<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(mark one)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
___ Exchange Act of 1934
For the quarterly period ended June 30, 1999 or
_____________
___ Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________
Commission file number 0-18603
_______
INTEGRAL SYSTEMS, INC.
----------------------
(Exact name of registrant as specified in its chapter)
Maryland 52-1267968
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Philadelphia Way, Suite A, Lanham, MD 20706
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-4233
--------------
(Former name, address and fiscal year, if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
___ ___
As of June 30, 1999 the aggregate market value of the Common Stock of the
Registrant (based upon the closing price of the Common Stock on the NASDAQ Stock
Exchange at June 30, 1999) held by non-affiliates of the Registrant was
$137,370,370.
Registrant had 7,136,379 shares of common stock outstanding as of June 30, 1999
Transitional Small Business Disclosure Format (check one):
Yes No X
___ ___
<PAGE>
INTEGRAL SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets June 30, 1999 and September 30, 1998............... 1
Statements of Operations - Three and Nine Months
Ended June 30, 1999 and June 30, 1998.......................... 3
Statement of Stockholders' Equity - Nine Months
Ended June 30, 1999............................................ 4
Statement of Cash Flow Nine Months Ended June 30, 1999
and June 30, 1998.............................................. 5
Notes to Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
PART II. OTHER INFORMATION:
Item 2. Changes in Securities and Use of Proceeds..................... 16
Item 4. Submission of Matter to a Vote of Security Holders............ 16
Item 6. Exhibits and Reports on Form 8-K............................. 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, September 30,
1999 1998
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and Marketable Securities $23,734,532 $ 3,055,144
Accounts Receivable 14,420,752 10,915,059
Prepaid Expenses 58,154 52,472
Deferred Income Taxes 182,691 182,691
----------- -----------
TOTAL CURRENT ASSETS 38,396,129 14,205,366
FIXED ASSETS
Electronic Equipment 483,293 560,509
Furniture & Fixtures 176,175 43,743
Leasehold Improvements 98,124 7,863
Software Purchases 54,850 55,040
Equip. Under Capital Lease 1,983,516 1,331,968
----------- -----------
SUBTOTAL 2,795,958 1,999,123
Less: Accumulated Depreciation 1,108,160 818,698
----------- -----------
TOTAL FIXED ASSETS 1,687,798 1,180,425
OTHER ASSETS
Software Development Costs 1,822,337 1,485,551
Deposits 13,666 11,671
----------- -----------
TOTAL OTHER ASSETS 1,836,003 1,497,222
TOTAL ASSETS $41,919,930 $16,883,013
=========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY June 30, September 30,
1999 1998
----------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 3,777,272 $ 3,083,964
Accrued Expenses 2,464,895 2,263,688
Notes Payable 0 0
Capital Leases Payable 560,673 401,386
Billings in Excess of Cost 2,228,014 518,720
Income Taxes Payable 478,897 747,777
----------- -----------
TOTAL CURRENT LIABILITIES 9,509,751 7,015,535
----------- -----------
LONG TERM LIABILITIES
Capital Leases Payable 911,591 748,446
----------- -----------
TOTAL LONG TERM LIABILITIES 911,591 748,446
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, 40,000,000 shares
authorized, and 7,136,379 and 5,839,984 shares
issued and outstanding at June 30, 1999
and September 30, 1998, respectively 71,364 58,399
Additional Pain-in Capital 21,405,871 1,398,982
Retained Earnings 10,021,353 7,661,651
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 31,498,588 9,119,032
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $41,919,930 $16,883,013
=========== ===========
STOCKHOLDERS' EQUITY
</TABLE>
See Notes to Financial Statements
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenue $10,968,549 $7,932,242 $28,473,028 $20,317,973
Cost of Revenue
Direct Labor 2,664,537 1,905,808 7,271,742 4,707,881
Overhead Costs 1,680,554 1,347,915 5,082,488 3,677,122
Travel and Other Direct Costs 258,291 284,141 860,049 611,476
Direct Equipment & Subcontracts 3,157,296 2,207,975 7,508,574 6,037,949
----------------- ----------------- ----------------- -----------------
Total Cost of Revenue 7,760,678 5,745,839 20,722,853 15,034,428
----------------- ----------------- ----------------- -----------------
Gross Margin 3,207,871 2,186,403 7,750,175 5,283,545
----------------- ----------------- ----------------- -----------------
Selling, General & Administrative 1,245,757 661,527 3,250,065 2,022,544
Product Amortization 165,000 165,000 495,000 495,000
----------------- ----------------- ----------------- -----------------
Income From Operations 1,797,114 1,359,876 4,005,110 2,766,001
Other Income (Expense)
Interest Income 51,383 14,142 109,279 34,061
Interest Expense (30,093) (16,908) (98,147) (64,822)
Miscellaneous, net (67,969) (45,810) (171,940) (134,936)
----------------- ----------------- ----------------- -----------------
Total Other Income (Expense) (46,679) (48,576) (160,808) (165,697)
Income Before Income Taxes 1,750,435 1,311,300 3,844,302 2,600,304
Provision for Income Taxes 675,900 506,446 1,484,600 1,004,246
----------------- ----------------- ----------------- -----------------
Net Income $ 1,074,535 $ 804,854 $ 2,359,702 $ 1,596,058
================= ================= ================= =================
Shares Outstanding During Period 6,342,882 5,813,976 6,043,982 5,779,850
Earnings per Share $0.17 $0.14 $0.39 $0.28
================= ================= ================= =================
Diluted Shares Outstanding 6,881,653 6,216,684 6,512,550 6,132,469
Diluted Earnings per Share $0.16 $0.13 $0.36 $0.26
================= ================= ================= =================
</TABLE>
See Notes to Financial Statements
<PAGE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Common
Number Stock Additional
of at Par Paid-in Retained
Shares Value Capital Earnings Total
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1998 5,839,984 $58,399 $ 1,398,982 $ 7,661,651 $ 9,119,032
.
Exercise of Stock Options 113,127 1,132 348,444 - 349,576
Private Placement 1,183,268 11,833 19,658,445 - 19,670,278
Net income - - - 2,359,702 2,359,702
---------- -------- ------------ ------------ ------------
Balance June 30, 1999 7,136,379 $71,364 $21,405,871 $10,021,353 $31,498,588
========== ======== ============ ============ ============
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1999 1998
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,359,702 $ 1,596,058
---------------- ---------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,007,969 857,103
(Increase) decrease in:
Accounts receivable (3,505,694) (2,144,481)
Prepaid expenses (5,682) 61,149
(Decrease) increase in:
Accounts payable 693,308 (407,612)
Accrued expenses 201,207 275,729
Billings in excess of cost 1,709,294 296,266
Income taxes payable (268,880) 556,305
---------------- ---------------
Total adjustments (168,478) (505,541)
---------------- ---------------
Net cash provided (used) by operations 2,191,224 1,090,517
---------------- ---------------
Cash flow from investing activities:
Acquisition of fixed assets (338,293) (110,136)
Increase in software development costs (831,786) (441,049)
Increase in other assets (1,995) (54,269)
---------------- ---------------
Net cash provided (used) in investing activities (1,172,074) (605,454)
---------------- ---------------
Cash flow from financing activities:
Proceeds from line of credit 0 (500,000)
Proceeds from sale/lease back 0 500,000
Payments on capital lease obligations (359,616) (85,668)
Proceeds from issuance of common stock 20,019,854 288,378
---------------- ---------------
Net cash provided by financing activities 19,660,238 202,710
---------------- ---------------
Net increase (decrease) in cash 20,679,388 687,773
Cash - beginning of year 3,055,144 1,006,614
---------------- ---------------
Cash - end of period $23,734,532 $ 1,694,387
================ ===============
</TABLE>
<PAGE>
INTEGRAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The interim financial statements include the accounts of Integral Systems,
Inc. (ISI or the Company) and its two wholly-owned subsidiaries, Integral
Marketing, Inc. (IMI) and InterSys, Inc. (INTSYS), and have not been
audited. In the opinion of management, the financial statements reflect
all adjustments consisting only of normal recurring accruals necessary for
a fair presentation of results for such periods. The financial statements,
which are condensed and do not include all disclosures included in the
annual financial statements, should be read in conjunction with the
consolidated financial statements of the Company for the fiscal year ended
September 30, 1998. The results of operations for any interim period are
not necessarily indicative of results for the full year.
Certain accounts in the prior period financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements.
2. Accounts Receivable
-------------------
Accounts receivable at June 30, 1999 and September 30, 1998 consist of the
following:
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------- --------------
<S> <C> <C>
Billed $ 8,560,332 $ 6,928,894
Unbilled 5,818,703 3,983,479
Other 41,717 2,686
------------- --------------
Total $14,420,752 $10,915,059
============= ==============
</TABLE>
The Company uses the direct write-off method for bad debts.
The Company's accounts receivable consist of amounts due on prime contracts
and subcontracts with the U.S. Government and contracts with various
private organizations. Unbilled accounts receivable consist principally of
amounts that are billed in the month following the incurrence of cost or
when milestones are delivered under fixed price contracts. All unbilled
receivables are expected to be billed and collected within one year.
3. Line of Credit
--------------
The Company has a line of credit agreement with a local bank for
$3,000,000. Borrowings under the line of credit bear interest at the
Eurodollar Rate plus 1.9% per annum. The line of credit is secured by the
Company's billed and unbilled accounts receivable and has certain financial
covenants, including minimum net worth and liquidity ratios. The line
expires July 31, 1999, but is planned to be renewed on more favorable terms
to the Company. At June 30, 1999 and September 30, 1998, the Company had
no outstanding balance under the line of credit.
4. Capital Lease
-------------
The Company has access to a $2.0 million equipment lease line of credit
that had a balance of $1,472,264 at June 30, 1999. The balance is payable
over 36 months and bears interest at a rate of 8.89% per annum. The unused
portion of the line of credit will be used to finance future equipment
purchases under substantially similar terms.
<PAGE>
5. Stock Splits
------------
On June 4, 1997, the Company's shareholders approved an increase to the
Company's authorized shares from 2.0 million to 10.0 million and also
authorized a three-for-one stock split which became effective in July 1997.
On May 29, 1998, the Company's board of directors declared a two-for-one
stock split in the form of a 100% stock dividend for stockholders of record
as of June 9, 1998.
On April 27, 1999, The Company's shareholders approved an amendment to the
Company's charter increasing the total number of shares of stock which the
Corporation is authorized to issue from 10.0 million to 40.0 million.
Stockholders' equity has been restated to give retroactive recognition to
the stock splits for all periods presented by reclassifying from additional
paid-in capital to common stock the par value of the additional shares
arising from the splits. In addition, all references to number of shares,
per share amounts, stock option data, and market prices of common stock
have been restated.
6. Business Segment Information
----------------------------
During the periods ended June 30, 1999 and June 30, 1998, the Company's
operations included two reportable segments: Satellite ground systems and
electronic test instrumentation and equipment marketing.
