EIP shall have
ten days after delivery to accept or reject Products. Thereafter, EIP will
be deemed to have accepted such Products whether or not such acceptance is
conveyed to SRI.
OBLIGATIONS OF EIP
10. As an inducement to SRI to enter into this Agreement, EIP shall
a. use all reasonable efforts and diligence to promote and expand the use
and sale of Products and associated Software/Circuitware and
Documentation (a Product and one or more titles of
Software/Circuitware and the related Documentation are collectively
referred to as a "SYSTEM");
b. sell and sublicense at least twenty (20) Systems prior to the first
anniversary of this Agreement and at least twenty-five (25) Systems
per year each year thereafter;
c. maintain competent sales personnel and/or distributors to solicit
orders for the sale of the Products;
d. pay all costs associated with the promotion and sale of the Products,
including but not limited to, the cost of printing and distributing
brochures, exhibiting the Products at trade shows and conferences,
sales commissions for units sold through EIP and any other related
activity that EIP in its sole discretion may conduct; and
e. comply with all applicable laws and regulations in the Territory.
Unless EIP conforms with the above, EIP agrees that SRI may terminate this
Agreement only in accordance with the notice, cure periods and other provisions
of Article 18.b.
<PAGE>
LIMITED WARRANTY
11. a. NOTHING IN THE AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE
OR WARRANTY GIVEN BY SRI THAT THE USE OF ANY PRODUCT,
SOFTWARE/CIRCUITWARE, AND/OR DOCUMENTATION WILL NOT INFRINGE THE
PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON. FURTHERMORE BUT FOR
THE LIMITED WARRANTY BELOW, SRI MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCT,
SOFTWARE/CIRCUITWARE, AND/OR DOCUMENTATION, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
b. SRI warrants each Product sold and delivered to EIP hereunder shall be
free from defects in materials and workmanship under normal service
and use, and shall conform to the specifications set forth in the
Documentation, and shall meet or exceed the performance standards set
forth in the Documentation, in each case, for a period beginning on
the date of delivery and ending the earlier of twelve (12) months
after delivery by EIP to its customers or fourteen (14) months after
delivery by SRI to EIP.
c. If EIP gives SRI notice during the warranty period referred to in
Paragraph 11.b that any Product or part thereof is defective or
nonconforming, SRI shall repair or replace, at SRI'S sole option, such
defective or nonconforming Product or part thereof free of charge.
All transportation and other costs incurred in connection with the
return of any defective or nonconforming Product or part thereof will
be reimbursed by SRI, and the reshipment of such repaired Product or
part thereof or replacement thereof will be paid by SRI. If the
Product is not defective or nonconforming (following testing by SRI),
EIP will be responsible for all such transportation costs. Products
which have been changed or altered in any manner from their original
design in a manner not authorized by SRI or EIP, or which are
improperly or defectively installed, serviced or used are not covered
by this warranty.
d. This warranty is provided to EIP only. Third parties purchasing
Products from EIP are not entitled to present warranty claims directly
to SRI and EIP will so instruct such third parties. No warranties
made by EIP in connection with Products, Software/Circuitware and/or
Documentation shall expressly or implicitly obligate SRI in any manner
whatsoever.
LIMITATION OF LIABILITY
12. IN NO EVENT SHALL SRI OR EIP BE LIABLE TO THE OTHER OR ANY THIRD PARTY FOR
ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR WITH RESPECT TO ANY CLAIM, DEMAND, ACTION OR OTHER PROCEEDING
RELATING TO THIS AGREEMENT HOWEVER CAUSED, AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) AND WHETHER OR NOT SRI HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL SRI'S OR EIP'S LIABILITY OWING
TO THE OTHER OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM, DEMAND, ACTION OR
OTHER PROCEEDING RELATING TO THIS AGREEMENT EXCEED THE TOTAL AMOUNT ACTUALLY
PAID SRI UNDER THIS AGREEMENT.
<PAGE>
TRADEMARKS
13. a. EIP has the right to attach its own trademarks, service marks and
trade names to the Products, Software/Circuitware and Documentation
and to use such marks and names in all labels, packaging, advertising
and literature related thereto.
b. This Agreement does not include any license or right in favor of EIP
to use SRI'S trademarks, service marks, or trade names in EIP's
business name or in connection with the business of EIP, except as
contained in labels, packaging, advertising or literature related to
Products, Software/Circuitware and Documentation.
INFRINGEMENT INDEMNIFICATION
14. a. Subject to Article 12, SRI shall indemnify and hold EIP, its officers,
employees and agents harmless from and against any and all liability,
loss, expense (including reasonable attorneys' fees), resulting from
any claim, demand, action or other proceeding alleging that the
Products, Software/Circuitware and/or Documentation infringe any
patent, copyright, trade secret, or other intellectual property right,
provided EIP promptly notifies SRI of any and all claims, demands and
proceedings related thereto and provides reasonable assistance and
gives SRI the opportunity to assume sole control over the defense and
all negotiations for a settlement or compromise.
b. The indemnification obligation in this paragraph 14 shall be effective
only if: (1) EIP is not substantially in default of its payment
obligations; (2) EIP has given prompt notice of the claim and
permitted SRI to defend; (3) EIP has reasonably cooperated in the
defense of the claim; and/or (4) the Products, Software/Circuitware
and/or Documentation are used in an authorized manner and such
authorized use is alleged to constitute the infringement. SRI shall
have no obligation to EIP to defend or satisfy any claims made against
EIP that arise from (i) the use of the Products, Software/Circuitware
and/or Documentation as only an element in a combination with other
products, software, circuitware or documentation not purchased or
licensed from SRI where the combination is alleged to constitute the
infringement, or (ii) the use, marketing, licensing, or disposition of
the Products, Software/Circuitware and/or Documentation by EIP other
than in an authorized manner and such unauthorized use is alleged to
constitute the infringement.
c. If such claim has occurrred or in SRI's opinion is likely to occur,
EIP agrees to accept noninfringing replacement Products,
Software/Circuitware and/or Documentation from SRI, if available, or,
if not, to return the Products, Software/Circuitware and/or
Documentation in its possession on written request from SRI. EIP will
be entitled to a full refund for the transfer prices previously paid
by EIP for all such returned Products, Software/Circuitware and
Documentation. EIP, however, will remain responsible for payment of
transfer prices for Products, Software/Circuitware and Documentation
not returned.
d. Subject to Article 12, EIP shall indemnify and hold SRI, its officers,
employees and agents harmless from and against any and all liability,
loss, expense (including reasonable attorneys' fees), or claims for
injury or damages arising out of the performance of this Agreement to
the extent such liability, loss, expense, attorneys' fees, or claims
for injury or dmages are caused by or results from the negligent or
intentional acts or omissions of EIP, its officers, agents or
employees.
<PAGE>
CONFIDENTIALITY
15. Each party will treat as confidential and appropriately safeguard during
the term of this Agreement and thereafter until such time as the
information properly comes into the public domain, without fault of the
other party, technical information relating to the Products,
Software/Circuitware and Documentation and all other information pertaining
to the other party or any part of the other party's pricing, business or
assets which are received at any time from the other party.
