UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-7445
DATRON SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 95-2582922
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
304 Enterprise Street, Escondido, California 92029-1297
(Address of principal executive offices) (zip code)
(760) 747-3734
(Registrant's telephone number, including area code)
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15 (d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of October 23, 1998, the Registrant had only one class of
common stock, par value $0.01, of which there were 2,685,932
shares outstanding.
<PAGE>1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept 30, March 31
1998 1998
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $845 $634
Accounts receivable, net 14,259 15,487
Inventories 13,421 14,048
Deferred income taxes 3,502 3,502
Prepaid expenses and other current assets 833 848
-------- --------
Total current assets 32,860 34,519
Property, plant and equipment, net 9,763 10,864
Goodwill, net 5,544 5,646
Other assets 481 255
-------- --------
Total assets $48,648 $51,284
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,264 $8,745
Accrued expenses 3,771 3,932
Customer advances 2,072 965
Income taxes payable 541 203
Current portion of restructuring reserve --- 320
Current portion of long-term debt 1,681 ---
-------- --------
Total current liabilities 13,329 14,165
Long-term debt 3,212 5,600
Deferred income taxes 1,914 1,914
-------- --------
Total liabilities 18,455 21,679
-------- --------
Stockholders' equity:
Preferred stock -- par value $0.01; authorized
2,000,000 shares, none issued or outstanding --- ---
Common stock -- par value $0.01; authorized
10,000,000 shares, 3,076,711 and 3,070,063 shares
issued in September and March, respectively 31 31
Additional paid-in capital 10,716 10,670
Retained earnings 21,796 21,254
Treasury stock, at cost; 390,779 shares in
September and March (2,106) (2,106)
Stock option plan and stock purchase plan notes rec (244) (244)
-------- --------
Total stockholders' equity 30,193 29,605
-------- --------
Total liabilities and stockholders' equity $48,648 $51,284
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>2
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $13,729 $14,937 $29,018 $25,278
Cost of sales 9,661 11,326 20,872 19,312
------- -------- -------- --------
Gross profit 4,068 3,611 8,146 5,966
Selling, general and admin. 2,870 2,797 6,102 5,545
Research and development 513 471 963 860
-------- ------- -------- --------
Operating income (loss) 685 343 1,081 (439)
Interest expense (84) (81) (212) (202)
Interest income 39 --- 46 3
Other expense --- (4) --- (10)
-------- ------- -------- --------
Income (loss) before income taxes 640 258 915 (648)
Income taxes (benefit) 261 109 373 (249)
-------- ------- -------- --------
Net income (loss) $379 $149 $542 ($399)
======== ======= ======== ========
Earnings (loss) per common
share--basic $0.14 $0.06 $0.20 ($0.15)
======= ======== ======== ========
Weighted average number of
common shares outstanding 2,686 2,667 2,684 2,666
======= ======== ======== ========
Earnings (loss) per common
share--assuming dilution $0.14 $0.06 $0.20 ($0.15)
======= ======== ======== ========
Weighted average number of
common and common equivalent
shares outstanding 2,686 2,689 2,684 2,666
======= ======== ======= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>3
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended
September 30,
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $542 ($399)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,238 1,284
Restructuring (320) (452)
Changes in operating assets and liabilities:
Accounts receivable 1,228 1,341
Inventories 627 475
Prepaid expenses and other assets (220) (50)
Accounts payable and accrued expenses (3,642) (689)
Customer advances 1,107 1,757
Income taxes payable 338 ---
--------- ---------
Net cash provided by operating activities 898 3,267
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (102) (436)
Proceeds from sales of property, plant and equipment 76 ---
--------- ---------
Net cash used in investing activities (26) (436)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 3,293 ---
Decrease in revolving credit facility (4,000) (3,600)
Stock options exercised --- 126
Issuance of common stock 46 ---
Purchase of treasury stock --- (53)
--------- ---------
Net cash used in financing activities (661) (3,527)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 211 (696)
Cash and cash equivalents at beginning of period 634 1,072
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $845 $376
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>4
Datron Systems Incorporated
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
---------------------
The unaudited consolidated financial statements included herein
contain the accounts of Datron Systems Incorporated and its
wholly owned subsidiaries (the "Company") and have been prepared
in accordance with the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.
It is suggested that these financial statements be read in
connection with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the
fiscal year ended March 31, 1998.
In the opinion of the Company's management, the accompanying
unaudited financial statements contain all adjustments,
consisting only of normal recurring adjustments, unless otherwise
stated, which are necessary to present fairly its financial
position at September 30, 1998 and the results of its operations
and its cash flows for the periods presented. Results of
operations for the periods presented herein are not necessarily
indicative of what results will be for the entire fiscal year.
The balance sheet at March 31, 1998 has been derived from audited
financial statements.
2. Earnings (Loss) per Share
-------------------------
Effective for the three-month period ended December 31, 1997, the
Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." This statement provides
simplified standards for the computation and presentation of
earnings per share ("EPS"), making EPS comparable to
international standards. SFAS No. 128 requires dual presentation
on the face of the income statement of "Basic" and "Diluted" EPS
by entities with complex capital structures, replacing "Primary"
and "Fully Diluted" EPS illustrated under Accounting Principles
Board Opinion No. 15, "Earnings Per Share."
Basic EPS excludes dilution from common stock equivalents and is
computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the
period. Diluted EPS reflects potential dilution from common
stock equivalents, similar to Fully Diluted EPS, but uses only
the average stock price during the period as part of the
computation.
Shares used in computing earnings (loss) per common share
assuming dilution include the weighted average of common stock
outstanding plus equivalent shares issuable under the Company's
stock option plans, when such amounts are dilutive. Options to
purchase 317,000 shares of common stock at prices ranging from
$6.50 - $15.73 were not included in the computation of diluted
EPS at September 30, 1998 because the effect of such options
would be anti-dilutive. Such options expire at various dates
from May 16, 1999 to August 4, 2008.
3. Cash Equivalents
----------------
Cash equivalents consist of highly liquid investments purchased
with original maturities of three months or less and which are
readily convertible into cash.
<PAGE>5
4. Accounts Receivable
-------------------
At September 30, 1998 and March 31, 1998, accounts receivable
were as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ -----------
<S> <C> <C>
Billed $10,085,000 $ 8,676,000
Unbilled 4,485,000 7,001,000
------------ -----------
Subtotal 14,570,000 15,677,000
Allowance for doubtful
accounts ( 311,000) (190,000)
----------- -----------
Total $14,259,000 $15,487,000
=========== ===========
</TABLE>
5. Inventories
-----------
At September 30, 1998 and March 31, 1998, inventories were as
follows:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ -----------
<S> <C> <C>
Raw materials $ 7,419,000 $7,830,000
Work-in-process 3,568,000 4,067,000
Finished goods 2,434,000 2,151,000
------------ -----------
Total $13,421,000 $14,048,000
============ ===========
</TABLE>
Inventories are presented net of allowances for obsolescence of
$1,753,000 and $1,656,000 at September 30, 1998 and March 31,
1998, respectively.
6. Property, Plant and Equipment
-----------------------------
At September 30, 1998 and March 31, 1998, property, plant and
equipment was as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ -------------
<S> <C> <C>
Land and buildings $ 8,643,000 $ 8,557,000
Machinery and equipment 14,966,000 15,201,000
Furniture and office equipment 1,504,000 1,506,000
Leasehold improvements 817,000 821,000
Construction-in-process 113,000 299,000
------------ ------------
Subtotal 26,043,000 26,384,000
Accumulated depreciation and
amortization (16,280,000) (15,520,000)
------------ -----------
Total $ 9,763,000 $10,864,000
============ ===========
</TABLE>
7. Long-Term Debt
--------------
On August 7, 1998, the Company issued a promissory note to a life
insurance company in the amount of $3,300,000 pursuant to a loan
agreement under which the Company borrowed the same amount. The
note is secured by a deed of trust on the Company's Simi Valley
facility and has a maturity date of September 1, 2008. Monthly
payments are calculated on a 20-year amortization. Interest is
payable at a rate of 6.76% per annum through September 1, 2003,
at which date the interest rate becomes variable and tied to
LIBOR, adjusting every quarter for the remainder of the term. On
September 1, 2003, the Company may either prepay the note without
penalty or accept the variable rate provisions.
<PAGE>6
At September 30, 1998 and March 31, 1998, long-term debt was as
follows:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ ----------
<S> <C> <C>
Revolving line of credit at prime plus 1.50%
in September and at prime plus 0.85% in
March, due April 30, 1999. $1,600,000 $5,600,000
6.76% note payable due September 1, 2008 3,293,000 ---
---------- ----------
Total long-term debt $4,893,000 $5,600,000
Less current portion (1,681,000) ---
---------- ----------
Long-term debt $3,212,000 $5,600,000
========== ==========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Datron Systems Incorporated and its wholly owned subsidiaries
(the "Company") report operations in two business segments:
Antenna and Imaging Systems, and Communication Products and
Services. The Antenna and Imaging Systems business segment
designs and manufactures specialized satellite communication
systems, subsystems and antennas that are sold worldwide to
commercial and governmental customers, including the U.S.
Department of Defense ("DoD"). This segment also sells remote
sensing satellite earth stations to worldwide commercial,
scientific and military organizations. Another additional market
for this segment is mobile direct broadcast satellite ("DBS")
television reception systems for recreational vehicles, boats and
large business jets. The Communication Products and Services
business segment designs, manufactures and distributes high
frequency and very high frequency radios and accessories for
worldwide military and civilian purposes.
This Management's Discussion and Analysis of Financial Condition
and Results of Operations contains "forward-looking statements"
as defined in the Private Securities Litigation Reform Act of
1995. A variety of factors could cause the Company's actual
results to differ from the anticipated results expressed in such
forward-looking statements. These include, among others,
uncertainties stemming from the dependence of the Company on
foreign sales and on large orders from a relatively small number
of customers, risks relating to the decline in the Company's
traditional defense business and the Company's efforts to develop
and market consumer products, lack of timely development or
customer acceptance of new products, worldwide economic downturns
and currency devaluations, and the impact of competition.
Investors are referred to the Company's periodic reports under
the Securities Exchange Act of 1934, including without
limitation, the Investment Considerations set forth in the
Company's Annual Report on Form 10-K.
Results of Operations
- ---------------------
Net income for the second quarter of fiscal 1999 was $379,000, or
$0.14 per share, compared with net income of $149,000, or $0.06
per share, in the second quarter of fiscal 1998. Net sales in
the second quarter of fiscal 1999 were $13,729,000, an 8%
decrease from second quarter net sales last fiscal year of
$14,937,000. The decrease in sales was primarily due to lower
sales of remote sensing systems and radio products, partially
offset by higher sales of DBS antenna products. The increase in
net income for the second quarter resulted primarily from higher
gross margins.
Net income for the six months ended September 30, 1998 was
$542,000, or $0.20 per share, compared with a net loss of
$399,000, or $0.15 per share, for the comparable period last
fiscal year. Net sales for the six months were $29,018,000, a
15% increase from net sales of $25,278,000 for the first six
months last fiscal year. All product categories contributed to
the higher sales, including a 51% increase in sales of DBS
products from the first six months last fiscal year. The
improvement from a net loss to net income for the recent six
months was primarily due to higher gross profits on the higher
sales, partially offset by higher operating expenses.
<PAGE>7
Operating results for each business segment were as follows:
Antenna and Imaging Systems
- --------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $9,378,000 $9,769,000 $19,405,000 $16,988,000
========== ========== =========== ===========
Gross profit $2,420,000 $1,876,000 $4,775,000 $3,235,000
========== ========== =========== ===========
Operating income (loss) $749,000 $234,000 $1,099,000 ($108,000)
========== ========== =========== ===========
</TABLE>
Sales of Antenna and Imaging Systems products decreased 4% in the
second quarter of fiscal 1999 compared with the second quarter of
fiscal 1998. The decrease was due to lower sales of remote
sensing systems, partially offset by higher sales of DBS antenna
products. Sales in the first six months of fiscal 1999 were 14%
higher than in the first six months of fiscal 1998. The increase
was due to higher sales in all product categories.
Gross profit percentage on sales of Antenna and Imaging Systems
products was 25.8% in the second quarter of fiscal 1999 compared
with 19.2% in the second quarter last fiscal year. The increase
was primarily due to production efficiencies and the absence of
severance costs related to a reduction in personnel in the second
quarter of fiscal 1998. Gross profit percentage for the first
six months of fiscal 1999 was 24.6% of sales compared with 19.0%
of sales for the first six months of fiscal 1998. The increase
was primarily due to production efficiencies and to a more
favorable product mix.
Operating income percentage on sales of Antenna and Imaging
Systems products was 8.0% in the second quarter of fiscal 1999
compared with 2.4% in the second quarter last fiscal year. The
increase resulted from higher gross profits. Operating income
percentage for the first six months of fiscal 1999 was 5.7% of
sales compared with an operating loss percentage of 0.6% of sales
for the first six months of fiscal 1998. The improvement was
primarily due to higher gross profits.
Communication Products and Services
- -----------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $4,351,000 $5,168,000 $9,613,000 $8,290,000
========== ========== ========== ==========
Gross profit $1,648,000 $1,735,000 $3,371,000 $2,731,000
========== ========== ========== ==========
Operating income $285,000 $468,000 $654,000 $381,000
========== ========== ========== ==========
</TABLE>
Sales of Communication Products and Services decreased 16% in the
second quarter of fiscal 1999 compared with the second quarter of
fiscal 1998. The decrease was due to lower order bookings
resulting from delays in anticipated international orders. Sales
in the first six months of fiscal 1999 were 16% higher than in
the first six months of fiscal 1998. The increase was primarily
due to a faster turn around of orders in backlog at the beginning
of the fiscal year. Worldwide economic instability has been
responsible for the delay of several anticipated orders, and
future anticipated orders may likewise be delayed.
Gross profit percentage on sales of Communication Products and
Services was 37.9% in the second quarter of fiscal 1999 compared
with 33.6% in the second quarter last fiscal year. The increase
was primarily due to a more favorable product mix. Gross profit
percentage for the first six months of fiscal 1999 was 35.1% of
sales compared with 32.9% of sales for the first six months of
fiscal 1998 due to manufacturing efficiencies related to a higher
level of sales.
<PAGE>8
Operating income percentage on sales of Communication Products
and Services was 6.6% in the second quarter of fiscal 1999
compared with 9.1% in the second quarter last fiscal year. The
decrease was primarily due to higher administrative expenses.
Operating income percentage for the first six months of fiscal
1999 was 6.8% of sales compared with 4.6% of sales for the first
six months of fiscal 1998. The increase was due to higher gross
profits.
Consolidated expenses were as follows:
- -------------------------------------
Selling, general and administrative expenses were $2,870,000 in
the second quarter of fiscal 1999, a 3% increase compared with
second quarter of fiscal 1998 expenses of $2,797,000. The
increase was primarily due to higher administrative expenses at
the Communication Products and Services business segment.
Selling, general and administrative expenses for the first six
months of fiscal 1999 were $6,102,000, a 10% increase compared
with first six months of fiscal 1998 expenses of $5,545,000. The
increase was in line with the higher sales level and resulted
from higher selling and administrative expenses at both business
segments.
Research and development ("R&D") expenses were $513,000 in the
second quarter of fiscal 1999 compared with $471,000 in the
second quarter last fiscal year. The 9% increase resulted from
higher spending on development programs at the Antenna and
Imaging Systems business segment. R&D expenses in the first six
months of fiscal 1999 were $963,000, a 12% increase compared with
first six months of fiscal 1998 expenses of $860,000. The
increase resulted from higher spending on development programs at
both business segments. The Company plans to increase R&D
spending during the last six months of fiscal 1999 to further
improve tracking antenna capabilities and to improve its mobile
DBS television products.
Order backlog at September 30 was as follows:
- --------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Antenna and Imaging Systems $24,221,000 $23,971,000
Communication Products and
Services 3,866,000 5,988,000
----------- -----------
Total $28,087,000 $29,959,000
=========== ===========
</TABLE>
The 1% increase in Antenna and Imaging Systems backlog at
September 30, 1998 compared with September 30, 1997 was primarily
due to a higher order backlog at the beginning of the current
fiscal year, partially offset by higher sales during the first
six months ended September 30, 1998.
The 35% decrease in Communication Products and Services backlog
at September 30, 1998 compared with September 30, 1997 was
primarily due to lower order bookings in the second fiscal
quarter ended September 30, 1998. As previously noted, worldwide
economic instability has been responsible for the delay of
several anticipated orders. Future results of operations may be
adversely affected if additional orders are likewise delayed.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1998, working capital was $19,531,000 compared
with $20,354,000 at March 31, 1998, a decrease of $823,000 or 4%.
Major changes affecting working capital during this period were
the following: accounts receivable decreased $1,228,000 as
collections exceed sales; inventories decreased $627,000 due to
reductions in both antenna and radio products inventories;
accounts payable and accrued expenses decreased $3,642,000; and
customer advances increased $1,107,000. Additionally, borrowings
on the Company's line of credit with its bank in the amount of
$1,600,000 were reclassified as current from long-term because
the Company's credit agreement with its bank is scheduled to
expire in less than one year. The Company's cash position at
September 30, 1998 was $845,000 compared with $634,000 at March
31, 1998, an increase of 33%. At September 30, 1998, the Company
had borrowed $1,600,000 in term debt from its bank to meet
operating cash requirements.
On August 7, 1998, the Company borrowed $3,300,000 from a life
insurance company in exchange for a promissory note secured by a
deed of trust on the Company's Simi Valley facility. The
promissory note bears interest at 6.76% per annum and has a
maturity date of September 1, 2008. See Note 7 to the
Consolidated Financial Statements in Part I, Item 1.
<PAGE>9
Capital equipment expenditures were $102,000 during the first six
months of fiscal 1999 compared with $436,000 in the first six
months last fiscal year. The decrease was due to lower purchases
of equipment at both business segments. The Company anticipates
expenditures for capital equipment will increase during the last
six months of the current fiscal year.
At September 30, 1998, the Company had a $15,500,000 committed
revolving line of credit with its bank, of which up to
$15,000,000 may be used for the issuance of letters of credit and
up to $5,500,000 may be used for direct working capital advances
provided that total credit extended does not exceed $15,500,000.
The Company believes its existing working capital, anticipated
future cash flows from operations, available credit with its bank
and other financing alternatives available to the Company are
sufficient to finance presently planned capital and working
capital requirements through the end of fiscal 1999. Certain
business opportunities could arise that would require working
capital and credit availability for the issuance of letters of
credit in amounts that exceed current credit limits with its
bank. The Company believes there are alternative sources of
financing available that would provide the necessary credit in
that event; however, there can be no assurance the Company will
be able to obtain such financing.
Year 2000 Issues
- ----------------
Some software included in products sold or licensed to the
Company's customers and certain portions of the Company's
internal operating systems may be subject to failure as a result
of what is commonly known as the Year 2000 date issue (the "Year
2000 issue"). A discussion of this issue follows:
The Company's state of readiness.
- --------------------------------
The Company believes all systems and products currently sold and
new products under development are Year 2000 compliant. Although
the Company's assessment of its Year 2000 exposure is not
complete, the Company currently believes its potential exposure
to problems arising from the Year 2000 issue lies in three areas:
- Information technology ("IT") previously sold or licensed to
the Company's customers and non-IT components imbedded in
products previously sold to the Company's customers.
- IT and non-IT components (such as computer chips imbedded in
hardware) used in the Company's internal operating systems.
- Compliance with the Year 2000 issue by third parties with
whom the Company has a material relationship.
Products sold or licensed to customers:
Most of the Company's antenna and image processing products and
some of its radio communication products contain IT and non-IT
components that may be affected by the Year 2000 issue. The
Company is pursuing a three-phase program to identify and resolve
this exposure:
1. Identify all products that contain IT and non-IT systems
that are not Year 2000 compliant. To the extent practical,
identify all customers who are still using those products.
Status: Estimated 80% complete. Estimated completion date:
December 31, 1998.
2. Determine appropriate solutions to remedy the non compliant
products and systems. Those solutions may include software
upgrades, replacement of non compliant components, referral of
problems relating to third party-provided software to the
original supplier, or determination that the age of the product
or nature of the problem is such that replacement of the product
or system is the only practical solution. Status: Estimated 50%
complete. Estimated completion date: March 31, 1999.
3. Notify all identified customers of the Year 2000 issue
associated with their products and systems, and inform them of
the Company's policy regarding their situation. All products and
systems under warranty or service agreement as of December 31,
1998 will be made Year 2000 compliant by the Company. Other
customers who have products and systems that can economically be
made Year 2000 compliant will be offered software upgrades and
component replacement for a fee. Customers who have products or
systems that cannot economically be made Year 2000 compliant will
be so notified and informed of current product alternatives
offered by the Company. Status: Estimated 10% complete.
Estimated completion date: June 30, 1999.
<PAGE>10
Internal operating systems:
Some of the Company's internal operating systems are Year 2000
compliant and some are not. The Company is pursuing a two-phase
program to identify and resolve this exposure:
1. Systematically test and verify internal IT systems and
modules for Year 2000 compliance. To the extent practical,
systematically test and verify equipment and facility systems
that contain non-IT components. Status: Estimated 65% complete.
Estimated completion date: March 31, 1999.
2. Use internal programmers and outside consultants to upgrade
those internal IT systems and modules that are not Year 2000
compliant. Replace non-IT components that are not Year 2000
compliant. Status: Estimated 50% complete. Estimated
completion date: June 30, 1999.
Third party relationships:
Although the Company is rarely dependent on a single source of
supply for IT and non-IT components, the failure of a selected
supplier to timely deliver Year 2000 compliant IT and non-IT
components could jeopardize the Company's ability to meet its
required delivery schedules. (The Company is also dependent on
third party service providers, such as telephone companies, banks
and insurance carriers; however, the Company does not believe it
has significant Year 2000 exposure from those providers and has
not implemented any programs to assure Year 2000 compliance by
them.) The Company is pursuing a two-phase program to identify
and resolve Year 2000 exposure from third parties:
1. Develop a supplier compliance warranty for incorporation in
all purchase orders issued after March 31, 1999. That warranty
will require suppliers selling IT and non-IT components to the
Company to certify that items delivered are Year 2000 compliant
and require them to correct or replace any such item found to be
non compliant. Status: Estimated 10% complete. Estimated
completion date: March 31, 1999.
2. Develop alternative sources for IT and non-IT components
that are Year 2000 compliant in the event existing suppliers are
not able to meet compliance requirements. Status: Not yet
started. Estimated completion date: September 30, 1999.
Costs to address the Company's Year 2000 issues.
- -----------------------------------------------
To date, the Company has spent approximately $50,000 in
identifying and fixing Year 2000 issues and estimates it will
incur an additional $230,000 for remediation of its remaining
Year 2000 issues. Because the Company's assessment of its Year
2000 exposure is not complete, it is likely that this estimate
will change.
Risks of the Company's Year 2000 issues.
- ---------------------------------------
The Company believes the most reasonably likely worst case Year
2000 scenario would include a combination of some or all of the
following:
- - Products sold to some of its customers would fail to perform
some or all of their intended functions. The Company estimates
the maximum number of customers that may be affected is 75. In
such a situation, the Company's maximum obligation would be to
repair or replace the defective products to the extent the
Company is required to do so under its contracts with its
customers.
- - Internal IT modules or systems may fail to operate or may
give erroneous information. Such failure could result in
production and shipping delays, inability to generate or delays
in generation of financial reports and statements, and computer
network downtime resulting in numerous inefficiencies and higher
payroll expenses.
<PAGE>11
- - Non-IT components in HVAC, lighting, telephone, security and
similar systems might fail and cause the entire system to fail.
Non-IT components in production and test equipment might fail,
resulting in delays in production and new product development.
The Company's contingency plans.
- -------------------------------
The Company believes its plans for addressing the Year 2000 issue
as outlined above are adequate to handle the most reasonably
likely worst case scenario. The Company does not believe it will
incur a material financial impact for the risk of failure, or
from the costs associated with assessing the risks of failure,
arising from the Year 2000 issue. Consequently, the Company does
not intend to create a contingency plan other than as set forth
above.
<PAGE>12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
In August 1992, Trans World Communications, Inc. (Trans World), a
wholly owned subsidiary of the Company and which was renamed
Datron World Communications Inc. on March 31, 1995, was named as
defendant in a lawsuit filed by ATACS Corporation (ATACS) and
AIRTACS Corporation (AIRTACS) relating to a contract to provide
radio communication shelters. ATACS and AIRTACS contend that
Trans World entered into an agreement to team with them on the
contract and then wrongfully failed to use them as
subcontractors. They seek damages in excess of $2,000,000. In
rulings on May 28, 1997 and September 3, 1997, the court found
Trans World in breach of a teaming agreement and awarded ATACS
and AIRTACS one dollar ($1.00) in damages. On September 8,
1998, the appeal court affirmed the district court's decision
except as to the award of nominal damages, and remanded the
matter to the district court for further hearing on damages. The
Company believes that final resolution of this matter will not
materially affect the consolidated financial position of the
Company.
Item 2. Changes in Securities.
Pursuant to a business loan agreement with a bank, the Company
must comply with certain financial covenants. The agreement also
prohibits the Company from declaration or payment of dividends or
other distributions on the Company's stock, except under certain
conditions specified in the agreement. The Company is in
compliance with both requirements.
Item 4. Submission of Matters to a Vote of Security Holders
On August 5, 1998, the Company held its annual meeting of
stockholders, proxies for which were solicited pursuant to
Regulation 14a under the Act. All existing directors were re-
elected.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.65 Loan Agreement between Registrant and Jackson
National Life Insurance Company dated August 7,
1998.
10.66 Datron Systems Incorporated Profit Sharing
and Savings Plan (Amended and Restated as of April
1, 1998).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter.
<PAGE>13
SIGNATURES
Pursuant to the requirements 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.
DATRON SYSTEMS INCORPORATED
Date: October 29, 1998 /s/ WILLIAM L. STEPHAN
Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
LOAN AGREEMENT
by and between
JACKSON NATIONAL LIFE INSURANCE COMPANY, as Lender
and
DATRON RESOURCES INC., as Borrower
TABLE OF CONTENTS
1. INCORPORATION OF RECITALS 6
2. CERTAIN DEFINED TERMS 6
2.1. Affiliated Party 6
2.2. Agreement 6
2.3. Application/Commitment 6
2.4. Appraisal 6
2.5. Assignment of Leases 6
2.6. Intentionally Omitted 6
2.7. Building Laws 6
2.8. Business Day 7
2.9. Closing Date 7
2.10. Deed of Trust 7
2.11. Default Rate 7
2.12. Dollar 7
2.13. Environmental Indemnity Agreement 7
2.14. ERISA 7
2.15. Escrow Agent 8
2.16. Event of Default 8
2.17. Funding 8
2.18. Governmental Approvals 8
2.19. Governmental Authority 8
2.20. Intentionally Omitted 8
2.21. Guaranty 8
2.22. Hazardous Materials 8
2.23. Hazardous Materials Claims 8
2.24. Improvements 8
2.25. Interest 8
2.26. Internal Revenue Code 9
2.27. Laws 9
2.28. Lien 9
2.29. Loan 9
2.30. Loan Amount 9
2.31. Loan Closing 9
2.32. Loan Documents 9
2.33. Loan Fee 9
2.35. Maturity Date 10
2.36. Note 10
2.37. Payment Date 10
2.38. Permitted Exceptions 10
2.39. Phase I Environmental Assessment 10
2.40. Project 10
2.41. Real Property 10
2.42. Regular Interest 10
2.43. Regular Interest Payment Date 10
2.44. Regular Interest Rate 11
2.45. Security Agreement 11
2.46. Subordination Agreement 11
2.47. Taxes 11
2.48. Tenants 11
2.49. Title Company 11
3. LOAN AMOUNT. 11
3.1. Loan Amount 11
3.2. Borrower's Use of Loan Amount 11
4. FUNDING. 12
4.1. Amount of Funding 12
4.2. Procedure for Funding 12
4.3. Conditions Precedent to Funding 12
5. REGULAR INTEREST; DEFAULT INTEREST. 15
5.1. Accrual; Payment 15
5.2. Limitations on Regular Interest Payment Date 16
5.3. Default Interest Rate 16
5.4. Computation 16
5.5. Reset of Regular Interest Rate 16
5.6. Survival of Note and Other Loan Documents 17
6. PAYMENT 17
6.1. Amortized Payments 17
6.2. Prepayment 18
6.2.1. Prepayment Not Allowed 18
6.2.2. Prepayment Allowed 18
6.2.2.1. Second (2nd) Through Fifth (5th) Loan
Years 18
6.2.2.2. Sixth (6th) Loan Year 18
6.2.2.3. Seventh (7th) Loan Year Through Date Ninety
(90) Days Prior to Maturity Date 18
6.2.2.4. Ninety (90) Day Period Immediately
Preceding Maturity Date 19
6.2.2.5. Partial Prepayment 19
6.2.3. Prepayment Premium Upon Acceleration 19
6.2.3.1. During the First (1st) Loan Year 19
6.2.3.2. After the First (1st) Loan Year 19
6.2.4. Waiver 20
6.3. Treatment of Payments 20
6.4. No Set-Off 20
6.5. Late Charges 21
7. MATURITY DATE 21
7.1. Maturity Date 21
7.2. Right to Accelerate Maturity Date 21
7.2.1. Lender's Option to Accelerate 21
7.2.2. Sale or Further Encumbrance 22
7.2.3. Change in Ownership 22
8. LOAN DOCUMENTS 22
9. LOAN FEE 23
10. REPRESENTATIONS AND WARRANTIES 24
10.1. Title 24
10.2. No Litigation 24
10.3. Due Authorization 24
10.4. Breach of Laws or Agreements 24
10.5. Leases 25
10.6. Condemnation 25
10.7. Consents and Taxes 25
10.8. Condition of Improvements 25
10.9. Information Correct 26
10.10. Material Adverse Change 26
10.11. Solvency 26
10.12. Zoning 26
10.13. Utilities 27
10.14. Brokerage Fees 27
10.15. Encroachments 27
10.16. Separate Parcel 27
10.17. ERISA 27
10.18. No Default 27
10.19. Trade Name; Principal Place of Business 27
10.20. FIRPTA 27
10.21. RICO 27
10.22. No Casualty 28
10.23. Hazardous Materials 28
11. BORROWER'S COVENANTS 28
11.1. Escrow Deposits 28
11.2. Payment of Taxes 29
11.3. Maintenance of Insurance 30
11.4. Mechanics' Liens 32
11.5. Maintenance, Repair and Restoration of
Improvements 33
11.6. Leases and Lease Reports 33
11.7. Compliance With Laws 33
11.8. Alterations 33
11.9. Personal Property 34
11.10. Prohibition Against Cash Distributions and
Application of Cash Flow 34
11.11. Inspection by Lender 34
11.12. Furnishing Information 34
11.13. Documents of Further Assurance 35
11.14. Furnishing Reports 35
11.15. Operation of Project and Zoning 35
11.16. Management, Agents' and Brokers' Contracts 36
11.17. Furnishing Notices 36
11.18. Corporate Existence 36
11.19. Articles of Incorporation 36
11.20. Publicity 36
11.21. No Additional Debt 36
11.22. Payments 37
12. SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES 37
13. EVENTS OF DEFAULT 37
13.1. Events of Default 37
13.2. Remedies Conferred Upon Lender 39
13.2.1. Lender's Remedies 39
13.2.2. Non-Waiver of Remedies 39
13.2.3. Rents and Profits 39
13.2.4. Remedies Cumulative 40
13.2.5. Indemnification 40
14. EXPENSES, CHARGES AND ATTORNEYS' FEES 40
14.1. Expenses 40
14.2. Attorneys' Fees and Expenses 41
15. CASUALTY AND CONDEMNATION 42
15.1. Lender's Election to Apply Insurance and
Condemnation Proceeds to Indebtedness 42
15.2. Borrower's Obligation to Rebuild and Use of
Proceeds Therefor 43
16. ENVIRONMENTAL COVENANTS AND INDEMNITY 44
16.1. Compliance With Laws 44
16.2. Prohibited Acts 44
16.3. Notification; Right to Audit 44
16.4. Hazardous Materials Liabilities 45
16.5. Remedial Work 46
16.6. Indemnification 46
16.7. Survival 47
17. GENERAL PROVISIONS 47
17.1. Captions 47
17.2. Merger 47
17.3. Notices 47
17.4. Modification; Waiver 48
17.5. Governing Law 48
17.6. Further Assurances 48
17.7. General Provisions Relating to Interest 48
17.8. Estoppel Certificates 50
17.9. Acquiescence Not to Constitute Waiver of
Lender's Requirements 50
17.10. Disclaimer by Lender 50
17.11. No Partnership 51
17.11.1. Creditor-Debtor Relationship 51
17.11.2. Indemnification 51
17.12. Right of Lender to Make Advances to Cure
Borrower's Defaults 52
17.13. Definitions Include Amendments 52
17.14. Time Is of the Essence 52
17.15. Execution in Counterparts 52
17.16. Waiver of Consequential Damages 52
17.17. Jurisdiction and Venue 53
17.18. Severability 53
17.19. Assignments 53
17.19.1. Lender's Right to Assign 53
17.19.2. Prohibition of Assignments by Borrower 53
17.19.3. Intentionally Omitted 54
17.19.4. Successors and Assigns 54
17.20. Pronouns 54
17.21. Resolution of Drafting Ambiguities 54
17.22. Conflicts 54
17.23. Attorneys' Fees; Legal Action 54
17.23.1. Attorneys' Fees 54
17.23.2. Legal Action 55
17.24. Exhibits 55
17.25. Intentionally Omitted 55
17.26. Recourse 55
17.27. WAIVER OF JURY TRIAL 56
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as
of the 7th day of August, 1998, by and between DATRON
RESOURCES INC., a California corporation ("Borrower"),
on the one hand, and JACKSON NATIONAL LIFE INSURANCE
COMPANY, a Michigan corporation, on the other hand
("Lender").