The Company builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Customers for these
systems include U.S. Government organizations such as the National
Aeronautics and Space Administration (NASA), the National Oceanic and
Atmospheric Administration (NOAA), and the U.S. Air Force, as well as
commercial satellite operators, both domestic and foreign.
Through its wholly-owned subsidiary, IMI, the Company acts as a
manufacturer's representative, selling electronic test instrumentation and
equipment to customers primarily in Maryland, Virginia and the District of
Columbia. (The Company's other wholly-owned subsidiary, InterSys, provides
consulting services for satellite design and procurement, but is presently
inactive.) Summarized financial information is as follows:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 1999 June 30, 1998
----------------------- ---------------------
<S> <C> <C>
Net Sales
Satellite ground systems $27,438,919 $19,193,368
Equipment marketing $ 1,034,109 $ 1,124,605
Income before taxes
Satellite ground systems $ 3,520,810 $ 2,201,484
Equipment marketing $ 323,492 $ 398,820
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
---------------------------------------------------------------------
Overview
Integral Systems, Inc. builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Since its inception in
1982, the Company has provided ground systems for over 100 different satellite
missions for communications, science, meteorology, and earth resource
applications. The Company has an established domestic and international
customer base that includes government and commercial satellite operators,
spacecraft and payload manufacturers, and aerospace systems integrators.
The Company has developed innovative software products that reduce the cost and
minimize the development risk associated with traditional custom-built systems.
The Company believes that it was the first to offer a comprehensive COTS
(Commercial-Off-The-Shelf) software product line for command and control. As a
systems integrator, the Company leverages these products to provide turnkey
satellite control facilities that can operate multiple satellites from any
manufacturer. These systems offer significant cost savings for customers that
have traditionally purchased a separate custom control center for each of their
satellites.
Results of Operations
The components of the Company's income statement as a percentage of revenue are
depicted in the following table for the three months ended June 30, 1999 and
June 30, 1998, respectively:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, June 30,
% of % of
1999 Revenue 1998 Revenue
------------------- ------------------- -------------------- ----------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Revenue $10,969 100.0 $7,932 100.0
Cost of Revenue 7,761 70.8 5,746 72.4
------- ----- ------ -----
Gross Margin 3,208 29.2 2,186 27.6
Operating Expenses
SG&A 1,246 11.3 661 8.4
Prod. Amortization 165 1.5 165 2.1
------- ----- ------ -----
Income from Operations 1,797 16.4 1,360 17.1
Other (net) -47 -.4 -49 -.6
------- ----- ------ -----
Pretax Income 1,750 16.0 1,311 16.5
Income Taxes 676 6.2 506 6.4
------- ----- ------ -----
Net Income $ 1,074 9.8 $ 805 10.1
======= ===== ====== =====
</TABLE>
<PAGE>
Revenue
- -------
The Company earns revenue from sales of its products and services through
contracts that are funded by the U.S. Government, both as a prime contractor or
a subcontractor, as well as commercial and international organizations. The
Company, through its wholly-owned subsidiary IMI, earns commission revenue by
representing a number of electronic product manufacturers in Maryland, Virginia
and the District of Columbia, principally in space-related markets.
Internally, the Company classifies revenues in two separate categories on the
basis of the contracts' procurement and development requirements: (i) contracts
which require compliance with Government procurement and development standards
("Government Services") are classified as government revenue, and (ii) contracts
conducted according to commercial practices ("Commercial Products and Services")
are classified as commercial revenue, regardless of whether the end customer is
a commercial or government entity. Sales of the Company's COTS products are
classified as Commercial Products and Services revenue. IMI sales of third-
party hardware and software are also classified as Commercial Products and
Services revenue.
For the three months ended June 30, 1999 and 1998 the Company's revenues were
generated from the following sources:
<TABLE>
<CAPTION>
Three Months Ended June 30,
Revenue Type 1999 1998
-------------------------------- -------- --------
<S> <C> <C>
Commercial Products and Services
Commercial Users 42% 27%
U.S. Government Users 2 12
---- ----
Subtotal 44 39
Government Services
NOAA 43 41
NASA 10 15
Other U.S. Government Users 3 5
---- ----
Subtotal 56 61
Total 100% 100%
==== ====
</TABLE>
Based on the Company's revenue categorization system, the Company classified 44%
and 39% of its revenue as Commercial Products and Services revenue with the
remaining 56% and 61% classified as Government Services revenue for the three
months ended June 30, 1999 and 1998, respectively. By way of comparison, if the
revenues were classified strictly according to end-user (independent of the
Company's internal revenue categorization system), the U.S. Government would
account for 58% and 73% of the total revenues for the three months ended
June 30, 1999 and 1998, respectively.
On a consolidated basis, revenue increased 38%, or $3.1 million, to $11.0
million for the three months ended June 30, 1999, from $7.9 million for the
three months ended June 30, 1998. The increase was due in part to increases in
the Commercial Products and Services revenues (which increased approximately
$1.7 million during the three months ended June 30, 1999 compared to the same
period in fiscal year 1998) principally as a result of expanding business from
existing customers and revenues earned from awards with new customers.
Government Services revenues increased approximately $1.4 million as U.S.
Government customers increased their purchases of the Company's EPOCH product
line and related services for both command and control applications and for
Integration and Test ("I&T") services.
<PAGE>
Cost of Revenue/Gross Margin
The Company calculates gross margin by subtracting cost of revenue from revenue.
Included in cost of revenue are direct labor expenses, overhead charges
associated with the Company's direct labor base and other costs that can be
directly related to specific contract cost objectives, such as travel,
consultants, equipment, subcontracts and other direct costs.
Gross margins on contract revenues vary depending on the type of product or
service provided. Generally, license revenues related to the sale of the
Company's COTS products have the greatest gross margins because of the minimal
associated marginal costs to produce. By contrast, gross margin rates for
equipment and subcontract pass-throughs seldom exceed 15%. Engineering service
gross margins typically range between 20% and 35%, while gross margins for IMI
vary considerably depending on sales volume achieved.
During the three months ended June 30, 1999, cost of revenue increased to $7.8
million from $5.7 million during the three months ended June 30, 1998 due
primarily to increases in direct labor and related overhead costs necessary to
staff the Company's new contracts and revenue growth. Direct equipment and
subcontract costs also increased by approximately $950,000 between these
periods.
Cost of revenue expressed as a percentage of revenues decreased to 70.8% for the
three months ended June 30, 1999 from 72.4% for the three months ended June 30,
1998 primarily due to a lower percentage of direct costs (i.e., labor, travel
and equipment) in the fiscal year 1999 cost of revenue mix.
The Company's gross margin increased 47%, or $1.0 million, to $3.2 million for
the three months ended June 30, 1999 from $2.2 million for the three months
ended June 30, 1998. The increase was principally due to higher product license
revenues coupled with engineering service revenue growth.
Gross margin as a percentage of revenue was 29.2% during the three months ended
June 30, 1999 compared to 27.6% for the three months ended June 30, 1998. The
increase is principally attributable to margin percentage increases in
engineering service revenue and equipment and subcontract revenue combined with
higher software license sales.
Operating Expenses/ Income from Operations
Selling, General & Administrative expenses ("SG&A") increased to approximately
$1,250,000 during the three months ended June 30, 1999 from $660,000 in the
quarter ended June 30, 1998. The change was primarily due to increases in the
Company's management labor costs and expenses associated with the implementation
of a new accounting and management information system as the Company continues
to build its infrastructure to accommodate future growth. The Company also
experienced higher than usual selling and proposal efforts during the quarter
ended June 30, 1999. As a percentage of revenue, SG&A accounted for 11.3% of
revenue for the three months ended June 30, 1999 compared to 8.4% in the quarter
ended June 30, 1998. Product amortization was $165,000 for both the three
months ended June 30, 1999 and the three months ended June 30, 1998.
Income from operations increased 32% to $1.8 million for the three months ended
June 30, 1999 from $1.4 million for the three months ended June 30, 1998
primarily due to increases in gross margin dollars described above. As a
percentage of revenue, income from operations decreased to 16.4% for the three
months ended June 30, 1999 from 17.1% for the prior fiscal year's third quarter.
This decrease was principally the result of a higher percentage of SG&A expenses
against revenue.
The Company's effective tax rate was 38.6% for both the three months ended
June 30, 1999 and the three months ended June 30, 1998.
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
-------------------------------------------------------------------
The components of the Company's income statement as a percentage of revenue are
depicted in the following table for the nine months ended June 30, 1999 and
June 30, 1998, respectively:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, June 30,
% of % of
1999 Revenue 1998 Revenue
------------------- ------------------- -------------------- ----------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Revenue $28,473 100.0 $20,318 100.0
Cost of Revenue 20,723 72.8 15,034 74.0
------- ----- ------- -----
Gross Margin 7,750 27.2 5,284 26.0
Operating Expenses
SG&A 3,250 11.4 2,023 10.0
Prod. Amortization 495 1.7 495 2.4
------- ----- ------- -----
Income from Operations 4,005 14.1 2,766 13.6
Other (net) (161) (.6) (166) (.8)
------- ----- ------- -----
Pretax Income 3,844 13.5 2,600 12.8
-------
Income Taxes 1,484 5.2 1,004 4.9
------- ----- ------- -----
Net Income $ 2,360 8.3 $ 1,596 7.9
======= ===== ======= =====
</TABLE>
Revenue
- -------
The Company earns revenue from sales of its products and services through
contracts that are funded by the U.S. Government, both as a prime contractor or
a subcontractor, as well as commercial and international organizations. The
Company, through its wholly-owned subsidiary IMI, earns commission revenue by
representing a number of electronic product manufacturers in Maryland, Virginia
and the District of Columbia, principally in space related markets.
Internally, the Company classifies revenues as either Government Services
revenue or Commercial Products and Services revenue. See "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Comparison of the Three Months Ended June 30, 1999 and June 30, 1998 --
Revenue."
<PAGE>
For the nine months ended June 30, 1999 and 1998, respectively, the Company's
revenues were generated from the following sources:
<TABLE>
<CAPTION>
Nine Months Ended June 30,
Revenue Type 1999 1998
-------------------------------- -------- --------
<S> <C> <C>
Commercial Products and Services
Commercial Users 31% 33%
U.S. Government Users 3 12
--- ---
Subtotal 34 45
Government Services
NOAA 50 36
NASA 11 14
Other U.S. Government Users 5 5
--- ---
Subtotal 66 55
Total 100% 100%
=== ===
</TABLE>
Based on the Company's revenue categorization system, the Company classified 34%
and 45% of its revenue as Commercial Products and Services revenue with the
remaining 66% and 55% classified as Government Services revenue for the nine
months ended June 30, 1999 and 1998, respectively. By way of comparison, if the
revenues were classified strictly according to end-user (independent of the
Company's internal revenue categorization system), the U.S. Government would
account for 69% and 67% of the total revenues for the nine months ended June 30,
1999 and 1998, respectively.