TECHNICAL ASSISTANCE
16. SRI agrees to provide to three (3) EIP employees, at no charge, five (5)
days of applications training at its Menlo Park facility from a course
outline provided by EIP to SRI at least four (4) weeks in advance of the
requested training date. The course outline must be approved by SRI (which
approval will not be unreasonably withheld). SRI further agrees to supply
to EIP, at no charge, reasonable applications support until the first
anniversary of the date hereof. For special software or circuitware
modulation or simulation requirements beyond those listed on Schedule 2
hereto, for consultation with EIP's customers and for design changes
requested by EIP customers, SRI agrees to provide consulting engineering to
EIP at a rate not to exceed $125 per hour. SRI shall provide or arrange
for additional training, applications support, service and other technical
assistance with respect to Products, Software/Circuitware and Documentation
upon such reasonable terms, conditions and prices as the parties mutually
agree.
OPTION TO ACQUIRE MANUFACTURING AND TECHNOLOGY RIGHTS
17. a. SRI and EIP have discussed the possibility of SRI granting to EIP an
option to manufacture any or all Products (and/or to have any or all
Products manufactured for it). However, no such option is granted by
this Agreement, and any such future option shall be subject to mutual
agreement of SRI and EIP. All terms and conditions relating to any
such future option will be negotiated by the parties in good faith.
Upon exercise of any such future option, SRI would deliver to EIP only
that portion of the Technology (as defined below) which SRI deems
necessary to manufacture any such Product, and SRI would further
cooperate with EIP and would take such further action reasonably
requested by EIP to assist in the transfer to EIP of responsibility
for manufacturing any such Product. In exchange for such delivery and
assistance, EIP would pay to SRI a per unit transfer price (to be
mutually agreed) for each Product manufactured by or for EIP and sold
by EIP. Such transfer prices would be payable within 30 days after
each calendar quarter with respect to all such Products sold by EIP in
such calendar quarter.
b. If SRI desires to sell, license or otherwise transfer all or any
portion of the Technology (as defined below), SRI will give EIP notice
thereof. Upon receipt of such notice, SRI and EIP will negotiate in
good faith the terms of a sale, license or other transfer. If EIP and
SRI fail to reach agreement on such terms within 60 days, SRI shall
deliver to EIP its written offer of the terms upon which it is willing
to sell, license or otherwise transfer the Technology and EIP shall
have the right, exercisable within 30 days after receipt of such
written offer, to purchase, license or otherwise acquire such
Technology from SRI on the terms of such written offer. If EIP fails
to exercise such right, then SRI has the right to sell, license or
otherwise transfer such Technology to a third party, subject to the
terms of this Agreement, within 120 days thereafter on the same terms
as such written offer. If SRI fails to consummate such sale, license
or other transfer within such 120 day period, any such sale, license
or other transfer will again be subject to EIP's right of first
refusal set forth in this Article. For purposes of this Agreement,
"TECHNOLOGY" means all confidential or proprietary information,
designs, drawings, plans, schematics, reports, memoranda, blueprints,
patents, copyrights, trade secrets, know-how and other intellectual
property relating to the Products, Software/Circuitware and
Documentation.
<PAGE>
TERMINATION
18. a. Unless terminated sooner pursuant to Article 18(b) hereof, this
Agreement will continue until the second anniversary of the date
hereof, and thereafter until terminated by either party giving to the
other at least six (6) months' notice in writing.
b. Notwithstanding Article 18(a) hereof, either party may terminate this
Agreement (i) by written notice effective immediately if the other
party makes a general assignment for the benefit of creditors or
commences any action seeking to have an order for relief entered on
its behalf as debtor or to adjudicate it insolvent, or seeking
reorganization of it or its debts under any law relating to
bankruptcy, or (ii) by written notice effective 90 days after delivery
of such notice if the other party fails to comply with any material
obligation hereunder and such failure is not cured within such 90-day
period.
c. Upon termination of this Agreement in any manner, the following
provisions will take effect:
(i) All rights granted to EIP under or pursuant to this Agreement
shall cease, and where appropriate, revert to the SRI; PROVIDED,
that EIP shall have the right to resell and sublicense in an
orderly manner all Products, Software/Circuitware and
Documentation in its possession on the effective date of such
termination.
(II) THE FOLLOWING PROVISIONS OF THIS AGREEMENT SHALL SURVIVE ANY
TERMINATION:
(A) EIP's obligation to make the payments referred to in Article
8;
(B) Any cause of action or claim of EIP or SRI, accrued or to
accrue, because of any breach or default by the other party;
and
(C) The provisions of Articles 11, 12, 14 and 15. (/INITIALED/
TWW, INA)
EXPENSES, TAXES AND OTHER CHARGES
19. All of the expenses incurred by EIP relating to the sale of the Products
and the sublicense of the Software/Circuitware and the Documentation and
the provision of related services will be borne by EIP, except as otherwise
expressly provided herein or by written instrument signed by SRI.
Notwithstanding any provision in this Agreement to the contrary, after
passage of title, EIP shall in all cases be responsible for the payment of
all shipping, handling, insurance, brokerages, taxes, customs and other
governmental charges however designated imposed in the Territory.
FORCE MAJEURE
20. Neither party shall be liable to the other party for any loss, damage,
delay or failure of performance resulting directly or indirectly from any
cause beyond its reasonable control, including force majeure, strikes, or
the laws, regulations, acts, or failure to act of any governmental
authority.
<PAGE>
WAIVER OF BREACH
21. No waiver of breach of any of the provisions of this Agreement shall be
construed to be a waiver of any succeeding breach of the same or any other
provision.
NO AGENCY CREATED
22. The relationship of the parties under this Agreement shall be and at all
times remain one of independent contractors, and EIP is neither an employee
nor an agent of SRI. Neither party shall have any authority to assume or
create obligations on the other's behalf with respect to the Products,
Software/Circuitware or Documentation, or otherwise, and will not take any
action which has the effect of creating the appearance of its having such
authority.
ARBITRATION
23. Any controversy or claim arising out of or relating to the Agreement, or
the breach thereof, or any failure to agree where agreement of the parties
is necessary pursuant hereto, including the determination of the scope of
this agreement to arbitrate, shall be resolved by the following procedures:
a. The parties shall use all reasonable efforts to amicably resolve the
dispute through direct discussions. The senior management of each
party commits itself to respond promptly to any such dispute. Either
party may send written notice to the other party identifying the
matter in dispute and invoking the procedures of this article. Within
ten (10) days after such written notice is received, unless a delay is
agreed to by both parties or the parties agree to confer by telephone,
one or more principals of each party shall meet in San Francisco to
attempt to amicably resolve the dispute by written agreement. If said
dispute cannot be settled through direct discussions, the parties
agree to first endeavor to settle the dispute in an amicable manner by
mediation in San Francisco and administered by the American
Arbitration Association ("AAA"), 417 Montgomery Street, San Francisco,
California 94104-1113, pursuant to the Commercial Mediation Rules of
the AAA at the time of submission prior to resorting to binding
arbitration.