RECITALS
This Agreement is made with reference to the
following facts:
A. Borrower is a corporation which has its
principal place of business at 304 Enterprise Street,
Escondido, California 92029. Borrower's sole
shareholder is Datron/Transco Inc.
B. Borrower is the owner of that certain real
estate (the "Real Property") located in the City of Simi
Valley, County of Ventura, State of California,
consisting of approximately 8.90 acres which is improved
with one (1) industrial building containing 111,960 net
rentable square feet, consisting of approximately fifty
percent (50%) corporate office finish, commonly known as
the Datron Transco Building (the "Building"). The Real
Property is more particularly described in Exhibit "A"
attached hereto and made a part hereof.
C. Borrower desires to refinance the Real
Property and the Building, and to enable it to do so,
Borrower desires to borrow from Lender the sum of Three
Million Three Hundred Thousand and No/100 U.S. Dollars
(U.S. $3,300,000.00).
D. Lender is willing to lend the sum of Three
Million Three Hundred Thousand and No/100 U.S. Dollars
(U.S. $3,300,000.00) to Borrower upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein and for other valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as
follows:
1. INCORPORATION OF RECITALS. The above Recitals are
incorporated herein by this reference.
2. CERTAIN DEFINED TERMS. The following terms as used
herein shall have the following meanings:
2.1. Affiliated Party shall mean any person or
entity who, directly or indirectly, whether by itself or
through one or more intermediaries, controls or is
controlled by, or is under common control with,
Borrower, including but not limited to any entity whose
principals are comprised of, identical to, or
substantially in common with Borrower, or the principals
of Borrower.
2.2. Agreement shall mean this Agreement, as
originally executed or as may be hereafter supplemented
or amended from time to time in writing.
2.3. Application/Commitment shall mean the written
application submitted to PPM Finance, Inc. for the Loan
(as defined below) dated April 22, 1998, as modified by
handwritten comments thereon and that certain Mortgage
Loan Application Amendment No. 1 - Revised, dated June
1, 1998, and the acceptance thereof as a commitment
dated July 1, 1998.
2.4. Appraisal shall mean an appraisal which: (i)
is prepared by an appraiser who (a) is a member of a
national appraisal organization that has adopted the
Uniform Standards of Professional Appraisal Practice
(USPAP) established by the Appraisal Standards Board of
the Appraisal Foundation, and (b) uses the assumptions
and limiting conditions established by Lender; and (ii)
conforms with Lender's appraisal guidelines and the
requirements of the Application/Commitment.
2.5. Assignment of Leases shall mean that certain
document entitled Assignment of Leases, Rents, Issues
and Profits of even (or approximately even) date
herewith executed by Borrower in favor of Lender, in the
form attached hereto as Exhibit "D."
2.6. Intentionally Omitted.
2.7. Building Laws shall mean all federal, state
and local laws, statutes, regulations, codes,
ordinances, orders, rules and requirements applicable to
the development, construction, use, operation,
management and maintenance of the Property (as defined
below), including any and all access, building, zoning,
planning, subdivision, fire, traffic, safety, health,
labor, discrimination, environmental, air quality,
wetlands, shoreline, flood plain laws, regulations and
ordinances, including, without limitation, all
applicable requirements of the Fair Housing Act of 1988
(as amended), the Americans with Disabilities Act of
1990, as amended and all orders or decrees of any court
adopted or enacted with respect thereto applicable to
the Project, as any of the same may from time to time be
amended, modified or supplemented.
2.8. Business Day shall mean any day on which (i)
dealings in U.S. Dollar deposits between banks may be
carried on in New York, New York, and (ii) Lender is
open for business at its principal place of business in
Chicago, Illinois.
2.9. Closing Date shall mean the date of the
Funding (as defined below) and recordation of the Deed
of Trust (as defined below). The Closing Date shall
occur no later than August 31, 1998 or such later date
as the parties may hereafter agree upon in writing. If
the Funding has not occurred on or before August 31,
1998, this Agreement may be declared null, void and of
no force or effect, at Lender's sole option.
2.10. Deed of Trust shall mean that certain
Deed of Trust, Assignment of Rents and Security
Agreement of even (or approximately even) date herewith,
encumbering the Project (as defined below), executed by
Borrower, as Trustor, for the benefit of Lender, as
Beneficiary, in the form attached hereto as Exhibit "C,"
granting Lender a first priority lien and security
interest in the Project to secure Borrower's payment of
the amounts due and performance of the obligations under
the Loan Documents (as defined below).
2.11. Default Rate shall mean a rate per annum
equal to the lesser of (i) eighteen percent (18%), or
(ii) the Highest Lawful Rate (as defined in Section
17.7, below).
2.12. Dollar, Dollars and $ shall mean dollars
in lawful currency of the United States of America.
2.13. Environmental Indemnity Agreement shall
mean the document entitled Environmental Indemnity
Agreement of even (or approximately even) date herewith
executed by Borrower, as "Indemnitor" thereunder, for
the benefit of Lender and others, as "Indemnified
Parties" thereunder, in the form attached hereto as
Exhibit "G."
2.14. ERISA shall mean the Employee Retirement
Income Security Act of 1974, as amended, and the
regulations promulgated thereunder from time to time.
2.15. Escrow Agent shall mean Chicago Title
Company, 700 South Flower Street, Los Angeles,
California, 90017 Attention: Laine Cheng.
2.16. Event of Default shall mean any one of
the "Events of Default" set forth in Section 13.1,
below.
2.17. Funding shall mean the advance of the
Loan Amount (as defined below) made by Lender to
Borrower pursuant to Section 4, below.
2.18. Governmental Approvals shall mean all
required consents, licenses and permits and all other
authorizations or approvals relating to the operation of
the Project (as defined below) by a Governmental
Authority (as defined below).
2.19. Governmental Authority shall mean any
federal, state, county or municipal government, or
political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality, or public body,
or any court, administrative tribunal, or public
utility.
2.20. Intentionally Omitted.
2.21. Guaranty shall have the meaning ascribed
to it in Section 4.3(c), below.
2.22. Hazardous Materials shall have the
meaning ascribed to it in Section 16.2, below.
2.23. Hazardous Materials Claims shall have the
meaning ascribed to it in Section 16.3, below.
2.24. Improvements shall mean with respect to
the Real Property (as defined below), all of Borrower's
ownership interest in (i) the Building, including all
present and future structures, buildings (including
roofs and exterior walls), improvements, appurtenances,
landscaping, pavement, and fencing, and (ii) fixtures of
any kind located on any portion of the Real Property,
including all apparatus, equipment, furniture, and
appliances located on, in or at the Building, including
without limitation, heating and air-conditioning
systems, life safety systems, window coverings, drapes
and rods, carpeting and floor coverings, as described in
Exhibit "B" attached to the Deed of Trust and
incorporated herein by this reference, it being intended
and agreed that all such items shall be conclusively
considered to be a part of the Real Property, whether or
not attached or affixed thereto.
2.25. Interest shall mean Regular Interest (as
defined below) or Default Interest (as defined in
Section 5.3, below), as applicable.
2.26. Internal Revenue Code shall mean the
Internal Revenue Code of 1986, as amended from time to
time, the regulations promulgated thereunder from time
to time, and any successor statute.
2.27. Laws shall mean collectively, all
federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including
judicial opinions or precedential authority in the
applicable jurisdiction, as any of the same may from
time to time be amended, modified or supplemented.
2.28. Lien shall mean any lien, mortgage,
pledge, security interest, lease, charge, option or
encumbrance of any kind, whether voluntary or
involuntary (including any conditional sale or other
title retention agreement, any lease in the nature
thereof, and any agreement to create or give any
security interest).
2.29. Loan shall mean the loan made by Lender
to Borrower pursuant to the terms of this Agreement, the
Note (as defined below) and the other Loan Documents (as
defined below).
2.30. Loan Amount shall mean the principal
amount of Three Million Three Hundred Thousand and
No/100 U.S. Dollars (U.S. $3,300,000.00).
2.31. Loan Closing shall mean the Closing Date.
2.32. Loan Documents shall mean and include
this Agreement, the Note (as defined below), the Deed of
Trust, the Security Agreement (as defined below), the
Assignment of Leases, the Guaranty, the UCC-1 Financing
Statement, the Environmental Indemnity Agreement, the
Subordination Agreement (defined below) and other
specific written agreements and instruments by and
between Borrower and Lender which evidence, secure or
directly relate to the Loan, as originally executed or
as any of the same may be hereafter supplemented or
amended from time to time in writing.
2.33. Loan Fee shall mean a sum equal to the
good faith deposit in the amount of Thirty-Three
Thousand and No/100 U.S. Dollars (U.S. $33,000.00), the
commitment fee in the amount of Thirty-Three Thousand
and No/100 U.S. Dollars (U.S. $33,000.00), and the rate
lock deposit in the amount of Thirty-Three Thousand and
No/100 U.S. Dollars (U.S. $33,000.00), all payable as
provided in Section 9, below.
2.34. Loan Year shall mean any twelve (12)
month period commencing on September 1st in one calendar
year and ending on August 31st in the succeeding
calendar year. Notwithstanding the foregoing, the first
Loan Year shall mean the period commencing on the date
of Funding and ending on August 31, 1999, and the last
Loan Year shall mean the period commencing on September
1, 2007 and ending on the Maturity Date. By way of
example, the second Loan Year shall mean the period
commencing on September 1, 1999 and ending on August 31,
2000, the third Loan Year shall mean the period
commencing on September 1, 2000 and ending on August 31,
2001, and so on.
2.35. Maturity Date shall be as defined in
Section 7.1, below.
2.36. Note shall mean that certain document
entitled Promissory Note Secured By Deed of Trust to be
executed by Borrower payable to the order of Lender in
the face amount of Three Million Three Hundred Thousand
and No/100 U.S. Dollars (U.S. $3,300,000.00) in the form
attached hereto as Exhibit "B."
2.37. Payment Date shall mean (i) the date on
which any payment of principal, Regular Interest (as
defined below) or Default Interest (as defined herein)
is due, or (ii) the Maturity Date, as the context
requires.
2.38. Permitted Exceptions shall mean those
Liens and other matters with respect to the Real
Property which are described on Exhibit "K" attached
hereto and made a part hereof and any such other title
exceptions or objections, if any, as Lender may approve
in advance in writing.
2.39. Phase I Environmental Assessment shall
mean that certain Phase I Environmental Assessment of
the Real Property dated as of July 15, 1998, prepared by
Versar, Inc.
2.40. Project shall mean all of the Real
Property and Improvements, including but not limited to
the Building, all rights, privileges, easements,
hereditaments and appurtenances, thereunto relating or
appertaining, and all personal property, fixtures and
equipment required or used (or to be used) for the
operation thereof owned by Borrower in which Lender is
granted a Lien and/or security interest under any of the
Loan Documents.
2.41. Real Property shall mean that certain
parcel of real property more particularly described in
Exhibit "A" attached hereto and made a part hereof, as
well as all entitlements, rights and easements
appurtenant thereto.
2.42. Regular Interest shall mean interest on
the unpaid principal balance of the Loan at the Regular
Interest Rate (as defined below), as determined pursuant
to this Agreement.
2.43. Regular Interest Payment Date shall mean
the first (1st) day of each and every calendar month
during the term hereof; provided, however, that if any
such date is not a Business Day, the Regular Interest
Payment Date shall be the first (1st) Business Day which
precedes the first (1st) day of the calendar month.
Regular Interest shall be payable on each Regular
Interest Payment Date; provided, however, that if the
Closing Date falls on any date which is not the first
(1st) day of a calendar month, then the first payment of
Regular Interest (which shall be a prorated amount based
on the number of days from and including the date of
Funding to and excluding the first (1st) Regular
Interest Payment Date occurring after the date of
Funding) shall not be made on the first Regular Interest
Payment Date, but shall be due and payable concurrently
with the Funding of the Loan. The second payment of
Regular Interest shall then be due, according to
schedule, on the second Regular Interest Payment Date
occurring after the date of the Funding.
Notwithstanding anything in this Agreement to the
contrary, no Regular Interest Payment Date may extend
beyond the Maturity Date.
2.44. Regular Interest Rate shall mean interest
at an annual rate of six and seventy-six one-hundredths
percent (6.76%), as such rate shall be reset in
accordance with Section 5.5, below.
2.45. Security Agreement shall mean the
document entitled Security Agreement of even (or
approximately even) date herewith executed by Borrower
in favor of Lender, in the form attached hereto as
Exhibit "E."
2.46. Subordination Agreement shall mean that
certain Subordination and Attornment Agreement, of even
date (or approximately even) herewith, by and among
Borrower, Lender and Tenant (defined below)
substantially in the form attached hereto as Exhibit
"H."
2.47. Taxes shall mean taxes, levies, imposts,
duties, withholdings or other charges of whatever nature
levied, imposed, collected, withheld or assessed by any
Government Authority or any political subdivision or
taxing authority thereof, other than any such charges on
or measured by the net income, net worth or
shareholders' capital of Lender.
2.48. Tenants shall mean the lessees of the
Building, or any assignee or successor-in-interest
thereto.
2.49. Title Company shall mean Chicago Title
Company, whose address is set forth in Section 2.15,
above.
3. LOAN AMOUNT.
3.1. Loan Amount. Subject to the terms and
conditions of this Agreement, Lender agrees to lend to
Borrower and Borrower agrees to borrow from Lender the
Loan Amount for the purpose of refinancing the Project
which must be substantially in accordance with the
sources and uses statement attached to the
Application/Commitment. To further evidence the Loan
and/or to secure its payment, Borrower shall execute and
deliver to Lender the Loan Documents as required by this
Agreement.
3.2. Borrower's Use of Loan Amount. Borrower shall
use the Loan Amount solely and exclusively for the
purpose stated in Section 3.1, above and other uses
directly related to maintaining, managing, owning and
improving the Real Property and/or Improvements,
including expenses incurred in connection with obtaining
the Loan. Borrower shall not use any portion of the
Loan Amount for any purpose not specifically permitted
pursuant to this Section 3.2 without the prior written
consent of Lender, which consent may be withheld in
Lender's sole and absolute discretion.
4. FUNDING.
4.1. Amount of Funding. Unless otherwise
specifically provided in writing by Lender and Borrower,
the Loan shall be funded to Borrower in one funding in
an amount equal to the Loan Amount.
4.2. Procedure for Funding. So long as (i) no
Event of Default has occurred and/or is continuing
hereunder, and (ii) all conditions precedent specified
in Section 4.3, below, have been satisfied by Borrower
or waived in writing by Lender by no later than one (1)
day prior to the Closing Date, Lender shall wire
transfer the Loan Amount to the Title Company and shall
deliver Lender's closing instructions to the Title
Company and/or the Escrow Agent. The Loan Amount shall
be held in escrow by the Title Company until the Loan
Documents have been fully executed by Borrower and have
been delivered to Lender, or are held by the Title
Company for delivery to Lender, and all other
instructions contained in Lender's closing instructions
to the Title Company have been satisfied.
4.3. Conditions Precedent to Funding. The
obligation of Lender to make the Loan is subject to
Borrower having satisfied or Lender having waived in
writing (each as determined by Lender in its sole and
absolute discretion) each of the following conditions
precedent at or prior to the Closing Date:
(a) Borrower has delivered, or the Title
Company is prepared to deliver to Lender the Note, the
Deed of Trust and all other Loan Documents each in form
and substance satisfactory to Lender and each duly
executed and delivered by Borrower.
(b) Title Company is prepared to issue to
Lender with respect to the Real Property an ALTA
Extended-Coverage Lender's Policy of Title Insurance (at
Borrower's sole expense), which policy shall have a
liability amount not less than the Loan Amount and shall
be subject only to the Permitted Exceptions (the "Title
Policy"). The Title Policy shall (a) be issued in ALTA
(1970) form, or another form accepted and approved by
Lender, and (b) include: (i) coverage satisfactory to
Lender, including, but not limited to, coverage insuring
the priority of the Lien of the Deed of Trust over
mechanic's, materialmen's or laborers' liens,
notwithstanding the commencement of any work or
improvement visible on the Real Property; (ii)
endorsements required by Lender; and (iii) coverage
and/or direct access reinsurance otherwise required by
and satisfactory to Lender.
(c) Borrower has delivered, has caused to be
delivered, or the Title Company is prepared to deliver
to Lender a guaranty (the "Guaranty"), executed by an
authorized signatory of Datron Systems Incorporated (the
"Guarantor"), as Guarantor for the benefit of Lender
with respect to Borrower's obligations hereunder, in the
form attached hereto as Exhibit "K."
(d) Borrower shall have delivered to Lender
an Urban ALTA/ACSM Land Title Survey of the Real
Property and the Improvements (at Borrower's sole
expense) prepared by a professional land surveyor
entirely satisfactory to Lender (the "Survey"), which
Survey shall be certified to Lender and the Title
Company. In addition, the record legal description of
the Real Property must appear on the Survey, and any
record easements or servitudes and covenants affecting
the Real Property must be plotted thereon. The Survey
must (i) be dated no more than sixty (60) days earlier
than the Closing Date, (ii) provide evidence
satisfactory to Lender that all streets providing access
to the Project are dedicated for public use and
maintained by the appropriate governmental authority,
(iii) provide evidence that all utilities, including
electricity, gas, water and sewage, reach the property
by means of valid easements and (iv) be in a form
satisfactory to Lender.
(e) Lender shall have received (i) a
certified copy of the Articles of Incorporation of
Borrower, (ii) a copy of the by-laws of Borrower, (iii)
a Certificate of Status for Borrower (evidencing that
Borrower is in good standing in California) issued by
the Secretary of State of California dated as of a date
not earlier than thirty (30) calendar days prior to the
Closing Date, and (iv) a list of all officers, directors
and shareholders of Borrower with an indication of
shares held by each.
(f) Lender shall have received a certified
resolution of Borrower's Board of Directors authorizing
(i) the borrowing made by Borrower pursuant to this
Agreement, and (ii) the execution and delivery of the
Loan Documents by the person(s) signing this Agreement
and the other Loan Documents on behalf of Borrower.
(g) Lender shall have received an opinion of
counsel for Borrower and an opinion of counsel for
Guarantor both in form and substance acceptable to
Lender covering, without limitation, those items set
forth in the Application/Commitment.
(h) Borrower shall have delivered to Lender,
at Borrower's sole expense, a UCC lien search on
Borrower, Datron Systems Incorporated, and the Building,
respectively, for the State of California (Secretary of
State's Office) and the County of Ventura which: (i) is
prepared by a search company acceptable to Lender; (ii)
is dated as of a date not earlier than thirty (30) days
prior to the Closing Date; and (iii) reflects no UCC
financing liens on the Project other than those
previously approved in writing by Lender's counsel.
(i) Lender shall have received all financial
information from Borrower required under the
Application/Commitment, or otherwise, and all such
information shall be satisfactory to Lender.
(j) Lender shall have been provided with
certificates evidencing all the insurance policies on
the Project required by Lender pursuant to the Deed of
Trust, which policies shall include a standard "Lender's
Loss Payable Endorsement" satisfactory to Lender naming
Lender as an additional insured and mortgagee. The
originals of said certificates shall be provided to
Lender no later than thirty (30) days after the Closing
Date.
(k) Lender shall have received and approved
the Appraisal, which Appraisal shall be subject to, and
must satisfy, all of Lender's requirements, as set forth
in the Application/Commitment, or otherwise.
(l) Borrower shall have delivered to Lender
and Lender shall have approved, the Phase I
Environmental Assessment, which Phase I Environmental
Assessment shall be subject to, and must satisfy, all of
the requirements set forth in the
Application/Commitment. Borrower shall have also
delivered to Lender a fully-executed Environmental
Indemnity Agreement, in form and content identical to
that attached hereto as Exhibit "G."
(m) Borrower shall have caused an engineering
inspection of the Real Property and the Improvements to
be completed, and delivered to Lender a summary of the
findings of such inspection in form and content
satisfactory to Lender. Such inspection shall be
subject to, and must satisfy, all of the requirements
set forth in the Application/Commitment.
(n) Borrower shall have caused a seismic
inspection of the Real Property and the Improvements to
be completed, and delivered to Lender a summary of the
findings of such an inspection in form and content
satisfactory to Lender. Such inspection shall be
subject to, and must satisfy, all of the requirements
set forth in the Application/Commitment.
(o) Borrower shall have delivered to Lender
true and complete copies of all leases, subleases,
option agreements, management agreements and other
rental or occupancy agreements relating to the Property
and all amendments or modifications thereto. Borrower
also shall have provided or delivered to Lender: (i) a
copy of Borrower's proposed form lease, which form lease
shall have been approved by Lender; (ii) a copy of the
most current financial statement for each lessee, along
with financial statements for the prior (3) three years
(if available) for each lessee; (iii) an estoppel
certificate and Subordination Agreement from each
lessee; and (iv) at least five (5) Business Days prior
to Loan Closing, a certified Rent Roll (as defined
below) of the Project for the ten (10) days prior to
Closing, evidencing that (a) the tenancies generate
monthly rental income of at least Fifty-Five Thousand
and No/100 Dollars ($55,000.00) (excluding parking); (b)
the current occupancy rate is no less than one hundred
percent (100%); and (c) the annualized net operating
income for the Project is at least Five Hundred Forty
Thousand and No/100 Dollars ($540,000.00).
(p) Borrower shall have delivered to Lender
true and complete copies of: (i) paid tax receipts for
the two (2) years prior to the year in which the Funding
occurs covering Taxes, (ii) a copy of the current tax
bill covering Taxes (iii) the most recent rendition of
personal property filed with the taxing authority; (iv)
an inventory of all tangible personal property and
equipment owned by Borrower; (v) a valid Certificate of
Occupancy for each element of the Improvements; (vi) all
Governmental Approvals; (vii) letters from all utility
companies serving the Project that utilities are being
provided to the Property; (viii) evidence satisfactory
to Lender that the Improvements comply with all
applicable zoning laws; and (ix) all other documents
reasonably requested and required by Lender.
(q) Borrower shall have provided Lender with
evidence that the annual debt service on the Loan
(calculated by multiplying the monthly payment of
principal and interest by twelve (12)) does not exceed
Three Hundred Nineteen Thousand Fifteen and No/100
Dollars ($319,015.00).
(r) No Event of Default (and no event which
with the giving of notice, lapse of time or both would
constitute an Event of Default) shall have occurred and
be continuing on the Closing Date. All the
representations and warranties made by Borrower in this
Agreement and in the Deed of Trust shall have been true
and correct when made and shall be true and correct in
all material respects as if made on the Closing Date.
All the covenants of Borrower contained herein, in the
Deed of Trust or in any one or more of the other Loan
Documents shall have been fully satisfied by Borrower or
waived in writing by Lender on or prior to the Closing
Date.
(s) Lender shall have received such other
approvals, opinions and documents as it may reasonably
request.
5. REGULAR INTEREST; DEFAULT INTEREST.
5.1. Accrual; Payment. Regular Interest on the
outstanding principal of the Loan shall accrue from the
date of the Funding at the applicable Regular Interest
Rate. Payments of Regular Interest shall be made by
Borrower on each and every Regular Interest Payment Date
during the term of the Loan; provided, however, that if
the Closing is on a day other than the first day of a
calendar month, the first payment of Regular Interest
shall be made in advance on the Closing Date, as
described in Section 6.1, below.
5.2. Limitations on Regular Interest Payment Date.
5.2.1. Each Regular Interest Payment Date
for the Loan which would otherwise fall on a day which
is not a Business Day shall be on the first (1st)
Business Day which precedes the first (1st) day of the
calendar month.
5.2.2. No Regular Interest Payment Date may
extend beyond the Maturity Date.
5.3. Default Interest Rate. After the occurrence
of an Event of Default and until such Event of Default
has been cured, any and all amounts payable under this
Agreement, the Note, the Deed of Trust or the other Loan
Documents shall bear interest at the Default Interest
Rate ("Default Interest").
5.4. Computation. All computations of Regular
Interest and Default Interest shall be made on the basis
of a thirty (30) day month, a three hundred sixty (360)
day year and a twenty (20) year amortization. Regular
Interest or Default Interest, as the case may be, shall
be computed by multiplying the Regular Interest Rate or
Default Interest Rate, as applicable, by a fraction, the
numerator of which shall be equal to the number of days
that have elapsed during the period for which such
computation is made (including the first day of such
period but excluding the last day of such period) and
the denominator of which shall be three hundred sixty
(360), unless such computation shall result in a Regular
Interest Rate or Default Interest Rate higher than the
Highest Lawful Rate (as defined below in Section 17.7),
in which event the Regular Interest Rate or Default
Interest Rate, as applicable, shall be the Highest
Lawful Rate. Regular Interest and Default Interest
shall not be compounded.
5.5. Reset of Regular Interest Rate. Commencing on
the first (1st) day of the sixth (6th) Loan Year (to
wit, September 1, 2003) (the "Reset Date"), Lender shall
reset the Regular Interest Rate to a new variable rate
(the "Reset Rate"), as set forth below in this Section
5.5. Lender, sometime during the period commencing on
January 1, 2003 and ending on March 31, 2003, shall
provide Borrower with written notice (the "Reset
Notice") specifying the applicable interest rate spread
(the "Spread") over the ninety (90) day LIBOR Index, as
listed in the "Money Rates" column in the "Money and
Investing" section of the Wall Street Journal, as
published on the Business Day prior to the applicable
Adjustment Date (defined below), or if such Index is
then no longer published daily therein, then as
available through Bloomberg, L.P. or a similar service
designated by Lender in Lender's sole and absolute
discretion (the "Index"). The Spread shall be
determined by Lender in Lender's sole and absolute
discretion. The Reset Rate shall be adjusted as of the
last Business Day of each calendar quarter (with each
such date herein being referred to as an "Adjustment
Date"). Following each Adjustment Date, the monthly
payment, as set forth in Section 6, below, shall be
adjusted accordingly, with the principal amortization
schedule remaining unchanged. As Regular Interest is
paid in arrears, the monthly payment will not be
adjusted until the first (1st) calendar day of the month
following each Adjustment Date. Lender, during the
first (1st) two (2) weeks of June, 2003, shall calculate
and notify Borrower of the initial Reset Rate which
shall apply as of first (1st) day of the sixth (6th)
Loan Year (to wit, September 1, 2003). If Borrower
elects to accept the Reset Rate, it shall provide
written notice to Lender of its acceptance no later than
June 30, 2003. If Borrower fails to provide such notice
to Lender or elects not to accept the Reset Rate, the
Loan shall be due and payable, without any Prepayment
Premium (as defined in Section 6.2, below), on or before
September 1, 2003. If Borrower elects to accept the
Reset Rate, the Reset Rate, as adjusted pursuant to this
Section 5.5 and subject to Section 17.7, below, shall
become the Regular Interest Rate for the remainder of
the Loan commencing on the Reset Date.