On a consolidated basis, revenue increased 40%, or $8.2 million, to $28.5
million for the nine months ended June 30, 1999 from $20.3 million for the nine
months ended June 30, 1998. The increase was due in part to increases in the
Commercial Products and Services revenues (which rose approximately $500,000
during the nine months ended June 30, 1999 compared to the nine months ended
June 30, 1998), principally as a result of expanding business from existing
customers and revenues earned from awards with new customers. This increase is
net of a $100,000 decline in IMI revenues during the compared periods.
The Company's Government Services revenues increased approximately $7.7 million
during the nine months ended June 30, 1999 compared to the nine months ended
June 30, 1998 as U.S. Government customers increased their purchases of the
Company's EPOCH product line and related services for both command and control
applications and for I&T services.
Cost of Revenue/Gross Margin
During the nine months ended June 30, 1999, cost of revenue increased to $20.7
million from $15.0 million during the nine months ended June 30, 1998 due
primarily to increases in direct labor and related overhead costs necessary to
staff the Company's new contracts and revenue growth. Direct equipment and
subcontract costs also increased by approximately $1.5 million between these
periods.
Cost of revenue expressed as a percentage of revenues decreased to 72.8% for the
nine months ended June 30, 1999 from 74.0% for the nine months ended June 30,
1998 primarily due to a lower percentage of equipment and subcontract costs in
the fiscal year 1999 cost of revenue mix.
<PAGE>
The Company's gross margin increased 47%, or $2.5 million, to $7.8 million for
the nine months ended June 30, 1999 from $5.3 million for the nine months ended
June 30, 1998. The increase was principally due to higher product license
revenues coupled with engineering service revenue growth.
Gross margin as a percentage of revenue was 27.2% during the nine months ended
June 30, 1999 compared to 26.0% for the nine months ended June 30, 1998. The
increase is principally attributable to margin percentage increases in equipment
and subcontract revenue combined with higher software license sales.
Operating Expenses/Income from Operations
SG&A increased to approximately $3.3 million during the nine months ended
June 30, 1999 from $2.0 million during the nine months ended June 30, 1998. The
change was primarily due to increases in the Company's management and marketing
labor costs and expenses associated with the implementation of a new accounting
and management information system as the Company continues to build its
infrastructure to accommodate future growth. As a percentage of revenue, SG&A
accounted for 11.4% of revenue for the nine months ended June 30, 1999 compared
to 10.0% in the nine months ended June 30, 1998. Product amortization was
$495,000 for both the nine months ended June 30, 1999 and the nine months ended
June 30, 1998.
Income from operations increased 45% to $4.0 million for the nine months ended
June 30, 1999 from $2.8 million for the nine months ended June 30, 1998
primarily due to increases in gross margin dollars described above. As a
percentage of revenue, income from operations increased to 14.1% for the nine
months ended June 30, 1999 from 13.6% for the first nine months of fiscal year
1998. This increase was principally the result of higher gross margin rates
offset by a higher percentage of SG&A expenses against revenue.
The Company's effective tax rate was 38.6% for both the nine months ended
June 30, 1999 and the nine months ended June 30, 1998.
Outlook
The Company's strong nine-month results represent a continued trend from prior
fiscal years of increased sales and profitability on those sales. At this time,
the Company has a backlog of work to be performed and it may receive additional
contract awards based on proposals in the pipeline. Management believes that
operating results for future periods will continue to improve based on the
following assumptions:
. Demand for satellite technology and related products and services will
continue to expand
. Sales of its software products and engineering services will continue to
increase
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Since the Company's inception in 1982, it has been profitable on an annual basis
and has generally financed its working capital needs through internally
generated funds, supplemented by borrowings under the Company's general line of
credit facility with a commercial bank and the proceeds from the Company's
initial public offering in 1988. In June 1999 the Company supplemented its
working capital position by raising approximately $19.7 million (net) through
the private placement of approximately 1.2 million shares of its common stock.
For the nine months ended June 30, 1999, the Company provided approximately $2.2
million of cash from operating activities and used approximately $1.2 million
for investing activities, including approximately $830,000 for newly capitalized
software development costs. The Company anticipates that it will spend more
money for software development in fiscal year 1999 than in fiscal year 1998, as
it completes the development of NT versions of its software products. During
the nine months ended June 30, 1999, the Company also purchased approximately
$650,000 of equipment under capital lease.
The Company has access to a general line of credit facility through which it can
borrow up to $3.0 million. Borrowings under the line of credit bear interest at
the Eurodollar Rate plus 1.9% per annum. Any accrued interest is payable
monthly. The line of credit is secured by the Company's billed and unbilled
accounts receivable. The line also has certain financial covenants, including
minimum net worth and liquidity ratios. The line expires July 31, 1999, but is
planned to be renewed on more favorable terms to the Company. At June 30, 1999,
the Company had no amounts outstanding under the line of credit.
The Company also has access to a $2.0 million equipment lease line of credit
under which it had approximately $1.5 million outstanding as of June 30, 1999.
The balance is payable over 36 months and bears interest at a rate of 8.8% per
annum. The unused portion of the line of credit will be available to finance
future equipment purchases under substantially similar terms.
The Company currently anticipates that its current cash balances, amounts
available under its credit facilities and net cash provided by operating
activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months. The Company
believes that inflation did not have a material impact on the Company's revenues
or income from operations during the nine months ended June 30, 1999 or in past
fiscal years.
Year 2000 Compliance
Many currently installed computer systems, software products, and
microprocessor-dependent equipment are coded to accept only two digit entries in
the date code field. To distinguish 21st century dates from 20th century dates,
these date code fields must be able to accept four digit entries.
The Company may realize exposure and risk if the systems it relies upon to
conduct day-to-day operations are not year 2000 compliant. The potential areas
of exposure include electronic data exchange systems operated by third parties
with whom the Company transacts business, products purchased from third parties
and computers, software, telephone systems and other equipment used internally.
To minimize the potential adverse effects of the year 2000 problem, the Company
established an internal project team comprised of all functional disciplines.
This project team has begun a three-phase process of:
. identifying our internal information and non-information technology
systems that are not year 2000 compliant;
. determining their significance in the effective operation of the
Company; and
. developing plans to resolve the issues where necessary.
The Company has been communicating with its suppliers and others with whom it
does business to coordinate year 2000 readiness. The responses received by the
Company to date indicate that steps are currently being taken to address this
concern. However, if those third parties are not able to make all systems year
2000 compliant, there could be a material adverse impact on the Company.
<PAGE>
After initial review of the Company's computer systems, software products and
microprocessor dependent equipment, management has determined the Company to be
year 2000 compliant and, as such, does not anticipate any material adverse
operational issues to arise. Based on current estimates, management expects
that the Company's future costs in connection with its year 2000 compliance
project will not exceed $20,000; however, future anticipated costs are difficult
to estimate with any certainty and may differ materially from those currently
projected based on the results of phase one of the Company's year 2000
compliance project. The anticipated costs associated with the Company's year
2000 compliance program do not include time and costs that may be incurred as a
result of any potential failure of third parties to become year 2000 compliant
or costs to implement the Company's future contingency plans. The Company has
not yet developed a contingency plan in the event that any non-compliant
critical systems are not remedied by January 1, 2000, nor has it formulated a
timetable to create a contingency plan. Upon completion of our review, if
systems material to the Company's operations have not been made year 2000
compliant in a timely manner, the year 2000 issue could have a material adverse
effect on the Company's business, financial condition and results of operations.
Forward Looking Statements
Certain of the statements contained in this section, including those under the
headings "Outlook" and "Liquidity and Capital Resources" are forward looking.
In addition, from time to time, the Company may publish forward looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products, research and
development activities and similar matters. While the Company believes that
these statements are and will be accurate, a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's statements.
The Company's business is dependent upon general economic conditions and upon
various conditions specific to its industry, and future trends cannot be
predicted with certainty. Particular risks and uncertainties that may effect
the Company's business including the following:
. The presence of competitors with greater financial resources and their
strategic response to the Company's new services.
. The potential obsolescence of the Company's services due to the
introduction of new technologies.
. The response of customers to the Company's marketing strategies and
services.
. Changes in activity levels in the Company's core markets.
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
ITEM 2. Changes in Securities and Use of Proceeds
In June 1999, the Company sold an aggregate of 1,183,268 shares of its common
stock, par value $.01 per share, to investors which represented that they were
accredited investors. The aggregate offering price for such sale was
$21,298,824. No underwriters were involved in the sale. The Company relied on
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and Rule 506 under Regulation D of the Securities Act for the exemption from
registration of the sale of such shares.
ITEM 4. Submission of Matter to a Vote of Security Holders
The Annual Meeting of Stockholders of the company was held on April 27, 1999.
The following matters were voted on by stockholders, and received the votes
indicated.
1. The stockholders elected the following individuals to the Board of
Directors:
<TABLE>
<CAPTION>
Director For Against Abstain Broker Non-Votes
<S> <C> <C> <C> <C>
Steven R. Chamberlain 5,498,891 0 259,194 161,171
Thomas L. Gough 5,498,891 0 259,194 161,171
Dominic A. Laiti 5,498,891 0 259,194 161,171
R. Doss McComas 5,498,891 0 259,194 161,171
Robert P. Sadler 5,498,891 0 259,194 161,171
Bonnie K. Wachtel 5,498,891 0 259,194 161,171
</TABLE>
2. The stockholders approved a proposed amendment to the Articles of
Restatement of the Articles of Incorporation of the Company to increase
the number of shares of common stock authorized to 40,000,000. The vote
was as follows:
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Total 5,095,748 65,912 757,596
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
--------
3.1 Articles of Restatement of the Company (Incorporated by
reference to the Registration Statement on Form S-3 (File
No. 333-82499) filed with the Commission on July 8, 1999).
3.2 By-Laws of the Company (Incorporated by reference to the
Company's Annual Report on Form 10-KSB filed by the Company
with the Commission on December 29, 1998).
4.1 Specimen Common Stock Certificate (Incorporated by reference
to the Registration Statement on Form S-1 (File No. 333-
58453) filed by the Company with the Commission on July 2,
1998).
10.1 1988 Stock Option Plan (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-61559) filed
by the Company with the Commission on August 14, 1998).
10.2 Contract, effective 5/17/96, between Integral Systems, Inc.
and the U.S. National Oceanic and Atmospheric Administration
(Incorporated by reference to the Company's Annual Report on
Form 10-KSBA filed by he Company with the Commission on
July 10, 1997) (Portions of this exhibit have been omitted
pursuant to an order for confidential treatment granted by
the Commission).
10.3 Lease dated June 1, 1999, between Integral Systems, Inc. and
ASP Washington, L.L.C.
10.4 Master Equipment Lease Agreement dated December 3, 1997
between NationsBanc Leasing Corporation and Integral Systems
Inc. (Incorporated by reference to the Registration Statement
on Form S-1 (File No. 333-58453) filed by the Company with
the Commission on July 2, 1998).