If after ninety (90) days from the first written notice of dispute,
the parties fail to resolve the dispute by written agreement or
mediation, either party may submit the dispute to final and binding
arbitration administered by the AAA, pursuant to the Commercial
Arbitration Rules of the AAA at the time of submission. California
Arbitration Law shall govern except in the event a stay is sought
pursuant to the California Code of Civil Procedure Section 1281.2(c),
in which event the parties agree that the issue shall be resolved
under the United States Arbitration Act. The arbitration shall be
held in San Francisco, California before a single neutral,
independent, and impartial arbitrator (the "Arbitrator"). The
language of the arbitration shall be English, provided however that an
interpreter may be provided for any witness that desires an
interpreter; the costs of such interpretation shall be borne by the
party requesting the interpreter, subject to being awarded by the
Arbitrator as a cost of arbitration.
c. Unless the parties have agreed upon the selection of the Arbitrator
before then, the AAA shall appoint the Arbitrator as soon as
practicable, but in any event within thirty (30) days after the
submission to AAA for binding arbitration. The arbitration hearings
shall commence within forty-five (45) days after the selection of the
Arbitrator. Unless the Arbitrator otherwise directs, each party shall
be limited to one pre-hearing deposition lasting no longer than 6
hours. The parties shall exchange documents to be used at the hearing
no later than ten (10) days prior to the hearing date. Unless the
Arbitrator otherwise directs, each party shall have no longer than ten
(10) hours to present its position, the entire proceedings before the
Arbitrator shall be on no more than three (3)
<PAGE>
hearing days within a two week period. At the close of evidence, each
side shall submit a proposed award to the Arbitrator, one of which
shall be selected by the Arbitrator. The award shall be made no more
than thirty (30) days following the close of the proceeding. Under no
circumstances should any time limit on the arbitration hearings be
applied so as to render any award subject to vacation under California
Code of Civil Procedure Section 1286.2. Accordingly, the Arbitrator
shall have authority to alter any time period believed necessary to
avoid vacatur under Section 1286.2. The Arbitrator's award shall be a
final and binding determination of the dispute and shall be fully
enforceable as an arbitration award by the California courts in
accordance with the California Arbitration Law. The prevailing party
shall be entitled to recover its reasonable attorneys' fees and
expenses, including arbitration administration fees, incurred in
connection with such proceeding. Neither party nor the Arbitrator may
disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties.
APPLICABLE LAW
24. This Agreement, including the decision to arbitrate and any decision by an
arbitrator pursuant to Section 23, shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflicts of law principles thereof, and shall not be governed by the
United Nations Convention on Contracts for the International Sale of
Goods.
NOTICES
25. a. Any notice, demand, acknowledgment, or other communication permitted
or required under the terms of this Agreement or otherwise shall,
unless specifically otherwise provided in this Agreement, be in
writing and shall be given or made by facsimile transmission,
telegram, telex, or similar communication, by overnight express
delivery or by certified or registered mail addressed to the
respective party at its address in the introduction of this Agreement,
or such other address as such party will designate by notice pursuant
to this Article.
b. Any notices, demands, acknowledgments, or other communication
permitted or required under this Agreement will be deemed effective
(a) when delivered in person or by facsimile transmission, or (b) one
business day after deposited with an overnight express delivery
service or five calendar days after deposited in the mails by
certified mail, in either case, postage prepaid and properly
addressed.
U.S. EXPORT LAWS AND REGULATIONS
26. Each party hereby acknowledges that the rights and obligations of the
Agreement are subject to the laws and regulations of the United States
relating to the export of products and technical information. Without
limitation, each party shall comply with all such laws and regulations.
<PAGE>
NO OTHER RIGHTS
27. The Agreement shall not be construed to grant any license or other rights
to EIP in any patent rights, know-how or other technology of SRI, except as
expressly provided in the Agreement.
AGREEMENT INCLUSIVE
28. This Agreement covers all contracts and agreements between the parties
relating to the subject matter hereof. In order to be binding upon SRI or
EIP, any amendment, modification supplementation, extension, renewal,
ratification, rescission, discharge, abandonment or waiver of this
Agreement, or any of the provisions hereof, must be in writing signed by
both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth.
SRI INTERNATIONAL,
a California nonprofit public benefit
corporation
By: /S/ Taylor W. Washburn
--------------------------------
Taylor Washburn
Division Vice President,
System Technology Division
EIP MICROWAVE, INC.,
a Delaware corporation
By: /s/ Ivan N. Andres
-----------------------
Name: Ivan N. Andres
Title: Vice President Marketing
<PAGE>
SCHEDULE 1
PRODUCTS AND TRANSFER PRICES
* * * Confidential; this information has been omitted pursuant to 17 C.F.R.
Reg. Section 240.24b-2 and filed separately with the Securities and
Exchange Commission.
<PAGE>
SCHEDULE 2
SOFTWARE/CIRCUITWARE
* * * Confidential; this information has been omitted pursuant to 17 C.F.R.
Reg. Section 240.24b-2 and filed separately with the Securities and
Exchange Commission.
<PAGE>
SCHEDULE 3
DOCUMENTATION
Full operating manual for the Products and Software/Circuitware in Microsoft
Word version 6.0 format.
<PAGE>
SCHEDULE 4
SRI CUSTOMERS
SRI retains the right to sell Products and to sublicense Software/Circuitware
and Documentation to the following customers for their own internal use and not
for resale.
1. Chicago Board of Trade
2. Chicago Mercantile Exchange
3. All other financial trading institutions
4. SRI International
5. Existing classified clients with respect to existing
classified programs only
/INITIALED/ INA, 10/4/95 - TWW, 9/25/95
<PAGE>
SCHEDULE 5
TERM AND CONDITIONS OF PRODUCT PURCHASES
1. RELEASES
If this is a blanket order, EIP shall only be liable for quantities
released referencing this blanket purchase order.
2. DELIVERY
Seller shall promptly notify EIP if it is unable to make timely delivery
and state the reasons. Such notification shall not affect EIP's
termination rights under Article 11.
3. ACCEPTANCE
Acceptance of this order shall only be to the terms and conditions stated
herein. Modifications hereof or additions hereto, to be effective, must be
made in writing and be signed by Buyer. These terms and conditions,
together with such modifications and with such data relating to price and
delivery as are accepted in writing by Buyer, constitute the entire
agreement between the parties.
4. PRICING
A. If Seller decreases prices for items furnished hereunder, the price of
all unshipped items shall be adjusted to the lower prices.
B. Applicable taxes and other charges such as duties, customs, tariffs,
imposts and government imposed surcharges shall be stated separately on
Seller's invoice.
5. SCHEDULING
A. Seller shall not deliver items earlier than five (5) business days
prior to agreed scheduled delivery dates and Buyer may return early or
excess shipments at Seller's risk and expense.
B. Upon fifteen (15) days written notice to Seller, Buyer may reschedule
any Release in whole or in part at no additional charge.
C. Buyer may place any portion of an order on hold by notice which shall
take effect immediately upon receipt. Orders placed on hold will be
rescheduled within a reasonable time.
6. PACKING AND SHIPMENT
F.O.B. point is Buyer's dock unless otherwise specified in this Agreement.
All items shall be prepared for shipment in a manner which (i) follows good
commercial practice, (ii) is acceptable to common carriers for shipment at
the lowest rate, and (iii) is adequate to insure safe arrival. Seller
shall mark all containers with necessary lifting, handling and shipping
information, purchase order number, date of shipment and the names of Buyer
and Seller. Buyer shall notify Seller of the method of shipment. If no
instructions are given, Seller shall select the least expensive carrier.
7. INSPECTION
A. All items shall be subject to inspection and test by the Buyer, and
where the order is issued under a Government contract to the extent
practicable at all pLaces and times, including the period of manufacture
and in any event prior to acceptance.
B. Buyer shall have the right to reject or require the correction of any
item found to be defective, which item shall be promptly replaced or
corrected by Seller.
8. WARRANTY
Seller warrants that all material ordered hereunder will conform in all
respects with the specifications, drawings, sample or other description
furnished or specified by the Buyer, and will be merchantable and free from
any defects in material and workmanship, and Seller further warrants that
all material purchased hereunder that is manufactured in accordance with
the Seller's specifications shall be fit and sufficient for the purposes
for which it was designed. Seller agrees that the foregoing warranty shall
survive acceptance of and payment for the materials, and shall save Buyer
harmless from any loss, damage or expense, whatsoever, including attorneys'
fees, that Buyer may incur as a result of any breach of such warranties.