5.6. Survival of Note and Other Loan Documents. It
is the intention of Lender and Borrower that this
Agreement and the Note shall remain in full force and
effect and shall continue to be secured by the Loan
Documents (except for the Environmental Indemnity
Agreement, which shall be unsecured) until all
obligations of Borrower to Lender under this Agreement,
including, but not limited to this Section 5, have been
fully satisfied. Notwithstanding any other provision of
any of the Loan Documents, the Loan Documents and any
other security for this Agreement and/or the Note shall
continue in full force and effect, and Borrower shall
have no right to a release of any security for this
Agreement and/or the Note until all of Borrower's
obligations under the Note, this Agreement (including
but not limited to, this Section 5) and the other Loan
Documents (other than the Environmental Indemnity
Agreement) have been paid and performed in full. Once
all of Borrower's obligations under the Note, this
Agreement (including but not limited to this Section 5)
and the other Loan Documents (other than the
Environmental Indemnity Agreement) have been paid and
performed in full, Lender shall release all security for
this Agreement, including but not limited to having the
Trustee (as that term is defined in the Deed of Trust)
reconvey the Project to Borrower.
6. PAYMENT.
6.1. Amortized Payments. Borrower shall make
monthly payments of principal and Regular Interest, in
arrears, on each and every Regular Interest Payment Date
during the term of the Loan without set-off, deduction,
demand or notice of any kind or nature whatsoever;
provided, however, that if the Closing Date falls on any
date which is not the first (1st) day of a calendar
month, then the first (1st) payment of Regular Interest
(which shall be a pro-rated amount of Regular Interest
only based on the number of days from and including the
date of Funding to the first (1st) Regular Interest
Payment Date following the date of Funding), shall be
made on the date of Funding (and, at Lender's sole
option, deducted from the Loan Amount), and the first
amortized payment of principal and Regular Interest
shall be due on the second Regular Interest Payment Date
following the date of Funding. Borrower's monthly
payments of principal and Regular Interest shall be
calculated on the basis of a three hundred sixty (360)
day year and a twenty (20) year amortization, as
described in Section 5.4, above, and, as applicable,
shall adjust as the Regular Interest Rate adjusts, as
set forth in Section 5.5, above. On the Maturity Date,
the entire outstanding principal balance of the Loan,
together with any and all accrued and unpaid Regular
Interest, and all other amounts, of any kind or nature
whatsoever, owing by Borrower to Lender under the Loan
Documents shall be fully due and payable to Lender.
6.2. Prepayment.
6.2.1. Prepayment Not Allowed. This Loan
may not be prepaid during the first (1st) Loan Year.
6.2.2. Prepayment Allowed.
6.2.2.1. Second (2nd) Through Fifth
(5th) Loan Years. During the period commencing on the
first (1st) day of the second Loan Year and ending on
the last day of the fifth (5th) Loan year, Borrower may
prepay the Loan in whole or in part upon payment to
Lender of a prepayment premium equal to the greater of
(i) one percent (1%) of the prepaid amount, or (ii) an
amount calculated at the time of prepayment using a
formula designed to compensate Lender for the loss of
its performing Loan ("Yield Protection Payment"). This
Yield Protection Payment will be calculated by (a)
assuming reinvestment of the prepaid amount in U.S.
Treasury securities with maturities as close as
practicable to the Maturity Date, (b) assuming
conversion of the Note to a bond-equivalent, interest-
only note without changing its interest rate, and (c)
determining the present value of the difference between
the two assumed interest-payment streams, using the
yield of the assumed reinvestment as the discount rate.
Borrower agrees that Lender shall not be obligated to
actually reinvest the amount prepaid in any Treasury
obligations as a condition precedent to receiving the
Prepayment Premium hereunder.
6.2.2.2. Sixth (6th) Loan Year. During
the sixth (6th) Loan Year, Borrower may prepay the Loan
in whole or in part upon payment to Lender of a
prepayment premium equal to two percent (2%) of the
prepaid amount.
6.2.2.3. Seventh (7th) Loan Year Through
Date Ninety (90) Days Prior to Maturity Date. During
the period commencing on the first (1st) day of the
seventh (7th) Loan Year and ending on the date which is
ninety (90) days prior to the Maturity Date, Borrower
may prepay the Loan in whole or in part upon payment to
Lender of a prepayment premium equal to one percent (1%)
of the prepaid amount.
6.2.2.4. Ninety (90) Day Period
Immediately Preceding Maturity Date. During the ninety
(90) day period immediately preceding the Maturity Date,
Borrower may prepay the Loan in full without any
prepayment premium.
6.2.2.5. Partial Prepayment.
Notwithstanding the foregoing, during each of the first
five (5) Loan Years, Borrower may prepay up to ten
percent (10%) of the then outstanding balance of the
Loan (on a non-cumulative basis) upon payment of a
prepayment premium equal to one percent (1%) of prepaid
amount in each such year. Thereafter, during each of
the remaining Loan Years, Borrower may prepay up to ten
percent (10%) of the then outstanding balance of the
Loan (on a non-cumulative basis) without any prepayment
premium.
Any prepayment premium required to be
paid by Borrower pursuant to this Section 6.2.2 shall
hereinafter be referred to as a "Prepayment Premium."
No Prepayment Premium will be charged on amounts
attributable to insurance or condemnation proceeds
applied to reduce the principal balance of the Loan.
6.2.3. Prepayment Premium Upon
Acceleration.
6.2.3.1. During the First (1st) Loan
Year. Following an Event of Default during the first
(1st) Loan Year, including but not limited to any
transfer or conveyance of any right, title or interest
in the Real Property and/or Improvements encumbered by
the Deed of Trust, which gives Lender the right to
accelerate the maturity of the Note pursuant to the
terms of the Deed of Trust, if Lender elects to
accelerate the maturity of the Note, Borrower agrees to
pay, as an additional amount to be secured by the Deed
of Trust, the greater of (i) the Prepayment Premium, and
(ii) ten percent (10%) of the principal amount due on
the date of the Event of Default (the later being the
"Acceleration Prepayment Premium").
6.2.3.2. After the First (1st) Loan Year.
Following an Event of Default after expiration of the
first (1st) Loan Year, including but not limited to any
transfer or conveyance of any right, title or interest
in the Real Property and/or Improvements encumbered by
the Deed of Trust, which gives Lender the right to
accelerate the maturity of the Note pursuant to the
terms of the Deed of Trust, if Lender elects to
accelerate the maturity of the Note, Borrower agrees to
pay, as an additional amount to be secured by the Deed
of Trust, the Prepayment Premium which would be
applicable had Borrower elected to prepay the Loan on
the date of the Event of Default, as set forth in
Section 6.2.2, above.
6.2.4. Waiver. By initialing this
subsection below, Borrower expressly waives any right
under California Civil Code 2954.10 or otherwise to
prepay the Loan, in whole or in part, without paying the
applicable Prepayment Premium or Acceleration Prepayment
Premium, as hereinabove set forth. Borrower
acknowledges that prepayment or acceleration of the Loan
may result in Lender incurring additional costs
(including lost opportunity costs), expenses or
liabilities. Borrower therefore agrees that the
Prepayment Premium or, as applicable, the Acceleration
Prepayment Premium represents a reasonable estimate of
the prepayment costs, expenses or liabilities Lender may
suffer on a prepayment or acceleration. Borrower agrees
that Lender's willingness to offer the Regular Interest
Rate to Borrower is sufficient and independent
consideration, given individual weight by Lender, for
this waiver. Borrower understands that Lender would not
offer the Regular Interest Rate to Borrower absent this
waiver.
6.3. Treatment of Payments. All payments of
principal, interest, Late Charge (as defined below),
Prepayment Premium and Acceleration Prepayment Premium,
if any, due under this Agreement or the Note shall be
paid to Lender by wire transfer of immediately available
funds to such bank or place, or in such other manner, as
Lender may from time to time designate. If such payment
is received by Lender (or Lender's designee) at or
before 2:00 p.m., such payment will be credited to
Borrower's account as of the date on which received. If
such payment is received by Lender (or Lender's
designee) after 2:00 p.m., such payment will be credited
to Borrower's account on the business day next following
the date on which received. Each installment payment
under this Agreement shall be applied in the following
order of priority: (i) first, to any costs or expenses
for which Borrower is liable hereunder or under the
other Loan Documents, including any unpaid Late Charge;
(ii) second, to fees dues to Lender, if any; (iii)
third, to accrued and unpaid Default Interest, if any;
(iv) fourth, to accrued and unpaid Regular Interest; and
(v) to unpaid principal.
6.4. No Set-Off. Each payment of principal,
Interest or other amount payable by Borrower under this
Agreement, the Note or any other Loan Document shall, to
the extent permitted by applicable law, be made without
set-off or counterclaim and free and clear of, and
exempt from, and without deduction or withholding for or
on account of, any present or future Taxes levied,
imposed, collected, withheld or assessed by any
Governmental Authority or any political subdivision or
taxing authority thereof. Borrower shall indemnify
Lender against any such Taxes (other than Taxes on the
overall net income of Lender imposed by any taxing
authority) which may be assessed against Lender or
claimed or demanded from Lender in respect of any amount
payable by Borrower hereunder (including, without
limitation, all amounts paid pursuant to this Section
6.4 or in respect of the Funding), and against any
costs, charges, expenses or liability arising out of or
in respect of any such assessment, claim or demand.
6.5. Late Charges. If any installment payable
hereunder shall not be received by Lender within ten
(10) calendar days of the date such installment is due,
irrespective of whether such failure constitutes an
Event of Default under Section 13.1, below, then Lender
shall have the option, subject to the provisions of
Section 17.7, below, to charge Borrower a late payment
charge ("Late Charge") of five percent (5%) of the
amount of each installment overdue. The parties hereby
recognize that the Late Charge is a reasonable
approximation of the additional administrative costs,
collection costs and other direct and indirect costs
which may be sustained by Lender as a result of the
failure of Borrower timely to pay amounts due hereunder.
This Section 6.5 and the amount for which it provides,
shall not limit Lender's right under this Agreement, the
Note, the Deed of Trust or otherwise, to compel prompt
performance thereunder. Borrower's failure to collect
such Late Charge shall not constitute a waiver of
Lender's right to require payment of such Late Charge
for past or future defaults. The Late Charge shall be
in addition to all other rights and remedies available
to Lender upon the occurrence of a default under the
Loan Documents. BORROWER ACKNOWLEDGES AND AGREES THAT
IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO FIX
THE ACTUAL DAMAGES RESULTING FROM BORROWER'S FAILURE TO
PAY AMOUNTS WHEN DUE AND THEREFORE, SUBJECT TO THE
PROVISIONS OF SECTION 17.7, HEREOF, SHALL PAY SUCH LATE
CHARGE NOT AS A PENALTY, BUT FOR THE PURPOSE OF
DEFRAYING THE EXPENSES INCIDENT TO SERVICING THE LOAN
AND HANDLING AMOUNTS PAST DUE. FURTHER, BORROWER AGREES
THAT A CHARGE OF FIVE PERCENT (5%) OF EACH DELINQUENT
PAYMENT HEREUNDER IS A REASONABLE ESTIMATE OF THE
DAMAGES TO LENDER. THE LATE CHARGES SHALL BE PAYABLE BY
BORROWER WITHOUT PREJUDICE TO THE RIGHTS OF LENDER TO
COLLECT ANY OTHER AMOUNTS TO BE PAID UNDER THIS NOTE OR
THE DEED OF TRUST (INCLUDING, WITHOUT LIMITATION,
LENDER'S RIGHT TO COLLECT DEFAULT INTEREST).
7. MATURITY DATE.
7.1. Maturity Date. Assuming no acceleration by
Lender and no prepayment in full of the Loan, the
Maturity Date of the Note is September 1, 2008. On the
applicable Maturity Date, Borrower shall pay to Lender
the entire outstanding principal, accrued and unpaid
Interest and any and all other outstanding charges, fees
or amounts owing to Lender by Borrower hereunder, under
the Note and any other sums due under any of the other
Loan Documents.
7.2. Right to Accelerate Maturity Date.
7.2.1. Lender's Option to Accelerate.
Lender shall have the right and option to accelerate the
Maturity Date if Borrower commits an Event of Default
under this Agreement, or otherwise defaults (after
applicable cure periods) in the payment or performance
of any of Borrower's obligations under any of the Loan
Documents.
7.2.2. Sale or Further Encumbrance.
Subject to Section 7.2.3, below, if, during the term of
the Loan, Borrower sells, conveys, assigns or otherwise
transfers (hereinafter collectively referred to as a
"Sale") or further pledges, mortgages or otherwise
encumbers (hereinafter collectively referred to as an
"Encumbrance") all or any part of the Real Property
and/or Improvements, whether any such Sale or
Encumbrance occurs directly or indirectly, voluntarily
or involuntarily, or by operation of law, without the
prior written consent of Lender (which may be withheld
in Lender's sole and absolute discretion), an Event of
Default shall be deemed to have occurred and Lender may,
at its sole option, elect to accelerate all sums due
under the Loan. Borrower shall pay Lender's out-of-
pocket expenses incurred in connection with the review
of any transfer for which Borrower requests consent
pursuant to this Section 7.2.2.
7.2.3. Change in Ownership. If, during the
term of the Loan, Borrower, or any partner, member or
shareholder of Borrower sells, conveys, transfers or
otherwise vests any direct or indirect interest in
Borrower, without the prior consent of Lender, (which
Lender may withhold at its sole discretion), an Event of
Default shall be deemed to have occurred and Lender may,
at its sole option, elect to accelerate all sums due
under the Loan. Borrower shall remain at all times
during the term of the Loan a wholly-owned subsidiary of
Datron/Transco, Inc. ("DTI"), Datron Systems
Incorporated ("DSI") or any other wholly-owned
subsidiary of either DTI or DSI.
Notwithstanding the foregoing, the ownership interest in
Borrower may be sold to any person or entity in
connection with a transaction whereby such person or
entity acquires all or a substantial part of DTI or DSI
("Pre-approved Transfer"); provided, that, in the event
of a Pre-approved Transfer, Borrower shall provide
Lender, within fifteen (15) days of such Pre-approved
Transfer, copies of any and all documents evidencing the
Pre-approved Transfer. Borrower shall pay Lender's out-
of-pocket expenses incurred in connection with the
review of any sale, conveyance, transfer or other
vesting pursuant to this Section 7.2.3.
8. LOAN DOCUMENTS. To evidence and/or secure the
payment to Lender of all sums due or to become due under
this Agreement and the Note, Borrower shall execute and
deliver or cause to be executed and delivered to Lender,
among other things, the following documents and
instruments:
(a) the Note, substantially in the form attached
hereto as Exhibit "B;"
(b) the Deed of Trust, substantially in the form
attached hereto as Exhibit "C;"
(c) the Assignment of Leases, substantially
in the form attached hereto as Exhibit "D;"
(d) the Security Agreement, substantially in
the form attached hereto as Exhibit "E;"
(e) UCC Financing Statements, each in the
form attached hereto as Exhibit "F;"
(f) an Environmental Indemnity Agreement,
substantially in the form attached hereto as Exhibit "G;"
(g) the Subordination Agreement,
substantially in the form attached hereto as
Exhibit "H;"
(h) A Borrower's affidavit containing certain
warranties and representations by Borrower;
(i) an Estoppel Certificate, substantially in
the form attached hereto as Exhibit "I" from
each Tenant;
(j) A Guaranty, substantially in the form attached
hereto as Exhibit "K;"
(k) A certificate regarding personal property
containing certain warranties and
representations by Borrower regarding the
personal property included in the Project; and
(l) Such other papers and documents as may be
required by this Agreement, the
Application/Commitment or as Lender may
reasonably require.
The Loan Documents shall create in favor of Lender a
perfected first-lien encumbrance or security interest in
the Project and any other collateral covered thereby.
9. LOAN FEE. As consideration to Lender for its
commitment to make the Loan, Borrower has heretofore
paid to Lender a Loan Fee in the amount of Ninety-Nine
Thousand and No/100 U.S. DOLLARS (U.S. $99,000.00) (as
described more fully in Section 2.33 above). On the
Closing Date, Lender shall refund the entire Loan Fee to
Borrower, less all of Lender's out-of-pocket expenses
and costs expended in connection with the Loan
("Costs"), which Costs shall include, but not be limited
to, fees and expenses for Lender's outside counsel,
title insurance charges and premiums, survey costs,
transfer or recording taxes and fees; provided, however,
Lender may, in its sole discretion, withhold a
reasonable portion of the Loan Fee to be refunded so
that Lender may pay all invoices in respect of Costs
received after the Closing Date.
10. REPRESENTATIONS AND WARRANTIES. To induce Lender
to execute this Agreement and perform the obligations of
Lender hereunder, Borrower hereby represents and
warrants for the benefit of Lender as of the date hereof
as follows:
10.1. Title. Borrower has all power, authority
and legal right and all necessary Governmental Approvals
to own the Project and to create a Lien on and security
interest in the Project pursuant to the Loan Documents
to be executed and delivered by Borrower, and to execute
and deliver to Lender this Agreement, the Note, the
other Loan Documents and any other documents or
instruments contemplated herein or therein to be
executed and delivered by Borrower, and to observe and
perform the provisions hereof and thereof. To the best
of Borrower's knowledge after due investigation, each of
the Tenants have all power, authority and legal right
and all Governmental Approvals required to operate the
Building in compliance with applicable law.
10.2. No Litigation. Except for claims fully
covered by insurance, where the insurance company is
defending such claims and such defense is not being
provided under a reservation of rights, and except as
disclosed in writing to Lender prior to the date hereof,
there is no pending litigation or unsatisfied judgment
entered of record against the Borrower or the Project.
No litigation or proceedings are pending, or to
Borrower's knowledge are threatened, against any
Affiliated Party which might affect: (i) the validity
or priority of the lien of the Deed of Trust; (ii) the
ability of Borrower or Guarantor hereof to perform their
respective obligations pursuant to and as contemplated
by the terms and provisions of this Agreement and the
other Loan Documents; or (iii) materially the operations
or financial condition of the Project, Borrower, or any
Affiliated Party.
10.3. Due Authorization. Borrower is a
corporation duly organized under the laws of California
and validly existing under the laws of the State of
California. The execution and delivery of the Loan
Documents and all other documents executed or delivered
by or on behalf of Borrower and pertaining to the Loan
have been duly authorized or approved by Borrower and,
when executed and delivered by Borrower or when caused
to be executed and delivered on behalf of Borrower, will
constitute the legal, valid and binding obligations of
the obligor thereon, enforceable in accordance with
their respective terms except as limited by bankruptcy,
insolvency, or other laws of general application
relating to the enforcement of creditor's rights, and
the payment or performance thereof will be subject to no
offsets, claims or defenses of any kind or nature
whatsoever.
10.4. Breach of Laws or Agreements. Neither
the execution, delivery or performance of this
Agreement, the Note, the other Loan Documents, or any
other documents or instruments contemplated herein or
therein to be executed and delivered by Borrower, the
consummation of the transactions contemplated hereby or
thereby, nor compliance with the provisions hereof and
thereof, will conflict with or result in a breach of (i)
any of the provisions of any applicable license, permit,
statute, ordinance, law, judgment, order, writ,
injunction, decree, rule or regulation of any court,
administrative agency or other governmental authority,
(ii) any determination or award of any arbitrator, (iii)
any agreement or instrument to which Borrower or any
Guarantor is a party or by which it or any of the
Project is bound, (iv) any of the provisions of
Borrower's bylaws or other governing documents or
resolutions, or shareholders' agreements, or constitute
a default under any thereof, or (v) result in the
creation or imposition of any lien, charge or
encumbrance upon the Project, except as permitted by the
Loan Documents and the other documents and instruments
contemplated herein and therein to be executed and
delivered by Borrower.
10.5. Leases. Borrower and its agents have not
entered into any leases or other arrangements for the
occupancy of all or any portion of the Project other
than leases shown on the most recent rent roll furnished
to Lender (the "Rent Roll"). All leases disclosed on
the Rent Roll are in full force and effect and to
Borrower's knowledge, there are no existing defaults
thereunder other than as disclosed in writing to Lender.
10.6. Condemnation. (i) No condemnation of any
portion of the Project, (ii) no condemnation or
relocation of any roadways abutting the Project, and
(iii) no denial of access to the Project from any point
of access to the Project, has commenced or, to
Borrower's knowledge, is contemplated by any
Governmental Authority.
10.7. Consents and Taxes. No consent, approval
or other authorization of or by any court,
administrative agency or other Governmental Authority is
required in connection with the execution, delivery,
performance, or consummation of the transactions
contemplated by this Agreement, or the Loan Documents to
be executed and delivered by Borrower. Borrower has
filed all tax returns required to be filed by it and is
not in default in the payment of any Taxes levied or
assessed against it, any of its assets or any of the
Project.
10.8. Condition of Improvements. To the best
of Borrower's knowledge after diligent investigation and
inquiry, the foundations and structure of the
Improvements are structurally sound, and the various
mechanical systems have adequate capacities for the
purposes for which the Improvements are to be used and
are in good working condition. To the best of
Borrower's knowledge after diligent investigation and
inquiry, the Improvements were built in substantial
compliance with applicable plans and specifications
furnished to the Lender's engineering consultant, and
the Improvements are in full compliance with all
applicable Building Laws, including without limitation
the Americans With Disabilities Act of 1990 and all laws
relating to sprinklers. The Building has a clear height
of twenty-six (26) feet and contains three (3) grade
level doors and one (1) dock high door. To the best of
Borrower's knowledge after diligent investigation and
inquiry, certificates of occupancy with respect to the
Improvements, and any other certificates which may be
required to evidence compliance with building codes and
permits and approval for full occupancy of the
Improvements and all installations therein have been
issued by all appropriate authorities. Borrower has no
knowledge of required capital expenditures or deferred
maintenance other than those that would be normally
expected for a building of similar age and type. No
notice of violation of any Building Law has been
received. No construction or other work has commenced
nor shall any construction or other work be commenced on
the Real Property and/or Improvements prior to the
Closing Date which has resulted or could result in
mechanics', materialmen's or laborers' lien claims on
the Project prior to the lien of the Deed of Trust.
10.9. Information Correct. All financial
statements furnished to Lender by Borrower, Guarantor or
any Affiliated Party fairly present the financial
condition of such persons or entities and were prepared
in accordance with generally accepted accounting
principles consistently applied. All other information
previously furnished by Borrower, Guarantor or any
Affiliated Party to Lender in connection with the Loan
is true, complete and correct in all respects except as
otherwise disclosed to Lender in writing and does not
fail to state any material fact necessary to make the
statements made not misleading. Neither Borrower nor
Guarantor has misstated or failed to disclose to Lender
any material fact relating to: (i) the condition, use
or operation of the Project; (ii) the status or any
material condition of any tenant or lease at the Project
known to it; (iii) Borrower; (iv) Guarantor; or (v) the
litigation disclosure provided by Borrower and
Guarantor, except as disclosed in writing to Lender
prior to the date hereof.
10.10. Material Adverse Change. No material
adverse change in the operations or financial condition
of Borrower, Guarantor or any Affiliated Party has
occurred since the respective effective dates of
its/their financial statements previously submitted to
Lender, and no material adverse change in the condition
(physical or otherwise) of the Project has occurred
since the date of the Application/Commitment.
10.11. Solvency. Neither Borrower nor Guarantor
is (i) currently insolvent on a balance sheet basis, or
(ii) currently unable to pay its debts as they come due;
and no bankruptcy or receivership proceedings are
contemplated or pending as to any of them.
10.12. Zoning. The use of the Project (including
contemplated accessory uses) does not violate (i) any
Law (including subdivision, zoning, building,
environmental protection and wetlands protection Laws),
or (ii) any restrictions of record, or any agreement
affecting the Project or any part thereof. Without
limiting the generality of the foregoing, Borrower has
complied with all Governmental Approvals. The Project
includes parking for three hundred twelve (312)
vehicles, which parking complies with all applicable
zoning ordinances and tenant lease requirements.
10.13. Utilities. The Project has adequate water,
gas and electrical supply, storm and sanitary sewerage
facilities, other required public utilities, fire and
police protection, and means of appropriate access
between the Project and public highways.
10.14. Brokerage Fees. No brokerage fees or
commissions are payable by or to any person in
connection with this Agreement or the Loan to be
disbursed hereunder other than fees payable to Sunrise
Mortgage and Investment Company, which fees shall be
paid by Borrower.
10.15. Encroachments. No building or other
Improvement on the Real Property encroaches upon any
building line, setback line, side yard line, or any
recorded or visible easement (or other easement of which
Borrower has knowledge with respect to the Real
Property), except as shown on the Survey.
10.16. Separate Parcel. The Project is taxed
separately without regard to any other property and for
all purposes the Project may be mortgaged, conveyed, and
otherwise dealt with as an independent parcel.
10.17. ERISA. The assets of Borrower are not
"plan assets" of any employee benefit plan covered by
ERISA or 4975 of the Internal Revenue Code. The
transactions contemplated by this Agreement by or with
Borrower are not in violation of state statutes
regulating investments of and fiduciary obligations with
respect to "governmental plans," as defined in 3(32)
of ERISA.
10.18. No Default. No Event of Default has
occurred and is continuing.
10.19. Trade Name; Principal Place of Business.
Borrower uses no trade name other than its actual name
set forth herein. The principal place of business of
Borrower is as stated in Section 17.3, below.
10.20. FIRPTA. Borrower is not a "foreign person"
within the meaning of 1445 or 7701 of the Internal
Revenue Code.
10.21. RICO. Borrower has not been charged with
nor, to its knowledge, is it under investigation for,
possible violations of the Racketeer Influenced and
Corrupt Organizations Act, the Continuing Criminal
Enterprise Act, the Controlled Substance Act of 1978, or
similar laws providing for the possible forfeiture of
any of its respective assets or properties.
10.22. No Casualty. No part of the Project have
been damaged by fire or other casualty except as
disclosed in writing to Lender.
10.23. Hazardous Materials. Borrower represents
(i) that to the best of its knowledge following inquiry
as a duly diligent property owner, (a) the Project has
been and is free from contamination by Hazardous
Materials and petroleum products (including, without
limitation, asbestos in any form, urea formaldehyde,
polychlorinated biphenyls, underground storage tanks,
atmospheric radon at levels over four (4) picocuries per
cubic liter and any other substances exposure to which
is prohibited, limited or regulated by any federal,
state, county, regional or local authorities or which
pose a hazard to public health), and (b) no release of
any such Hazardous Materials or petroleum product has
occurred on or about the Project, (ii) that the Project
currently complies, and will comply based on its
anticipated use, with all legal requirements relating to
the environment and the Hazardous Materials Laws, (iii)
that, in connection with the ownership, operation, and
use of the Project, all necessary notices have been
filed and all required permits, licenses and other
authorizations have been obtained, including, without
limitation, those relating to the generation, treatment,
storage, disposal or use of the Hazardous Materials and
petroleum products, and (iv) that to the best of
Borrower's knowledge following inquiry as duly diligent
property owner, there is no present, past or threatened
investigation, inquiry or proceeding relating to the
environmental condition of, or to the events, on or
about the Project.
11. BORROWER'S COVENANTS. In addition to the other
covenants and undertakings herein contained, Borrower
hereby covenants and agrees with Lender from and after
the date hereof and during the term of this Agreement,
as follows:
11.1. Escrow Deposits.
11.1.1. Unless specifically waived by a
separate written agreement, Borrower shall deposit
monthly with Lender a sum equal to one twelfth (1/12) of
the amount estimated by Lender to be required to pay on
an annual basis, at least thirty (30) days prior to
their respective due dates, for Taxes, assessments,
ground rent and insurance premiums for the Project (the
"Escrow Account"). Lender shall not pay interest on or
segregate the Escrow Account unless required to do so
under applicable law. If applicable law requires Lender
to segregate the Escrow Account, Borrower shall execute
such documents as Lender, in its sole discretion, deems
necessary to perfect its security interest in the Escrow
Account. On the Closing Date, Borrower shall make an
initial deposit with Lender of a sum equal to one-
twelfth (1/12) of the estimated annual property taxes
and assessments, a sum equal to one-twelfth (1/12) of
the annual ground rent, if applicable, and a sum equal
to one-twelfth (1/12) of the estimated annual insurance
premiums, multiplied by the number of months elapsed in
the respective billing periods.
11.1.2. The Escrow Account is hereby pledged
as additional security for the Loan, shall be held to be
irrevocably applied for the purposes for which made
hereunder and shall not be subject to the direction or
control of Borrower; provided, however, that neither
Lender nor any depository holding such funds shall be
liable for any failure to apply to the payment of taxes,
assessments, ground rent or insurance premiums any
amount so deposited unless (i) Borrower shall have
requested Lender or said depository in writing to make
application of such funds to the payment of the
particular taxes, assessments, ground rent or insurance
premiums as the case may be, accompanied by the bills
therefor, (ii) there shall exist no Event of Default
hereunder or under any of the Loan Documents, (iii)
there are sufficient funds in the Escrow Account to pay
the particular taxes, assessments, ground rent or
insurance premiums and (iv) following payment of such
taxes, assessments, ground rent or insurance premiums,
the Escrow Account will be "in balance" in the
reasonable opinion of Lender.
11.1.3. Notwithstanding the foregoing,
Lender hereby waives the deposit and escrow requirements
set forth above in this Section 11.1.1, unless: (i) an
Event of Default exists under any of the Loan Documents;
(ii) Borrower fails to comply with all of Lender's
insurance requirements, as set forth in Section 11.3.1,
below; (iii) Borrower fails to pay the required monthly
payment of principal and interest as and when due more
than three (3) times in any twelve (12) month period; or
(iv) Borrower fails to provide evidence to Lender of
Borrower's payment, at least ten (10) days prior to
their respective due dates, of any such Taxes,
assessments, ground rent and insurance premiums for the
Project. Without limiting the foregoing, Borrower shall
be liable for the payment of all insurance premiums,
taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents,
including, without limitation, any such Taxes,
assessments, ground rent, insurance premiums or any
other lienable impositions which Lender pays prior to
taking title to the Project (or any portion thereof) or
which remain unpaid after Lender takes title to the
Project (or any portion thereof), and Lender shall not
be required to establish that it incurred any loss or
damage prior to seeking recourse in connection
therewith.