10.5 Loan Agreement dated November 14, 1997 between NationsBank,
N.A. and Integral Systems, Inc. and Promissory Note dated
November 14, 1997 by Integral Systems, Inc. in favor of
NationsBank, N.A. (Incorporated by reference to the
Registration Statement on Form S-1 (File No. 333-58453) filed
by the Company with the Commission on July 2, 1998).
10.6 Subcontract (J8-759124-C3JP) between Hughes Space and
Communications Company and Integral Systems, Inc., dated
March 3, 1999 (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment filed with
the commission).
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
b. Reports on Form 8-K
-------------------
None.
<PAGE>
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.
INTEGRAL SYSTEMS, INC.
---------------------
(Registrant)
Date: August 11, 1999 By: /s/
--------------- ------------------------------------------
Thomas L. Gough
President and Chief Operating Officer
Date: August 11, 1999 By: /s/
--------------- ------------------------------------------
Elaine M. Parfitt
Vice President and Chief Financial Officer
<PAGE>
Exhibit 10.3
LEASE BETWEEN
ASP WASHINGTON, L.L.C.
AND
Integral Systems, Inc.
----------------------
Date:
Building: 5200 & 5000 Philadelphia Way
----------------------------
Lanham, MD 20706
WBP #11 & WBP #16
- -NET-
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
1. Access.................................. 12
2. Accord and Satisfaction................. 12
3. Amendment............................... 14
4. Applicable Law.......................... 17
5. Assignment, Letting, Subletting......... 08
6. Attorney's Fees......................... 14
7. Binding Effect.......................... 15
8. Broker's Indemnification................ 17
9. Building Services....................... 04
10. Casualty................................ 08
11. Construction Conditions................. 11
12. Condemnation............................ 10
13. Entire Agreement........................ 18
14. Estoppel Certificate.................... 16
15. Holdover Tenancy........................ 14
16. Improvements and Alterations by Tenant.. 08
17. Insurance; Indemnity.................... 05
18. Landlord's Reserved Rights.............. 15
19. Liens and Insolvency.................... 10
20. Limitation of Landlord's Liability...... 15
21. Notices................................. 15
22. Occupancy: Lease Commencement Date...... 10
23. Parking................................. 12
24. Quiet Enjoyment, Inability to Perform... 13
25. Relocation.............................. 10
26. Removal of Property..................... 13
27. Rent.................................... 02
28. Repairs................................. 07
29. Riders and Attachments.................. 15
30. Rules and Regulations................... 11
31. Security Deposit........................ 04
32. Severability............................ 16
33. Signs................................... 12
34. Subordination........................... 17
36. Tenant's Default........................ 12
36. Tenant's Property....................... 07
37. Terms and Definitions................... 01
38. Time.................................... 17
39. Use of Leased Premises.................. 05
40. Uses.................................... 02
41. Utilities............................... 04
42. Waiver.................................. 17
43. Waiver of Subrogation................... 07
44. Waiver of Jury Trail.................... 17
</TABLE>
<PAGE>
LIST OF SCHEDULES
1. NOT APPLICABLE
2. Rules and Regulations
3. Work Letter
4. Certificate of Acceptance
LIST OF EXHIBITS
Exhibit A Demised Premises
Exhibits B & C Site & Parking Plan
Exhibit D Tenant's Estimated Share of Operating Expenses
Exhibit E HVAC Maintenance Schedule
Exhibit F Declaration of Covenants
Exhibit G Subordination, Nondisturbance and Attornment Agreement
Exhibit H Right of First Offer at 5200 Philadelphia Way
Exhibit H-1 Plan for plus or minus 5,000 sf ROFO space at 5200
Philadelphia Way
Exhibit I Right of First Offer at 5000 Philadelphia Way
Exhibit I-1 Plan for plus or minus 10,521 sf ROFO space at 5000
Philadelphia Way
<PAGE>
LEASE
This Lease is made between Integral Systems, Inc. whose address is 5000
----------------------- ----
Philadelphia Way, Suite A, Lanham, Maryland 20706 ("Tenant") and ASP WASHINGTON,
- --------------------------------------------------
L.L.C., whose address is 4601 Forbes Boulevard, Suite 100, Lanham, Maryland
20706, ("Landlord") on this ______, day of _________, 1999.
1. TERMS AND DEFINITIONS
---------------------
A. "Leased Premises" shall mean the 46,700 square feet at 5000
--------------------------
Philadelphia Way and 20,000 square feet at 5200 Philadelphia Way for a
----------------------------------------------------------------------
total of 66,700 sf, as described in Exhibit A attached hereto and made a
-------------------
part hereof.
B. "Building" shall mean the multi-tenant buildings located at 5000 and
------------- --------
5200 Philadelphia Way at the development in Lanham, Maryland.
--------------------- ----------------
C. "Project" shall mean the WASHINGTON BUSINESS PARK located in Lanham,
-------------------------
Maryland.
D. "Lease Commencement Date" shall mean the earlier of 10 days after
----------------------------
substantial completion or the date on which Tenant opens for business
---------------------------------------------------------------------
from within the Premises or as may be adjusted pursuant to paragraph 17
-------------------------
below. The Scheduled Lease Commencement Date is anticipated to be June 1,
------------------------------------------------------------------
1999. Landlord shall use reasonable efforts to make the 20,000 square
---------------------------------------------------------------------
feet at 5200 Philadelphia Way available as of March 15, 1999 and Tenant
-----------------------------------------------------------------------
shall pay Operating Expenses only on this space through May 31, 1999, and
-------------------------------------------------------------------------
thereafter pay the Total Rent.
------------------------------
E. "Lease Term" shall mean 120 months from the Lease Commencement Date
---
and the Lease Termination Date shall mean May 31, 2009.
------------
F. "Base Rent" shall mean $ (See Rent Schedule on Page 1-A) per year,
----------------------------------
payable for the convenience of Tenant each month in installments of as
--
noted on Page 1-A.
------------------
G. "Tenant's Estimated Share of Operating Expenses" shall mean $ (See
------
Rent Schedule on Page 1-A) through the end of the current calendar year
--------------------------
and shall be adjusted annually on the calendar year thereafter and
payable pursuant to the terms of paragraph 3.
H. "Tenant's Total Square Footage" shall mean 66,700 Square Feet
------------------
comprised of 46,700 Square Feet at 5000 Philadelphia Way plus 20,000
--------------------------------------------------------------------
Square Feet at 5200 Philadelphia Way;
-------------------------------------
a. "Total Building Square Footage at 5000 Philadelphia Way" shall
--------------------------------------------------------------
mean 94,821 square feet, "Tenant's Prorata Share at 5000
--------------------------------------------------------
Philadelphia Way" shall mean 49,2507%.
--------------------------------------
b. "Total Building Square Footage at 5200 Philadelphia Way" shall
--------------------------------------------------------------
mean 52,786 square feet; "Tenant's Prorata Share at 5200
--------------------------------------------------------
Philadelphia Way" shall mean 37.8888%.
--------------------------------------
I. "Deposit" shall mean within two (2) business days after receipt of an
------------------------------------------------
executed copy of this agreement, Tenant shall provide to Landlord an
--------------------------------------------------------------------
irrevocable Letter of Credit ("LOC") drawn upon an FDIC insured bank with
-------------------------------------------------------------------------
offices in the Washington D.C. area that is reasonably acceptable to
--------------------------------------------------------------------
Landlord. Said LOC shall be in the amount of $350,000.00 and shall be
----------------------------------------------------------------------
valid for a period of ten (10) years. Subsequent to the second (2nd)
---------------------------------------------------------------------
lease year, Tenant may replace the original LOC with a new LOC in the
---------------------------------------------------------------------
amount of $310,000.00 which shall be valid for no less than the remaining
-------------------------------------------------------------------------
lease term and upon the expiration of each subsequent lease year, the
---------------------------------------------------------------------
then current LOC may be replaced by a new LOC reduced by $40,000.00 until
-------------------------------------------------------------------------
the end of the sixth (6th) lease year at which point Tenant may replace
-----------------------------------------------------------------------
the then current LOC with a $150,000.00 LOC that shall remain in place
----------------------------------------------------------------------
until 30 days after the expiration of the ten (10) year lease term. Each
-------------------------------------------------------------------------
LOC shall stipulate that it may be redeemed by Landlord upon an Event of
------------------------------------------------------------------------
Default by Tenant or if not replaced by Tenant within 30 days of its
--------------------------------------------------------------------
expiration.
-----------
<PAGE>
RENTAL SCHEDULE PAGE 1-A
<TABLE>
<CAPTION>
WBP #11 WBP #16
Operating Operating
Monthly Expenses Expenses Total Rent/Monthly
Period $/S.F. Base Rent 20,000 SF 46,700 SF Base Rent + Estimated Operating Expenses (WBP #11 & #16)
- ----------------------- ------ ---------- ------------- ------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/01/99 - 05/31/2000 10.10 $56,139.17 $1.95/SF $1.75/SF $56,139.17 + 3,250.00 + 6,810.42 = $66,199.59
06/01/00 - 05/31/2001 10.40 $57,806.67 Adj. Annually Adj. Annually $57,806.67 + Annually Adjusted Operating Expenses
06/01/01 - 05/31/2002 10.72 $59,585.33 Adj. Annually Adj. Annually $59,585.33 + Annually Adjusted Operating Expenses
06/01/02- 05/31/2003 11.04 $61,364.00 Adj. Annually Adj. Annually $61,364.00 + Annually Adjusted Operating Expenses
06/01/03 - 05/31/2004 11.37 $63,198.25 Adj. Annually Adj. Annually $63,198.25 + Annually Adjusted Operating Expenses
06/01/04 - 05/31/2005 11.71 $65,088.08 Adj. Annually Adj. Annually $65,088.08 + Annually Adjusted Operating Expenses
06/01/05 - 05/31/2006 12.06 $67,033.50 Adj. Annually Adj. Annually $67,033.50 + Annually Adjusted Operating Expenses
06/01/06 - 05/31/2007 12.42 $69,034.50 Adj. Annually Adj. Annually $69,034.50 + Annually Adjusted Operating Expenses
06/01/07 - 05/31/2008 12.79 $71,091.08 Adj. Annually Adj. Annually $71,091.08 + Annually Adjusted Operating Expenses
06/01/08 - 05/31/2009 13.18 $73,258.83 Adj. Annually Adj. Annually $73,258.83 + Annually Adjusted Operating Expenses
</TABLE>
**NOTE** Landlord shall use reasonable efforts to make the 20,000 square feet
at 5200 Philadelphia Way available as of March 15, 1999 and Tenant
---------------
shall pay Operating Expenses only on this space through May 31, 1999
and thereafter pay the Total Rent.
<PAGE>
J. "Permitted Purpose" shall mean use of the Leased Premises as office
---------
and labs for computer and engineering services and sales.
---------------------------------------------------------
K. "The Broker of Record" shall mean Hyatt Real Estate 1919 West
---------------------------
Street, Annapolis, MD 21041.