9. INVOICING AND PAYMENT
A. Invoices shall be in duplicate and shall include purchase agreement
number, purchase order number, part number, description of items, quantity,
unit price and extended totals. Payment shall not constitute acceptance.
B. Prompt payment discounts will be computed from the latest of (i) the
scheduled delivery date, (ii) the date of actual delivery, or (iii) the
date an acceptable invoice is received. Payment is made when Buyer's check
is mailed.
10. CHANGES
Buyer may at any time, by written notice and without notice to sureties or
assignees, make changes within the general scope of this order in any one
or more of the following (i) drawings, designs or specifications, (ii)
method of shipping or packing, (iii) place of inspection, acceptance or
point of delivery, (iv) delivery schedule. Should any such change increase
or decrease the cost of, or the time required for, performance of this
order, any equitable adjustment will be requested by Seller or Buyer, in
the price, delivery schedule or both. No claim by Seller for such
adjustment will be valid unless submitted to Buyer within thirty (30) days
from date of such change. The claim should be accompanied by an estimate
of charges for redundant material, work in process, or both. Nothing
contained in this clause shall relieve Seller from proceeding without delay
in the performance of this order as changed.
11. TERMINATION FOR DEFAULT
A. Buyer may, by notice, terminate this Agreement in whole or in part if
the Seller fails to (i) deliver items on agreed delivery schedules, (ii)
replace or correct defective items under warranty, or (iii) perform any
other obligations, or if Seller becomes insolvent.
B. Seller shall continue to supply any portion of this Agreement not
terminated.
C. Upon termination of this Agreement, at Buyer's request Seller will
transfer title and deliver to Buyer (i) any completed items, and (ii) any
partially completed items and all unique materials. Prices for partially
completed items and unique materials so accepted shall be negotiated.
However, such prices shall not exceed the agreement price per item.
D. Buyer's rights and remedies herein are in addition to any other rights
and remedies provided at law or in equity.
12. TERMINATION FOR CONVENIENCE
A. Buyer may terminate this Agreement in whole or in part at any time and
for any reason upon written notice to Seller. Seller shall stop work
immediately upon receipt of said notice.
<PAGE>
B. There shall be no charges for canceling orders for standard items.
Only Paragraphs C through E of this Article 12 shall govern Buyer's
liability for canceling orders for non-standard items.
C. Any claim for cancellation charges for non-standard items must be
submitted to Buyer in writing within thirty (30) days after receipt of
Buyer's termination notice.
D. Seller's claim may include (i) the cost of unique work in process, (ii)
the cost of paying claims to Seller's vendors for work directly allocable
to items cancelled and which cannot be diverted to other customers of
Seller's vendors. Seller shall wherever possible place such work in
process in inventory and sell it to other customers. In no event shall
such claim exceed the total price for the items cancelled. Upon payment of
Seller's claim, Buyer shall be entitled to all work and materials paid for.
E. Buyer reserves the right to inspect Seller's work in process and to
audit all relevant documents prior to paying Seller's claim.
13. INSOLVENCY, LOSS OF PROFITS, DAMAGES
The insolvency or adjudication of bankruptcy of, or the filing of a
voluntary petition in bankruptcy, or the making of an assignment for the
benefit of creditors, by either party, shall be a material breach hereof.
In no event shall Seller be entitled to anticipatory profits or to special
or consequential damages.
14. PATENTS, COPYRIGHTS, TRADE SECRETS AND TRADEMARKS
Seller shall indemnify Buyer and its cutomers against any costs, expenses
(including attorneys' fees), losses, damages or liability incurred because
of actual or alleged infringement of any patent, copyright, trade secret or
trademark arising out of the use or sale by Buyer or use by Buyer's
customers of items. Buyer shall notify Seller of such claim or demand and
shall permit Seller to participate in the defense thereof. If an
injunction issues as a result of any such claim, Seller agrees at its
expense to either: (i) procure for Buyer the right to continue using items,
(ii) replace them with non-infringing items, (iii) modify them so they
become non-infringing or (iv) at Buyer's option refund to Buyer the amount
paid. Such indemnification shall not apply where items are manufactured to
Buyer's detailed design.
15. BUYER'S PROTECTION IN CONNECTION WITH WORK DONE AT ITS PLANT
The Seller shall take such steps as may be reasonably necessary to prevent
injury or property damage during any work hereunder that may be performed
by employees or agents or subcontractors of the Seller at the Buyer's
plant, and the Seller shall indemnify and hold harmless the Buyer from and
against all loss, liability, and damages arising from or caused solely by
any act or omission of such agents, employees or subcontractors of the
Seller, and Seller shall maintain such insurance against public liability
and property damages, and such Employee's Liability and Compensation
Insurance as will protect the Buyer against the aforementioned risks and
against any claims under any Workmen's Compensation and Occupational
Disease Acts.
16. COMPLIANCE WITH LAWS
Seller shall comply with all federal, state and local laws and regulations
governing the manufacture or sale of items or the performance of services
covered by this Agreement.
17. TOOLING, CONFIDENTIAL MATTER AND PUBLICITY
A. Any specifications, drawing, schematics, technical information, data,
tools, dies, patterns, masks, gauges, test equipment and other material
furnished or paid for by Buyer shall (i) be kept confidential, (ii) remain
and/or become Buyer's property, (iii) be used by Seller exclusively for
Buyer's orders, (iv) be clearly marked as Buyer's property and segregated
when not in use, (v) be kept in good working condition at Seller's expense,
and (vi) be shipped to Buyer promptly on demand.
B. Seller shall insure Buyer's property and be liable for loss or damage
while Seller's possession or control, ordinary wear and tear excepted.
C. Neither party may use the other party's name in advertisements nor
otherwise disclose the existence of content or this Agreement without the
other's prior written consent.
18. ASSIGNMENT
Neither party may assign any rights in nor delegate any obligations under
this Agreement or any portion thereof without the written consent of the
other.
19. CONTINGENCIES
Neither party shall be responsible for its failure to perform due to causes
beyond its reasonable control such as acts of God, fire, theft, war, riot,
embargoes or acts of civil or military authorities. If delivery is to be
delayed by such contingencies, Seller shall immediately notify Buyer in
writing and Buyer may either (i) extend time of performance, or (ii)
terminate the uncompleted portion of the order at no cost to Buyer.
20. APPLICABLE LAW
This Purchase Order shall be construed in accordance with the laws of the
State of California.
<PAGE>
EXHIBIT 13
EIP MICROWAVE, INC.
1995 ANNUAL REPORT
_________________
For Year Ended September 30, 1995
<PAGE>
EXHIBIT 13
EIP IS ON COURSE
We believe EIP has the resources to stay on course:
The right people to be the preferred wireless
and microwave test and measurement company.
The right technologies to fulfill the needs of the
telecommunications, wireless, and defense electronics markets.
The right strategies for the future.
(PHOTO OF EXECUTIVES)
<TABLE>
<S> <C> <C>
JOHN ARDIZZONE IVAN ANDRES PETE PRAGASTIS
CFO, VICE PRESIDENT OPERATIONS VICE PRESIDENT, MARKETING AND SALES MANAGER OF ENGINEERING
</TABLE>
During the past two years, a significant turnaround has taken place - see
Summary of Operations on page 7.
<PAGE>
THE RIGHT PRODUCTS FOR TODAY AND THE FUTURE.
(Photos of products - pages 2-3)
THE 1110A FAMILY OF COMMUNICATIONS BAND SYNTHESIZERS CAN GENERATE AN
UNPRECEDENTED VARIETY OF TODAY'S DIGITAL WIRELESS SIGNALS.