11.2. Payment of Taxes. Borrower agrees to pay
prior to the date when delinquent all general, special
and supplemental Taxes, including, without limitation,
all non-governmental levies and assessments such as
maintenance charges, owner association dues and charges,
and assessments, fees, levies and charges resulting from
covenants, conditions and restrictions affecting the
Project, which are assessed against or imposed upon the
Project, or become due and payable with respect to the
Project, or which create or are secured by a lien upon
the Project (all of such Taxes, assessments, fees,
levies and charges are hereinafter collectively referred
to as "Impositions"). For the purposes of this Section
11.2, "Impositions" shall specifically exclude (i) any
such Taxes or withholdings imposed on interest income
under 871 or 881 of the Internal Revenue Code or any
corresponding provisions of succeeding laws or similar
state laws, and (ii) any amounts required to be withheld
under 1441 or 1442 of the Internal Revenue Code to
collect any Taxes described in this Section 11.2.
Borrower shall, promptly upon receipt, furnish to Lender
all official receipts evidencing payment of any such
Impositions (which shall be either originals, duplicate
originals or copies duly certified or authenticated).
Lender may, but is not required to, pay at any time and
from time to time any amount in respect of such
Impositions in which event Borrower shall, in each
instance, reimburse Lender on demand therefor and pay to
Lender the additional amounts specified above.
Borrower shall have the right before any
delinquency occurs to contest in good faith the amount
or validity of any Imposition by appropriate legal
proceedings; provided, any such contest by Borrower
shall not in any way release, modify or extend
Borrower's obligation to pay an Imposition at the time
and in the manner provided in this Section 11.2, unless
Borrower gives prior written notice to Lender of
Borrower's intent to contest the Imposition, and, at
Lender's sole option, (i) Borrower demonstrates to
Lender's reasonable satisfaction that the contest
proceedings shall conclusively operate to prevent the
sale of the Project or to stay payment of the Imposition
prior to final determination of the proceedings, or
(ii) Borrower furnishes a good and sufficient bond or
other security for payment as requested by and
reasonably satisfactory to Lender and which security is
permitted by law to accomplish a stay of payment of the
Imposition. At the conclusion of such proceedings,
Borrower shall pay the Imposition as determined in such
proceedings. If Borrower fails to commence such contest
or, having commenced to contest the same, and having
deposited such security required by Lender for its full
amount, shall thereafter fail to prosecute such contest
in good faith or with due diligence, or, upon adverse
conclusion of any such contest, shall fail to pay such
Imposition, Lender may at its election (but shall not be
required to), pay and discharge any such Imposition and
any interest or penalty thereon, and any amounts so
expended by Lender shall be deemed to constitute
disbursements of the Loan proceeds hereunder (even if
the total amount of disbursements would exceed the face
amount of the Note) and shall bear interest from the
date expended at the Default Rate and be payable with
such interest upon demand. Lender in making any payment
hereby authorized relating to Impositions, may do so
according to any bill, statement or estimate procured
from the appropriate public office without inquiry into
the accuracy of such bill, statement or estimate or into
the validity of any Imposition, sale, forfeiture, tax
lien or title or claim thereof.
11.3. Maintenance of Insurance.
11.3.1. Borrower and/or Tenants shall at all
times during the term of this Loan fully comply with all
of Lender's insurance requirements as set forth on that
certain PPM Finance, Inc.'s Property and Liability
Insurance Requirements for Jackson National Life
Insurance Company (the "Insurance Requirements
Exhibit"), a copy of which is attached hereto as Exhibit
"L," including, without limitation, providing and
keeping in force the following types of insurance (as
required under the Insurance Requirements Exhibit): (i)
property coverage; (ii) personal property contents;
(iii) builder's risk; (iv) business income; (v)
comprehensive or commercial general liability; (vi)
boiler and machinery; (vii) flood insurance; (viii)
ordinance or law coverage; (ix) earthquake coverage; (x)
dram shop or liquor liability coverage; and (xi) such
other policies as Lender may reasonably require from
time to time. Without limiting the foregoing, Borrower
shall keep in force the earthquake coverage required
hereunder until such time that Borrower completes, and
Lender receives satisfactory evidence that Borrower
completed, all the retrofit work set forth in that
certain report prepared by Seismic Design Consultants,
Inc., bearing Job Number 29-10-98-56, dated July 15,
1998, including, without limitation, Section 7.3
thereof.
11.3.2. Borrower hereby presently and
absolutely assigns, transfers and sets over to Lender
all of its right, title and interest in and to any and
all insurance proceeds from all insurance policies
required hereunder or otherwise obtained by Borrower in
any way in connection with the Project or its operation,
whether required hereunder or not. Borrower shall
furnish Lender with evidence of insurance, as more
particularly described in the Insurance Requirements
Exhibit, and, upon Lender's written request, Borrower
shall promptly furnish Lender with an original of all
policies of insurance required by this Agreement. At
least ten (10) days prior to the expiration of each
insurance policy, Borrower shall furnish Lender with
evidence satisfactory to Lender of (i) the payment of
the premium or issuance of a binder with respect to each
insurance policy, and (ii) arrangements for the
reissuance of the policy continuing insurance in force
as required by this Agreement. In addition, Borrower
shall notify Lender in writing as soon as reasonably
practicable of any vacancy, change of title, tenant
occupancy or use, physical damage, additional
improvements or other factors affecting any insurance
contract. Notwithstanding the foregoing, upon the
occurrence of an Event of Default, Lender shall have the
right (but not the obligation) to place and maintain
insurance required to be placed and maintained by
Borrower hereunder, and use funds on deposit in the
Escrow Account for the payment of insurance to pay for
same. Any additional amounts expended therefor shall
constitute additional disbursements of Loan proceeds
(even if the total amount of disbursements would exceed
the face amount of the Note), and shall bear interest
from the date expended at the Default Rate and be
payable together with such interest upon demand.
11.3.3. Upon foreclosure of the Deed of
Trust or other transfer of title or assignment of the
Project in extinguishment, in whole or in part, of the
amounts due under the Loan, all right, title and
interest of Borrower in and to all policies of insurance
required by this Agreement shall inure to the benefit of
and pass to the successor in interest to Borrower, or
the purchaser or grantee of the Project. If prior to
any such transfer of title, any claim under any casualty
insurance policy has not been paid and distributed in
accordance with the terms of this Agreement, but such
claim is paid after any such transfer of title, then, to
the extent the amounts due hereunder were not fully
discharged in conjunction with such transfer of title,
the subject insurance proceeds shall belong to and be
paid to Lender. Borrower hereby assigns, transfers and
sets over to Lender all of its right, title, and
interest in and to any such insurance proceeds. The
balance of any such insurance proceeds, if any, shall
belong to Borrower.
11.4. Mechanics' Liens.
11.4.1. Borrower will not suffer or permit
any mechanics' lien claims to be filed or otherwise
asserted against the Project and will promptly discharge
the same if any claims for lien or any proceedings for
the enforcement thereof are filed or commenced;
provided, however, that Borrower shall have the right to
contest in good faith and with due diligence the
validity of any such lien or claim upon furnishing to
the Title Company such security or indemnity as it may
require to induce the Title Company to insure Lender's
first-lien priority against all such claims, liens or
proceedings; and provided further that Lender will not
be required to make any further disbursements of the
Loan proceeds (if any are required) unless (i) any
mechanics' lien claims shown by any title insurance
commitments or interim binders or certifications have
been released or insured against by the Title Company,
or (ii) Borrower shall have provided Lender with such
other security with respect to such claim as may be
acceptable to Lender, in its sole discretion.
11.4.2. If Borrower shall fail promptly to
discharge any mechanics' lien claim filed or otherwise
asserted or to contest any such claims and give security
or indemnity in the manner provided in Section 11.4.1
hereof, or, having commenced to contest the same and
having given such security or indemnity, shall
thereafter fail to prosecute such contest in good faith
or with due diligence, or fail to maintain such
indemnity or security so required by the Title Company
for its full amount, or, upon adverse conclusion of any
such contest, shall fail to cause any judgment or decree
to be satisfied and lien to be promptly released, then,
and in any such event, Lender may, at its election (but
shall not be required to), (i) procure the release and
discharge of any such claim and any judgment or decree
thereon, without inquiring into or investigating the
amount, validity or enforceability of such lien or claim
and (ii) effect any settlement or compromise of the
same, or may furnish such security or indemnity to the
Title Company. Any amounts expended by Lender in doing
so, including premiums paid or security furnished in
connection with the issuance of any surety company
bonds, shall be deemed to constitute disbursements of
the Loan proceeds hereunder (even if the total amount of
disbursements would exceed the face amount of the Note)
and shall bear interest from the date expended at the
Default Rate and be payable together with such interest
upon demand.
11.5. Maintenance, Repair and Restoration of
Improvements. Borrower shall (i) promptly repair,
restore or rebuild any Improvements which may become
damaged or be destroyed; and (ii) keep the Improvements
in good condition and repair, without waste.
11.6. Leases and Lease Reports. (i) Except in
the ordinary course of business and in the exercise of
sound business judgment, and at market rents, a schedule
of which has been approved by Lender and in accordance
with the standard form of lease approved by Lender,
Borrower shall not enter into, modify, amend, waive any
material provision of, terminate or cancel any leases of
all or any portion of the Project without the prior
written consent of Lender and all lessees shall be
required at Lender's election to execute estoppel
certificates and subordination, non-disturbance and
attornment agreements in form and substance satisfactory
to Lender; and (ii) within fifteen (15) days following
the end of each calendar month, Borrower shall deliver
to Lender a report showing the status of the leasing of
the Project certified by Borrower. Such report shall
include information on the amount of space covered by
any letters of intent, leases out for execution, and
fully executed leases; the rental under each lease
agreement or proposed lease agreement; the term of each
lease agreement; and a summary of any terms which vary
from the standard form of lease previously approved by
Lender. Any new lease, modification, amendment, waiver
of any material provision, termination or cancellation
of any lease of space in the Project without the prior
written consent of Lender shall be deemed by Lender, in
its sole discretion, as an Event of Default. Lender
reserves the right to charge an administrative fee for
any such modification, amendment, waiver, termination or
cancellation of any lease(s) done with or without
Lender's consent.
11.7. Compliance With Laws. Borrower shall
promptly comply with all applicable Laws of any
Governmental Authority having jurisdiction over Borrower
or the Project, and shall take all actions necessary to
bring the Project into compliance with all applicable
Laws, including without limitation all Building Laws
(whether now existing or hereafter enacted).
11.8. Alterations. Without the prior written
consent of Lender, Borrower shall not make any material
alterations to the Project (other than completion of
tenant work required pursuant to leases entered into in
accordance with the terms of this Agreement).
11.9. Personal Property. (i) All of Borrower's
personal property, fixtures, furnishings, furniture,
attachments and equipment located on or used in
connection with the Project, shall always be located at
the Project and shall also be kept free and clear of all
chattel mortgages, conditional vendor's liens and all
other liens, encumbrances and security interests of any
kind whatever, (ii) Borrower will be the absolute owner
of said personal property, fixtures, attachments and
equipment, and (iii) Borrower shall, from time to time,
furnish Lender with evidence of such ownership
satisfactory to Lender, including searches of applicable
public records.
11.10. Prohibition Against Cash Distributions and
Application of Cash Flow. Borrower shall first apply
all cash flow from the Project to pay Project expenses,
including amounts due to Lender pursuant to the Loan
Documents. No cash flow from the Project shall be
distributed to any partners, principals, members or
shareholders of Borrower or applied to the payment of
any obligations, debts or expenses not related to the
Project if an Event of Default has occurred or if there
is a reasonable likelihood that such money will be
necessary for the operation of the Project or the
payment of principal and interest due in connection with
the Loan within ninety (90) days following any
contemplated cash flow distribution.
11.11. Inspection by Lender. Borrower shall allow
Lender and Lender's representatives and agents full
access to the Project upon reasonable prior notice and
at reasonable times and shall provide to Lender such
documents relating to the Project as may be requested by
Lender or its representatives and agents. Lender may
disclose the existence and contents of such documents to
anyone it desires.
11.12. Furnishing Information. Borrower shall
deliver or cause to be delivered to Lender annual
financial statements for Borrower and annual financial
statements for Guarantor, and such other financial
information as Lender may reasonably require, as soon as
available and in all events no later than one hundred
twenty (120) days after the close of each fiscal year.
The annual statements shall be certified as true and
correct by an authorized financial officer of Borrower
or Guarantor hereof, as the case may be. If an Event of
Default has occurred or Lender reasonably believes that
previously provided financial statements are inaccurate,
Borrower and Guarantor shall promptly provide Lender
with such additional financial reports and/or
information as Lender may request in Lender's sole and
absolute discretion, and Lender may require that any
such financial statements be prepared in accordance with
generally accepted accounting principals and certified
by an independent certified public accountant. Borrower
shall also furnish a current operating statement for the
Project (including a rent roll if there are any leases
of the Project or any part thereof), at the time it
delivers its financial statements. Additionally,
Borrower and Guarantor hereof shall: (i) promptly
supply Lender with such information concerning its/their
respective affairs and property relating to the
development and operation of the Project as Lender may
hereafter request from time to time; (ii) at any time
during regular business hours permit Lender or any of
its agents or representatives to have access to and
examine all of its books and records regarding the
development and operation of the Project; (iii) permit
Lender to copy and make abstracts from any and all of
such books and records; (iv) immediately notify Lender
if Borrower receives any actual notice, action or lien
notice or otherwise becomes aware that the Project
violates or is alleged to violate any Building Law, or
of a condition or situation on the Project which will
constitute violation of a Building Law (whether now
existing or hereafter enacted), which notice to Lender
shall describe with particularity the Building Law
violation and Borrower's plan to promptly correct the
violation; and (v) if Borrower is a corporation and/or
has made filings with the government securities
commission or any national securities exchange, promptly
furnish to Lender copies of all (a) filings by it with
the government securities commission or any national
securities exchange, (b) mailings by it to its
shareholders, (c) reports furnished by it to rating
agencies and relating to its outstanding commercial
paper, (d) information generally supplied by it in
writing to security analysts, and (e) furnish other
information concerning Borrower and Guarantor as is
reasonably requested from time to time by Lender.
Notwithstanding any of the foregoing, Lender may, at any
time during the term of the Loan, require Borrower to
provide Lender with quarterly financial statements.
11.13. Documents of Further Assurance. Borrower
shall, from time to time, upon Lender's request,
execute, deliver, record and furnish such documents as
Lender may reasonably deem necessary or desirable to
(i) perfect and maintain perfected as valid liens upon
the Project, the liens granted by Borrower to Lender
under the Deed of Trust and the Assignment of Leases and
other security interests under the other Loan Documents
as contemplated by this Agreement, (ii) correct any
errors of a typographical nature or inconsistencies
which may be contained in any of the Loan Documents, and
(iii) consummate fully the transaction contemplated
under this Agreement.
11.14. Furnishing Reports. Borrower shall provide
Lender, promptly after receipt, with copies of all
inspections, reports, test results and other information
received by Borrower from time to time from its
employees, agents, representatives, architects and
engineers, which in any way relate to the Project, or
any part thereof.
11.15. Operation of Project and Zoning. As long
as any portion of the Loan remains outstanding, the
Project shall be operated in a first class manner as an
industrial and office facility. Borrower shall fully
and faithfully perform all of its covenants, agreements
and obligations under each of the leases of the Project.
Borrower shall not initiate or acquiesce in a zoning
variation or reclassification without Lender's written
consent.
11.16. Management, Agents' and Brokers' Contracts.
Other than in the ordinary course of business, Borrower
shall not enter into, modify, amend, waive any material
provision of, terminate or cancel any management
contracts for the Project or agreements with agents or
brokers, without the prior written approval of Lender.
If in the ordinary course of business Borrower shall
enter into, modify, amend, waive any provision of,
terminate or cancel any contracts or agreements (other
than management contracts) with agents or brokers,
Borrower shall notify Lender within ten (10) days after
such action.
11.17. Furnishing Notices. As soon as Borrower
becomes aware of the same, Borrower shall promptly
notify Lender in writing of any occurrence, event, or
condition (including, but not limited to, any pending or
threatened suit or proceeding against Borrower, or any
of its Affiliated Parties, or the Project, by or before
any court, administrative agency or other governmental
authority or any arbitrator which is not fully covered
by insurance), the enactment of any statute, ordinance
or law, or the giving of any notice or other
communication by any party pursuant to any of the
Permitted Exceptions which, individually or in the
aggregate, has resulted or might result in (i) an Event
of Default hereunder or under any one or more of the
other Loan Documents, (ii) the breach of any of the
representations and warranties of Borrower set forth in
this Agreement or in any of the other Loan Documents or
any other documents or instruments contemplated herein
or therein to be executed and delivered by Borrower, or
(iii) a default in any obligation of Borrower to any
third party.
11.18. Corporate Existence. Borrower shall
maintain its existence as a corporation in good standing
under the laws of the State of California.
11.19. Articles of Incorporation. Without the
prior written consent of Lender, Borrower shall not
permit or suffer any amendment or modification of its
articles of incorporation, and shall not permit or
suffer the admission of any new shareholders, except as
permitted pursuant to Section 7.2.3.
11.20. Publicity. During the term of the Loan,
Lender may issue or publish releases or announcements
stating that the financing for the Project is being
provided by Lender to Borrower, and Borrower hereby
consents thereto. In addition, Lender may, without the
need of additional consents, answer any questions from
third parties about Lender's credit experience with
Borrower and/or Guarantor.
11.21. No Additional Debt. Other than customary
trade payables paid within sixty (60) days after they
are incurred, Borrower shall not refinance, incur any
liability or indebtedness secured by the Project or any
part thereof, or mortgage, hypothecate, assign, pledge,
grant security interests in or otherwise encumber or
allow any Lien to be placed of record against all or any
part of the Project (except in favor of Jackson National
Life Insurance Company or its successors or Affiliated
Parties, whether or not Jackson National Life Insurance
Company is, at that time, the holder of the indebtedness
evidenced by the Note, the Deed of Trust and the other
Loan Documents), without the prior express written
consent of Lender which consent may be given or withheld
in Lender's sole discretion.
11.22. Payments. Borrower shall pay all sums due
pursuant to this Agreement, the Note, the Deed of Trust
and the other Loan Documents to be executed and
delivered by Borrower, as and when the same shall be due
and payable and shall perform all of its obligations
hereunder and thereunder in accordance with the terms
hereof and thereof.
12. SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES. All covenants, agreements, representations
and warranties made by Borrower herein, in the Deed of
Trust, in the Note, and all other Loan Documents, and in
any certificates delivered by Borrower to Lender
hereunder, and other instruments described in or
delivered pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Loan
Closing and shall continue in effect so long as this
Agreement or any other Loan Document (other than the
Environmental Indemnity Agreement) or any of the
instruments described herein or therein are outstanding.
All covenants, agreements, representations and
warranties in this Agreement and in any other Loan
Document shall bind the party making the same and its
successors and assigns and shall inure to the benefit of
and be enforceable by each party to whom made and by
their respective successors and assigns.
13. EVENTS OF DEFAULT.
13.1. Events of Default. The occurrence of any
one or more of the following events shall constitute an
event of default under this Agreement, the Note, the
Deed of Trust and all of the other Loan Documents (each
of which is hereafter referred to as an "Event of
Default"):
(a) If Borrower fails to make when due any
payment of any installment of Regular Interest or
Default Interest, or any required payment, repayment or
prepayment of the principal of the Loan, or fails to
make when due any other payment, of any kind or nature
whatsoever (including, but not limited to payment of the
balloon payment due and owing on the Maturity Date) owed
by Borrower under the Note, this Agreement or any of the
other Loan Documents, whether owed to Lender or to a
third party;
(b) If Borrower defaults in the performance
of any of its non-monetary covenants, agreements and
obligations under this Agreement and fails to cure such
default within thirty (30) days after written notice
thereof from Lender; provided, however, that if such
default is reasonably susceptible of cure, but cannot be
cured within such thirty (30) day period, then so long
as Borrower promptly commences cure and thereafter
diligently pursues such cure to completion, the cure
period shall be extended for an additional thirty (30)
days, within which Borrower may complete such cure;
(c) If at any time or times hereafter any
representation or warranty (including the
representations and warranties of Borrower set forth in
any Loan Document), statement, report or certificate
furnished to Lender in connection with the Loan is not
true and correct in any material respect;
(d) If any petition is filed by or against
Borrower or any Affiliated Party under the Federal
Bankruptcy Code or any similar state or federal Law,
whether now or hereafter existing (and, in the case of
involuntary proceedings, failure to cause the same to be
vacated, stayed or set aside within thirty (30) days
after filing);
(e) If any assignment, pledge, encumbrance,
transfer, hypothecation or other disposition is made in
violation of Sections 7.2.2 or 7.2.3 of this Agreement;
(f) If Borrower or Guarantor shall fail to
pay any debt owed by it or is in default under any
agreement with Lender or any other party (other than a
failure or default for which the maximum liability for
Borrower or Guarantor does not exceed twenty-five
percent (25%) of their respective assets) and such
failure or default continues after any applicable grace
period specified in the instrument or agreement relating
thereto;
(g) any Governmental Approval necessary in
connection with the execution or performance of any of
this Agreement, the Note, the Deed of Trust or the other
Loan Documents, or in connection with the operation of
the Building, or any other documents required to be
delivered by Borrower hereunder or under any other Loan
Document is modified, revoked or withdrawn in a way
materially prejudicial to the rights of Lender
hereunder.
(h) Borrower suspends its business operation
with respect to the Building other than as a result of a
casualty or eminent domain; or Borrower transfers or
disposes all of or substantially all of its assets other
than in the ordinary course of its business as
contemplated by this Agreement;
(i) by virtue of the enactment of any
federal, state or local law, ordinance or regulation, or
as a result of a determination of any court of competent
jurisdiction, arbitrator in a binding arbitration or
judicial referee, the Deed of Trust or the other Loan
Documents cease to constitute the legal, valid and
binding obligations of Borrower enforceable in
accordance with their terms;
(j) the Deed of Trust or the recordation
thereof ceases to be in full force and effect and to
create a Lien in favor of Lender with the first-lien
priority required by this Agreement; or
(k) it becomes unlawful for Borrower to
perform any of its material obligations under this
Agreement, the Note, the Deed of Trust or the other Loan
Documents.
13.2. Remedies Conferred Upon Lender.
13.2.1. Lender's Remedies. Upon the
occurrence of any Event of Default, Lender shall, have
the right (but not the obligation) to pursue any one or
more of the following remedies concurrently or
successively, it being the intent hereof that all such
remedies shall be cumulative and that no such remedy
shall be to the exclusion of any other: (i) declare the
Note to be immediately due and payable; (ii) use and
apply any monies deposited by Borrower with Lender,
including amounts in the Escrow Account, regardless of
the purpose for which the same was deposited, to cure
any such default or to apply on account of any
indebtedness under this Agreement which is due and owing
to Lender; and (iii) exercise or pursue any other right
or remedy permitted under this Agreement or any of the
Loan Documents or conferred upon or available to Lender
at law, in equity or otherwise.
13.2.2. Non-Waiver of Remedies. No waiver
of any breach or Event of Default hereunder shall
constitute or be construed as a waiver by Lender of any
subsequent breach or Event of Default or of any breach
or default of any other provision of this Agreement.
13.2.3. Rents and Profits. Upon the
occurrence of an Event of Default, Lender may, but shall
not be limited to, enforce Borrower's assignment for
security purposes to Lender of the Leases and the Rents
and Profits, as set forth herein, in the Assignment of
Leases, or otherwise under the Loan Documents, by
taking, without limitation, one or more of the following
actions: (a) obtaining the appointment of a receiver;
(b) obtaining possession of the Leases and/or Rents and
Profits; (c) delivery to any one or more of the tenants
of a written demand for turnover of the Rents and
Profits in accordance with 2938 of the California
Civil Code; or (iv) delivery to Borrower of a written
demand for the Leases and/or the Rents and Profits in
accordance with 2938 of the California Civil Code
(collectively, the "Enforcement Actions"). On and after
the date Lender takes one or more of the Enforcement
Actions (the "Enforcement Date"), Lender shall be
entitled to enforce any rights it may have under the
Leases and/or collect and receive all Rents and Profits
that has accrued but remains unpaid and uncollected by
Borrower or its agent, and all Rents and Profits that
accrue on or after the Enforcement Date.
Notwithstanding whether Lender has taken one or more of
the Enforcement Actions, Borrower shall, upon the
occurrence of an Event of Default, immediately turnover
to Lender all Leases and all Rents and Profits then in
its possession, or thereafter collected or received by
Borrower or its agent. Lender may, in its sole
discretion, unless otherwise required by law, apply all
or any portion of the Rents and Profits to: (i)
reasonable costs, as described below, of protecting and
preserving the Project; (ii) the outstanding balance
under the Loan Documents, and/or (iii) otherwise, in
accordance with any of the Loan Documents. Neither the
taking of an Enforcement Action by Lender, nor the
collection, distribution or application of the Rents and
Profits by Lender shall do any of the following: (1)
make Lender a mortgagee in possession of the Project;
(2) constitute an action, render the Loan or any of the
Loan Documents unenforceable, violate 726 of the
California Code of Civil Procedure or, other than with
respect to marshalling requirements, otherwise limit any
rights available to Lender with respect to its security;
or (3) be deemed to create any bar to a deficiency
judgment pursuant to applicable law, notwithstanding
that the Enforcement Action may reduce the outstanding
balance under the Loan and the Loan Documents.
Notwithstanding the foregoing, the remedies set forth
herein shall be in addition to any and all other
remedies which Lender may have under 2938 of the
California Civil Code or other applicable law.
For purposes of this Agreement,
reasonable costs shall include only the following: (i)
expenditures for repairs and maintenance of the Project,
but only to the extent that such expenditures are
necessary to comply with applicable laws or cure an
emergency or life-threatening situation; (ii)
expenditures for taxes, but only to the extent that such
expenditures are necessary to prevent an imminent tax
sale of the Project, or any portion thereof; (iii) and
such other expenditures as Lender, in its sole and
absolute discretion, deems necessary.
13.2.4. Remedies Cumulative. The remedies
provided in this Agreement shall be in addition to, and
not in substitution for, the rights and remedies which
would otherwise be vested in Lender for the recovery of
damages, or otherwise, upon a breach of any of the
representations, warranties, covenants, undertakings or
agreements of Borrower hereunder.
13.2.5. Indemnification. Without prejudice
to any other provisions of this Agreement, Borrower
shall indemnify Lender against any and all liabilities,
damages, claims, causes of action, losses and/or
expenses, which Lender may sustain or incur as a
consequence of the occurrence of an Event of Default,
including without limitation, reasonable attorneys'
fees.
14. EXPENSES, CHARGES AND ATTORNEYS' FEES.
14.1. Expenses. Borrower agrees to pay all
expenses of the Loan on the Closing Date and on demand
at such subsequent times as Lender may determine,
including all recording charges, title insurance
charges, costs of surveys, costs for certified copies of
instruments, escrow charges, fees, expenses and charges
of architectural/engineering consultants of Lender,
reasonable fees and expenses of Lender's attorneys, all
administrative fees and expenses in connection with any
modification of any of the terms of the Loan, and all
costs and expenses incurred by Lender in connection with
the determination of whether Borrower has performed the
obligations undertaken by Borrower under this Agreement
or has satisfied any conditions precedent to the
obligations of Lender under this Agreement. All such
expenses, charges, costs and fees shall be Borrower's
obligation regardless of whether the Loan is disbursed
in whole or in part, unless such failure to disburse is
due to Lender's wrongful failure to disburse hereunder.
Any and all advances or payments made by Lender under
this Agreement from time to time, or for fees of
architectural and engineering consultants and attorneys'
fees and expenses, if any, and all other Loan expenses
shall, as and when advanced or incurred by Lender,
constitute additional indebtedness evidenced by the Note
and secured by the Deed of Trust and the other Loan
Documents to the same extent and effect as if the terms
and provisions of this Agreement were set forth therein,
whether or not the aggregate of such indebtedness shall
exceed the aggregate face amount of the Note. Without
limiting the foregoing, Borrower shall indemnify Lender
against any and all liabilities, damages, claims, causes
of action, losses and/or expenses, which Lender may
sustain or incur as a consequence of Borrower's failure
to pay such expenses.
14.2. Attorneys' Fees and Expenses. If at any
time hereafter prior to repayment of the Loan in full,
Lender employs counsel for advice or other
representation (whether or not any suit has been or
shall be filed and whether or not other legal
proceedings have been or shall be instituted and, if
such suit is filed or legal proceedings instituted,
through all administrative, trial and appellate levels)
with respect to the Loan, the Project or any part
thereof, this Agreement or any of the Loan Documents,
including, but not limited to any proposed or actual
restructuring of the Loan, or to protect, collect,
lease, sell, take possession of, or liquidate any of the
Project, or to attempt to enforce any security interest
or lien on any of the Project, or to enforce any rights
of Lender or any of Borrower's obligations hereunder or
those of any other person, firm or corporation which may
be obligated to Lender by virtue of this Agreement or
any other agreement, instrument or document heretofore
or hereafter delivered to Lender by or for the benefit
of Borrower, or to analyze and respond to any request
for consent or approval made by Borrower, then, in any
such event, all of the reasonable attorneys' fees and
expenses arising from such services, and all expenses,
costs and charges relating thereto, shall bear interest
from the date expended at the Default Rate and shall be
paid by Borrower on demand and if Borrower fails to pay
such fees, costs and expenses, payment thereof by Lender
shall be deemed to constitute disbursement of the Loan
proceeds hereunder (even if the total amount of
disbursements would exceed the face amount of the Note)
and shall constitute additional indebtedness of Borrower
to Lender, payable on demand and secured by the Deed of
Trust and other Loan Documents. Notwithstanding the
foregoing, Lender's reasonable attorneys' fees and
expenses arising from Lender's analysis and response to
any request for consent or approval made by Borrower
shall not bear interest until ten (10) days after Lender
notifies Borrower in writing that such attorneys' fees
and expenses are due, and thereafter, any unpaid portion
of such attorneys' fees and expenses shall bear interest
at the Default Rate.
15. CASUALTY AND CONDEMNATION.
15.1. Lender's Election to Apply Insurance and
Condemnation Proceeds to Indebtedness. Upon any loss or
damage to any portion of the Improvements due to fire or
other casualty, or any taking of any portion of the
Project by condemnation or under power of eminent
domain, Lender shall have the right, but not the
obligation, to settle insurance claims and condemnation
claims or awards for more than One Hundred Thousand
Dollars ($100,000.00) and if Lender elects not to settle
such claim or award, then Borrower shall settle such
claim or award and such settlement shall be subject to
Lender's prior written approval. Borrower shall have
the right to settle claims or awards for less than such
amount, provided that Lender shall have the right to
settle any claim or award that Borrower has not settled
on or before one hundred twenty (120) days after the
date of such loss or prior to the date of such taking.