---------------------------
L. "Authorized Number of Parking Spaces" shall mean 170 spaces at 5000
------------------
Philadelphia Way and 110 spaces at 5200 Philadelphia Way.
---------------------------------------------------------
M. It is understood and agreed that the Lease dated April 1, 1987, as
------------------------------------------------------------------
amended August 31, 1990, December 31, 1991 and February 28, 1994 between
------------------------------------------------------------------------
the parties hereto for the premises at 5000-A Philadelphia Way will
-------------------------------------------------------------------
become null and void upon the commencement date of this Lease.
--------------------------------------------------------------
2. USES
----
A. Tenant agrees continuously to use and occupy the Leased Premises for the
Permitted Purpose only, and for no other purpose. Tenant covenants to comply
with the provisions of all recorded covenants, conditions and restrictions,
including but not limited to the Declaration of Restrictive Easements and
Covenants recorded on July 14, 1975 a copy of which has been provided to Tenant,
--------------------------------------------
and all building, zoning, fire and other governmental laws, ordinances,
regulations or rules applicable to the Leased Premises and all requirements of
the carriers of insurance covering the Project. Tenant shall not do or permit
anything to be done in or about the Leased Premises, or bring or keep anything
in the Leased Premises that may increase the fire and extended coverage
insurance premium upon the Building; that may injure the Building; may
constitute waste; or be a nuisance, public or private, or menace to tenants of
adjoining premises or anyone else.
B. Tenant agrees that it has determined to Tenant's satisfaction that the
Leased Premises can be used for the purpose for which they are leased and waives
any right to terminate this lease in the event the Leased Premises cannot be
used for such purposes or for any reason may not be used for such purposes
during the Lease Term.
C. By taking possession hereunder, on the Lease Commencement Date Tenant
-------------------------------
shall have acknowledged that it has examined the Leased Premises and accepts the
same as being in the condition called for by this lease.
3. RENT
----
A. Tenant covenants and agrees to pay to Landlord during the term of this
lease (at the placed specified for notice in paragraph 29 below) the Base Rent
without deduction or set off, payable for the convenience of Tenant each month,
in advance on the first day of each calendar month. Tenant also covenants and
agrees to pay to Landlord the Additional Rent as described in paragraph 3C
below. (Base Rent and Additional Rent, together with other amounts which may be
payable by Tenant to Landlord under this lease shall sometimes be referred to
collectively as "Rent"). Rent for any fractional calendar month, at the
beginning or end of the term, shall be that proportion of the monthly
installment which the number of days during such month bears to the total number
of days in the month. Rent not paid within 10 days of when due shall be subject
------------------ ----------
to a 5% late penalty and begin to bear interest on the date when due, after
- ------------------------- -----
applicable grace periods, at a rate of 3% over Wall Street Journal Prime per
- -------------------------- -------------------------------------
annum or the lawful penalty interest allowed in Maryland, whichever is lower.
- ------
<PAGE>
B. (i) For purposes of this lease, "lease year" shall mean each successive
twelve consecutive month period, beginning from January 1 of the year following
-------------------------------
commencement. All Operating Costs will be prorated during the commencement year
- -------------------------------------------------------------------------------
from the commencement date until December 31.
- ---------------------------------------------
C. (i) In addition to the Base Rent, the Tenant shall pay Tenant's Prorata
Share of Building Operating Costs. Building Operating Costs shall be all
expenses relating to the Building including, but not limited to, real estate
taxes, sales, franchise, business, corporation or any other taxes (except income
taxes) based on rents, Landlord's insurance (as defined in paragraph 7 below),
utilities not separately metered to individual tenants, maintenance, except
where otherwise provided, repairs, operating supplies, building services, snow
removal, landscaping, litter removal, tools, materials, labor for management and
maintenance, re-surfacing, re-painting and re-striping of parking areas, car
stops and security. They will not include monies spent for legal services, tax
accounting, interest, depreciation, executive salaries or expenditures of a
capital nature (except to the extent that such expenses otherwise cause a
reduction of the Building Operating Costs without a reduction of services; in
such case, that part of the capital expense attributable to the lease year under
good accounting practices shall be included in the Building Operating Costs).
(ii) In addition to the Base Rent, the Tenant shall also pay Tenant's
Prorata Share of Project Operating Costs. Project Operating Costs shall include
all expenses relating to that part of the Project which has been improved with
buildings owned by Landlord and for which services are rendered which are shared
in common with the Building (but not relating to the Building, other buildings
or vacant land in the Project) including, but not limited to, maintenance,
repairs, operating supplies, property management and servicing, snow removal,
landscaping and security. They will not include monies spent for legal services,
tax accounting, interest, depreciation, executive salaries or expenditures of a
capital nature (except to the extent that such expenses otherwise cause a
reduction of the Operating Costs without a reduction of services; in such case,
that part of the capital expense attributable to the lease year under good
accounting practices shall be included in the Operating Costs). (Tenant's Share
of Building and Project Operating Costs will sometimes be referred to herein as
"Additional Rent").
D. Tenant shall pay monthly, in addition to the Base Rent, Tenant's Estimated
Share of Operating Costs which shall represent Landlord's best estimate as to
the amount of Tenant's Prorata Share of Building and Project Operating Costs.
Exhibit D attached hereto sets forth Landlord's estimate of the Operating Costs.
THE INFORMATION SET FORTH IN EXHIBIT D SHALL NOT BE BINDING UPON LANDLORD AND
SHALL IN NO WAY LIMIT TENANT'S OBLIGATION TO PAY ADDITIONAL RENT AS DESCRIBED
ABOVE. Annually or from time to time but not more frequently than annually,
-------------------------------------
after assessing past actual and estimated operating cost data, the Landlord may
adjust the monthly operating cost payment provided for herein upward or downward
to reflect more accurately anticipated monthly costs. All payments due at least
20 days after the revision notice shall be made at the new rate.
As of the close of each calendar year, Landlord shall compute the actual cost
of operating the Building and the Project for the previous twelve-month period
----------------
(if the Building has been operating for less than twelve months, the cost of
operating the Building for a year shall be determined by dividing the actual
operating costs by the number of days of actual operation and multiplying by
365). Landlord shall deliver to Tenant notice of such cost and the amount due,
if any, from Tenant no later than April 15 of the year immediately subsequent to
the year to which such costs relate. Tenant shall reimburse Landlord within 30
days after notice of any deficiency between estimated operating costs paid and
actual costs incurred. In the event of overpayment by Tenant, the Landlord shall
apply the excess to the next successive installments of Rent due hereunder
unless there are no further rent payments due from Tenant, in which case
Landlord shall pay such excess to Tenant within 30 days of notice.
<PAGE>
Landlord shall, upon Tenant's request, deliver to Tenant a written accounting
showing how Operating Costs were calculated for the Building and/or Project.
----------------
Any statement of actual Operating Costs provided by Landlord to Tenant pursuant
- -------------------------------------------------------------------------------
to 3.D above shall be prepared in accordance with generally accepted accounting
- -------------------------------------------------------------------------------
principles, detailing the Operating Costs for the calendar year. Such statement
- --------------------------------------------------------------------------------
shall detail Landlord's expenses pursuant to this Lease and shall be accompanied
- --------------------------------------------------------------------------------
by a written statement executed by a financial officer of Landlord stating that
- -------------------------------------------------------------------------------
the calculations on all statements have been completed inn accordance with the
- ------------------------------------------------------------------------------
requirements of this Lease. Tenant shall have the right, to be exercised by
- ---------------------------------------------------------------------------
notice to Landlord within sixty days after receipt of the foregoing statement,
- ------------------------------------------------------------------------------
and completed within sixty days thereafter, either itself or with the assistance
- --------------------------------------------------------------------------------
of accountants or other consultants, to audit and/or inspect Landlord's books
- -----------------------------------------------------------------------------
and records pertaining to Operating Costs for such calendar year. If there has
- ------------------------------------------------------------------------------
been an error in Landlord's statement (as determined by the mutual agreement of
- -------------------------------------------------------------------------------
the parties or a final judicial order of a court having proper jurisdiction
- ---------------------------------------------------------------------------
thereof), then Landlord shall return to Tenant the amount of any overpayment
- ----------------------------------------------------------------------------
together with interest thereon from the date of payment to the date of return at
- --------------------------------------------------------------------------------
the rate of ten percent (10%) per annum. If Tenant's audit and/or inspection
- --------------------------------- ------------------------------------------
proves that Landord's calculation of Tenant's share of Operating Costs for any
- ------------------------------------------------------------------------------
audit and/or inspection for any calendar year was overstated by more than five
- ------------------------------------------------------------------------------
percent (5%) for such calendar year, then Landlord shall pay Tenant's reasonable
- --------------------------------------------------------------------------------
audit and/or inspection fees applicable thereto. In no event shall Tenant's
- ----------------------------------------------------------------------------
share of Operating Costs for any calendar year, when added to the total amount
- ------------------------------------------------------------------------------
of Operating Costs passed through to all tenants of the Building exceed the
- ---------------------------------------------------------------------------
total actual Operating Costs incurred by Landlord for such calendar year.
- -------------------------------------------------------------------------
4. SECURITY DEPOSIT
----------------
Tenant shall, pursuant to Paragraph I on Page 1, pay to Landlord the Deposit
=============================================
as security for performance of Tenant's obligations. Within thirty (30) days
-----------------------
after the expiration of the Term if Tenant is not in default under the Lease,
- -----------------------------------------------------------------------------
Landlord shall return the Security Deposit less any portion thereof which has
- -----------------------------------------------------------------------------
been applied or retained to cure any default or damage to the property.
- ----------------------------------------------------------------------
Landlord may, but is not obligated to, apply a portion of the deposit to cure
any default hereunder and Tenant on notice shall replenish the amount necessary
to provide the full deposit.
5. UTILITIES
---------
Tenant shall be solely responsible for and promptly pay all charges for heat,
gas, electricity and other utilities used or consumed and metered on the Demised
Premises. Landlord shall not be liable to Tenant for interruption in or
curtailment of any utility service, nor shall such interruption or curtailment
constitute a constructive eviction or grounds for rental abatement (except to
the extent Landlord may receive proceeds from rent abatement insurance for the
Demised Premises) in whole or in part.
6. BUILDING SERVICES
-----------------
Landlord agrees to maintain all parking and exterior areas, which
maintenance shall include lighting, gardening, cleaning, sweeping and painting.
Landlord shall maintain and repair the exterior of the Building, its structural
portions and the roof. All work performed by or on behalf of Landlord shall be
-------------------------------------------------------
conducted in a good and workmanlike manner.
- -------------------------------------------
Landlord shall not be liable in any event, nor shall Rent be abated, because
of interruption of Building Services for causes beyond Landlord's reasonable
---------------------------------------
control. If Building Services are interrupted for more than seven (7)
- ----------------------------------------------------------------------
consecutive days and Tenant is unable to conduct business from Premises, Rent
- -----------------------------------------------------------------------------
shall abate until service is restored. If said interruption is caused by
- ---------------------------------------=================================
Landlord and reasonably within Landlord's control and Landlord doesn't commence
===============================================================================
actions to address the problem within 30 days, Tenant may take steps to rectify
===============================================================================
the problem at Landlord's expense.