EIP'S STATE-OF-THE-ART 1140A MICROWAVE SYNTHESIZER WAS SELECTED AS THE
SIGNAL SOURCE FOR THE US AIR FORCE F-15 DOWN SIZED TESTER.
RECENT BENCHTOP PRODUCT INTRODUCTIONS HAVE STRENGTHENED EIP'S STRONG
POSITION IN THE COUNTER MARKET.
AS EARLY PIONEER IN THE VXI MARKET, EIP MAINTAINS A LEADERSHIP POSITION IN
THIS RAPIDLY EXPANDING FIELD.
2
<PAGE>
EIP Microwave, Inc., (EIP) specializes in the design and manufacture of high
quality microwave and RF test and measurement instruments. Microwaves are
extremely high frequency electromagnetic signals that offer unique advantages
when employed in such applications as communications and defense electronics.
For maximum performance, most microwave systems require periodic calibration
using precision test instruments such as those manufactured by EIP. The Company
also engages in the manufacture of radio frequency (RF) products for the
telecommunications and wireless industries.
EIP instruments are used to test microwave and RF devices throughout the
development, manufacture and field service phases of the device's life cycle.
EIP develops its products primarily for use in telecommunications, wireless and
defense electronics. Principal customers include research and development, and
production organizations, telephone companies, military and civilian government
agencies, and military subcontractors. EIP products are sold worldwide through
a network of independent manufacturers' representatives.
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
<S> <C> <C> <C>
For the years ended September 30, 1995 1994 1993
(Dollars in thousands except per share data)
Net sales $6,721 $5,389 $6,089
Research, development and engineering $742 $620 $1,022
Net income (loss) $125 $(453) $(806)
PER SHARE DATA
Net income (loss) $0.30 $(1.06) $(1.82)
Book value $4.05 $3.76 $4.53
NEW ORDERS
Bookings $7,127 $5,929 $5,538
Backlog $1,210 $862 $353
BALANCE SHEET
Working capital $1,415 $1,102 $1,332
Borrowings - - -
Stockholders' equity $1,716 $1,591 $2,044
</TABLE>
4
<PAGE>
TO OUR STOCKHOLDERS
OVERVIEW
In 1995 we surpassed expectations and significantly increased sales, orders
and earnings. The year represents a repositioning of the Company for what we
expect will be an era of profitable growth. The upward trend in sales, orders
and earnings is expected to continue due to a revitalization of our sales and
marketing effort, new product introductions, including products that address the
growing commercial wireless market, and continued growth in the VXI market.
Net income increased to $125,000 in fiscal 1995, compared to a loss of
$453,000 in fiscal 1994. Net sales increased in fiscal 1995 by 25% to
$6,721,000, compared to $5,389,000 in fiscal 1994. Orders increased 20% to
$7,127,000 from $5,929,000 for 1994. Backlog increased 40% to $1,210,000 at
September 30, 1995, compared to $862,000 at September 30, 1994. These
improvements resulted primarily from an increase in international business, an
increase in orders from government contractors, an increase in business for
products configured in the VXIbus format, and a continued focus on controlling
costs.
EIP Microwave, Inc. remains in a leadership position in terms of the number
of products developed and available in the VXI format as the VXI market
continues to grow. With the introduction of the SimCard product in the VXIbus
format, penetration of the fast growing commercial wireless market is occurring.
Gross profit margin improved to 46%, compared to 44% last year, due to
changes in product mix and increased production and sales volume.
Research and development expenses increased 20% to $742,000 in fiscal 1995,
from $620,000 in the prior year, as the Company continues to focus on new
product development.
Selling, general and administrative expenses increased 4% to $2,289,000 in
fiscal 1995, compared to $2,197,000 last year, primarily due to increased
commission resulting from increased sales volume.
FINANCIAL CONDITION
As in prior years, the Company managed its balance sheet and financed its
business from cash on hand and cash generated from operations. On November 27,
1995, the Company renewed its bank line of credit ("line") which provides for
borrowings up to 70% of eligible accounts receivable, not to exceed $500,000,
which expires November 15, 1996. This line is secured by the Company's accounts
receivable, inventory and fixed assets. The agreement, as amended, contains
various restrictive covenants requiring, among other matters, the maintenance of
minimum levels of tangible net worth and certain financial ratios, including
debt to net worth. The Company believes that the cash on hand, funds generated
from operations and the Company's line of credit will adequately finance the
Company's operations during fiscal 1996.
5
<PAGE>
OUTLOOK
Focus will be on new product development with an emphasis on products with
increased commercial applications, including products for the wireless market.
The Company will continue to concentrate on orders for product configured in the
VXIbus format. Controlling expenses and minimizing debt will also be of primary
importance in fiscal 1996.
/s/ J. Bradford Bishop
J. Bradford Bishop
Chairman of the Board and
Chief Executive Officer
/s/ John F. Bishop
John F. Bishop
Vice-Chairman of the Board,
President, Secretary and Treasurer
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended September 30, 1995 1994 1993
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales $6,721 100% $5,389 100% $6,089 100%
Gross profit 3,075 46% 2,360 44% 2,594 43%
Research, development and engineering 742 11% 620 12% 1,022 17%
Other expenses 2,207 33% 2,193 41% 2,378 39%
Net income (loss) 125 2% (453) (8)% (806) (13)%
Net income (loss) per share 0.30 (1.06) (1.82)
Weighted average shares of common
stock and equivalents (in thousands) 423 428 442
FINANCIAL POSITION
Working capital 1,415 1,102 1,332
Long-term debt - - -
Stockholders' equity 1,716 1,591 2,044
Total assets 3,017 2,744 2,981
RATIO ANALYSIS (%)
Percent of net sales:
Gross profit 46 44 43
Research, development and engineering 11 12 17
Other expenses 33 41 39
Current ratio 2.09x 1.96x 2.42x
Debt to equity ratio (interest bearing) - - -
Debt ratio (total liabilities to total assets) 43% 42% 31%
</TABLE>
This data should be read in conjunction with Management's Discussion and
Analysis of Results of Operations and Financial Condition on pages 8-9.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for fiscal 1995 were $6,721,000, a 25% increase from fiscal 1994 sales
of $5,389,000. The increase in net sales in fiscal 1995, compared to the prior
year, was primarily attributable to increased international sales, orders from
government contractors, and sales of products configured in the VXIbus format.
The 11% decrease in fiscal 1994 net sales, compared to fiscal 1993 net sales of
$6,089,000 was attributable to market softness for the Company's products.
Average sales prices and foreign exchange rate fluctuations did not have a
material impact on net sales or gross profit margins for the last three fiscal
years.
The Company's gross profit margin increased in fiscal 1995 to 46%, from 44% in
fiscal 1994, and 43% in fiscal 1993. The increase in the fiscal 1995 gross
profit margin, compared to fiscal 1994 and fiscal 1993, is primarily due to a
change in product mix, and allocating a fixed element of overhead cost over a
higher production and sales volume as well as cost reduction activities in
fiscal 1994. Inflation did not have a material effect on revenues nor gross
profit during fiscal years 1995, 1994 or 1993.
Incoming orders for fiscal 1995 were $7,127,000, a 20% increase from $5,929,000
for the same period a year ago. Backlog at September 30, 1995, was $1,210,000,
a 40% increase from $862,000 at September 30, 1994. The increase in orders and
backlog in fiscal 1995, compared to the prior year, was primarily due to
increased international orders, orders from government contractors, and orders
for products configured in the VXIbus format. Incoming orders for the fiscal
1994 year increased 7% from $5,538,000 for the same period of the previous year.