If (i) no Event of Default exists; (ii) no Event of
Default which constitutes a payment default has occurred
during the preceding twelve months; (iii) the proceeds
received by Lender, together with any additional funds
deposited with Lender by Borrower are sufficient, in
Lender's sole and absolute discretion, either to restore
the Project to its condition before the casualty or to
remedy the condemnation; (iv) local building and zoning
laws allow the Improvements to be rebuilt to that which
existed prior to the casualty or condemnation; (v) the
Loan-to-value ratio of the Improvements on completion of
the restoration will be sixty percent (60%) or less, as
determined by an Appraisal (unless the amount of
proceeds is less than three percent (3%) of the Loan
Amount); (vi) a loss of no more than five percent (5%)
of the commercial tenant rental income will result
through commercial tenants exercising rights to
terminate their leases as a result of the casualty or
condemnation; and (vii) Borrower complies with all
conditions set forth in Section 15.2, below, then
Borrower shall be entitled to use the insurance or
condemnation proceeds to rebuild the Improvements or to
remedy the effect of the condemnation, as the case may
be. The Appraisal required pursuant to the foregoing
provision shall be at Borrower's expense and Borrower is
required to provide proof of such payment to Lender and
Lender's Mortgage Correspondent. In all other cases,
Lender shall have the right (but not the obligation) to
collect, retain and apply to the indebtedness of
Borrower under this Agreement and the other Loan
Documents all insurance and condemnation proceeds (after
deduction of all expenses of collection and settlement,
including attorneys' and adjusters' fees and expenses),
and if such proceeds are insufficient to pay such amount
in full, to declare the balance remaining unpaid on the
Note and Deed of Trust to be due and payable forthwith
and to avail itself of any of the remedies afforded
thereby as in the case of any Event of Default. Any
proceeds remaining after application to the indebtedness
of Borrower under this Agreement and the other Loan
Documents shall be paid by Lender to Borrower or the
party then entitled thereto.
15.2. Borrower's Obligation to Rebuild and Use
of Proceeds Therefor. If Lender does not elect to or is
not entitled to apply fire or casualty insurance
proceeds to the indebtedness, as provided under Section
15.1, above, Lender shall have the right (but not the
obligation) to settle, collect and retain such proceeds,
and after deduction of all expenses of collection and
settlement, including attorneys' and adjusters' fees and
expenses, to release the same to Borrower periodically,
provided that Borrower shall: (i) expeditiously repair
and restore all damage to the portion of the
Improvements in question resulting from such fire or
other casualty, including completion of the construction
if such fire or other casualty shall have occurred prior
to completion, so that the Improvements will be
completed in accordance with the plans and
specifications approved by Lender; and (ii) if the
proceeds of fire or casualty insurance (and the
undisbursed available Loan proceeds for construction)
are, in Lender's sole judgment, insufficient to complete
the repair and restoration of the buildings, structures
and other improvements constituting the Project, then
Borrower shall promptly deposit with Lender the amount
of such deficiency.
Any request by Borrower for a disbursement by
Lender of fire or casualty insurance proceeds and funds
deposited by Borrower pursuant to this Section 15.2 and
the disbursement thereof shall be conditioned upon
Borrower's compliance with and satisfaction of the same
conditions precedent as would be applicable in
connection with construction loans made by institutional
lenders for projects similar to the Project, including
approval of plans and specifications submittal of
evidence of completion, updated title insurance, lien
waivers, and other customary safeguards. Borrower's
failure to comply with this Section 15.2 shall
constitute an Event of Default.
16. ENVIRONMENTAL COVENANTS AND INDEMNITY.
16.1. Compliance With Laws. Borrower shall
keep and maintain the Project in compliance with, and
shall not cause or permit the Project to be in violation
of any federal, state or local laws, ordinances or
regulations, now or hereafter in effect, relating to
environmental conditions, industrial hygiene, human
health or safety or Hazardous Materials (as defined
below) on, under or at the Project, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. 6901, et seq., ("RCRA"), the
Clean Air Act, 42 U.S.C. 7401, et seq., the Toxic
Substances Control Act, 15 U.S.C. 2601 through 2629,
the Safe Drinking Water Act, 42 U.S.C. 300f through
300j, and any similar State and local laws and
ordinances, including but not limited to Hazardous Waste
Control Act, California Health and Safety Code 25100,
et seq.; Hazardous Substance Account Act, California
Health and Safety Code 25300, et seq.; Hazardous
Substance Cleanup Bond Act of 1984, California Health
and Safety Code 25385, et seq., and related statutes
including 25356.1-25356.4 of the California Health
and Safety Code; Porter-Cologne Water Quality Control
Act, California Water Code 13000, et seq.; Safe
Drinking Water and Toxic Enforcement Act of 1986
("Proposition 65"), California Health and Safety Code
25249.5, et seq.; California Health and Safety Code
25220, et seq., 25280, et seq., 25359.7; California
Civil Code 3483; and California Code of Civil
Procedure 736; and in the regulations now or hereafter
adopted and publications now or hereafter promulgated
pursuant thereto, or any other federal, state or local
governmental law, ordinance, rule or regulation related
thereto (collectively, the "Hazardous Materials Laws").
16.2. Prohibited Acts. Borrower shall not use,
generate, manufacture, treat, handle, refine, produce,
process, store, discharge, release, dispose of or allow
to exist on, under or at the Project any flammable
explosives, radioactive materials, asbestos, organic
compounds known as polychlorinated biphenyls, chemicals
known to cause cancer or reproductive toxicity,
pollutants, contaminants, hazardous wastes, toxic
substances or related materials, including, without
limitation, any substances defined as or included in the
definition of "hazardous substances," "hazardous
wastes," "hazardous materials," or "toxic substances"
under the Hazardous Materials Laws (collectively
"Hazardous Materials"), except in compliance with all
applicable law. Furthermore, Borrower shall not allow
to exist on, under or at the Project, any underground
storage tanks or underground deposits unless they exist
in compliance with applicable Hazardous Materials Laws.
16.3. Notification; Right to Audit. Borrower
shall immediately advise Lender in writing of (i) any
actual, suspected or threatened release of any Hazardous
Materials on all or any part of the Project, or on
property immediately adjacent to the Project, (ii) any
and all enforcement, clean up, removal, mitigation or
other governmental or regulatory actions instituted,
contemplated or threatened pursuant to any Hazardous
Materials Laws affecting the Project, (iii) all claims
made or threatened by any third party against Borrower
or the Project relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from
any Hazardous Materials (the matters set forth in
clauses (ii) and (iii), above, are hereinafter referred
to as "Hazardous Materials Claims"), and (iv) Borrower's
discovery of any occurrence or condition on the Project
or any real property adjoining or in the vicinity of the
Project which could subject Borrower or the Project to
any restrictions on ownership, occupancy,
transferability or use of the Project under any
Hazardous Materials Laws. Without limiting the
foregoing, Lender, at Lender's sole expense, shall have
the right to perform, or cause to be performed,
environmental audits at such times during the Term of
the Loan as Lender reasonably believes that such an
audit may disclose the presence or release of any
Hazardous Materials or petroleum products or if an
environmental audit deems further testing necessary;
provided, however, that the cost of such audit(s) shall
be paid by Borrower if the environmental consultant (the
"Consultant") who performed the audit(s) initiates or
institutes an Operations and Maintenance Plan to be
strictly adhered to by Borrower, Borrower's Project
manager or other person or entity employed by Borrower
to operate and maintain the Project. Borrower shall
have the right to approve the Consultant retained by
Lender, which approval shall not be unreasonably
withheld or delayed; provided, however, that if the
Consultant retained by Lender is the same consultant who
prepared the Phase I Environmental Assessment, as set
forth in Section 2.39, above, Borrower shall not have
any such approval right.
16.4. Hazardous Materials Liabilities. Lender
shall have the right to join and participate in, as a
party if it so elects, any settlements, remedial
actions, legal proceedings or actions initiated in
connection with any Hazardous Materials Claims and to
have its reasonable attorneys' fees in connection
therewith paid by Borrower. Borrower shall be solely
responsible for, and shall indemnify, hold harmless and
defend (using counsel of Lender's choosing) Lender, its
directors, officers, employees, agents, successors and
assigns (hereinafter collectively called the
"Indemnitees") from and against, any loss, damage, cost,
expense or liability directly or indirectly arising out
of or attributable to the use, transportation,
generation, manufacture, treatment, handling, refining,
production, processing, storage, release, threatened
release, discharge, disposal, or presence of Hazardous
Materials on, under or at the Project (the losses,
damages, costs, expenses or liabilities against which
Borrower is obligated to indemnify and hold harmless the
Indemnitees under the provision of this Section are
hereinbelow collectively called "Hazardous Materials
Liabilities"), which Hazardous Materials Liabilities
include, without limitation: (i) all foreseeable and
unforeseeable consequential damages; (ii) the costs of
any required or necessary repair, cleanup or
detoxification of the Project, and the preparation and
implementation of any closure, remedial or other
required plans; and (iii) all reasonable costs and
expenses incurred by Lender in connection with clauses
(i) and (ii), including, without limitation, reasonable
attorneys' fees. At the Closing, Borrower will execute
a separate Environmental Indemnity Agreement in the form
attached as Exhibit "G."
16.5. Remedial Work. All monitoring and
investigation of site conditions, cleanup, containment,
removal, restoration or other remedial work for the
Project which is required by the Hazardous Materials
Laws or requested by Lender pursuant to this Section
16.5 is hereinafter referred to as the "Remedial Work."
All Remedial Work shall be conducted: (i) in a diligent
and timely manner by licensed contractors acting under
the supervision of a consulting environmental engineer
acceptable to Lender; (ii) pursuant to a detailed
written plan approved by any public or private agencies
or persons with the legal or contractual right to such
approval; (iii) with such insurance coverage pertaining
to liabilities arising out of the Remedial Work as is
customarily maintained with respect to such activities;
and (iv) only following receipt of any required permits,
licenses, or approvals. The selection of the Remedial
Work contractors and consulting environmental engineer,
the contracts entered into with such parties, all
disclosures to or agreements with any public or private
agencies or parties relating to the Remedial Work and
the written plan for the Remedial Work shall be subject
to Lender's prior written approval. In addition,
Borrower shall submit to Lender, promptly upon receipt
or preparation, copies of any and all reports, studies,
analyses, correspondence, governmental comments or
approvals prepared or received by Borrower in connection
with any Remedial Work. All costs and expenses of such
Remedial Work shall be paid by Borrower, including,
without limitation, the cost of the Remedial Work
contractors and the consulting and environmental
engineers, taxes and penalties assessed in connection
with the Remedial Work and Lender's reasonable fees and
costs incurred in connection with monitoring and
reviewing the Remedial Work. If Borrower shall fail to
commence or cause to be commenced in a timely manner or
fail diligently to prosecute the completion of such
Remedial Work, Lender may, but shall not be required to,
cause such Remedial Work to be performed, and all costs
incurred by Lender in connection therewith, together
with interest thereon at the Default Rate, shall be
reimbursed by Borrower upon demand and shall be secured
by the Deed of Trust.
16.6. Indemnification. BORROWER WILL INDEMNIFY
AND HOLD HARMLESS LENDER, ITS OFFICERS, DIRECTORS,
PARTNERS, EMPLOYEES, AGENTS, REPRESENTATIVES AND
ATTORNEYS AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS,
COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS'
FEES) OF WHATEVER KIND OR NATURE ("CLAIMS") WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AT ANY TIME AGAINST
LENDER AND IN ANY WAY RELATING TO OR ARISING OUT OF OR
IN CONNECTION WITH THE ENVIRONMENTAL CONDITION OF THE
PROJECT AS A RESULT OF THE CONSTRUCTION OR MAINTENANCE
OF THE IMPROVEMENTS THEREON AND/OR THE USE, OCCUPATION
OR OPERATION OF THE PROJECT, OR OTHERWISE.
16.7. Survival. The obligations of Borrower
set forth in this Section 16 shall survive repayment of
the Loan, any judicial or non-judicial foreclosure of
the Deed of Trust and any deed in lieu of foreclosure.
17. GENERAL PROVISIONS.
17.1. Captions. The captions and headings of
various Articles and Sections of this Agreement and
Exhibits pertaining hereto are for convenience only and
are not to be considered as defining or limiting in any
way, the scope or intent of the provisions hereof.
17.2. Merger. This Agreement, the Note, the
Deed of Trust, and all the other Loan Documents referred
to herein, constitute the entire agreement of the
parties with respect to the Project and the Loan, and
all prior discussions, negotiations and document drafts
are merged herein and therein. This Agreement may not
be changed orally, but only by a written instrument
signed by each party hereto. Neither Lender nor any
employee of Lender has made or is authorized to make any
representation or agreement upon which Borrower may rely
unless such matter is made for the benefit of Borrower
and is in writing signed by an authorized officer of
Lender. Borrower agrees that it has not and will not
rely on any custom or practice of Lender, or on any
course of dealing with Lender, in connection with the
Loan unless such matters are set forth in this Agreement
or the Loan Documents or in an instrument made for the
benefit of Borrower and in a writing signed by an
authorized officer of Lender.
17.3. Notices. All notices, demands, requests
or other communications which any party hereto may be
required or may desire to give hereunder shall be in
writing, addressed as follows and shall be deemed to
have been properly given if hand delivered, if sent by
reputable overnight courier or if mailed by United
States registered or certified mail, postage prepaid,
return receipt requested:
If to Borrower: Datron Resources Inc.
304 Enterprise Street
Escondido, California 92029
Attention: Treasurer
If to Lender: Jackson National Life Insurance Company
c/o PPM Finance, Inc.
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attention: Manager of Commercial Mortgage
Servicing
or at such other address as the party to be served with
notice may have furnished in writing to the party
seeking or desiring to serve notice as a place for the
service of notice. Unless otherwise expressly
stipulated in this Agreement, notices shall be deemed to
have been given or made, (i) in the case of notice by
mail on the earlier of the date reflected on the return
receipt or three (3) calendar days after deposit in the
U.S. mails, and (ii) in the case of delivery by courier,
by the courier's delivery receipt.
17.4. Modification; Waiver. No modification,
waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed
by the party against which the enforcement of such
modification, waiver, amendment, discharge or change is
sought. Lender reserves the right to charge an
administrative fee for any such modification, waiver,
amendment, discharge or change of this Agreement.
17.5. Governing Law. THIS AGREEMENT, THE NOTE,
THE DEED OF TRUST AND ALL OF THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA WITHOUT RESORT TO CHOICE
OF LAW PRINCIPLES.
17.6. Further Assurances. Borrower agrees to
execute and deliver such other instruments as may be
requested by Lender from time to time to effect and
confirm the transactions described herein and
contemplated hereby.
17.7. General Provisions Relating to Interest.
IT IS THE INTENTION OF THE PARTIES HERETO TO CONFORM
STRICTLY TO APPLICABLE USURY LAWS REGARDING THE USE,
FORBEARANCE OR DETENTION OF THE INDEBTEDNESS EVIDENCED
BY THIS AGREEMENT, THE NOTE, THE DEED OF TRUST AND THE
OTHER LOAN DOCUMENTS, WHETHER SUCH LAWS ARE NOW OR
HEREAFTER IN EFFECT, INCLUDING THE LAWS OF THE UNITED
STATES OF AMERICA, THE LAWS OF THE STATE OF CALIFORNIA
OR ANY OTHER JURISDICTION WHOSE LAWS ARE APPLICABLE, AND
INCLUDING ANY SUBSEQUENT REVISIONS TO OR JUDICIAL
INTERPRETATIONS OF THOSE LAWS, IN EACH CASE TO THE
EXTENT THEY ARE APPLICABLE TO THIS AGREEMENT, THE NOTE,
THE DEED OF TRUST AND THE OTHER LOAN DOCUMENTS (THE
"APPLICABLE USURY LAWS"); PROVIDED, HOWEVER, IF SUCH
LAWS SHALL HEREAFTER PERMIT HIGHER RATES OF INTEREST,
THEN THE APPLICABLE USURY LAWS SHALL BE THE LAWS
ALLOWING THE HIGHER RATES OF INTEREST. BORROWER
ACKNOWLEDGES THAT LENDER IS LICENSED AS A COMMERCIAL
FINANCE LENDER UNDER CALIFORNIA FINANCIAL CODE 22000,
ET SEQ., AND AS SUCH, IS COMPLETELY EXEMPT FROM
CALIFORNIA USURY LAWS. NOTWITHSTANDING ANYTHING SET
FORTH IN THIS AGREEMENT, THE INTEREST APPLICABLE TO THE
NOTE IS AS SPECIFICALLY SET FORTH THEREIN, AND THE
INTEREST APPLICABLE TO THE NOTE SHALL NOT BE AGGREGATED,
BLENDED OR OTHERWISE CONSIDERED AS ONE INTEREST RATE
APPLICABLE TO THE LOAN. NONETHELESS, THE FOLLOWING
SHALL APPLY:
If, despite Lender's exempt status, it is
nonetheless determined that any acceleration of the
maturity of the Note or any payment by Borrower or any
other person or entity results in Borrower or such other
person or entity being deemed to have paid any interest
(including fees and any other additional amounts) in
excess of the Maximum Amount (as defined below), or if
any transaction contemplated hereby would otherwise be
usurious under any Applicable Usury Laws, then, in that
event, notwithstanding anything to the contrary in this
Agreement or any other Loan Document or any other
agreement or instrument, it is agreed as follows: (i)
the provisions of this Section 17.7 shall govern and
control; (ii) the aggregate of all interest under the
Applicable Usury Laws that is contracted for, charged,
taken, reserved or received under this Agreement, or
under any of the other aforesaid agreements or
instruments or otherwise shall under no circumstances
exceed the Maximum Amount, and any excess shall either
be refunded to Borrower or applied in reduction of
principal, if permitted by California law, in the sole
discretion of Lender; (iii) neither Borrower nor any
other person or entity shall be obligated to pay the
amount of such interest to the extent that it is in
excess of the Maximum Amount; (iv) any Interest
contracted for, charged, reserved, taken or received in
excess of the Maximum Amount shall be deemed an
accidental or bona fide error and cancelled
automatically to the extent of such excess; (v) the
effective rate of Interest on the Loan shall be ipso
facto reduced to the Highest Lawful Rate (defined
below); and (vi) the provisions of this Agreement, the
Note, the Deed of Trust and the other Loan Documents
immediately shall be deemed reformed, without the
necessity of the execution of any new document or
instrument, so as to comply with all Applicable Usury
Laws; provided, however, that to the fullest extent
permitted by Applicable Usury Laws, any subsequent
reductions in the applicable rate of Interest shall not
reduce the Interest to accrue pursuant to this
Agreement, the Note, the Deed of Trust and the other
Loan Documents below the Highest Lawful Rate until the
aggregate amount of Interest actually accrued pursuant
to this Agreement, the Note, the Deed of Trust and the
other Loan Documents, together with such additional
interest, equals the amount of Interest which would have
accrued if the Highest Lawful Rate had at all times been
in effect and such additional interest, if any, had been
paid in full. All sums paid, or agreed to be paid, to
Lender for the use, forbearance or detention of the
indebtedness of Borrower to Lender evidenced by this
Agreement, the Note, the Deed of Trust and the other
Loan Documents shall, to the fullest extent permitted by
the Applicable Usury Laws, be amortized, pro rated,
allocated and spread throughout the full term of the
indebtedness evidenced by this Agreement, the Note, the
Deed of Trust and the other Loan Documents so that the
actual rate of Interest does not exceed the Highest
Lawful Rate in effect at any particular time during the
full term thereof. As used herein, the term "Maximum
Amount" means the maximum non-usurious amount of
interest which may be lawfully contracted for, charged
or received by Lender in connection with the
indebtedness evidenced by this Agreement, the Note, the
Deed of Trust and other Loan Documents under all
Applicable Usury Laws. For purposes of this Agreement,
the term "Highest Lawful Rate" means the maximum rate of
interest, if any, that may be charged under all
Applicable Usury Laws on the principal balance of the
Loan from time to time outstanding.
17.8. Estoppel Certificates. Within ten (10)
calendar days after written request by Lender, Borrower
shall execute and deliver to Lender, in such form as
Lender shall reasonably request, a Certificate
confirming (i) that, as of the date of such Certificate,
this Agreement, the Note, the Deed of Trust and each
other Loan Document are in full force and effect and are
enforceable against Borrower in accordance with their
terms, (ii) the amount of principal outstanding pursuant
to the Note as of the date of such Certificate, and
(iii) as of the date of such Certificate, there is no
uncured Event of Default under this Agreement or any
other Loan Document.
17.9. Acquiescence Not to Constitute Waiver of
Lender's Requirements. Each and every covenant and
condition for the benefit of Lender contained in this
Agreement may be waived by Lender.
17.10. Disclaimer by Lender.
17.10.1. This Agreement is made for the sole
benefit of Borrower and Lender (and Lender's successors
and assigns and participants, if any), and no other
person shall have any benefits, rights or remedies under
or by reason of this Agreement, or by reason of any
actions taken by Lender pursuant to this Agreement.
Lender shall not be liable for any debts or claims
accruing in favor of any third parties against Borrower
or others or against the Project. Borrower is not and
shall not be an agent of Lender for any purposes.
Except as may be expressly set forth in the Loan
Documents, Lender is not and shall not be an agent of
Borrower for any purposes.
17.10.2. Any review, investigation or
inspection conducted by Lender, any architectural or
engineering consultants retained by Lender, any agent or
representative of Lender retained to verify
independently Borrower's satisfaction of any conditions
precedent to the disbursement of the Loan, Borrower's
performance of any of the covenants, agreements and
obligations of Borrower under this Agreement, or the
truth of any representations and warranties made by
Borrower hereunder (regardless of whether or not the
party conducting such review, investigation or
inspection should have discovered that any of such
conditions precedent were not satisfied or that any such
covenants, agreements or obligations were not performed
or that any such representations or warranties were not
true), shall not affect or constitute a waiver by Lender
of (i) any of Borrower's representations and warranties
under this Agreement or Lender's reliance thereon, or
(ii) Lender's reliance upon any certifications required
under this Agreement or any other facts, information or
reports furnished Lender by Borrower hereunder.
17.10.3. By accepting or approving anything
required to be observed, performed, fulfilled or given
to Lender pursuant to the Loan Documents, including any
certificate, statement of profit and loss or other
financial statement, survey, appraisal, lease or
insurance policy, Lender shall not be deemed to have
warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any
term provision or condition thereof, and such acceptance
or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by Lender.
17.11. No Partnership.
17.11.1. Creditor-Debtor Relationship.
Lender and Borrower intend that the relationship between
them pursuant to this Agreement and each of the other
Loan Documents shall be solely that of creditor and
debtor. Nothing contained in this Agreement or in any
other of the Loan Documents or any other document or
instrument made in connection with the Loan, shall be
deemed or construed to create, or to constitute, a
partnership, tenancy-in-common, joint tenancy, joint
venture or co-ownership by and between Lender and
Borrower. Lender in no way shall be responsible or
liable for the debts, losses, obligations, or duties of
Borrower with respect to the Project or otherwise. All
obligations to pay real property or other Taxes,
assessments, insurance premiums and all other fees and
charges arising from the ownership, operation or
occupancy of the Project and to perform any agreements
and contracts relating to the Project shall be the sole
responsibility of Borrower. Borrower, at all times
consistent with the terms and provisions of this
Agreement and each of the other Loan Documents and any
other document or instrument evidencing, securing or
otherwise relating to the Loan, shall be free to
determine and follow its own policies and practices in
the conduct of its business on the Project.
17.11.2. Indemnification. Borrower shall
indemnify, defend and hold Lender, and its officers,
directors, employees, shareholders, advisers, and agents
(collectively, "Indemnified Parties") harmless from and
against all claims, injury, damage, loss, costs
(including attorneys' fees and costs) and liability of
any and every kind incurred by Indemnified Parties by
reason of (i) the operation or maintenance of the
Project or any construction on the Real Project or
Improvements; (ii) the payment of any brokerage
commissions or fees of any kind with respect to the
Application/Commitment or the Loan, and for any
reasonable legal fees or expenses incurred by Lender in
connection with any claims for such commissions or fees;
(iii) any other action or inaction by, or matter which
is the responsibility of, Borrower; and (iv) the breach
of any representation or warranty or failure to fulfill
any of Borrower's obligations under this Agreement or
any other Loan Document. The foregoing indemnity shall
include the cost of all alterations, repairs and
replacements to the Project (including without
limitation architectural, engineering, legal and
accounting costs), all fines, fees and penalties, and
all legal and other expenses (including reasonable
attorneys' fees), incurred in connection with the
Project being in violation of the Building Laws and for
the cost of collection of the sums due under this
indemnity, whether or not Borrower is in possession of
the Project. If Lender shall become the owner of or
acquire an interest in or rights to the Project by
foreclosure (whether such foreclosure is judicial or non-
judicial foreclosure) or deed in lieu of foreclosure of
the deed of trust securing payment of the Loan, or by
other means, the foregoing indemnification obligation
shall survive such foreclosure or deed in lieu of
foreclosure or other acquisition of the Property, unless
Lender's own negligent acts or omissions cause what
would otherwise be considered an indemnification
obligation by Borrower or Guarantor.
17.12. Right of Lender to Make Advances to Cure
Borrower's Defaults. If Borrower shall fail to perform
in a timely fashion any of Borrower's covenants,
agreements or obligations contained in this Agreement or
the Loan Documents, Lender may (but shall not be
required to) perform any of such covenants, agreements
and obligations. Any funds advanced by Lender in the
exercise of its judgment that the same are needed to
protect its security for the Loan are deemed to be
obligatory advances hereunder and any amounts expended
(whether by disbursement of undisbursed Loan proceeds or
otherwise) by Lender in so doing, shall constitute
additional indebtedness evidenced and secured by the
Note, the Deed of Trust and the other Loan Documents,
shall bear interest from the date expended at the
Default Rate and be payable together with such interest
upon demand.
17.13. Definitions Include Amendments.
Definitions contained in this Agreement which identify
documents, including the Loan Documents, shall be deemed
to include all amendments and supplements to such
documents from the date hereof, and all future
amendments and supplements thereto entered into from
time to time to satisfy the requirements of this
Agreement or otherwise with the prior written consent of
the Lender. Reference to this Agreement contained in
any of the foregoing documents shall be deemed to
include all amendments and supplements to this
Agreement.
17.14. Time Is of the Essence. Time is hereby
declared to be of the essence of this Agreement and of
every part hereof.
17.15. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an
original and all of which taken together shall
constitute one and the same agreement.
17.16. Waiver of Consequential Damages. In no
event shall Lender be liable to Borrower for
consequential damages, whatever the nature of a breach
by Lender of its obligations under this Loan Agreement,
or any of the Loan Documents, and Borrower for itself
and all Affiliated Parties hereby waives all claims for
consequential damages.
17.17. Jurisdiction and Venue. Any action or
proceeding relating to or arising out of this Agreement,
the Project, the other Loan Documents or the Loan
("Proceedings") shall be filed, if a State action, in
the Superior Court of the State of California for the
County of Ventura, or if a Federal action, in the United
States District Court for the Central District of
California; and Borrower waives any objection which it
may have at any time to the laying of venue of any
proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an
inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such
court does not have jurisdiction over such party.
17.18. Severability. The parties hereto intend
and believe that each provision in this Agreement
comports with all applicable Laws. However, if any
provision or provisions, or if any portion of any
provision or provisions, in this Agreement is found by a
court of law to be in violation of any applicable Law,
and if such court declares such portion, provision, or
provisions of this Agreement to be illegal, invalid,
unlawful, void or unenforceable as written, then it is
the intent of all parties hereto that such portion,
provision, or provisions shall be given force to the
fullest possible extent that they are legal, valid and
enforceable, and that the remainder of this Agreement
shall be construed as if such illegal, invalid,
unlawful, void, or unenforceable portion, provision, or
provisions were not contained herein, and that the
rights, obligations, and interests of Borrower and
Lender under the remainder of this Agreement shall
continue in full force and effect.
17.19. Assignments.
17.19.1. Lender's Right to Assign. Lender
shall have the right to assign, transfer, sell,
negotiate, pledge or otherwise hypothecate this
Agreement and any of its rights and security hereunder,
including the Note, Deed of Trust, and any other Loan
Documents. Borrower hereby agrees that all of the
rights and remedies of Lender in connection with the
interest so assigned shall be enforceable against
Borrower by such assignee with the same force and effect
and to the same extent as the same would have been
enforceable by Lender but for such assignment. Borrower
agrees that Lender shall have the right to sell
participations in the Loan or to include the Note in a
securitized pool of indebtedness without the consent of
Borrower.
17.19.2. Prohibition of Assignments by
Borrower. Borrower shall not assign or attempt to
assign its rights under this Agreement. Borrower will
not suffer or permit any of its interest or rights in
the Project to be assigned, sold, pledged, encumbered,
transferred, hypothecated or otherwise disposed of until
the provisions of this Agreement have been fully
complied with and the Loan and all other sums evidenced
by the Note and/or secured by the Deed of Trust and
other Loan Documents, have been repaid in full.
17.19.3. Intentionally Omitted.
17.19.4. Successors and Assigns. Subject to
the foregoing restrictions on transfer and assignment
contained in this Section 17.19, this Agreement shall
inure to the benefit of and shall be binding on the
parties hereto and their respective successors and
assigns.
17.20. Pronouns. All pronouns and any variations
thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural forms thereof, as
its context shall require.
17.21. Resolution of Drafting Ambiguities.
Borrower acknowledges that it was represented by counsel
in connection with the preparation, execution and
delivery of this Agreement, the Note, the Deed of Trust
and the other Loan Documents to be executed and deliv
ered by Borrower and that Borrower's counsel reviewed
and participated in the revision of all of the Loan
Documents and that any rule of construction under any
applicable law to the effect that ambiguities are to be
resolved against the drafting party shall not be
employed in the interpretation of any of this Agreement
or any of the other Loan Documents. Accordingly, the
parties hereby waive the provisions of California Civil
Code 1654.
17.22. Conflicts. Borrower and Lender hereby
acknowledge and agree that concurrently with entering
into this Agreement, they have also entered into the
other Loan Documents which set forth rights, obligations
and remedies of the parties in connection with the Loan,
some of which are also addressed in this Agreement.