=================================
<PAGE>
USE OF LEASED PREMISES Tenant agrees to:
- ----------------------------------------
a. Compliance with Laws: At Tenant's expense, comply with the provisions of
------------------------------------------------------------------------
all recorded convenants, conditions and restrictions and all building,
----------------------------------------------------------------------
zoning, fire and other governmental laws, ordinances, regulations or
--------------------------------------------------------------------
rules now in force or which may hereafter be in force relating to
-----------------------------------------------------------------
Tenant's use and occupancy of the Leased Premises, the Building, or the
-----------------------------------------------------------------------
Project and all requirements of the carriers of insurance covering the
----------------------------------------------------------------------
Project.
-------
b. Nuisances or Waste: Not do or permit anything to be done in or about the
------------------------------------------------------------------------
Leased Premises, or bring or keep anything in the Leased Premises that
----------------------------------------------------------------------
may increase Landlord's fire and extended coverage insurance premium,
---------------------------------------------------------------------
damage the Building or the Project, constitute waste, constitute an
-------------------------------------------------------------------
immoral purpose, or be in a nuisance, public or private, or menace or
---------------------------------------------------------------------
other disturbance to tenants of adjoining premises or anyone else.
------------------------------------------------------------------
c. Hazardous Substances: (i) comply with all Environmental Laws; (ii) not
----------------------------------------------------------------------
cause or permit any Hazardous Materials to be treated, stored, disposed
-----------------------------------------------------------------------
of, generated, or used in the Leased Premises or the Project, provided,
-----------------------------------------------------------------------
however, that Tenant may store, use or dispose of products customarily
----------------------------------------------------------------------
used in businesses such as Tenant's in connection with the operation and
------------------------------------------------------------------------
maintenance of property if Tenant complies with all Environmental Laws
----------------------------------------------------------------------
and does not contaminate the Leased Premises, Project or environment;
---------------------------------------------------------------------
(iii) promptly after receipt, deliver to Landlord any communication
-------------------------------------------------------------------
concerning any past or present, actual or potential violation of
----------------------------------------------------------------
Environmental Laws, or liability of either party for Environmental
------------------------------------------------------------------
Damages. Environmental Laws mean all applicable present and future
------------------------------------------------------------------
statutes, regulations, rules, ordinances, codes, permits or orders of
---------------------------------------------------------------------
all governmental agencies, departments, commissions, boards, bureaus, or
------------------------------------------------------------------------
instrumentalities of the United States, states and their political
------------------------------------------------------------------
subdivisions and all applicable judicial, administrative and regulatory
-----------------------------------------------------------------------
decrees and judgements relating to the protection of public health or
---------------------------------------------------------------------
safety or of the environment. Hazardous Materials include substances (i)
------------------------------------------------------------------------
which require remediation under any Environmental Laws; or (ii) which
---------------------------------------------------------------------
are or become defined as a "hazardous waste", "hazardous substance",
--------------------------------------------------------------------
pollutant or contaminant under any Environmental Laws; or (iii) which
--------------------------------------------------------------------
are toxic, explosive, corrosive, flammable, infectious, radioactive,
--------------------------------------------------------------------
carcinogenic or mutagenic; or (iv) which contain petroleum hydrocarbons,
--------------------------------------------------------------------
polychlorinated biphenyls, asbestos, asbestos containing materials or
--------------------------------------------------------------------
urea formaldehyde.
------------------
7. INSURANCE: INDEMNITY
--------------------
A. Landlord shall secure and maintain throughout the term of this lease
insurance (the cost of which shall be a Building Operating Cost) in amounts and
form within Landlord's sole discretion as customarily carried by landlord's of
-------------------------------------------------------------------------
buildings and projects similar to the Building and Project in the Washington
- ----------------------------------------------------------------------------
Metropolitan area:
- ------------------
1) Fire insurance with extended coverage endorsements attached in the
amount of the full insurable value of the Building (with any deductible
--------------
being the responsibility of Landlord);
-------------------------------------
2) Comprehensive Public Liability Insurance (including bodily injury and
property damage insurance) for the Project (not including the Leased
Premises or other tenant occupied space);
3) Rental Abatement Insurance against abatement of loss of rent in case
of fire or other
casualty.
<PAGE>
4) Landlord may, but is not obligated to, purchase such other insurance
customarily purchased, from time to time, by first class office building
owners and managers in the Washington area and treat the cost thereof as a
Building Operating CostMegan JohnstonFinancial Printing Group4) Landlord
may, but is not obligated to, purchase such other insurance customarily
purchased, from time to time, by first class office building owners and
managers in the Washington area and treat the cost thereof as a Building
Operating Cost. Landlord may charge Tenant with any excess cost of the
insurance described in this subparagraph due to the particular use of the
Leased Premises by Tenant.
B. Tenant shall, at its own expense, procure and maintain throughout the
term of this lease:
1) Comprehensive Public Liability Insurance (with any deductible being the
responsibility of Tenant) insuring Tenant's activities with respect to the
Leased Premises against loss, damage or liability for personal injury or
death, Lessor's damage to property or commercial loss occurring on or about
the Leased Premises, in amounts no less than:
(a) $1,000,000 with respect to personal injury or death to any one
person;
(b) $5,000,000 with respect to personal injury or death arising out of
any one occurrence.
(c) $1,000,000 with respect to property damage arising out of any one
occurrence.
2) Workmen's Compensation Insurance in at least the statutory amounts with
respect to any work or other operation in or about the Leased Premises.
Landlord and Landlord's mortgagee shall be named as an additional insured
under such insurance and such insurance shall be primary and non-contributing
with any insurance carried by the Landlord. The liability insurance policy shall
contain endorsements requiring 30 days' notice to Landlord prior to any
cancellation or any reduction in amount of coverage. Tenant shall deliver to
Landlord as a condition precedent to its taking occupancy of the Leased Premises
(but not to its obligation to pay rent) a certificate or certificates evidencing
such insurance. Tenant, as a material part of the consideration to be rendered
to Landlord, hereby waives all claims against Landlord for injury to Tenant, its
agents, employees, invitees, or third persons in or about the Leased Premises
from any cause arising at any time except the negligence or willful misconduct
of Landlord, its agents, employees or invitees.
C. Tenant shall indemnify and hold Landlord harmless from and against all
demands, suits, fines, liabilities, losses, damages, costs and expenses
(including legal expenses) which Landlord may incur or become liable for as a
result of any breach by Tenant, its agents, employees, officers, contractors,
invitees or licensees of the terms or covenants of this lease or any other of
the acts or omissions of Tenant, its agents, employees, officers, contractors,
invitees or licensees.
Landlord shall indemnify and hold Tenant harmless from and against all
----------------------------------------------------------------------
demands, suits, fines, liabilities, losses, damages, costs and expenses
- -----------------------------------------------------------------------
(including legal expenses) which Tenant may incur or become liable for as a
- ---------------------------------------------------------------------------
result of any negligent act of Landlord, its agents, employees, officers,
- -------------------------------------------------------------------------
contractors, invitees or licensees.
- -----------------------------------
<PAGE>
8. WAIVER OF SUBROGATION
Each party releases the other party from liability for any loss or damage
-------------------------------------------------------------------------
to the Building, Leased Premises or tangible personal property, or any resulting
- --------------------------------------------------------------------------------
loss of income, or loss under worker's compensation laws and benefits,
- ----------------------------------------------------------------------
notwithstanding that such loss, damage or liability may arise out of the
- ------------------------------------------------------------------------
negligent or intentionally tortious act or omission of the other party or its
- -----------------------------------------------------------------------------
agents, if such loss or damage is covered by insurance benefiting the party
- ---------------------------------------------------------------------------
suffering such loss or damage or was required to be covered by insurance
- ------------------------------------------------------------------------
pursuant to this Lease. Each party shall have a waiver of subrogation clause
- ----------------------------------------------------------------------------
included in its policies (providing such waiver shall not impair the
- --------------------------------------------------------------------
effectiveness of such policy or the insured's ability to recover thereunder) and
- --------------------------------------------------------------------------------
shall promptly notify the other in writing if such clause cannot be included in
- -------------------------------------------------------------------------------
any such policy. If such waiver of subrogation clause shall not be available in
- -------------------------------------------------------------------------------
both Landlord's and Tenant's policies, then the foregoing waiver of right of
- ----------------------------------------------------------------------------
recovery shall be void.
- -----------------------
9. REPAIRS
-------
Subject to Landlord's duty to provide the Building Services, Tenant agrees
to maintain in a neat, clean and sanitary condition and keep in good repair, the
interior of the Leased Premises. Such maintenance and repair shall be at the
sole cost of Tenant and shall include but not be limited to the maintenance and
repair of floor coverings, ceilings and walls, front and rear doors, and all
glass on the Leased Premises. Tenant shall within thirty (30) days after taking
occupancy of the Leased Premises, have in force a service contract or contracts
for the Heating, Ventilating and/or Air Conditioning equipment serving the
premises and shall provide the Landlord with a copy of said contract or
contracts. Exhibit E ("HVAC Equipment") outlines the minimum scope of service to
------------------
be provided. Landlord represents and warrants that the HVAC Equipment is in good
-------------------------------------------------------------------
working order as of the Commencement Date and of sufficient capacity to service
- -------------------------------------------------------------------------------
the Premises, Landlord shall be responsible for replacement of HVAC Equipment
- -----------------------------------------------------------------------------
only if Tenant has properly maintained and serviced said HVAC Equipment. If
- ------------------------------------------------------------------------
Tenant fails to maintain or keep the Leased Premises in good repair and such
failure continues for 5 business days after written notice from Landlord and
-------- ---
Tenant has not commenced to effectuate such repair within said 5 business days,
- ------------------------------------------------------------------------------
Landlord may perform any such required maintenance and repairs and the cost
thereof shall be Additional Rent payable by Tenant within 10 days of receipt of
an invoice from Landlord.
10. TENANT'S PROPERTY
-----------------
Furnishings, trade fixtures, and equipment installed by Tenant shall be the
property of Tenant subject to paragraph 24. On termination of the lease, if
Tenant is not in default, Tenant may remove any such property and shall remove
any such property if directed by Landlord. Tenant shall repair the Leased
Premises to the same condition as when the Lease Term commenced, ordinary wear
and tear excepted, or reimburse Landlord for the cost of so repairing the Leased
Premises. If Tenant fails to remove such property as required under this lease,
Landlord may do so and Landlord shall not be liable for any loss or damage to
the property of Tenant which may occur during Landlord's removal thereof.
<PAGE>
11. IMPROVEMENTS AND ALTERATIONS BY TENANT
--------------------------------------
Without Landlord's prior written approval which approval shall not be
---------------------------
unreasonably withheld nor shall Landlord's response to such request be delayed
- ------------------------------------------------------------------------------
beyond 30 days from receipt thereof, Tenant may not make such additional
- ------------------------------------
improvements or alterations to the Leased Premises which it may deem necessary
or desirable other than non-structural or cosmetic alterations or improvements.