Backlog at September 30, 1994 increased 144% from $353,000 at September 30,
1993.
The increases in orders and backlog for fiscal 1994, compared to fiscal 1993,
were due to an increase in order activity late in the 1994 fiscal year from the
United States Government and its contractors, and due to increased orders for
products configured in the VXIbus standard.
Research, development and engineering expenditures increased 20% to $742,000 in
fiscal 1995, from $620,000 in the prior fiscal year. The increase in fiscal
1995, compared to fiscal 1994, was a result of increased new product development
expenditures. Research, development and engineering expenditures in fiscal 1994
decreased 39%, compared to $1,022,000 in the prior year, primarily due to the
completion of significant research projects during late fiscal 1993. The
majority of the fiscal 1995 and 1994 investment was in the development of non-
VXIbus standard product.
Selling, general and administrative expenses increased 4% in fiscal 1995 to
$2,289,000, compared to $2,197,000 in fiscal 1994, primarily due to increased
commission expense resulting from increased sales volume. Selling, general and
administrative expenses decreased 8% in fiscal 1994, compared to $2,399,000 in
fiscal 1993, primarily due to a reduction in head count and reduced commission
expense resulting from decreased sales volume.
8
<PAGE>
The Company earned interest and dividend income of $25,000, $4,000, and $21,000,
during fiscal 1995, 1994, and 1993, respectively. The increase in interest and
dividend income earned in fiscal 1995, as compared to fiscal 1994, was primarily
due to increased earnings performance in short-term securities. Also included
in fiscal 1995 interest and other, net, is a gain on sales of fixed assets of
$56,000. The decrease in interest and dividend income in fiscal 1994, as
compared to fiscal 1993, was primarily due to reduced earnings performance in
short-term securities.
As a result of the foregoing, the Company earned $125,000 in fiscal 1995, as
compared to a net loss of $453,000 in fiscal 1994, and a net loss of $806,000 in
fiscal 1993.
FINANCIAL CONDITION
As in prior years, the Company managed its balance sheet and financed its
business from cash on hand and cash generated from operations. Accordingly, the
Company had no long-term debt and no short-term bank borrowings at September 30,
1995. At September 30, 1995, the Company's cash and short-term investments
combined were $445,000, compared to $519,000, at September 30, 1994, as the
Company used cash on hand to fund capital expenditures, and to fund operations.
The Company's accounts payable balance increased by $83,000 to a September 30,
1995 year end balance of $610,000. At September 30, 1995, the Company had no
material commitments for capital expenditures.
Working capital increased by $313,000 in fiscal 1995, after a decrease of
$230,000 in fiscal 1994. The Company's current ratio increased to 2.09:1 at
September 30, 1995, from 1.96:1 at September 30, 1994.
In addition to funds generated from operations, on November 27, 1995, the
Company renewed a line of credit agreement with a bank that allows the Company
to borrow on a short-term basis through November 15, 1996. The maximum
borrowings under this agreement are the lesser of $500,000, or 70% of the net
amount of the Company's eligible accounts receivable as determined by the bank,
bearing interest at the prime rate plus 2% per annum, provided that the interest
rate in effect each month shall not be less than 7.50% per annum. The
agreement, as amended, contains various restrictive covenants requiring, among
other matters, the maintenance of minimum levels of tangible net worth and
certain financial ratios, including debt to net worth.
Although the covenants have not materially limited the Company's borrowing
capabilities in the past, future performance and levels of capital expenditures
could reduce the total amount of funds available at any given time. The
agreement also precludes or limits the Company in taking certain actions, such
as paying dividends, making loans, making acquisitions or incurring
indebtedness, without the bank's prior written consent. The credit arrangement
is secured by substantially all of the Company's assets. At September 30, 1995,
no borrowings were outstanding on this line.
The Company believes that the cash on hand and funds generated from operations
will provide for the cash requirements for fiscal 1996.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) September 30, September 30,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 126 $ 211
Short-term investments 319 308
-------------------------------
445 519
Accounts receivable, net 1,064 714
Inventories 1,133 984
Prepaid expenses 74 38
-------------------------------
Total current assets 2,716 2,255
Property and equipment, net 271 459
Other assets 30 30
-------------------------------
$3,017 $2,744
-------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 610 $ 527
Accrued liabilities 691 626
-------------------------------
Total current liabilities 1,301 1,153
-------------------------------
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock, $.01 par value; authorized -
10,000,000 shares; 423,307 shares
issued and outstanding 5 5
Additional paid-in capital 844 844
Retained earnings 867 742
-------------------------------
Total stockholders' equity 1,716 1,591
-------------------------------
$3,017 $2,744
-------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
10
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended September 30, 1995 1994 1993
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Net sales $6,721 $5,389 $6,089
----------------------------------------------
Cost and expenses:
Cost of sales 3,646 3,029 3,495
Research, development and engineering 742 620 1,022
Selling, general and administrative 2,289 2,197 2,399
Interest and other, net (81) (4) (21)
----------------------------------------------
Total costs and expenses 6,596 5,842 6,895
----------------------------------------------
Net income (loss) $ 125 $ (453) $ (806)
----------------------------------------------
----------------------------------------------
Net income (loss) per share $ 0.30 $ (1.06) $ (1.82)
----------------------------------------------
----------------------------------------------
Weighted average common shares outstanding 423 428 442
----------------------------------------------
----------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
(Dollars in thousands) Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992 423,307 $ 4 $772 $2,001 $2,777
Stock issues 28,132 1 72 - 73
Net loss - - - (806) (806)
-----------------------------------------------------------------------
Balance at September 30, 1993 451,439 5 844 1,195 2,044
Rescission of fiscal 1993 stock issuance (28,132) - - - -
Net loss - - - (453) (453)
-----------------------------------------------------------------------
Balance at September 30, 1994 423,307 5 844 742 1,591
-----------------------------------------------------------------------
Stock issues - - - - -
Net income - - - 125 125
-----------------------------------------------------------------------
Balance at September 30, 1995 423,307 $ 5 $844 $ 867 $1,716
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
11
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
<TABLE>
<CAPTION>
For the years ended September 30, 1995 1994 1993
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 125 $ (453) $ (806)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 220 286 310
(Gain) loss on the sale of capital equipment (146) 10 35
Change in assets and liabilities:
Accounts receivable, net (350) (215) 477
Inventories (149) 161 233
Prepaid expenses and other assets (36) 29 4
Accounts payable 83 306 (172)
Accrued liabilities 65 (90) (142)
-----------------------------------
Cash (used in) provided by operating activities (188) 34 (61)
-----------------------------------
Cash flows from investing activities:
Purchase of short-term investments (11) - (311)
Capital expenditures (41) (70) (180)
Proceeds from the sale of capital equipment 155 - -
-----------------------------------
Cash provided by (used in) investing activities 103 (70) (491)
-----------------------------------
Decrease in cash and equivalents (85) (36) (552)
Cash and equivalents at beginning of year 211 247 799
-----------------------------------
Cash and equivalents at end of year $ 126 $ 211 $ 247
-----------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
NOTE 1. THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
The Company is in a single industry segment constituting the development,
manufacture, and sale of frequency test and measurement instruments. The
Company's primary products are microwave frequency counters which represented
64% of net sales in 1995, 75% of net sales in 1994, and 83% of net sales in
1993. Substantially all of its activities are conducted in the United States
and the Company has no foreign manufacturing operations nor material amounts of
foreign assets. Export sales, principally to customers in Western Europe, as a
percent of net sales were approximately 43% in 1995, 36% in 1994, and 48% in
1993. Profit margins are similar on foreign and domestic sales. Direct sales
to the United States government and its contractors as a percent of net sales
were approximately 36% in 1995 (11% to one government subcontractor), 44% in
1994, (14% to one government subcontractor), and 18% in 1993, (2% to one
government subcontractor). Foreign sales through Marconi Instruments
represented 19% of net sales in 1995, 16% of net sales in 1994 and 14% of net
sales in 1993.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany transactions and
accounts have been eliminated.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term investments, consisting of publicly traded preferred stocks and
government bonds, which mature on November 16, 1995, are stated at fair value.