Borrower and Lender hereby further agree that to the
extent that the provisions of any of the other Loan
Documents constitute an addition to or an enhancement of
(without conflicting or being inconsistent with) the
provisions of this Agreement, then the provisions of
said other Loan Documents and the provisions of this
Agreement shall all be and remain in full force and
effect, enforceable by Lender in accordance with their
respective terms; provided, however, that if and to the
extent that there is any direct conflict or
inconsistency between the provisions of the other Loan
Documents and the provisions of this Agreement, the
provisions set forth in the other Loan Documents shall
govern and control.
17.23. Attorneys' Fees; Legal Action.
17.23.1. Attorneys' Fees. Borrower shall
reimburse Lender for all reasonable attorneys' fees and
expenses incurred by Lender in connection with the
enforcement of Lender's rights under this Agreement,
including, without limitation, reasonable attorneys'
fees and disbursements for out-of-court workouts and
settlements or for enforcement of rights under any state
or federal statute, including, without limitation,
attorneys' fees incurred in bankruptcy and insolvency
proceedings. Borrower specifically acknowledges that,
due to the complexity of the Loan, the real estate
development sophistication of Borrower and the
difficulties contemplated in enforcement of Lender's
remedies, Lender shall be entitled to retain attorneys
of Lender's choice, including attorneys in the employ of
Lender, to protect its interests properly and completely
upon an Event of Default.
17.23.2. Legal Action. Lender shall have the
right, at Borrower's expense, to commence, to appear in,
or to defend any action or proceeding purporting to
affect the rights or duties of the parties to this
Agreement, the Note, the Deed of Trust or any of the
Loan Documents and in connection therewith shall have
the right to pay, at Borrower's expense, all necessary
expenses, including reasonable attorney's fees, if
Borrower fails upon reasonable notice to so commence,
appear in or defend any such action or proceeding with
counsel of Lender's choice, except in a suit by Borrower
against Lender.
17.24. Exhibits. All Exhibits attached to this
Agreement are incorporated herein by this reference as
though set forth in full herein.
17.25. Intentionally Omitted.
17.26. Recourse. The Loan is a full recourse loan
to Borrower. Notwithstanding anything to the contrary
in the Note, this Agreement and each other Loan
Document, the liability of Borrower for the payment of
principal and Interest, and the observance and
performance of all of the terms, covenants, conditions
and provisions of the Note, this Agreement and the other
Loan Documents is not limited or restricted to the
Project, and full recourse may be had for the payment of
such indebtedness, or the observance or performance of
any of the terms, covenants, conditions or provisions of
the Note, this Agreement or any of the other Loan
Documents against any property, assets or funds of
Borrower other than the Project.
Lender may seek payment from Guarantor without
first reducing its claim against Borrower to judgment.
Guarantor shall be obligated as though it had itself
executed this Agreement, the Note and the other Loan
Documents. Accordingly, Lender may enforce the terms,
covenants, conditions and provisions of the Note, this
Agreement and the other Loan Documents against Guarantor
notwithstanding Borrower's filing of a petition in
bankruptcy and obtaining a discharge. Furthermore,
Guarantor shall provide to Lender the same financial
information that Borrower is required to provide
hereunder.
Nothing contained herein shall be construed to
prevent Lender from exercising any remedy allowed by Law
or by the terms of this Agreement or any other Loan
Document.
17.27. WAIVER OF JURY TRIAL. BORROWER AND LENDER
EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT RELATING
THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH
IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
IN WITNESS WHEREOF, Borrower and Lender have
executed this Agreement as of the day and year first set
forth above.
BORROWER:
DATRON RESOURCES INC.
a California corporation
By: /s/ WILLIAM L. STEPHAN
Its: Treasurer
LENDER:
JACKSON NATIONAL LIFE INSURANCE
COMPANY,
a Michigan corporation
By: PPM Finance, Inc.,
a Delaware corporation,
Its: Authorized Agent
By: /s/ JAMES B. KEARNS
Its: Senior Regional Director
DATRON SYSTEMS INCORPORATED
PROFIT SHARING AND SAVINGS PLAN
(Amended and Restated as of April 1, 1998)
TABLE OF CONTENTS
Page
1. DEFINITIONS 3
2. PARTICIPATION 11
2.1. Service Requirement and Commencement
Date. 11
2.2. Period of Participation 12
2.3. Suspended Participation 12
3. DEFERRED PAY CONTRIBUTIONS 12
3.1. General Rules 12
3.2. Limitations on Deferred Pay
Contributions 13
3.3. Administrative Committee May Modify
or Revoke Deferred Pay
Contribution Elections 13
3.4. Distribution of Excess Deferrals and
Excess Contributions 14
3.5. Special Employer Contributions 15
4. EMPLOYER MATCHING AND PROFIT SHARING
CONTRIBUTIONS 15
4.1. Matching Contributions 15
4.2. Profit Sharing Contributions 15
4.3. Time for Contributions 16
4.4. Limitations on Employer
Contributions 16
4.5. Administrative Committee May Reduce or
Discontinue Matching Contributions 16
4.6. Distribution of Excess Aggregate
Contributions 16
5. ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 17
5.1. Accounts 17
5.2. Valuation of Accounts 17
5.3. Allocation of Employer Contributions
and Forfeitures 18
5.4. Limitations on Allocations 19
6. VESTING AND TREATMENT OF FORFEITURES 21
6.1. Vesting 21
6.2. Forfeitures 22
7. INVESTMENT OF PLAN ASSETS 23
7.1. Options Available to Participants 23
7.2. No Investment in Securities of the
Company or in Real Estate Leased
to the Company 24
7.3. Certain Other Investments 24
8. DISTRIBUTION OF BENEFITS AND
WITHDRAWALS 24
8.1. Amount of Plan Benefit 24
8.2. Time of Distribution 25
8.3. Methods of Distribution 26
8.4. Valuation of Accounts for
Distribution 26
8.5. Distribution after Total Disability 27
8.6. Distribution Pursuant to a Qualified
Domestic Relations Order 27
8.7. Withdrawal After Age 59 1/2 27
8.8. Withdrawals in the Event of Financial
Hardship 27
8.9. Loans to Employees 29
8.10. Direct Benefit Transfers 29
9. DEATH BENEFITS AND BENEFICIARIES 30
9.1. Death Benefits 30
9.2. Designation of Beneficiary 31
9.3. Absence of Valid Designation of
Beneficiary 31
9.4. Direct Benefit Transfers 31
10. TRUST AND PAYMENT OF BENEFITS AND
EXPENSES 31
10.1. Trust 31
10.2. Payment of Benefits 32
10.3. Expenses of Plan Administration 32
11. ADMINISTRATION 32
11.1. Board of Directors 32
11.2. Administrative Committee 32
11.3. Appointment of Investment Managers 35
11.4. Funding Policy 35
11.5. Engagement of Advisors 35
11.6. Service in More than One Fiduciary
Capacity 35
11.7. Indemnification 35
12. CLAIMS AND REVIEW PROCEDURES 36
12.1. Claims Procedure 36
12.2. Review Procedure 37
13. AMENDMENT AND TERMINATION 37
13.1. Amendment 37
13.2. Termination, Partial Termination,
or Complete Discontinuance of
Contributions 38
14. MISCELLANEOUS 38
14.1. No Effect on Employment Relationship 38
14.2. Mergers and Transfer of Assets 38
14.3. Prohibition Against Assignment 39
14.4. Permissible Reversions 39
14.5. Masculine/Feminine; Singular/Plural 40
14.6. Missing Participant or Beneficiary 40
14.7. Notices and Elections 40
14.8. Top Heavy Rules 40
14.9. Rollovers and Direct Transfers from
Other Plans 42
14.10. Compliance with Section 401(a)(9) of
the Code 43
14.11. Benefits for Certain Reemployed
Participants Who Return from
Military Service 43
14.12. Applicable Law and Severability 43
DATRON SYSTEMS INCORPORATED
PROFIT SHARING AND SAVINGS PLAN
(Amended and Restated as of April 1, 1998
INTRODUCTION
i. Datron Systems Incorporated (the "Company")
originally adopted this Plan effective April 1, 1980,
and has amended and restated it from time to time
thereafter.
ii. Effective as of April 1, 1998, unless otherwise
indicated, the Plan was amended and restated to read as
set forth herein. The principal changes reflected in
this amendment and restatement are designed to reflect
the merger of the Datron World Communications Inc.
Profit Sharing and Savings Plan (the "Datron World
Plan") with and into this Plan effective as of February
1, 1998, but the Company has also adopted additional
changes that are deemed necessary or desirable.
iii. The primary purpose of the Plan is to provide
Eligible Employees with the opportunity to accumulate
funds for their retirement through a program of pre-tax
savings, which may be supplemented by contributions made
by their Participating Employer. In this regard, the
Plan and the trust established hereunder are intended to
qualify as a "profit sharing plan" under section 401(a)
of the Code and as a "qualified cash or deferred
arrangement" under section 401(k) of the Code. Another
purpose of the Plan is to provide security for
Participants and their Beneficiaries through the
provision of benefits in the event of a Participant's
death or Total Disability.
iv. Except as otherwise indicated, the provisions of
this amended and restated Plan shall apply only to
individuals who are Employees on or after February 1,
1998. The benefits payable under the Plan to (or with
respect to) any individual who ceased to be an Employee
prior to February 1, 1998, and the rights and
obligations of any such individual with respect to such
benefits, shall be determined under the terms of the
Plan as in effect on (or as of) the date such individual
ceased to be an Employee.
1. DEFINITIONS
The terms defined in this Section are indicated by
capitalized initial letters wherever they appear in the
Plan and, whenever used, shall have the following
meanings:
1.1 "Administrative Committee" shall mean the committee
described in Section 11.2.
1.2 "Beneficiary" shall mean the person or persons
entitled to receive any benefits payable hereunder after
the death of a Participant (determined under Section 9).
1.3 "Board of Directors" shall mean the board of
directors of the Company.
1.4 "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.5 "Company" shall mean Datron Systems Incorporated, a
Delaware corporation.
1.6 "Compensation" shall mean, with respect to any
Employee, the Employee's wages, salaries, fees for
professional services, and other amounts received for
personal services actually rendered in the course of
employment by the Company or any Related Company, plus
the amount, if any, of his Deferred Pay Contributions
and the amount of any Participating Employer
contributions to a "cafeteria plan" governed by section
125 of the Code that are made at the Employee's
election, but excluding the following:
(a) Contributions to this Plan and any other plan of
deferred compensation, to the extent deductible or not
includable in gross income by the Employee;
(b) Distributions from any plan of deferred
compensation other than an unfunded plan that is not
qualified under section 401 of the Code;
(c) Amounts realized from the exercise of a stock
option or the disposition of stock acquired on exercise
of a stock option;
(d) Amounts realized on the vesting of restricted
property; and
(e) All other amounts that receive special tax benefits
under the Code.
1.7 "Covered Compensation" shall mean an Eligible
Employee's Compensation. Notwithstanding the preceding
sentence: (i) except as otherwise provided herein, the
amount of any Eligible Employee's "Covered Compensation"
taken into account under the Plan for any Plan Year
shall not exceed $160,000 (or such larger amount as may
be prescribed for that Plan Year by the Secretary of the
Treasury pursuant to section 401(a)(17) of the Code);
and (ii) for purposes of determining the amount of any
Participant's Deferred Pay Contributions under Section
3, his "Covered Compensation" shall be limited to
amounts payable after the effective date of his election
to make such Contributions.
1.8 "Deferred Pay Account" shall mean the account
established pursuant to Section 5.1 for each Participant
who elects to make Deferred Pay Contributions to the
Plan, to which such Contributions are credited.
1.9 "Deferred Pay Contributions" shall mean, with
respect to any Participant, the amount of his
Compensation that he has elected to contribute to the
Plan pursuant to Section 3.1.
1.10 "Eligible Employee" shall mean each Employee of a
Participating Employer, except the following:
(a) any such person who is a "leased employee" within
the meaning of section 414(n) of the Code;
(b) any such person who is a member of a collective
bargaining unit that has entered into a collective
bargaining agreement with his Participating Employer
with respect to which there is evidence that retirement
benefits were the subject of good faith bargaining,
unless participation in this Plan is specifically
provided for in such agreement; and
(c) any such person who is not classified as an
Employee for tax purposes by his Participating Employer.
1.11 "Employee" shall mean any individual employed by
the Company or any Related Company any portion of whose
compensation is subject to withholding of income tax
and/or for whom social security contributions are made
by the Company or Related Company that employs him. The
term "Employee" shall also include individuals who are
"leased employees" within the meaning of section 414(n)
of the Code and who are providing services to the
Company or any Related Company, other than any such
individuals who are described in section 414(n)(5) of
the Code. An Employee's employment shall not be
considered terminated for purposes of the Plan while he
is on an unpaid leave of absence. "Leave of absence"
shall mean a leave granted by the Company or any Related
Company, in accordance with rules uniformly applied to
all of its Employees, for reasons of health or public
service, or for other reasons determined by the Company
or Related Company to be in its best interests, and
shall include periods of military service for which
reemployment rights are prescribed by law.
Notwithstanding the foregoing provisions of this
Section, Employees who do not return to the employ of
the Company or any Related Company within 30 days (or
such longer period as may be prescribed by law)
following the end of their leave of absence, or in the
case of military service within the period their
reemployment rights are protected by law, shall be
deemed to have terminated their employment as of the
earlier of (a) the date the leave ended, or (b) the
first anniversary of the date the leave began (unless
such failure to return was the result of death, Total
Disability or Normal Retirement, in which case
employment shall be deemed to have terminated on the
date of death, Total Disability or Normal Retirement, as
applicable).
1.12 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.13 "Highly Compensated Employee" shall mean, with
respect to any Plan Year, an Employee who performs
services for the Company or any Related Company during
such Plan Year and who:
(a) Is a 5% owner (within the meaning of section
416(i)(1)(B)(i) of the Code) of the Company or any
Related Company during that Plan Year or the preceding
Plan Year; or
(b) Receives Compensation in excess of $80,000 during
the preceding Plan Year and, if elected by the
Administrative Committee for such preceding Year, was in
the Top-Paid Group for such preceding Year.
1.14 "Hour of Service" shall mean, with respect to any
Employee:
(a) Each hour for which the Employee is paid or
entitled to payment by the Company or any Related
Company for the performance of duties. Hours of Service
credited under this paragraph shall be credited to the
Plan Year or Service Anniversary Year, as appropriate,
in which the duties are performed;
(b) Each hour for which the Employee is paid or
entitled to payment by the Company or any Related
Company on account of a period of time during which no
duties are performed due to vacation, holiday, sickness,
incapacity (including disability), leave of absence,
layoff, jury duty and military service; provided that no
more than 501 Hours of Service shall be credited under
this paragraph on account of any single continuous
period during which the Employee performs no duties, and
further provided that no Hours of Service shall be
credited under this paragraph if the only payments made
or due to the Employee with respect to such period arise
under a plan maintained solely to comply with applicable
worker's compensation, unemployment compensation or
disability insurance laws. The number of Hours of
Service credited under this paragraph and the Plan Year
or Service Anniversary Year, as appropriate, to which
they shall be credited shall be determined in accordance
with Department of Labor Regulations, section
2530.200b-2(b);
(c) Solely for purposes of determining whether the
Employee has had a One-Year Break in Service, each hour
for which the Employee is absent from work by reason of
a Maternity or Paternity Absence; provided that no more
than 501 Hours of Service shall be credited to the
Employee under this paragraph by reason of any one such
Absence. If the Employee needs any of the Hours of
Service credited under this paragraph to avoid a
One-Year Break in Service in the Plan Year or Service
Anniversary Year, as appropriate, in which the Maternity
or Paternity Absence begins, such Hours of Service shall
only be credited to such Year. If the Employee does not
need any of the Hours of Service credited under this
paragraph to avoid a One-Year Break in Service in the
Plan Year or Service Anniversary Year, as appropriate,
in which the Maternity or Paternity Absence begins, such
Hours of Service shall be credited to the next such
Year. For each day of Maternity or Paternity Absence
covered by this paragraph, the Employee shall be
credited with the number of Hours of Service with which
he would have been credited but for such Absence, based
on his normal work schedule for the pay period
immediately prior to the commencement of such Absence;
(d) Each hour for which the Employee receives (or is
entitled to receive) back pay from the Company or any
Related Company, irrespective of mitigation of damages;
provided that no Hour of Service shall be credited under
this paragraph that has previously been credited to the
Employee under paragraph (a), (b) or (c) above. The
number of Hours of Service credited under this paragraph
and the Plan Year or Service Anniversary Year, as
appropriate, to which they shall be credited shall be
determined in accordance with Department of Labor
Regulations, section 2530.200b-2(b); and
(e) Each hour during an unpaid leave of absence granted
in accordance with Section 1.11 (or during a period of
military service described in that Section) for which
the Employee would have been paid or entitled to payment
had he not been granted such leave of absence (or
performed such military service), based on the
Employee's normal work schedule for the pay period
immediately prior to the commencement of the leave (or
military service); provided that no more than 501 Hours
of Service shall be credited under this paragraph on
account of any one such unpaid leave of absence (or
period of military service), and further provided that
no Hours of Service shall be credited under this
paragraph for any period after the Employee's employment
is deemed to have terminated under the rules set forth
in Section 1.11. Hours of Service credited under this
paragraph shall be credited to the Plan Year(s) or
Service Anniversary Year(s), as appropriate, that
include the pay periods during which the leave (or
military service) occurs.
Any Employee with respect to whom an accurate record of
Hours of Service is not kept by the Company or any
Related Company shall be credited with 10 Hours of
Service for each day during which he completes at least
one Hour of Service.
1.15 "Limitation Year" shall mean the Plan Year.
1.16 "Matching Contributions" shall mean the amount, if
any, contributed to the Plan by the Participating
Employers pursuant to Section 4.1 as a function of
Participants' Deferred Pay Contributions.
1.17 "Matching Contributions Account" shall mean the
account established for each Participant pursuant to
Section 5.1, to which his share of any Matching
Contributions made by his Participating Employer is
credited.
1.18 "Maternity or Paternity Absence" shall mean an
Employee's absence from employment with the Company or
any Related Company:
(a) Because of the pregnancy of the Employee;
(b) Because of the birth of a child of the Employee;
(c) Because of the placement of a child with the
Employee in connection with his adoption of such child;
or
(d) For purposes of caring for a child described in
paragraph (b) or (c) for a period beginning immediately
following its birth or placement with the Employee.
An Employee shall submit to the Administrative Committee
such timely information as the Committee may reasonably
require to establish that an absence qualifies as a
Maternity or Paternity Absence.
1.19 "Normal Retirement" shall mean ceasing to be an
Employee upon or after attaining Normal Retirement Age.
1.20 "Normal Retirement Age" shall mean age 65.
1.21 "One-Year Break in Service" shall mean, with
respect to any Employee, a Service Anniversary Year or
Plan Year, as appropriate, during which the Employee
does not complete more than 500 Hours of Service.
1.22 "Participant" shall mean an Eligible Employee who
is participating in the Plan in accordance with Section
2.
1.23 "Participating Employer" shall mean the Company,
Datron/Transco Inc., Datron World Communications Inc.
and any other Related Company that has been authorized
by the Board of Directors to participate in this Plan
with respect to all or any portion of its Employees and
that has adopted this Plan by appropriate corporate
action.
1.24 "Plan" shall mean the Datron Systems Incorporated
Profit Sharing and Savings Plan, as set forth herein and
as it may be amended from time to time hereafter.
1.25 "Plan Accounts" shall mean a Participant's Deferred
Pay Account, Matching Contributions Account, Profit
Sharing Account, any Special Contribution Account
established for the Participant and any Rollover Account
established for the Participant, or any of such
Accounts, as applicable.
1.26 "Plan Benefit" shall have the meaning specified in
Section 8.1.
1.27 "Plan Year" shall mean each 12-consecutive month
period commencing April 1 and ending the next following
March 31.
1.28 "Profit Sharing Account" shall mean the account
established for each Participant pursuant to Section
5.1, to which his share of any Profit Sharing
Contribution made by his Participating Employer is
credited.
1.29 "Profit Sharing Contribution" shall mean the
amount, if any, contributed to the Plan by the
Participating Employers pursuant to Section 4.2.
1.30 "Qualified Domestic Relations Order" shall mean a
judgment, decree or order (including approval of a
property settlement agreement) issued pursuant to any
State domestic relations law (including a community
property law) that the Administrative Committee
determines is a "qualified domestic relations order"
within the meaning of section 414(p) of the Code. Such
determination shall be made under reasonable procedures
established by the Administrative Committee.
1.31 "Quarter" shall mean a calendar quarter, commencing
January 1, April 1, July 1 and October 1.
1.32 "Related Company" shall mean: (i) any corporation
that is a member of the same "controlled group of
corporations" (as defined in section 414(b) of the Code)
as the Company; (ii) a trade or business (whether or not
incorporated) that is under "common control" (as defined
in section 414(c) of the Code) with the Company; (iii) a
trade or business (whether or not incorporated) that is
a member of the same "affiliated service group" (as
defined in section 414(m) of the Code) as the Company;
and (iv) any other entity that must be combined with the
Company and treated as a single employer under
regulations issued under section 414(o) of the Code;
provided that, except as provided in the following
sentence, status as a Related Company shall be limited
to periods after the date of the affiliation with the
Company described in this Section. With respect to
individuals who are (or were) employed by Transco
Communications, Inc., the term "Related Company" shall
include any predecessor of that company.
1.33 "Rollover Account" shall mean the account
established pursuant to Section 5.1 for each Eligible
Employee who elects to roll over a distribution from
another tax-qualified retirement plan into this Plan or
who arranges to have an amount transferred directly from
another tax-qualified retirement plan into this Plan, in
either case in accordance with Section 14.9.
1.34 "Service Anniversary Year" shall mean, with respect
to any Employee, each 12-consecutive month period
commencing on the date the Employee first performs an
Hour of Service and anniversaries of such date.
1.35 "Special Contribution Account" shall mean the
account established pursuant to Section 5.1 for each
Eligible Employee who receives an allocation of any
special contribution to the Plan made pursuant to
Section 3.5.
1.36 "Top-Heavy Plan" shall have the meaning specified
in Section 14.8(b).
1.37 "Top-Paid Group" shall mean, with respect to any
Plan Year,
the top 20% of all Employees who perform services for
the Company or any Related Company during such Plan
Year, ranked on the basis of their Compensation for such
Plan Year. In determining the number of Employees in
the Top-Paid Group for any Plan Year:
(a) All Employees described in section 414(q)(5) of the
Code (and the regulations promulgated thereunder) shall
be included; and
(b) Nonresident aliens who receive no earned income
(within the meaning of section 911(d)(2) of the Code)
that constitutes income from sources within the United
States (within the meaning of section 861(a)(3) of the
Code) from the Company or any Related Company during
such Plan Year shall be excluded.
An individual described in paragraph (b) of this Section
shall also be excluded in determining the members of the
Top-Paid Group for any Plan Year.
1.38 "Total Disability" or "Totally Disabled" shall mean
a physical or mental incapacity that prevents a
Participant from performing his normal job and that a
medical examiner satisfactory to the Administrative
Committee certifies is likely to be
permanent.
1.39 "Trust" shall mean the trust described in Section
10.
1.40 "Trustee" shall mean the trustee(s) of the Trust
established pursuant to the Plan.
1.41 "Year of Service" shall mean, with respect to any
Employee:
(a) for purposes of determining vesting with respect to
periods
prior to April 1, 1991, a Service Anniversary Year
during which the Employee completes at least 1,000 Hours
of Service; and (b) for purposes of determining vesting
with respect to periods after March 31, 1991, a Plan
Year during which the Employee completes at least 1,000
Hours of Service, provided, however, that, if an
Employee completes at least 1,000 Hours of Service in
his Service Anniversary Year that ends on or after April
1, 1991 and also completes at least 1,000 Hours of
Service in the Plan Year that commences on such date, he
shall be credited with two Years of Service for purposes
of vesting at the end of such Plan Year (or on an
earlier date in such Plan Year on which he ceases to be
an Employee). Notwithstanding the foregoing provisions
of this Section, an Employee's Years of Service shall
not include the following:
(i) any Years of Service completed before the Employee
has five consecutive One-Year Breaks in Service, if the
Employee had not completed at least three Years of
Service before the first of such One-Year Breaks in
Service; or
(ii) any Years of Service completed prior to April 1,
1980.
2. PARTICIPATION
2.1 Service Requirement and Commencement Date.
(a) Current Participants. Each Employee who was a
Participant on February 1, 1998 shall continue to
participate on and after February 1, 1998 under and in
accordance with the terms of this Plan.
(b) Future Participants. Any Employee not described in
paragraph (a) of this Section shall automatically
commence participating in the Plan on the first day of
the first pay period next following the date he has been
an Employee for six months and has completed 500 Hours
of Service, provided he is an Eligible Employee on such
day. If 500 Hours of Service are not completed during
the first six months of employment, participation in the
Plan shall commence on the first day of the first pay
period next following the expiration of any succeeding
six-month period of employment during which 500 Hours of
Service are completed, provided the Employee is an
Eligible Employee on such day. If an Employee is not an
Eligible Employee on such day, he shall automatically
commence participating in the Plan on the day he becomes
an Eligible Employee.
(c) Special Rule for Rollover Accounts.
Notwithstanding the foregoing provisions of this
Section, an Eligible Employee who makes a rollover
contribution to this Plan (in accordance with Section
14.9) or who arranges for a direct transfer of funds
into this Plan (in accordance with Section 14.9) shall
automatically commence participating in the Plan with
respect to his Rollover Account (but not for purposes of
Sections 3 and 4) on the date such rollover or transfer
is made.
2.2 Period of Participation. A Participant's
participation in the Plan shall continue until the date
he has received the entire amount to which he is
entitled under the Plan or, if earlier, the date of his
death.
2.3 Suspended Participation. A Participant who
ceases to be an Eligible Employee but continues to be an
Employee shall become a suspended Participant. No
amounts shall be credited to a suspended Participant's
Plan accounts that are based on his Covered Compensation
for the period of his suspension. However, a suspended
Participant shall continue to vest and shall be entitled
to benefits in accordance with the other provisions of
the Plan throughout the period he is on suspended
status.
3. DEFERRED PAY CONTRIBUTIONS
3.1 General Rules.
(a) Written Election. Each Participant may elect to
make Deferred Pay Contributions to the Plan. Such an
election must be filed at least 10 days prior to the
desired commencement date.
(b) Amount of Deferred Pay Contributions. Subject to
any limitations imposed by the Administrative Committee
and to the contribution limitations set forth in Section
3.2 below, the amount of a Participant's Deferred Pay
Contributions may be any specified percentage, in 1%
increments, from 1% to 25% of his Covered Compensation.
(c) Deemed Employer Contributions. For federal income
tax purposes, Deferred Pay Contributions shall be deemed
to be Participating Employer contributions to the Plan,
and a Participant's election to make Deferred Pay
Contributions shall constitute an election to have the
amount that would otherwise constitute his Compensation
reduced by the amount of his Deferred Pay Contributions.
(d) Change in Amount of Deferred Pay Contributions.
Subject to any limitations imposed by the Administrative
Committee and to the contribution limitations set forth
in Section 3.2 below, a Participant may change the
percentage of his Deferred Pay Contributions to any
percentage allowed under paragraph (b) of this Section,
effective on the first day of the first pay period in
any month, by giving written notice to his Participating
Employer at least 10 days prior to the last day of the
month preceding the month the change is to become
effective.
(e) Stopping and Resuming Deferred Pay Contributions.
A Participant may elect to discontinue future Deferred
Pay Contributions at any time, and any such election
shall be effective as soon as reasonably practicable
after its receipt by the appropriate Participating
Employer. Following a discontinuance, a Participant may
resume making Deferred Pay Contributions, effective on
the first day of the first pay period in any Quarter, by
giving written notice to his Participating Employer at
least 10 days prior to the last day of the month
preceding the month contributions are to resume.
(f) Payment to Trust. A Participant's Deferred Pay
Contributions shall be paid to the Trust by his
Participating Employer as soon as reasonably
practicable, and no later than 15 days, after the amount
otherwise would have been paid to the Participant.
3.2 Limitations on Deferred Pay Contributions.
Notwithstanding any other provision of the Plan:
(a) Deferred Pay Contributions for any Plan Year shall
not exceed the amount the Administrative Committee
estimates will be deductible by the Participating
Employers for such Plan Year under section 404 of the
Code;
(b) No Participant shall be permitted to make Deferred
Pay Contributions for any calendar year in excess of the
maximum amount allowed under section 402(g)(1) of the
Code, as such amount is adjusted for increases in the
cost-of-living pursuant to section 402(g)(5) of the
Code;
(c) The "actual deferral percentage" (as defined in
section 401(k)(3) of the Code) for any Plan Year of
those Participants who are Highly Compensated Employees
shall not exceed the percentage allowed under section
401(k)(3) of the Code; and
(d) No Participant shall be permitted to make Deferred
Pay Contributions that would cause the annual additions
to his Plan Accounts to exceed the limitations set forth
in paragraphs (a)-(c) of Section 5.4.
3.3 Administrative Committee May Modify or Revoke
Deferred Pay Contribution Elections.
(a) General Rule. Notwithstanding any other provision
of the Plan, the Administrative Committee may modify or
revoke the Deferred Pay Contribution election of any
Participant at any time, if it determines that such
modification or revocation is necessary to ensure that
his Deferred Pay Contributions for any Plan Year will
not exceed any of the limitations set forth in Section
3.2. If Deferred Pay Contributions would have been made
under a Participant's election but for the application
of Section 2.3 (dealing with suspension), such election
shall be deemed modified so as not to require Deferred
Pay Contributions of an amount greater than the maximum
amount allowed under the terms of the Plan.
(b) Modification Priorities. Any modification of a
Participant's Deferred Pay Contribution election that is
required to satisfy section 402(g)(1) of the Code shall
be made before any modification is made to satisfy
section 401(k)(3) of the Code.
3.4 Distribution of Excess Deferrals and Excess
Contributions.
(a) Deferred Pay Contributions in Excess of Annual
Limitation. If any Participant's Deferred Pay
Contributions for any calendar year exceed the annual
limitation set forth in Section 3.2(b), the excess
amount, adjusted for income (or loss) attributable
thereto, shall be distributed to the Participant from
the Trust. Such distribution shall be made no later
than the April 15 following the close of the calendar
year with respect to which the excess Deferred Pay
Contributions were made.