-------------------------------------------------------
Any such improvements or alterations by Tenant shall be done, at Tenant's
expense, by a licensed contractor reasonably approved by Landlord in conformity
----------
with plans and specifications approved by Landlord. If requested by Landlord,
Tenant will post a bond or other security satisfactory to Landlord to protect
Landlord against liens arising from work performed for Tenant. All work
performed shall be done in a good and workmanlike manner and with materials
(where not specifically described in the specifications) of the quality and
appearance comparable to those in the Building, and shall become the property of
the Landlord.
12. CASUALTY
--------
If the Leased Premises or the Building are destroyed or damaged by fire,
earthquake or other casualty to the extent that they are untenantable in whole
or in part, then Landlord may, at Landlord's option, proceed with reasonable
diligence to rebuild and restore the Leased Premises or such part thereof as may
be destroyed or damaged, provided that within thirty days after such damage or
destruction Landlord shall in writing notify Tenant of Landlord's intention to
do so, and from the date of casualty during the period of such rebuilding and
--------------------------
restoration, the Rent shall be abated in the same ratio as the square footage in
the portion of the Leased Premises rendered untenantable shall bear to the total
square footage in the Leased Premises. If Landlord shall reasonably determine
that such destruction or damage cannot be repaired within 180 days from the date
of notice, it shall so notify Tenant within thirty days. In such event, either
Landlord or Tenant may within 20 days after such notice, terminate this Lease.
If neither party terminates the Lease during that 20 days period, this lease
shall remain in effect and Landlord shall diligently proceed to repair or
reconstruct the Leased Premises and Rent shall abate as set forth above.
13. ASSIGNMENT, LETTING AND SUBLETTING
----------------------------------
A. Tenant, its legal representative and successors in interest shall not,
directly or indirectly, mortgage, pledge, assign, let or sublet or permit the
mortgaging, pledging, assigning, letting or subletting of this lease, or any
part thereof, or permit any part of or all of the Leased Premises to be used or
occupied by another, without first obtaining the written consent of Landlord
which approval shall not be unreasonably withheld or conditioned nor shall
- --------------------------------------------------------------------------
Landlord's response to such request be delayed beyond 30 days from receipt
- --------------------------------------------------------------------------
thereof. If Tenant is a corporation, any transfer of this lease from Tenant by
- -------
merger, consolidation, reorganization or liquidation or any change in the
ownership, or power to vote the 51% majority of the outstanding voting stock of
---
Tenant shall constitute an assignment for the purposes of this paragraph. The
---
previous sentence shall not apply, however, if at the time of execution of this
- -------------------------------------------------------------------------------
Lease Tenant is a publicly held corporation whose shares of stock are listed on
- -------------------------------------------------------------------------------
a recognized security exchange or over-the-counter market. Notwithstanding any
- -------------------------------------------------------------------------------
of the foregoing, an assignment of this Lease or a sublease of any or all of the
- --------------------------------------------------------------------------------
Leased Premises by Tenant to an affiliate of Tenant shall be expressly permitted
- --------------------------------------------------------------------------------
provided that notice of the assignment is given to Landlord and Tenant remains
- ------------------------------------------------------------------------------
liable under the Lease. For purposes of this provision, an "affiliate" is any
- -----------------------------------------------------------------------------
person or entity which controls Tenant, is controlled by Tenant or is under
- ---------------------------------------------------------------------------
common control with Tenant. In addition, Tenant may freely assign this Lease to
- --------------------------------------------------------------------------------
any person or entity that acquires Tenant's business as a going concern or to
- -----------------------------------------------------------------------------
any entity that survives a merger or consolidation involving Tenant as long as
- ------------------------------------------------------------------------------
the surviving entity has a net worth equivalent to or greater than Tenant had
- -----------------------------------------------------------------------------
one year prior thereto as evidenced by audited financial statements. Any such
- ---------------------------------------------------------------------
assignment made without Landlord's approval shall be voidable by Landlord. Any
approval by Landlord, unless specifically stated therein, shall not relieve
Tenant from its obligations under this lease.
B. In addition to any other reasonable bases, Landlord shall be deemed to
be reasonably withholding its consent to any such assignments, letting or
subletting, if such assignment, letting or subletting would result in the
assignment, leasing or subleasing of,
(i) the Leased Premises to any party, business or lessee who proposes
to conduct a business therein which is not in conformance with the provisions
of paragraph 2 hereof; or
(ii) the Leased Premises to a party whose financial condition and
credit rating in Landlord's sole but reasonable judgment is not equal to or
--------------
better than that of Tenant's; or
(iii) the Leased Premises to a party whose business is of a character
which does not in Landlord's sole but reasonable opinion comport with the
---------------
character of the Building.
<PAGE>
C. One-half of any rent (net of Tenant's costs of such subletting or
-------------------------------------------
assignment) in excess of the Rent reserved hereunder which is received by Tenant
- ----------
pursuant to an assignment, letting or subletting shall be remitted to Landlord
within 10 days of receipt by Tenant (for purposes of this subparagraph 13.C.,
all money in whatever form received by Tenant from any third party pursuant to
an assignment, letting or subletting shall be deemed to be rent).
D. Tenant shall notify Landlord in writing of any proposed assignment or
-------------------------------------------------------------------------
sublease at least thirty (30) days prior to the effective date of such proposed
- -------------------------------------------------------------------------------
sublease or assignment. The notice to Landlord shall include a copy of the
- ---------------------------------------------------------------------------
proposed sublease or assignment. The notice to Landlord shall include a copy of
- --------------------------------------------------------------------------------
the proposed assignment or sublease. Landlord shall respond in writing to
- --------------------------------------------------------------------------
tenant's notice within twenty (20) days of the date of such notice. Landlord's
- -------------------------------------------------------------------------------
failure to respond with such time shall be deemed to mean that Landlord consents
- --------------------------------------------------------------------------------
to the proposed sublease or assignment. During said 20 days, Landlord may elect
- -------------------------------------- -----------
(by notifying Tenant in writing) to cancel this lease as to that part of the
Leased Premises subject to the proposed assignment, letting or subletting, and
this lease shall cease as to that part of the Leased Premises on the data which
the proposed assignment, letting or subletting was to be effective, with a
------
corresponding adjustment in Rent.
- ---------------------------------
<PAGE>
14. LIENS AND INSOLVENCY
--------------------
Tenant shall keep the Leased Premises and the Building free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by Tenant. If at any time a lien or encumbrance is filed against the
Leased Premises or the Building as a result of Tenant's failure to satisfy same,
Tenant shall promptly pay and discharge said lien or encumbrance, and if said
-------
lien or encumbrance has not been removed within thirty days from the date it is
filed or recorded against the Leased Premises of the Building, Tenant agrees it
will post a bond to discharge the same. In the event Tenant becomes insolvent,
---------------------------------
voluntarily or involuntarily bankrupt, or if a receiver, assignee or other
liquidating officer is appointed for the business or property of the Tenant,
then the Landlord shall have the right and option to terminate this lease at any
time by notice to Tenant.
15. RELOCATION
----------
16. CONDEMNATION
------------
If the whole or any part of the Leased Premises shall be taken under power
of eminent domain or like power, or sold under imminent threat thereof to any
public authority or private entity having such power, this agreement shall
terminate as to the part of the Leased Premises so taken or sold, effective as
of the date possession is required to be delivered to such authority or entity.
Rent for the remaining term shall be reduced in the proportion that the total
square footage of the Leased Premises is reduced by the taking. If a partial
taking or sale (i) substantially reduces the area of the Leased Premises
resulting in a substantial inability of Tenant to use the Leased Premises for
Tenant's business purposes, or (ii) renders the Building commercially unviable
to Landlord (in Landlord's sole but reasonable judgment), Tenant in the case of
--------------
(i) and Landlord in the case of (ii) may terminate this agreement by notice to
the other party within 30 days after the terminating party receives a written
notice of the portion to be taken or sold, to be effective 180 days thereafter
or when the portion is taken or sold whichever is sooner. All condemnation
awards and similar payments shall be paid and belong to Landlord, except any
amounts awarded or paid specifically for Tenant's trade fixtures, business
--------
damages and relocation costs, provided such awards do not reduce Landlord's
- -------
award.
17. OCCUPANCY: LEASE COMMENCEMENT DATE
----------------------------------
The Leased Premises shall be ready for occupancy on such date that the
Improvements are completed substantially in accordance with the terms of
paragraph 18.A. below, subject only to punchlist items which will not materially
---------
affect the use of the Leased Premises by Tenant for the purposes for which they
are intended and latent defects. If the Leased Premises are not ready for
------------------
occupancy by the Scheduled Lease Commencement Date (as set forth in subparagraph
1.D, above) then the Lease Commencement Date shall be adjusted to be the earlier
-----------
of that date 10 days after Landlord shall notify Tenant that the Leased Premises
are ready for occupancy (subject to the provisions which follow) or the date
-----------
which Tenant operates its business from the Leased Premises, if sooner.
- ----------------------------------------------------------------------
<PAGE>
If Landlord fails to cause the Leased Premises or any portion thereof to be
ready for occupancy at the time of the Scheduled Lease Commencement Date, (i)
neither Landlord nor Landlord's agents shall be liable for any damage, loss,
liability or expense caused thereby, nor (ii) shall this lease become void or
voidable (unless such inability continues for more than 180 days, in which case
Tenant may, upon 20 days' written notice to Landlord, terminate this lease).
18. CONSTRUCTION CONDITIONS
-----------------------
With respect to construction of the improvements described in Exhibit A and
---
Schedule 3, attached hereto and made a part hereof ("Improvements"), it is
- ------------
agreed that:
A. Landlord shall construct the Improvements described in Exhibit A and
---
Schedule 3.
-----------
B. Landlord makes no representations or warranties as to the sufficiency of
the Construction Documents to meet requirements of Tenant's business. Landlord
---------------------- --------
warrants and represents that the Construction Documents shall be prepared in
- ----------------------------------------------------------------------------
accordance with all applicable laws and building codes including the Americans
- ------------------------------------------------------------------------------
with Disability Act. Prior to or during Landlord's construction activities, the
- --------------------
parties may agree upon changes in the plans and specifications. If any change
required by Tenant in the plans or specifications increases the cost of work or
- ------------------
materials or the time required for completion of construction, tenant shall
reimburse Landlord for such increase in costs which exceeds the allowance at the
---------------------------
time the increased cost is incurred and shall reimburse Landlord for any loss in
rent at the time the rent would have become due.
C. Landlord shall bear the risk of loss to the Improvements until the term
of the lease commences, but has no obligation to insure against such losses.
D. Tenant may inspect the property from time to time but neither Tenant
nor its agent shall exercise any control over the persons performing
construction activities on the Project or Improvements.