Effective October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 requires companies to classify investments
in debt and equity securities with readily determinable fair values as "held-to-
maturity", "available for sale", or "trading" and establishes accounting and
reporting requirements for each classification. The Company classifies all
securities held as available for sale. The adoption of SFAS 115 did not have a
material effect on the Company's financial position or results of operations.
Securities classified as available for sale are reported at their fair market
value with unrealized gains and losses reported as a separate component of
stockholders' equity. Such unrealized gains and losses were immaterial as of
September 30, 1995 and 1994. Government bonds have a maturity of one year or
less. Publicly traded preferred stocks are considered highly liquid and are
classified as short-term investments.
13
<PAGE>
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents and
short-term investments and trade accounts receivable. The Company places its
cash, cash equivalents and short-term investments in a variety of financial
instruments such as certificates of deposit and marketable equity securities.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. The
Company maintains an allowance for uncollectible accounts receivable based upon
the expected collectibility of all accounts receivable balances. At September
30, 1995, the accounts receivable balance from three customers represented 19%,
17%, and 14% of net trade receivables.
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates actual
cost (determined on a first-in, first-out basis), or market.
PROPERTY AND EQUIPMENT
Purchased property and equipment are stated at cost and are depreciated using
the straight-line method over lives ranging from three to eight years. Self-
constructed demonstrator products are stated at their standard manufacturing
cost.
REVENUE RECOGNITION AND WARRANTY
Sales are recognized at the time of shipment provided no significant obligations
remain and collectibility is probable. The Company provides for the estimated
costs of fulfilling its warranty obligation at the time the related sale is
recorded.
INCOME TAXES
The Company utilizes an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequence of events that have been recognized in the Company's financial
statements or tax returns.
NET INCOME (LOSS) PER SHARE
The calculation of net income (loss) per share is based upon the weighted
average number of shares outstanding during the year. Common stock equivalents
were not materially dilutive.
14
<PAGE>
NOTE 2. CONSOLIDATED BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
(Dollars in thousands) September 30,
1995 1994
<S> <C> <C>
Accounts receivable:
Trade $1,138 $ 788
Less - allowance for
doubtful accounts (74) (74)
------------------
$1,064 $ 714
------------------
------------------
Inventories:
Raw materials $ 633 $ 576
Work-in-process 489 401
Finished goods 11 7
------------------
$1,133 $ 984
------------------
------------------
Property plant and equipment:
Machinery and
equipment $3,168 $3,222
Computer equipment
and software 1,160 1,270
Demonstrator equipment 359 395
Furniture, fixtures
and other fixed assets 471 501
------------------
5,158 5,388
Less: accumulated
depreciation (4,887) (4,929)
------------------
$ 271 $ 459
------------------
------------------
Accrued liabilities:
Salaries, wages
and benefits $ 157 $ 120
Commissions 61 54
Warranty 66 67
Other 407 385
------------------
$ 691 $ 626
------------------
------------------
</TABLE>
15
<PAGE>
NOTE 3. EMPLOYEE BENEFIT PLANS
RETIREMENT PLAN
The Company has a Retirement/Savings Plan which qualifies as a thrift plan under
Section 401(k) of the Internal Revenue Code. All employees who have completed
three months of service on or before the semiannual entry period are eligible to
participate in the Retirement Plan. The Retirement Plan allows participants to
contribute up to 12% of their earnings to the Retirement Plan and deduct this
amount from their wages for federal income tax purposes. The Company will
contribute 50 cents for each dollar contributed by the employee up to 3% of
total wages. Company contributions in fiscal years 1995, 1994, and 1993,
totaled $38,000, $37,000, and $45,000, respectively.
INCENTIVE COMPENSATION
The Company has an incentive compensation plan which provides for awards of
bonuses to officers and key employees based principally on achieving stipulated
Company financial objectives. In making specific awards, consideration is given
to the individual's contribution to the success of the Company, to the success
and performance of the unit or department of which the individual is a member,
and to the achievement of individual performance goals established at the
beginning of the fiscal year. The formula for computing bonuses has been
subject to annual modification and may in the future be again modified at the
discretion of the Board of Directors. Bonuses of $61,000 were awarded for
fiscal 1995 results. No bonuses were awarded for fiscal 1994 or fiscal 1993
results.
STOCK APPRECIATION RIGHTS PLAN
On November 11, 1992, the Board of Directors adopted a Stock Appreciation Rights
Plan ("SAR Plan"). The SAR Plan provides for the award of appreciation rights
("SARs") to officers and key management employees of the Company entitling such
participants to receive the increase, if any, in the value of one share of
Company common stock from the date of the award to the date(s) of valuation
established at the time of the award. Generally, SARs are deemed vested in five
equal annual installments. Each award vested will be paid in cash on a
scheduled payment date. During fiscal 1995 and 1994, no SARs were awarded.
During fiscal 1993, an aggregate of 44,600 SARs were awarded; 34,600 SARs had an
award price of $2.50, and 10,000 SARs had an award price of $2.75. A total of
2,760 SARs were vested during fiscal 1995. A total of 7,760 SARs were vested
during fiscal 1994. No SARs were vested during fiscal 1993. A total of 960,
24,040 and 800 SARs were canceled during fiscal 1995, 1994 and 1993,
respectively, leaving an aggregate of 8,280 SARs outstanding at September 30,
1995. The Company accrues a compensation liability over the vesting period based
on the increase in the market value of the common stock over the award price.
The liability recorded in fiscal 1995 was $34,660. At September 30, 1994, and
at September 30, 1993, the average of the bid and ask price of Company common
stock was less than the award price of the SARs awarded under the SAR Plan, and
consequently, no compensation liability was recorded for either fiscal 1994 or
fiscal 1993 relating to the SAR Plan.
STOCK OPTION PLAN
Under the Company's 1994 Stock Option Plan (the "Plan"), stock options may be
awarded to directors, consultants and employees to purchase up to 80,000 shares
of common stock at exercise prices determined by the Board of Directors. The
options can generally be awarded for periods up to 10 years and are subject to
vesting schedules as determined by the Board of Directors.
16
<PAGE>
The following table summarizes option activity under the Plan:
<TABLE>
<CAPTION>
Options Options Options
Available Outstanding Price Per Share
------------------------------------------
<S> <C> <C> <C>
Balance at September 30, 1994 - - $ -
Options authorized 80,000 - -
Options granted (57,500) 57,500 2.375
------------------------------------------
Balance at
September 30, 1995 22,500 57,500 $ 2.375
------------------------------------------
</TABLE>
As of September 30, 1995, none of the awarded options are exercisable.