(b) Deferred Pay Contributions of Highly Compensated
Employees in Excess of Nondiscrimination Limitation. If
the actual deferral percentage limitation for Highly
Compensated Employees set forth in Section 3.2(c) is
exceeded with respect to any Plan Year, the amount that
constitutes "excess contributions" (as defined in
section 401(k)(8)(B) of the Code) for such Plan Year,
adjusted for income (or loss) attributable thereto,
shall be distributed from the Trust to the appropriate
Participants who are Highly Compensated Employees on the
basis of the amount of each such Participant's excess
Deferred Pay Contributions determined in accordance with
section 401(k)(8)(C) of the Code, and shall be completed
by the last day of the Plan Year following the Plan Year
with respect to which such excess contributions were
made.
(c) Computation of Income (Loss) for Distributions.
The income (or loss) attributable to excess Deferred Pay
Contributions under paragraphs (a) and (b) of this
Section shall only include income (or loss) for the Plan
Year with respect to which the excess Deferred Pay
Contributions were made (and shall exclude any income or
loss for the period from the end of such Plan Year to
the date the excess amount is distributed). The amount
of such income (or loss) shall be computed in accordance
with regulations promulgated under section 401(k)(8)(A)
of the Code..
(d) Choice of Investment Funds for Distributions. In
accordance with equitable and nondiscriminatory rules
established by the Administrative Committee, each
Participant shall have the right to specify the
investment funds from which any distribution under
paragraph (a) or (b) of this Section shall be made. If
no such election is made in a timely manner, any such
distribution shall be made ratably from each investment
fund in which the Participant's Deferred Pay Account is
invested.
3.5 Special Employer Contributions.
(a) General Rule. In order to ensure that the
nondiscrimination tests imposed under section 401(k) of
the Code are met for any Plan Year, the Company may
determine that the Participating Employers will make a
special contribution to the Plan for such Plan Year.
(b) Contribution and Allocation. Any special
contribution to the Plan made pursuant to paragraph (a)
of this Section shall be contributed to the Trust no
later than the date prescribed for filing the Company's
federal income tax return for the Plan Year for which
such contribution is made (including extensions
thereof). Any such special contribution to the Plan
shall be allocated, as of the last day of the relevant
Plan Year, among the Deferred Pay Accounts of
Participants who are not Highly Compensated Employees
during such Plan Year (without regard to whether they
made Deferred Pay Contributions with respect to such
Plan Year). Such allocation shall be made in whatever
manner may be directed by the Administrative Committee
to enable the Plan to meet the nondiscrimination tests
of section 401(k) of the Code for the relevant Plan
Year.
(c) Treatment of Special Contributions. The Company
intends that any special contribution made pursuant to
paragraph (a) of this Section shall generally be treated
as Deferred Pay Contributions made pursuant to
Participants' Deferred Pay Contribution elections under
Section 3.1, except that such contribution: (1) shall
not be subject to the annual limit on Deferred Pay
Contributions set forth in Section 3.2(b); (2) may not
be withdrawn under the financial hardship withdrawal
provisions of Section 8.8; and (3) shall not affect
Participants' Compensation.
4. EMPLOYER MATCHING AND PROFIT SHARING
CONTRIBUTIONS
4.1 Matching Contributions. For each Plan Year, the
Company shall determine whether any or all of the
Participating Employers will make Matching Contributions
to the Plan and, if so, the amount or percentage
thereof. Each Participating Employer's Matching
Contributions for any Plan Year shall be a uniform
percentage of the Deferred Pay Contributions made by
each Participant employed by such Participating
Employer, subject to whatever maximum dollar amount or
percentage limitation the Company may choose to impose.
4.2 Profit Sharing Contributions. Without regard to
whether a Participating Employer makes Matching
Contributions to the Plan for a given Plan Year, the
Company may determine that any or all of the
Participating Employers will make a Profit Sharing
Contribution to the Plan for such Plan Year. The amount
of any Profit Sharing Contribution by any Participating
Employer shall be in the sole and absolute discretion of
the Company.
4.3 Time for Contributions. Any Matching and/or
Profit Sharing Contribution to the Plan for a given Plan
Year shall be contributed to the Trust no later than the
date prescribed for filing the Company's federal income
tax return for such Plan Year (including extensions
thereof).
4.4 Limitations on Employer
Contributions. Notwithstanding any other provision of
the Plan:
(a) Matching and Profit Sharing Contributions for any
Plan Year shall not exceed the amount the Administrative
Committee estimates will be deductible by the
Participating Employers for such Plan Year under section
404 of the Code; and
(b) With respect to Matching Contributions for any Plan
Year, the "contribution percentage" (as defined in
section 401(m)(3) of the Code) of those Participants who
are Highly Compensated Employees shall not exceed the
percentage allowed under section 401(m)(2) of the Code.
4.5 Administrative Committee May Reduce or
Discontinue Matching Contributions. Notwithstanding any
other provision of the Plan, the Administrative
Committee may reduce or discontinue Matching
Contributions on behalf of any Participant who is a
Highly Compensated Employee, if it determines that such
reduction or discontinuance is necessary to satisfy the
limitations imposed under section 415 or 401(m)(2) of
the Code.
4.6 Distribution of Excess Aggregate Contributions.
(a) General Rule. Notwithstanding any other provision
of the Plan, any Matching Contributions that constitute
"excess aggregate contributions" (as defined in section
401(m)(6)(B) of the Code) for any Plan Year, adjusted
for income (or loss) attributable thereto, shall be
distributed from the Trust to the appropriate
Participants who are Highly Compensated Employees. Such
distribution shall be made in accordance with section
401(m)(6)(C) of the Code, and shall be completed by the
last day of the Plan Year following the Plan Year with
respect to which such excess aggregate contributions
were made.
(b) Determination of Excess Aggregate Contributions.
The amount of excess aggregate contributions for any
Plan Year, and the amount of income (or loss)
attributable thereto, shall be determined in accordance
with section 401(m)(6)(B) of the Code, by applying (with
appropriate modifications) the rules for "excess
contributions" set forth in paragraphs (b) and (c) of
Section 3.4.
(c) Choice of Investment Funds for Distributions. In
accordance with equitable and nondiscriminatory rules
established by the Administrative Committee, each
Participant shall have the right to specify the
investment funds from which any distribution under
paragraph (a) of this Section will be made. If no such
election is made in a timely manner, any such
distribution shall be made ratably from each investment
fund in which the Participant's Matching Contributions
Account is invested.
5. ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
5.1 Accounts. The Administrative Committee shall
establish and maintain any or all of the following Plan
Accounts, as appropriate, for each Participant:
(a) A Deferred Pay Account, which will be credited with
the Participant's Deferred Pay Contributions;
(b) A Matching Contributions Account, which will be
credited with the Participant's share of any Matching
Contributions made by his Participating Employer;
(c) A Profit Sharing Account, which will be credited
with the Participant's share of any Profit Sharing
Contributions made by his Participating Employer;
(d) A Special Contribution Account, which will be
credited with the Participant's share of any special
contribution to the Plan made pursuant to Section 3.5;
and
(e) A Rollover Account, which will be credited with any
amount that the Participant receives from another tax-
qualified retirement plan and rolls over into this Plan
in accordance with Section 14.9, and any amount that the
Participant arranges to have transferred from another
tax-qualified retirement plan into this Plan in
accordance with Section 14.9.
5.2 Valuation of Accounts. Within 90 days after the
end of each Plan Year and within 90 days after the
removal or resignation of the Trustee, the
Administrative Committee shall direct the valuation of
the assets of the Plan based on fair market values as of
the close of the Plan Year (or the close of the shorter
period ending with such removal or resignation). The
Administrative Committee in its sole discretion may
direct a valuation of the Plan's assets as of any other
date, if such valuation is considered to be in the
interest of equitable administration of the Plan, and
any such other date shall also constitute a valuation
date hereunder. As of any valuation date and prior to
the allocation of Deferred Pay Contributions, Matching
Contributions, Profit Sharing Contributions and
forfeitures for the period covered by the valuation, the
Administrative Committee shall allocate the increment or
profits to, and charge any losses against, the
appropriate Plan Accounts of Participants, in proportion
to the balances of such Accounts as of the last
preceding valuation date.
5.3 Allocation of Employer Contributions and
Forfeitures.
(a) Matching Contributions. Any Matching Contributions
to the Plan by any Participating Employer for any Plan
Year shall be allocated to the Matching Contribution
Accounts of those Participants who were employed by such
Participating Employer during some or all of the period
they made Deferred Pay Contributions to the Plan during
such Plan Year, and who:
(1) completed at least 500 Hours of Service during such
Plan Year and are Employees on the last day of such Plan
Year, or
(2) ceased to be Employees during such Plan Year
because of Normal Retirement, Total Disability, or death
(without regard to the number of Hours of Service they
completed during such Plan Year).
Such allocation shall be made as of the last day of the
Plan Year for which the Matching Contribution is made,
or as of such other date(s) in such Plan Year as the
Administrative Committee may direct, as a uniform
percentage of the Deferred Pay Contributions made by
each such Participant during the period he was so
employed, subject to whatever maximum dollar amount or
percentage limitation the Company may choose to impose.
(b) Profit Sharing Contributions and Forfeitures. Any
Profit Sharing Contribution to the Plan by any
Participating Employer for any Plan Year and, except as
provided in the last two sentences of Section 6.2(b),
any forfeitures attributable to Employees of such
Participating Employer for such Plan Year, shall be
allocated to the Profit Sharing Accounts of:
(1) those Participants who are Employees on the first
and last day of such Plan Year, who were employed by the
Participating Employer that makes the contribution for
all or a portion of the relevant Plan Year, and who
completed at least 1,000 Hours of Service during such
Plan Year; and
(2) those Participants or Employees who were Employees
on the first day of such Plan Year and who were employed
by the Participating Employer that makes the
contribution for all or a portion of the relevant Plan
Year, but ceased to be Employees during such Plan Year
because of Normal Retirement, Total Disability, or death
(without regard to the number of Hours of Service they
completed during such Plan Year).
Such allocation shall be made as of the last day of the
Plan Year for which the Profit Sharing Contribution is
made, in the ratio that each such Participant's or
Employee's Covered Compensation for the portion of the
relevant Plan Year that he was both employed by the
Participating Employer that makes the contribution and
was an Eligible Employee bears to the total Covered
Compensation of all such Participants or Employees who
were employed by the Participating Employer that makes
the contribution for the portion of such Plan Year that
they were Eligible Employees.
5.4 Limitations on Allocations.
(a) General Limitation. Notwithstanding any other
provision of the Plan, the total annual additions to a
Participant's Plan Accounts for any Limitation Year
shall not exceed the lesser of:
(1) $30,000 (or, if greater, one-fourth of the dollar
limitation on benefits payable under a defined benefit
plan set forth in section 415(b)(1)(A) of the Code); or
(2) 25% of the Participant's Compensation for such
Limitation Year.
(b) Aggregation of Other Plans. If any Participant in
this Plan is also a participant in another "defined
contribution plan" (as defined in section 414(i) of the
Code) maintained by the Company or any Related Company,
such Participant's annual additions under such other
plan(s) shall be aggregated with the Participant's
annual additions under this Plan for purposes of the
limitation set forth in paragraph (a) of this Section.
If such aggregate annual additions would exceed such
limitation, the limitation shall first be applied to
limit the Participant's annual additions under the other
plan(s).
(c) Combined Plan Limitation. If any Participant in
this Plan is also a participant in a "defined benefit
plan" (as defined in section 414(j) of the Code)
maintained by the Company or any Related Company, the
sum of the "defined benefit plan fraction" and the
"defined contribution plan fraction" (as defined in
section 415(e) of the Code) for such Participant for any
Limitation Year shall not exceed the combined plan
limitation set forth in section 415(e) of the Code. If
a restriction on benefits and annual additions for any
such Participant is required to comply with such
combined plan limitation, the restriction shall first be
applied to reduce the Participant's benefit under the
defined benefit plan.
(d) Treatment of Excess Annual Additions. If the
annual additions to a Participant's Plan Accounts for
any Limitation Year would exceed any of the limitations
described in paragraphs (a) -
(c) of this Section for such Limitation Year, and if the
excess is a result of the allocation of forfeitures
pursuant to Section 5.3(b), a reasonable error in
estimating the Participant's Taxable Compensation for
such Limitation Year, a reasonable error in determining
the amount of Deferred Pay Contributions that the
Participant may make for such Limitation Year under
section 415 of the Code, or such other limited facts and
circumstances as may be permitted by the Commissioner of
Internal Revenue, the excess amount shall be reduced as
follows:
(1) Excess amounts that are attributable to Deferred
Pay Contributions shall be returned to the Participant
as a cash bonus, and such amounts shall not thereafter
constitute annual additions for the relevant Limitation
Year;
(2) Excess amounts that are attributable to Matching
Contributions shall be held unallocated in a suspense
account, and shall be treated and allocated (in the
following Limitation Year(s)) as provided in the third
sentence of subparagraph (4) of this paragraph;
(3) Excess amounts remaining after the application of
subparagraphs (1) and (2) of this paragraph shall be
allocated and reallocated to the appropriate Plan
Accounts of all other Participants, in accordance with
Section 5.3(b), to the extent that such allocations
would not cause the annual additions to each other
Participant's Plan Accounts to exceed any of the
limitations provided in the Plan; and
(4) To the extent that the excess amounts described in
subparagraph (3) of this paragraph cannot be allocated
to other Participants' Plan Accounts, such amounts shall
be held unallocated in a suspense account. No
investment gains or losses shall be allocated to the
suspense account. All amounts held in the suspense
account shall be allocated and reallocated to
Participants' Profit Sharing Accounts in the following
Limitation Year (or Years, if necessary), in proportion
to their estimated Covered Compensation for such
Limitation Year(s). Such allocation shall be made
before any other amount that would constitute an annual
addition for such Limitation Year(s) (including Deferred
Pay Contributions) may be contributed to the Plan.
(e) Special Definitions.
(1) For purposes of this Section, the term "annual
additions" shall mean the aggregate amount credited to a
Participant's Plan Accounts from: (i) Deferred Pay
Contributions, Matching Contributions, any special
contribution to the Plan made pursuant to Section 3.5,
Profit Sharing Contributions and forfeitures; (ii)
amounts allocated under paragraph (d) of this Section
(dealing with excess annual additions); (iii) amounts
allocated under Section
14.6 (dealing with Missing Participants and
Beneficiaries); and
(iv) employer contributions made under Section 14.8
(dealing with Top-Heavy Plans).
(2) For purposes of this Section, the term "employer"
shall include all corporations that are members of the
same "controlled group" as the Company, determined under
section 1563(a) of the Code (without regard to sections
1563(a)(4) and 1563(e)(3)(C)), except that the phrase
"more than 50 percent" shall be substituted for the
phrase "at least 80 percent" wherever the latter phrase
appears in section 1563(a).
6. VESTING AND TREATMENT OF FORFEITURES
6.1 Vesting.
(a) Deferred Pay, Special Contribution and Rollover
Accounts. All amounts credited to a Participant's
Deferred Pay Account, Special Contribution Account (if
any) and Rollover Account (if any) shall be fully (100%)
vested and nonforfeitable at all times.
(b) Matching Contributions and Profit Sharing Accounts
(Effective February 1, 1998).
(1) All amounts credited to a Participant's Matching
Contributions and Profit Sharing Accounts shall become
fully (100%) vested and nonforfeitable when the
Participant attains Normal Retirement Age while he is
still an Employee, or when he becomes Totally Disabled
or dies.
(2) With respect to a Participant who was a participant
in the Datron World Plan on February 1, 1998, the
effective date of that plan's merger into the Plan, all
amounts attributable to employer matching contributions
on behalf of the Participant for periods ending on or
before March 31, 1998 will remain fully (100%) vested
and nonforfeitable. If such a Participant would have
been credited with at least "three years of service
under the terms of the Datron World Plan by April 1,
1998, the Participant's entire Matching Contributions
Account balance shall at all times be fully (100%)
vested and nonforfeitable.
(3) Subject to subparagraph (2) above, if a Participant
ceases to be an Employee prior to attaining Normal
Retirement Age for any reason other than death or Total
Disability, the Participant's vested interest in his
Matching Contributions and Profit Sharing Accounts shall
be determined under the following schedule:
YEARS OF SERVICE VESTED
PERCENTAGE
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
6.2 Forfeitures.
(a) Forfeiture on Termination. When a Participant
ceases to be an Employee, the non-vested portion of his
Matching Contributions and Profit Sharing Accounts shall
be forfeited. Such forfeited portion shall be valued as
of the valuation date coinciding with or immediately
preceding the date the Participant ceases to be an
Employee. If the Participant is not re-employed by the
last day of the Plan Year in which he ceased to be an
Employee, the forfeited portion of such Accounts shall
be allocated as of such day in accordance with Section
5.3(b).
(b) Reemployment Before Five One-Year Breaks in
Service. The following rules, as applicable, shall be
applied to any Participant who ceases to be an Employee
when he is not fully (100%) vested in his Matching
Contributions and Profit Sharing Accounts and who is re-
employed before he has five consecutive One-Year Breaks
in Service:
(1) If the Participant is re-employed by the last day
of the Plan Year in which he ceased to be an Employee,
the amount forfeited as a result of the termination of
his employment (and any earnings thereon) shall be
restored to the appropriate Plan Accounts maintained for
the Participant, and shall not thereafter constitute a
forfeiture.
(2) If the Participant is re-employed after the last
day of the Plan Year in which he ceased to be an
Employee, an amount equal to the amount forfeited as a
result of the termination of his employment (determined
as of the date thereof) shall be credited to the
appropriate Plan Accounts maintained for the
Participant.
(3) Except in the case of a Participant described in
subparagraph (4) below, the Participant's vested interest in his
Matching Contributions and Profit Sharing Accounts at
the time he subsequently ceases to be an Employee shall
be determined under Section 6.1(b), on the basis of his
total Years of Service before and after reemployment.
(4) If the Participant had received a distribution of
any of the vested portion of his Matching Contributions
and Profit Sharing Accounts by the date he was re-
employed, his vested interest in such Accounts at the
time he subsequently ceases to be an Employee shall be
determined in accordance with paragraph (d) of this
Section.
The amount credited to a Participant's Plan Accounts
pursuant to subparagraph (2) of this paragraph shall, to
the maximum extent possible, consist of a special
allocation of the forfeitures attributable to the Plan
Year in which the Participant is re-employed (and shall
correspondingly reduce the amount of forfeitures
otherwise available for allocation to other Participants
for such Plan Year). If the amount to be so credited is
greater than the forfeitures attributable to the Plan
Year in which the Participant is re-employed, his
Participating Employer shall make a special contribution
to the Plan equal to the difference between such
amounts, which shall be credited to the appropriate Plan
Accounts maintained for the Participant.
(c) Reemployment After Five One-Year Breaks in Service.
If a Participant is not fully (100%) vested in his
Matching Contributions and Profit Sharing Accounts when
he ceases to be an Employee and he is not re-employed
until after he has five consecutive One-Year Breaks in
Service, his reemployment and subsequent Years of
Service shall have no effect on, and shall not provide
the Participant with any interest in or right to, the
amount that was forfeited as a result of his previous
termination of employment.
(d) Subsequent Termination Before Becoming Fully
Vested. Notwithstanding any other provision of the
Plan, if a re-employed Participant described in
subparagraph (b)(4) of this Section subsequently ceases
to be an Employee before he is fully (100%) vested in
his Matching Contributions and Profit Sharing Accounts
(based on his total Years of Service before and after
reemployment), his vested interest in such Accounts
shall be an amount "X", determined under the following
formula: X = P (AB + D) - D. For purposes of applying
this formula: P is the Participant's vested percentage
at the time he subsequently ceases to be an Employee
(determined under Section 6.1(b) on the basis of his
total Years of Service before and after reemployment);
AB is the balance in the Participant's Matching
Contributions and Profit Sharing Accounts at the time he
subsequently ceases to be an Employee; and D is the
amount that was distributed to the Participant from his
Matching Contributions and Profit Sharing Accounts as a
result of his previous termination of employment.
(e) Suspension of Payment Upon Reemployment.
Notwithstanding any other provision of the Plan, if a
Participant is re-employed before he has received a
distribution of the portion of his Plan Accounts that
was vested at the time he ceased to be an Employee, the
amount that was distributable as a result of his
termination of employment shall not be distributed and
shall remain in the Participant's Plan Accounts until he
subsequently ceases to be an Employee.
(f) Special Definitions. For purposes of this Section,
the terms "employment", "reemployed" and "reemployment"
shall only refer to employment by the Company or any
Related Company.
7. INVESTMENT OF PLAN ASSETS
7.1 Options Available to Participants. Each
Participant shall have the authority and the
responsibility to exercise investment management and
control over his Plan Accounts. By issuing written
investment directions to the Administrative Committee on
the forms prescribed for such purpose, each Participant
shall direct the investment of his Plan Accounts among
those investment vehicles that the Administrative
Committee makes available to Participants under the
Plan. The Administrative Committee shall establish and
communicate in writing to Participants equitable and
nondiscriminatory rules governing the time, method,
effective date and other items it deems necessary for
making or modifying investment directions; provided that
Participants shall be allowed to modify their investment
directions at least once during each Quarter. Any
Participant's change of investment directions shall
apply to his existing account balances, and/or to his
future Deferred Pay Contributions and any future
Matching and Profit Sharing Contributions and
forfeitures allocated to his Plan Accounts, as the
Participant may elect.
7.2 No Investment in Securities of the Company or in
Real Estate Leased to the Company. The assets of the
Plan shall not be invested in any security issued by the
Company or any Related Company, or in any real property
(and related personal property) which is leased to the
Company, any Related Company, or any other "disqualified
person" with respect to the Plan, as that term is
defined in section 4975(e)(2) of the Code.
7.3 Certain Other Investments. Assets of the Plan
may be invested in deposits that bear a reasonable rate
of interest in a bank or similar financial institution
supervised by the United States or any state thereof,
without regard to whether such bank or financial
institution is the Trustee or another fiduciary with
respect to the Plan. Cash temporarily awaiting
investment or payment of benefits or expenses of the
Plan may be retained in non-interest bearing deposits or
cash balances in a bank or similar financial institution
supervised by the United States or any state thereof,
without regard to whether such bank or financial
institution is the Trustee or another fiduciary with
respect to the Plan.
8. DISTRIBUTION OF BENEFITS AND WITHDRAWALS
8.1 Amount of Plan Benefit.
(a) Normal Retirement Age, Total Disability or Death.
If a Participant ceases to be an Employee upon or after
attaining Normal Retirement Age, or as a result of Total
Disability or death at any age, the Participant (or, in
the case of his death, his Beneficiary) shall be
entitled to a Plan Benefit equal to 100% of the balance
of each of the Participant's Plan Accounts.
(b) Other Terminations. If a Participant ceases to be
an Employee before he has attained Normal Retirement Age
for any reason other than death or Total Disability, he
shall be entitled to a Plan Benefit equal to the sum of:
(1) 100% of the balance of his Deferred Pay Account,
Special Contribution Account (if any) and Rollover
Account (if any); plus
(2) The vested portion of the balance of his Matching
Contributions and Profit Sharing Accounts, determined
under Section 6.1(b)(2) and (3).
8.2 Time of Distribution.
(a) General Rules. Subject to paragraph (b) below and
to Section 8.6:
(1) If a Participant ceases to be an Employee after
attaining Normal Retirement Age, distribution of his
Plan Benefit shall automatically be made in the form of
a single lump sum distribution of cash as soon as
practicable following his termination of employment,
unless the Participant properly elects a different form
of distribution within 10 days after he ceases to be an
Employee, or properly elects, in accordance with
subparagraph (3) below, to defer the distribution or
commencement to a later date;
(2) If a Participant has not attained Normal Retirement
Age when he ceases to be an Employee, distribution of
his Plan Benefit shall be made or commenced as soon as
practicable following the date he files a written
election for distribution. If no such election is made
before the Participant attains Normal Retirement Age,
distribution of his Plan Benefit shall automatically be
made in the form of a single lump sum distribution of
cash as soon as practicable after the date the
Participant attains such Age, unless the Participant
properly elects a different form of distribution within
10 days after he attains such Age, or properly elects,
in accordance with subparagraph (3) below, to defer the
distribution or commencement to a later date; and
(3) Any Participant who ceases to be an Employee may
elect to have the distribution of his Plan Benefit made
or commenced on a deferred date specified in such
election. To be effective, any such election must be
filed within 10 days after the Participant ceases to be
an Employee.
(b) Special Provisions. Notwithstanding any other
provision of the Plan:
(1) If the total value of a Participant's Plan Accounts
does not exceed $5,000 on the valuation date coinciding
with or immediately preceding the date he ceases to be
an Employee (and never exceeded $5,000 at the time of
any prior distribution), his Plan Benefit shall be
distributed in a single lump sum distribution of cash as
soon as practicable after the date he ceases to be an
Employee; and
(2) A Participant's Plan Benefit shall be distributed
(or distribution thereof shall commence) by April 1 of
the calendar year following the calendar year in which
he attains age 70-1/2 if the Participant is a "5% owner"
(as defined in section 416(i)(1)(B)(i) of the Code).
8.3 Methods of Distribution. Except as otherwise
provided in Section 8.2, each Participant may elect to
have his Plan Benefit distributed in either, or a
combination, of a single lump sum distribution of cash,
or monthly, Quarterly, semiannual or annual cash
installments of a fraction of his Plan Benefit, over a
period of years that does not exceed the lesser of 15 or
the life expectancy of the Participant at the time
payments are to commence. Such fraction shall be 1/x,
with x being, in the case of the first installment, the
total number of payments to be made, and thereafter
declining by one for each successive payment. Each
Participant who was a participant in the Datron World
Plan on or before February 1, 1998 may also elect to
have his Plan Benefit distributed in in either, or a
combination, of the following additional methods of
distribution:
(a) Payments in monthly, Quarterly, semiannual or
annual installments of a fraction of his Plan Benefit,
over a period of years certain, as elected by the
Participant. Such fraction shall be 1/x, with x being,
in the case of the first installment, the total number
of payments to be made, and thereafter declining by one
for each successive payment. Such period shall be
determined by the Participant, provided that the period
shall not exceed the life expectancy of the Participant
or the joint life expectancy of the Participant and his
Beneficiary, such life expectancy to be determined as of
the time payments begin; and further provided that the
present value of any such periodic installment payments
expected to be made to the Participant shall be more
than 50 percent of the present value of the total of
such installments expected to be made to the Participant
and a Beneficiary who is not his spouse determined as of
the date such payments commence.
(b) A nontransferable annuity contract purchased from
an insurance company at a cost equal to his Plan Benefit
payable for his life with, if he is married on the
annuity starting date, a survivor's annuity for the life
of his spouse that is 50 percent of the amount of the
annuity payable during the joint lives of the
Participant and his spouse (unless he elects a higher
percentage not to exceed 100 percent).
8.4 Valuation of Accounts for Distribution. When a
Participant's Plan Benefit is to be distributed, his
Plan Accounts shall be valued as of the valuation date
coinciding with or immediately preceding the date of
distribution.
8.5 Distribution after Total Disability. A
Participant who is Totally Disabled may elect to receive
a distribution of all or any portion of the balance of
his Plan Accounts, whether or not he has ceased to be an
Employee. Any such distribution shall be made as soon
as practicable after the election is filed.
8.6 Distribution Pursuant to a Qualified Domestic
Relations Order. Notwithstanding any other provision of
the Plan, any or all of the vested portion of a
Participant's Plan Accounts may be distributed to a
spouse, former spouse, child or other dependent of the
Participant pursuant to the terms of a Qualified
Domestic Relations Order, without regard to the
Participant's age or the fact that he has not ceased to
be an Employee.
8.7 Withdrawal After Age 59 1/2. At any time after a
Participant has attained age 59 1/2, he may elect to
withdraw all or any portion of the vested portion of his
Plan Accounts, even though he has not ceased to be an
Employee. A withdrawal under this Section shall be paid
only in a single lump sum distribution of cash, and
shall be paid as soon as practicable after the
Participant's election is filed. A withdrawal under
this Section shall not prevent the Participant from
continuing to participate in the Plan; provided that the
Participant may make no more than one additional
withdrawal under this Section in each Plan Year after
the Plan Year in which the first such withdrawal is
made.
8.8 Withdrawals in the Event of Financial Hardship.
(a) General Rules. Upon written application to the
Administrative Committee and subject to its consent, any
Participant, without regard to his age, may withdraw
funds from the vested portion of his Plan Accounts to
satisfy an immediate and heavy financial need arising
solely from one or more of the following:
(1) Expenses for medical care described in section
213(d) of the Code previously incurred by the
Participant, his spouse, or any of his dependents (as
defined in section 152 of the Code), or necessary for
any such person to obtain such medical care;
(2) Costs directly related to the purchase of a
principal residence for the Participant (excluding
mortgage payments);
(3) Payment of tuition and related educational fees for
the next 12 months of post-secondary education for the
Participant, or his spouse, children or dependents (as
defined in section 152 of the Code);
(4) Payments that are necessary to prevent the eviction
of the Participant from his principal residence or
foreclosure on the mortgage on that residence; or
(5) Any other expense that automatically qualifies as
an immediate and heavy financial need under regulations,
rulings or notices of general applicability issued under
section 401(k) of the Code.
The amount of any hardship withdrawal under this Section
may not exceed the lesser of: (i) the amount of the
expense(s) described in subparagraphs (1)-(5) of this
paragraph, plus any amounts necessary to pay federal,
state or local income taxes or penalties reasonably
anticipated to result from the withdrawal; or (ii) the
value of the vested portion of the Participant's Plan
Accounts (determined as of the valuation date coinciding
with or immediately preceding the date of the
withdrawal), minus the amount of any earnings in his
Deferred Pay Account that accrue after March 31, 1989.
A Participant may not make a withdrawal under this
Section unless he has first obtained all withdrawals
(other than hardship withdrawals) and all nontaxable
loans available under any tax-qualified retirement plan
maintained by the Company or any Related Company.
(b) Consequences of Hardship Withdrawal. If a
Participant makes a hardship withdrawal under this
Section, he shall be suspended from participation in
this Plan, and in any other plan maintained by the
Company or any Related Company that requires or allows
employee contributions (other than a plan that is a
welfare benefit plan under ERISA), for a period of 12
months following his receipt of the withdrawal. In
addition, such a Participant shall not be permitted to
make Deferred Pay Contributions for the Plan Year
immediately following the Plan Year in which the
withdrawal was made in excess of the difference between:
(1) the applicable limit under section 402(g) of the
Code for the Plan Year following the Plan Year in which
the withdrawal was made; and (2) the amount of the
Participant's Deferred Pay Contributions during the Plan
Year the withdrawal was made. A Participant who is
suspended under this paragraph shall automatically
resume making Deferred Pay Contributions, at the rate
that was in effect when his suspension began, as of the
first day of the first pay period in the Quarter that
begins 12 months after the commencement of his
suspension (unless the Participant makes an election to
stop making Deferred Pay Contributions under Section
3.1(e)).