NOTE 4. INCOME TAXES
Deferred tax assets (liabilities) are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Net operating loss carryforwards $ 1,016 $ 1,104 $ 982
Tax credit carryforwards 106 106 106
Inventory and other valuation reserves 190 182 142
Other - 77 101
--------------------------------------
Gross deferred tax asset 1,312 1,469 1,331
--------------------------------------
Depreciation expense - (35) (82)
Other - (5) (5)
--------------------------------------
Gross deferred tax liability - (40) (87)
--------------------------------------
Deferred tax asset valuation allowance (1,312) (1,429) (1,244)
--------------------------------------
$ - $ - $ -
--------------------------------------
--------------------------------------
</TABLE>
The Company provides a valuation allowance for deferred tax assets when it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.
The U.S. net operating loss carryforward of approximately $2,600,000 at
September 30, 1995, expires by fiscal year 2009 if not offset against taxable
income. The amount of and the benefit from net operating losses that can be
carried forward may be impaired in certain circumstances. Events which may
cause changes in the Company's tax carryovers include, but are not limited to, a
cumulative ownership change of more than 50% over a three-year period.
17
<PAGE>
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company's current building lease provides for rentals of $51,000 for fiscal
year 1996. The Company has signed a lease for 20,331 square feet in another
building located in Milpitas, California, for an initial term of three years
ending October 31, 1998. The lease provides for rentals of $207,000, $226,000,
and $226,000 for fiscal years 1996, 1997 and 1998, plus applicable real property
taxes and insurance, and contains one three year renewal option. Future lease
commitments for the next five fiscal years for all other leases are as follows
(in thousands):
FISCAL YEAR ENDING SEPTEMBER 30,
1996 $31
1997 31
1998 19
1999 5
Thereafter 3
---
$89
---
---
The Company also leases certain equipment on a month-to-month basis. Total
rental expense under all operating leases was $300,000, $364,000, and $420,000,
in fiscal years 1995, 1994, and 1993, respectively.
On October 1, 1995, the Company entered into an Employment Agreement (the
"Agreement") with John F. Bishop, Vice-Chairman of the Board, President,
Treasurer, and Secretary of the Company, whereby Mr. Bishop will provide his
services for a monthly salary of $6,500 for an initial term of two years. On
the first day of each month, the initial term is automatically extended for
an additional month, unless either party notifies the other in writing of his
or its desire not to extend the term. In the event the Company elects not to
extend the term or there is a change in control of the Company, Mr. Bishop
will continue to perform services for the Company for a three month
transition period and the Company would maintain his compensation and other
benefits for the three month transition period and an additional twenty-one
months. The Agreement also allows Mr. Bishop the use of an automobile and
the right to receive title to the automobile, arising out of his agreement to
forgo $56,846 of salary in prior years. Maintenance, insurance and gasoline
costs for the automobile and an office location are also part of the
Agreement. The corporate office is currently located in Newport Beach,
California, leased at a monthly rate of $1,320 on a month-to-month basis.
NOTE 6. LINE OF CREDIT
On November 27, 1995, the Company renewed a bank line of credit ("line") which
provides for borrowings up to 70% of eligible accounts receivable, not to exceed
$500,000, which expires November 15, 1996. Interest is charged at the bank's
prime rate plus 2% provided that the interest rate in effect each month shall
not be less than 7.5% per annum, and is payable monthly. This line is secured
by the Company's accounts receivable, inventory and fixed assets. The
agreement, as amended, contains various restrictive covenants requiring, among
other matters, the maintenance of minimum levels of tangible net worth and
certain financial ratios, including debt to net worth.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of EIP Microwave, 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 EIP
Microwave, Inc. and its subsidiary at September 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1995, 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
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.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
November 14, 1995
19
<PAGE>
STOCKHOLDERS' INFORMATION
PER SHARE STOCK DATA
1995 BID
HIGH LOW
First Quarter 3 1/4 1 3/4
Second Quarter 7 1 3/4
Third Quarter 9 1/4 1 1/4
Fourth Quarter 7 1/2 5 1/2
1994 BID
HIGH LOW
First Quarter 1 3/4 1 1/4
Second Quarter 1 1/4 1
Third Quarter 1 3/8 1
Fourth Quarter 1 3/4 1 1/4
The above table reflects the high and low bid information for the common stock
of EIP Microwave, Inc. based on quotes provided by NASDAQ Small Cap. These
quotations reflect interdealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions. The number
of stockholders of record as of December 18, 1995 was 146.
Under the terms of the current credit agreement, the Company may not pay or
declare dividends without the bank's prior written consent. No dividends were
paid during the past three (3) fiscal years.
ANNUAL MEETING
The Company's Annual Meeting of Stockholders will be held at 10:30 A.M. on
February 7, 1996, at One Big Canyon Drive, Newport Beach, California 92660.
FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for 1995 filed with the
Securities and Exchange Commission may be obtained by stockholders without
charge by a written request to John Ardizzone , EIP Microwave, Inc., 1745
McCandless Drive, Milpitas, California 95035-8024.
REGISTRAR AND TRANSFER AGENT
First Interstate Bank is the transfer agent and registrar for the Company's
common stock. Notices regarding changes of address, lost or stolen stock
certificates and transfers of stock, other than purchases or sales of stock,
should be directed to First Interstate Bank, 15821 Ventura Boulevard, Suite 670,
Encino, CA 91436-2946, Attention Stock Transfer Department.
"STREET NAME" HOLDERS
Some stockholders have their shares registered in their broker's name or "street
name". If you are a "street name" holder and are not receiving company
communications directly, we will be pleased to add you to our mailing list.
Please send your name and address to the Company's office.
20
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS CORPORATE OFFICERS
<S> <C>
J. BRADFORD BISHOP J. Bradford Bishop, Chairman of the Board
Chairman of the Board and and Chief Executive Officer
Chief Executive Officer
EIP Microwave, Inc. John F. Bishop, Vice-Chairman of the Board,
President, Secretary and Treasurer
JOHN F. BISHOP
Vice-Chairman of the Board, John J. Ardizzone, Jr., Chief Financial Officer,
President, Secretary and Treasurer Vice President Operations, and
EIP Microwave, Inc. Assistant Secretary
ROBERT D. JOHNSON 1,2 Ivan Andres, Vice President,
Private Investor Marketing and Sales
JAMES J. SHELTON 1,2
Private Investor, Venture Capitalist INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, San Jose, California
J. SIDNEY WEBB 1,2
Chairman of the Board
The Titan Corporation INFORMATION CONTACT
(Manufacturer of defense and industrial John J. Ardizzone, Jr., Chief Financial Officer,
products and systems.) Vice President Operations
EIP Microwave, Inc.
1745 McCandless Drive
Milpitas, CA 95035-8024
408/945-1477
1 Member, Audit Committee
2 Member, Compensation Committee
</TABLE>
21
<PAGE>
1995 FORM 10-KSB
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Name and State of Percent Owned
Description Incorporation By Company
----------- ------------- -------------
1. EIP International, Inc., Territory of the
a foreign sales corporation Virgin Islands 100%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 126
<SECURITIES> 319
<RECEIVABLES> 1,138
<ALLOWANCES> 74
<INVENTORY> 1,133
<CURRENT-ASSETS> 2,716
<PP&E> 5,158
<DEPRECIATION> 4,887
<TOTAL-ASSETS> 3,017
<CURRENT-LIABILITIES> 1,301
<BONDS> 0
<COMMON> 5
0
0
<OTHER-SE> 1,711
<TOTAL-LIABILITY-AND-EQUITY> 3,017
<SALES> 6,721
<TOTAL-REVENUES> 6,721
<CGS> 3,646
<TOTAL-COSTS> 3,646
<OTHER-EXPENSES> 2,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 125
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