(c) Effect on Future Distributions. If a Participant
who is not fully (100%) vested in his Matching
Contributions and Profit Sharing Accounts makes a
hardship withdrawal from either of such Accounts under
this Section and subsequently ceases to be an Employee
before he has become fully (100%) vested in such
Accounts, such Participant's vested interest in such
Accounts at the time he ceases to be an Employee shall
be determined under the formula set forth in Section
6.2(d).
8.9 Loans to Employees. Subject to such uniform and
nondiscriminatory rules as the Administrative Committee
may adopt and upon written application to the
Administrative Committee, an Employee may borrow from
his vested Plan Accounts the amount necessary to satisfy
an immediate and heavy financial need described in
Section 8.8. The minimum amount of any loan shall be
$1,000. The maximum aggregate amount of any loans shall
be the lesser of: (a) $50,000, reduced by the highest
outstanding balance of all of the Employee's loans from
all qualified retirement plans maintained by the Company
or any Related Company during the 12-month period ending
on the day before the loan is made; or (b) 50% of the
value of the Employee's vested interest in his Plan
Accounts (determined at the time of the loan). All
loans granted under this Section:
(a) Shall be available to all Employees on a reasonably
equivalent basis;
(b) Shall be secured by 50% of the value of the
Employee's vested interest in his Plan Accounts at the
time of the loan;
(c) Shall be for a fixed term of no more than five
years;
(d) Shall bear interest at a rate comparable to the
rate then being charged by institutional lenders for
loans made under similar circumstances, but in no event
shall the rate of interest exceed the maximum allowed
under applicable law;
(e) Shall require substantially equal periodic payments
of principal and interest, with all such payments to be
made at least quarterly and collected through payroll
withholding if possible;
(f) Shall be payable in advance without penalty;
(g) Shall be evidenced by the Employee's promissory
note, which shall be in such form as required by the
Administrative Committee;
(h) Shall be treated as a segregated investment
allocable solely to the borrowing Employee's Plan
Accounts; and
(i) Shall be due and payable on the date the Employee
ceases to be an Employee, and the Administrative
Committee shall direct foreclosure on the security for
the repayment of the loan if the loan is not paid in
full within 60 days following such date.
8.10 Direct Benefit Transfers.
(a) General Rule. In addition to the distribution
rules and options set forth in the preceding provisions
of this Section 8, any Participant who is entitled to
receive an "eligible rollover distribution" shall be
permitted to elect to have such distribution made in the
form of a direct transfer from the Trustee of this Plan
to the trustee or custodian of any other "eligible
retirement plan." Any such election shall be made in
such form and at such time as the Plan Administrator may
prescribe in accordance with section 401(a)(31) of the
Code and the regulations promulgated thereunder.
(b) Special Definitions. For purposes of this Section:
(1) An "eligible rollover distribution" means any
distribution to a Participant of all or any portion of
the balance to the credit of the Participant under the
Plan, other than: (i) any distribution that is one of a
series of substantially equal periodic payments made
(not less frequently than annually) for the life (or
life expectancy) of the Participant, for the joint lives
(or joint life expectancy) of the Participant and his
Beneficiary, or for a specified period of 10 years or
more; (ii) any distribution (or portion of a
distribution) that is required to be made under section
401(a)(9) of the Code; or (iii) any distribution (or
portion of a distribution) that would not be includible
in the Participant's gross income (determined without
regard to the exclusion for net unrealized appreciation
in employer securities provided under section 402 of the
Code); and
(2) An "eligible retirement plan" means: (i) an
individual retirement account described in section
408(a) of the Code; (ii) an individual retirement
annuity described in section 408(b) of the Code (other
than an endowment contract); (iii) an annuity plan
described in section 403(a) of the Code; or (iv) a
qualified trust described in section 401(a) of the Code
that provides for the acceptance of eligible rollover
distributions.
9. DEATH BENEFITS AND BENEFICIARIES
9.1 Death Benefits. If a Participant dies before his
entire vested interest in the Plan has been distributed,
the undistributed portion of such interest shall be
distributed to the Participant's Beneficiary. The
Beneficiary may elect to receive the distribution in a
single lump sum distribution of cash or in cash
installments. Such distribution shall be made or
commenced as soon as practicable following the
Participant's death and shall be completed within five
years following the Participant's death; provided,
however, that, if installment payments to the
Participant had begun prior to his death, the
Beneficiary may elect to receive such payments over a
period not longer than the period previously selected by
the Participant.
9.2 Designation of Beneficiary. Each Participant
shall have the right to designate a Beneficiary or
Beneficiaries to receive any amount payable under the
Plan in the event of his death, and shall have the right
at any time to revoke such designation or to substitute
another such Beneficiary or Beneficiaries. No
designation made pursuant to this Section shall be
effective unless the Participant's spouse consents to
such designation in a writing that acknowledges the
effects of the designation and that is witnessed by a
representative of the Administrative Committee or by a
notary public. Such consent shall not be required if
the Beneficiary is the Participant's spouse, or if the
Administrative Committee is satisfied that it cannot be
obtained because there is no spouse, because the spouse
cannot be located, or for such other reasons as may be
authorized under applicable regulations issued by the
Secretary of the Treasury.
9.3 Absence of Valid Designation of Beneficiary. If
there is no valid designation of a Beneficiary on file
with the Administrative Committee upon the death of a
Participant, such Participant's Beneficiary shall be
deemed to be his surviving spouse, or if there is no
surviving spouse, his estate.
9.4 Direct Benefit Transfers.
(a) General Rule. In addition to the distribution
rules and options set forth in the preceding provisions
of this Section 9, any Beneficiary who is entitled to
receive an "eligible rollover distribution" shall be
permitted to elect to have such distribution made in the
form of a direct transfer from the Trustee of this Plan
to the trustee or custodian of any other "eligible
retirement plan." Any such election shall be made in
such form and at such time as the Plan Administrator may
prescribe in accordance with section 401(a)(31) of the
Code and the regulations promulgated thereunder.
(b) Special Definitions. For purposes of this Section:
(1) An "eligible rollover distribution" means a
distribution described in Section 8.10(b)(1) when the
word "Beneficiary" is substituted for the word
"Participant" each place it appears in such Section; and
(2) An "eligible retirement plan" means: (i) an
individual retirement account described in section
408(a) of the Code; or (ii) an individual retirement
annuity described in section 408(b) of the Code (other
than an endowment contract).
10. TRUST AND PAYMENT OF BENEFITS AND EXPENSES
10.1 Trust. All contributions to the Plan and all
other assets of the Plan shall be held in trust under
one or more trust agreements entered into between the
Company and a named trustee or, at the direction of the
Company, under an annuity contract that meets the
requirements of section 401(f) of the Code. Custody of
Plan assets shall at all times be retained by the
Trustee or a custodian appointed by the Trustee in its
discretion.
10.2 Payment of Benefits. All Plan Benefits shall be
paid from the Trust upon the direction of the
Administrative Committee, in accordance with the Plan
and the Trust Agreement.
10.3 Expenses of Plan Administration. All expenses
of administering the Plan, including the fees of the
Trustee (if any), shall be paid from the Trust, unless
the Company chooses to pay such expenses. Although the
members of the Administrative Committee shall receive no
compensation for serving on such Committee, they shall
be reimbursed from the Trust for all necessary and
proper expenses incurred in carrying out the duties of
the Administrative Committee under the Plan, unless the
Company chooses to pay such expenses.
11. ADMINISTRATION
11.1 Board of Directors.
(a) Powers, Duties and Responsibilities. The Board of
Directors shall have the following powers, duties and
responsibilities in connection with the administration
of the Plan:
(1) Amending or terminating the Plan;
(2) Appointing and removing the Trustee;
(3) Appointing and removing the members of the
Administrative Committee; and
(4) Periodically reviewing the performance of the
Trustee, the Administrative Committee, persons to whom
any of its duties and responsibilities have been
allocated or delegated pursuant to paragraph (b) of this
Section, and any advisers engaged pursuant to Section
11.5.
(b) Allocation and Delegation of Responsibilities.
The Board of Directors may, by written resolution,
allocate or delegate its powers, duties and
responsibilities to any other person or persons;
provided, however, that any such allocation or
delegation shall be terminable upon such notice as the
Board of Directors deems reasonable and prudent under
the circumstances.
11.2 Administrative Committee.
(a) Designation of Administrative Committee. The
Administrative Committee shall administer the Plan and
shall be the Plan "administrator" as such term is
defined in ERISA. The Administrative Committee shall be
comprised of three or more persons who shall be
appointed by the Board of Directors and who may be
removed by the Board of Directors at any time, with or
without cause. All members of the Administrative
Committee are designated as agents of the Plan for the
service of legal process. The Company shall certify to
the Trustee the names and specimen signatures of the
members of the Administrative Committee. Any member of
the Administrative Committee may resign at any time by
submitting an appropriate written instrument to the
Company, and while any vacancy exists, the remaining
member(s) may perform any act which the Administrative
Committee is authorized to perform. All decisions
required to be made by the Administrative Committee
involving the interpretation, application and
administration of the Plan shall be resolved by majority
vote either at a meeting or in writing without a
meeting.
(b) Administrative Powers, Duties and Responsibilities.
The Administrative Committee shall have the following
powers, duties and responsibilities in connection with
the administration of the Plan:
(1) Determining the eligibility of Employees for
participation in the Plan;
(2) Exercising its duties and responsibilities under
Section 3 with respect to Deferred Pay Contributions;
(3) Determining the eligibility of Employees for
benefits provided by the Plan and the amount of the
benefit to which any Employee is entitled hereunder,
including such powers, duties and responsibilities as
are necessary and appropriate under the Plan's claims
and review procedures;
(4) Maintaining Plan Accounts and such other records as
it may determine are necessary or appropriate in
connection with the operation and administration of the
Plan;
(5) Communicating with Participants and other persons
with respect to the Plan;
(6) Complying with the reporting and disclosure
requirements imposed under ERISA;
(7) Authorizing, allocating and reviewing expenses
incurred by the Plan;
(8) Assuring that the bonding requirements imposed
under ERISA are
satisfied;
(9) Establishing and carrying out a funding policy as
described in Section 11.4;
(10) Establishing appropriate procedures to prevent the
Plan from engaging in transactions described in
sections 406 and 407 of ERISA or section 4975(c) of the
Code;
(11) Periodically reviewing any allocation or
delegation of duties and responsibilities made pursuant
to paragraph (d) of this Section and the performance of
any advisers engaged pursuant to Section 11.5; and
(12) Making recommendations to the Board of Directors
with respect to amendment or termination of the Plan.
The Administrative Committee shall establish such rules
and regulations, and shall take such other actions as it
deems necessary or appropriate to carry out its duties
and responsibilities.
(c) Investment Powers, Duties and Responsibilities.
The Administrative Committee shall have the following
powers, duties and responsibilities in connection with
the investment of the assets of the Plan:
(1) Making decisions with respect to the investment
options that are made available to Participants under
the Plan and communicating such options to the
Participants;
(2) Formulating rules governing the investment
directions of Participants;
(3) Selecting and removing investment managers
appointed pursuant to Section 11.3;
(4) Selecting and removing any insurance company or
companies that issue any life insurance policies or
annuity contracts that are made available for the
investment of Plan assets or the distribution of Plan
Benefits; and
(5) Periodically reviewing the performance of the
Trustee, any investment manager that has been appointed
under Section 11.3 and any insurance company appointed
under subparagraph (4) above.
Based on its review under subparagraph (5) above, the
Administrative Committee shall determine the
desirability of appointing, retaining or removing
investment managers or insurance companies described
therein, and shall advise the Board of Directors of any
matters that the Administrative Committee deems relevant
to the decision as to whether to retain the Trustee.
(d) Allocation and Delegation of Responsibilities. The
Administrative Committee may, by written resolution,
allocate any of its powers, duties and responsibilities
to one or more of its members, or delegate any of its
powers, duties and responsibilities to any other person
or persons; provided, however, that any such allocation
or delegation shall be terminable upon such notice as
the Administrative Committee deems reasonable and
prudent under the circumstances.
11.3 Appointment of Investment Managers. The
Administrative Committee may transfer the actual
investment management and control of all or any portion
of the assets of the Trust from the Trustee to one or
more investment managers. Any investment manager
appointed hereunder shall have the power to manage,
acquire or dispose of assets of the Plan, and shall be
an investment adviser registered under the Investment
Advisers Act of 1940, a bank, as defined in that Act,
or an insurance company empowered under the laws of more
than one State to manage, acquire or dispose of assets
of the Plan.
11.4 Funding Policy. At reasonable intervals, the
Administrative Committee shall make (or cause to be
made) an analysis of the future cash requirements of the
Plan for payment of benefits and expenses, and shall
include (or have included) in the analysis such
information as may be appropriate to enable the Trustee
and any investment manager that has been appointed under
Section 11.3 to design an investment policy that will
satisfy such requirements. Each such analysis shall be
communicated to, and discussed with, the Trustee and
each such investment manager.
11.5 Engagement of Advisors. The Board of Directors,
the Company, the Administrative Committee, or any person
to whom duties and responsibilities hereunder have been
allocated or delegated, may engage other persons to
render advice in connection with their respective duties
and responsibilities, including plan consultants,
investment advisers, accountants, and attorneys (who may
be counsel to the Company).
11.6 Service in More than One Fiduciary Capacity. Any
person may serve in more than one fiduciary or other
capacity with respect to the Plan.
11.7 Indemnification. The Company shall indemnify
and hold harmless the members of the Administrative
Committee from and against any and all liabilities,
claims, demands, costs and expenses, including
attorney's fees, arising out of an alleged breach in the
performance of its fiduciary duties under the Plan and
under ERISA, other than such liabilities, claims,
demands, costs and expenses as may result from willful
misconduct. The Company shall have the right, but not
the obligation, to conduct the defense of any member of
the Administrative Committee in any proceeding to which
this Section applies. In lieu of the foregoing, the
Company may satisfy its obligations under this Section
through the purchase of a policy or policies of
insurance providing equivalent protection.
12. CLAIMS AND REVIEW PROCEDURES
12.1 Claims Procedure.
(a) General Rule. The Administrative Committee shall
determine Participants' and Beneficiaries' rights to
benefits under the Plan. If a Participant or
Beneficiary disagrees with the Administrative
Committee's determination, he may file a written claim
for benefits with the Administrative Committee, provided
the claim is filed within 60 days of the date the
Participant or Beneficiary receives notification of the
determination.
(b) Notice if Claim is Denied. If any claim for
benefits is wholly or partially denied, the
Administrative Committee shall provide the claimant with
a notice of denial, written in a manner calculated to be
understood by the claimant and setting forth:
(1) The specific reason(s) for the denial;
(2) Specific references to the Plan provisions on which
the denial is based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim, with an explanation of why the material or
information is necessary; and
(4) An explanation of the steps to be taken if the
claimant wishes to submit the claim for review.
A notice of denial shall be provided within 90 days
after the claim is filed, unless special circumstances
require an extension of time for processing the claim.
If an extension is required, written notice shall be
furnished to the claimant within 90 days of the date the
claim was filed, stating the special circumstances
requiring the extension and the date by which a
decision on the claim can be expected, which shall be no
more than 180 days from the date the claim was filed.
If no notice of denial or of the fact that an extension
of time is necessary for processing a claim is provided
within the time prescribed in this paragraph, the claim
shall be deemed to have been denied as of the last day
of the applicable period, and the claimant may appeal
such denial in accordance with the procedure for review
of denied claims set forth in Section 12.2 below.
12.2 Review Procedure.
(a) Request for Review. Any person whose claim for
benefits is denied (or deemed denied), in whole or in
part, or such person's duly authorized representative,
may appeal from such denial by submitting a written
request for a review of the claim to the Administrative
Committee within 60 days after receiving written notice
of the denial (or, in the case of a deemed denial,
within 60 days after the claim is deemed denied). The
Administrative Committee shall give the claimant or
representative an opportunity to review pertinent Plan
documents in preparing a request for review. A request
for review shall set forth all of the grounds on which
it is based, all facts in support of the request and any
other matters the claimant deems pertinent. The
Administrative Committee may require the claimant to
submit such additional facts, documents or other
material as it may deem necessary or appropriate in
making its review.
(b) Time for Response. The Administrative Committee
shall act on each request for review within 60 days
after receipt thereof, unless special circumstances
require an extension of time, up to an additional 60
days, for processing the request. If such an extension
is required, written notice of the extension shall be
furnished to the claimant within the initial 60-day
period.
(c) Notice of Decision on Review. The Administrative
Committee shall give prompt, written notice of its
decision to the claimant. In the event the
Administrative Committee affirms the denial of the claim
for benefits, in whole or in part, such notice shall set
forth, in a manner calculated to be understood by the
claimant, specific reasons for the denial and specific
references to the Plan provisions on which the decision
is based.
13. AMENDMENT AND TERMINATION
13.1 Amendment. The Board of Directors reserves the
right to amend the Plan at any time and for any reason,
in whole or in part, including without limitation,
retroactive amendments necessary or advisable to qualify
the Plan and Trust under the provisions of section
401(a) and 401(k) of the Code. However, no such
amendment shall: (a) cause any part of the assets of the
Plan to revert to or be recoverable by the Company or
any Related Company or be used for or diverted to
purposes other than the exclusive purposes of providing
benefits to Participants and Beneficiaries and paying
the reasonable expenses of administering the Plan; (b)
deprive any Participant or Beneficiary of any benefit
already vested; (c) alter, change or modify the duties,
powers or liabilities of the Trustee hereunder without
its written consent; (d) permit any part of the assets
of the Plan to be used to pay premiums or contributions
of the Company or any Related Company under any other
plan maintained by the Company or any Related Company
for the benefit of its Employees; or (e) eliminate an
optional form of distribution with respect to benefits
accrued before the amendment. No amendment to the
vesting schedule of the Plan shall provide that the
vesting percentage of the Plan Benefit of an Employee
who is a Participant in the Plan on the date the
amendment is adopted or effective, whichever is later,
shall be less than the vesting percentage of such
Participant's Plan Benefit (determined as of such date)
computed without regard to such amendment. Further, no
amendment to the vesting schedule of the Plan shall
reduce the rate of vesting with respect to future
vesting of any such Participant with at least three
Years of Service.
13.2 Termination, Partial Termination, or Complete
Discontinuance of Contributions. The Company has
established the Plan with the bona fide intention and
expectation that it will be continued indefinitely.
However, the Company shall not be under any obligation
or liability to continue its contributions to the Plan,
or to otherwise maintain the Plan, for any given length
of time, and the Board of Directors may terminate the
Plan at any time and for any reason, in its sole and
absolute discretion, without any liability for such
termination. The board of directors of any other
Participating Employer may, in its sole and absolute
discretion, terminate the Plan with respect to its
Employees at any time and for any reason, without any
liability for such termination. If the Plan shall be
terminated or partially terminated, or if contributions
to the Plan are completely discontinued, the Plan
Accounts of all affected Participants shall become fully
(100%) vested and nonforfeitable, and the Trust shall
continue until all affected Participants' accounts have
been completely distributed to or for the benefit of the
Participants in accordance with the Plan.
14. MISCELLANEOUS
14.1 No Effect on Employment Relationship. Neither
the establishment of the Plan and the Trust nor any
modification thereof, nor the creation of any investment
fund or Plan Account, nor the payment of any benefits
hereunder, shall be construed as modifying or affecting
in any way the terms of employment of any Employee, and
shall not affect any Participating Employer's right to
terminate the employment of any of its Employees, with
or without cause.
14.2 Mergers and Transfer of Assets.
(a) Merger of the Company. If the Company merges or
consolidates with or into another corporation, or if
substantially all of the assets of the Company shall be
transferred to another corporation, the Plan shall
terminate on the effective date of such merger,
consolidation or transfer; provided, however, that, if
the surviving corporation resulting from such merger or
consolidation, or the corporation to which the assets
have been transferred, adopts this Plan, the Plan shall
continue and said corporation shall succeed to all
rights, powers and duties of the Company hereunder. The
employment of any Employee who is continued in the
employ of such successor corporation shall not be deemed
to have been terminated for any purpose hereunder.
(b) Merger of the Plan or Transfer of Assets. In no
event shall this Plan be merged or consolidated with any
other employee benefit plan, nor shall there be any
transfer of assets or liabilities from this Plan to any
other such plan, unless immediately after such merger,
consolidation or transfer, each Participant's benefits,
if such other plan were then to terminate, would be at
least equal to the benefits to which the Participant
would have been entitled had this Plan been terminated
immediately before such merger, consolidation, or
transfer.
14.3 Prohibition Against Assignment. Except in
accordance with the terms of a Qualified Domestic
Relations Order and with respect to loans to Employees
under Section 8.9:
(a) The benefits provided by this Plan shall not be
assigned, transferred, mortgaged, pledged, hypothecated
or otherwise alienated by any Participant or
Beneficiary, and neither the Company nor the Trustee
shall recognize any attempted assignment, transfer,
mortgage, pledge, hypothecation or other alienation by
any Participant or Beneficiary of all or any part of his
interest hereunder; and
(b) The interest of any Participant or Beneficiary in
any benefits provided hereunder shall not be subject in
any manner to transfer by operation of law and shall be
exempt from the claims of creditors or other claimants
under any order, decree, levy, garnishment, execution or
other legal or equitable process or proceeding, to the
fullest extent permitted by law.
14.4 Permissible Reversions.
(a) General Rules. Notwithstanding any other provision
of the Plan:
(1) To the extent any contribution to the Plan is made
by reason of a mistake of fact, it may be returned to
the appropriate Participating Employer within one year
from the date of the contribution;
(2) All contributions to the Plan are hereby
conditioned on their deductibility under section 404 of
the Code, and to the extent such deduction is
disallowed, any contribution may be returned to the
appropriate Participating Employer within one year from
the date of the disallowance; and
(3) Upon termination of the Plan, any amount held in a
suspense account established under Section 5.4(d) may be
returned to the appropriate Participating Employer to
the extent such amount may not then be allocated to any
Participant's Plan Accounts.
(b) Treatment of Earnings/Losses. The amounts which
may be returned to a Participating Employer pursuant to
paragraph (a) of this Section shall be the excess of the
amounts contributed over the amounts that would have
been contributed had there not been a mistake of fact or
disallowance of deduction, as applicable. No earnings
on the mistaken or non-deductible contributions may be
returned to a Participating Employer, and losses
sustained by the Trust after the date of contribution
shall proportionately reduce the amount that may be
returned to a Participating Employer hereunder.
14.5 Masculine/Feminine; Singular/Plural. Wherever
used herein, the masculine gender shall include the
feminine, and the singular number or tense shall include
the plural.
14.6 Missing Participant or Beneficiary. If, after
reasonable efforts to do so, the Administrative
Committee is unable to locate any person to whom a
benefit is payable hereunder, the benefit payable to
such person shall be forfeited. If such person has not
been located by the last day of the Plan Year in which
such forfeiture occurs, the amount forfeited shall be
allocated as of such day in accordance with Section
5.3(b). Any benefit that has been forfeited pursuant to
this Section shall be restored and distributed if such
person provides the Administrative Committee with his
current address and any other information such Committee
determines is necessary or desirable in connection with
the restoration and distribution of the forfeited
amount. Any restoration of benefits required under this
Section shall be made in the manner described in the
last two sentences of Section 6.2(b).
14.7 Notices and Elections. Any notice, election or
designation required or permitted by Participants shall
be made on the form prescribed for such purpose by the
Administrative Committee. Except as otherwise provided
in the Plan, any notice, election or designation by a
Participant must be filed with the Administrative
Committee.
14.8 Top Heavy Rules.
(a) When Applicable. For any Plan Year the Plan is a
Top-Heavy Plan, the provisions of this Section shall
supersede any conflicting provisions in the Plan.
(b) Definition of Top-Heavy Plan. The Plan is a "Top-
Heavy Plan" for any Plan Year if, as of the
Determination Date for such Plan Year, the Top-Heavy
Ratio for the Aggregation Group exceeds 60%.
(c) Minimum Allocation. Except as provided in
paragraph (d) of this Section, for each Plan Year the
Plan is a Top-Heavy Plan, the Matching Contributions,
Profit Sharing Contributions, forfeitures and any
special contribution made pursuant to Section 3.5
allocated on behalf of each Participant who is not a Key
Employee and who is employed by the Company or any
Related Company on the last day of the Plan Year shall
not be less than the lesser of: (1) 3% of such
Participant's Covered Compensation; or (2) the highest
percentage of any Key Employee's Covered Compensation
that is provided by Deferred Pay Contributions, Matching
Contributions, Profit Sharing Contributions and
forfeitures allocated to such Key Employee under the
Plan for that Plan Year, unless the Participant is also
a participant in a "defined benefit plan" (as defined in
section 414(j) of the Code) to which contributions have
been made by the Company or any Related Company, in
which case the minimum allocation shall not be less than
5% of such Participant's Covered
Compensation.
(d) Minimum Benefit Under Other Plan. Paragraph (c) of
this Section shall not apply to any Participant who
participates in any other plan maintained by the Company
or any Related Company that is qualified under section
401(a) of the Code and provides that the minimum
allocation and vesting requirements of section 416 of
the Code shall be met therein.
(e) Effect on Combined Plan Limitation. For any Plan
Year the Plan is a Top-Heavy Plan, the "defined benefit
plan fraction" and the "defined contribution plan
fraction" (as defined in section 415(e) of the Code)
shall be computed, for purposes of Section 5.4(c), by
substituting "1.0" for "1.25" each place it appears in
section 415(e) of the Code; provided that such
substitution shall not have the effect of reducing any
Participant's accrued benefit under the Plan, determined
as of the last day of the Plan Year immediately
preceding the first Plan Year the Plan is a Top-Heavy
Plan.
(f) Special Definitions. The following terms are
defined for purposes of this Section:
(1) "Aggregation Group" shall mean the following group
of plans that are maintained by the Company or any
Related Company and are qualified under section 401(a)
of the Code:
(i) Each plan in which at least one Key Employee
participates (a "Key Plan"), plus each other plan that
enables a Key Plan to meet the requirements of section
401(a)(4) or 410 of the Code; or
(ii) At the Administrative Committee's election, all
plans described in (i) above, plus any other plan or
plans that meet the requirements of sections 401(a)(4)
and 410 of the Code when considered together with the
plans described in (i) above.
(2) "Determination Date" shall mean, for any Plan Year,
the last day of the preceding Plan Year.
(3) "Key Employee" shall mean a "key employee" as
defined in section 416(i) of the Code and the
regulations promulgated thereunder.
(4) "Top-Heavy Ratio" shall mean the "top-heavy ratio"
of the Aggregation Group, computed in accordance with
section 416(g) of the Code and the regulations
promulgated thereunder. Notwithstanding the foregoing:
(i) the accrued benefit of any Employee who has not
performed any services for the Company or any Related
Company during the five-year period ending on the
Determination Date shall be included in the
determination of the Top-Heavy Ratio in accordance with
section 416(g)(4)(E) of the Code; (ii) rollover
contributions shall be taken into account in accordance
with section 416(g)(4)(A) of the Code; (iii)
distributions from terminated plans shall be included in
accordance with section 416(g)(3) of the Code; and (iv)
the accrued benefit of any Employee who is not a Key
Employee for the current Plan Year, but was a Key
Employee for any prior Plan Year, shall be treated in
accordance with section 416(g)(4)(B) of the Code.
14.9 Rollovers and Direct Transfers from Other Plans.
(a) In General. Notwithstanding any other provision of
the Plan, the Trustee is authorized to accept a rollover
contribution from any Participant, if such contribution
is described in section 402(c)(1), 403(a)(4) or
408(d)(3) of the Code, or a direct transfer of an
eligible rollover distribution described in section
401(a)(31) of the Code. The receipt of a rollover
contribution or a direct transfer of assets under this
Section shall be subject to the following conditions:
(1) No rollover or direct transfer may be in an amount
less than $500;
(2) All rollovers and direct transfers must be made in
cash or other property approved by the Administrative
Committee; and
(3) No amount may be rolled over or transferred
directly to the Plan without the prior written consent
of the Administrative Committee.
(b) Credited to Rollover Account. Any amount rolled
over or transferred directly to this Plan pursuant to
paragraph (a) of this Section shall be credited to a
Rollover Account established for the Participant who
made the rollover contribution or directed the transfer
to be made.
(c) Investment of Rollover Accounts. Amounts credited
to a Participant's Rollover Account pursuant to
paragraph (b) of this Section shall be invested in
accordance with his investment directions given pursuant
to Section 7.
(d) Distribution of Rollover Accounts. A Participant's
Rollover Account shall be distributed at the same time,
in the same manner and to the same persons as the rest
of his Plan Accounts.
14.10 Compliance with Section 401(a)(9) of the
Code. Notwithstanding any other provision of the Plan
to the contrary, all distributions from the Plan shall
be made in accordance with section 401(a)(9) of the Code
and the regulations promulgated thereunder, including
the minimum distribution incidental death benefit
requirements of such regulations.
14.11 Benefits for Certain Reemployed Participants Who
Return from Military Service. Notwithstanding any
provision of this Plan to the contrary, contributions,
benefits and service credit with respect to qualified
military service will be provided in accordance with
section 414(u) of the Code.
14.12 Applicable Law and Severability.
(a) Applicable Law. The Plan shall be construed,
administered and governed in all respects in accordance
with ERISA, and, to the extent not preempted by ERISA,
the laws of the State of California; provided, however,
that if any provision is susceptible of more than one
interpretation, the interpretation given thereto shall
be consistent with the Plan being a "qualified" plan
within the meaning of sections 401(a) and 401(k) of the
Code.
(b) Severability. If any provision of the Plan shall
be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions
hereof shall continue to be fully effective.
TO RECORD THE ADOPTION OF THIS AMENDMENT AND RESTATEMENT
OF THE PLAN, the Company has caused this document to be
executed by its duly authorized officer this 28th day of
September, 1998.
DATRON SYSTEMS INCORPORATED
By: /s/ WILLIAM L. STEPHAN
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SIX MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
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