E. It is understood and agreed that the Improvements to be made to portions
------------------------------------------------------------------------
of the Leased Premises currently occupied by Tenant will occur during both
- --------------------------------------------------------------------------
working and non-working hours and that a reasonable amount of disruption is
- ---------------------------------------------------------------------------
unavoidable. Tenant shall notify all of its employees of the proposed
- ---------------------------------------------------------------------
construction schedule and pending construction activities. As much of the work
- ------------------------------------------------------------------------------
as possible will be performed on weekends or after 4:00 PM and prior to 7:00 AM.
- -------------------------------------------------------------------------------
New construction will occur during weekends and normal business hours.
- ----------------------------------------------------------------------
F. Tenant, its employees, contractors, agent and invitees shall not have
any claim against Landlord for any personal injury or property damage arising
during or from construction activities unless caused by the negligence or
----------------------------------
willful misconduct of Landlord, its contractors, agents or employees.
- ---------------------------------------------------------------------
19. RULES AND REGULATIONS
---------------------
Tenant covenants that Tenant and its agents, employees, invitees, or those
claiming under Tenant will at all times observe, perform and abide by all the
general rules and regulations promulgated by Landlord from time to time.
Landlord shall enforce the rules and regulations against all tenants of the
- ---------------------------------------------------------------------------
Building or Project, as applicable in a non-discriminatory manner.
- ------------------------------------------------------------------
<PAGE>
20. PARKING
-------
Tenant and its employees and invitees shall have the exclusive right to use
at no charge throughout the Lease Term the Authorized Number of Parking Spaces
- ---------------------------------------
designated by Landlord pursuant to the rules and regulations relating to parking
adopted by Landlord from time to time. Tenant agrees not to overburden the
parking facilities and agrees to cooperate with Landlord and other tenants in
the use of parking facilities. Landlord reserves the right in its absolute
discretion to assign to any tenant specific parking spaces for its exclusive use
(provided such assignment does not materially limit the number of spaces
available for Tenant's use). Landlord may, at its own discretion, change the
location and nature of the parking spaces available to Tenant, its employees and
invitees, provided that after such change, there shall be available to Tenant
and its employees and invitees approximately the same number of spaces as
available before the change and provided further that during such relocation,
-------------------------------------------------
Tenant has access to and use of the parking facilities.
- -------------------------------------------------------
21. ACCESS
------
Tenant shall permit Landlord to enter the Leased Premises upon 24 Hours
-----========
advance notice at reasonable times for the purpose of inspecting, altering and
- ---------------
repairing the Leased Premises and ascertaining compliance by Tenant with the
provisions of this lease. Landlord may also show the Leased Premises to
prospective purchasers or renters at reasonable times and upon reasonable notice
within the last six months of the Lease Term, provided that Landlord shall not
- ----------------------------------------------
unreasonably interfere with Tenant's business operations.
22. SIGNS
-----
All signs and symbols placed in the doors or windows or elsewhere about the
Leased Premises, or upon any other part of the Building, including building
directories, shall be subject to the approval of the Landlord provided however
----------------
that Landlord's response to such request by Tenant not to be delayed for more
- -----------------------------------------------------------------------------
than 30 days from receipt thereof. Any signs or symbols which have been placed
- ----------------------------------
without approval may be removed by Landlord. Upon termination of tenancy, all
signs installed shall be removed and any damage resulting therefrom shall be
promptly repaired. Subject to Landlord's approval of design, size, color and
=========================================================
location, Tenant shall have the right to erect a free standing pedestal sign in
===============================================================================
front of the Premises at 5000 Philadelphia Way.
==============================================-
23. TENANT'S DEFAULT
----------------
It shall be an "Event of Default" if (i) Tenant shall fail to pay when due
any monthly installment of Rent or any other charge or payment required of
Tenant hereunder (although no legal or formal demand has been made therefor)
except that Tenant may be up to five days late with said payment no more than
- -----------------------------------------------------------------------------
three (3) times in any twelve consecutive monthly period without an event of
- ----------------------------------------------------------------------------
default occurring; (ii) Tenant shall violate or fail to perform any of the other
- -------------------
conditions, covenants or agreements herein made by Tenant, and such violation or
failure shall continue for a period of thirty days after written notice thereof
------
to Tenant by Landlord; (iii) tenant shall make a general assignment for the
benefit of its creditors or shall file a petition for bankruptcy or other
reorganization, liquidation, dissolution or similar relief; (iv) a proceeding is
filed against Tenant seeking any relief mentioned in (iii) above which is not
------------
dismissed within sixty (60) days; (v) a trustee, receiver or liquidator shall be
- ---------------------------------
appointed for Tenant or a substantial part of its property; (vi) Tenant shall
vacate or abandon the Leased Premises (an absence of substantial activity by
Tenant in the Leased Premises for more than 7 days to constitute such
abandonment) without paying Rent; or (vii) Tenant shall mortgage, assign or
--------------------
otherwise encumber its leasehold interest. If an Event of Default occurs, this
lease shall, at the option of Landlord, cease and terminate and shall operate as
a notice to quit any notice to quit, or of Landlord's intention to re-enter,
being hereby expressly waived and Landlord may proceed to recover possession
under and by virtue of the provisions of the laws of Maryland, or by such other
proceedings, including re-entry and possession, as may be applicable. If
Landlord elects to terminate this lease, the obligations herein contained on the
part of Landlord to be performed shall cease without prejudice, subject however,
to the right of Landlord to recover from Tenant all rental and other charges
accrued up to the time of termination or recovery to possession by Landlord,
whichever is later. Should this lease be terminated before the expiration of
the term of this lease by reason of an Event of Default, the Leased Premises may
be relet by Landlord, for such rent and upon such terms as Landlord is able to
obtain, and, if the full Rent shall not be realized by Landlord, Tenant shall be
liable for all damages sustained by Landlord, including, without limitation, the
deficiency in Rent, reasonable attorneys' fees, other collection costs and all
expenses (including leasing fees) of placing the Leased Premises in first class
rentable condition. Landlord shall use commercially reasonable efforts to relet
-----------------------------------------------------------
the Premises. Any damage or loss sustained by Landlord may be recovered by
- ------------
Landlord, at Landlord's option, (i) at the time of the reletting, (ii) in
separate actions, from time to time, as said damage shall have been made more
easily ascertainable by successive relettings, (iii) be deferred until the
expiration of the term of this lease, in which event the cause of action shall
not be deemed to have accrued until the date of expiration of said term, (iv) if
Landlord is unable to find a new tenant for the Leased
<PAGE>
Premises within sixty days from termination of the lease, Tenant shall
immediately pay Landlord the present value (discounted at 10%) of all the Base
Rent due for the remainder of the Term (as if there had been no termination for
cause) as liquidated damages subject, however, to applicable law. The amount
-----------------------------------------------
paid by Tenant will be offset by 50% of the present value of any Base Rent
- ---------------------------------------------------------------------------
Landlord ultimately receives from any new tenant who is in occupancy during any
- -------------------------------------------------------------------------------
remaining portion of this Lease Term less all costs allocable to securing and
- -------------------------------------========================================
putting a new tenant in the Premises. The provisions contained in this paragraph
====================================
shall be in addition to and shall not prevent the enforcement of any claim
Landlord may have against Tenant for anticipatory breach of the unexpired term
of this lease. All rights and remedies of Landlord under this lease shall be
cumulative and shall not be exclusive of any other rights and remedies provided
to Landlord under applicable law.
24. REMOVAL OF PROPERTY
-------------------
If, upon default by Tenant or termination of this lease, Landlord shall
enter or take possession of, the Leased Premises, Landlord shall have the right,
but not the obligation, to remove from the Leased Premises all personal
property, fixtures, furnishings and other property located therein and owned by
------------
Tenant, and to store such property in any place selected by Landlord, including
- ------
but not limited to a public warehouse, at the expense and risk of the owners
thereof, with the right to sell such stored property in accordance with law at a
---------------------------
public sale conducted on a commercially reasonable basis, upon ten days advanced
- --------------------------------------------------------------------------------
written notice to Tenant, after it has been stored for a period of thirty days
- -------
or more. At any time prior to sale that falls within the applicable cure periods
-----------------------------------------------------------------------
under Paragraph 23, Tenant has the right to cure such default and retain its
- ----------------------------------------------------------------------------
property by paying Landlord for storage and removal of such property and any
- ---------------------------------------------------------------------=======
other costs reasonably attributable to Tenant's default. The proceeds of such
=======================================================
sale shall be applied first to the cost of such sale, second to the payment of
the charges for storage, if any, and third to the payment of any other sums of
money which may then be due from Tenant to Landlord under any of the terms
hereof, the balance, if any to be paid to Tenant.
25. QUIET ENJOYMENT, INABILITY TO PERFORM
-------------------------------------
(a) If, and so long as, Tenant pays the Rent and keeps and performs each
and every term, covenant and condition herein contained on the part and on
behalf of Tenant to be kept and performed, Tenant shall quietly enjoy the Leased
Premises without hindrance or molestation by Landlord, subject to the terms,
covenants and conditions of this lease and the Superior Instruments (as defined
in paragraph 38 below).
(b) This lease and the obligations of Tenant to pay rent and perform all of
the terms, covenants and conditions on the part of Tenant to be performed shall
in no way be affected, impaired or excused because Landlord, due to Unavoidable
Delay, is (a) unable to fulfill any of its obligations under this lease, or (b)
unable to supply or delayed in supplying any service expressly or impliedly to
be supplied, or (c) unable to make or delay in making any repairs, replacements,
additions, alterations or decorations, or (d) unable to supply or delayed in
supplying any equipment or fixtures. Landlord shall in each instance exercise
reasonable diligence to effect performance when and as soon as possible.
However, Landlord shall be under no obligation to pay overtime labor rates.
"Unavoidable Delay" shall mean any and all delay beyond Landlord's
reasonable control, including without limitation, a delay caused by Tenant,
governmental restrictions, governmental regulations, controls, undue delays,
order of civil military or naval authority, governmental preemption, strikes,
labor disputes, lock-outs, shortage of labor or materials, inability to obtain
materials or reasonable substitutes therefore, default of any building or
construction contractor or subcontractor, Acts of God, fire, earthquake, floods,
explosions, actions of the elements, extreme weather conditions, enemy action,
civil commotion, riot or insurrection, fire or other unavoidable casualty,
delays in obtaining governmental permits or approvals or any other cause beyond
Landlord's reasonable control.
26. HOLD OVER TENANCY
-----------------
If (without execution of a new lease or written extension) Tenant shall
hold over after the expiration of the term of this lease, at Landlord's option,
Tenant may be deemed to be occupying the Leased Premises as a tenant from month
to month, which tenancy may be terminated as provided by law. During such
tenancy, Tenant agrees to pay to Landlord 175% of the Rent Payable on the last
----
day of the term of this Lease, unless a different rate is agreed upon and to be
bound by all of the terms covenants and conditions as herein specified, so far
as applicable.
If Landlord relets the Leased Premises to a new lessee and the term of such
new lease commences during the period for which Tenant holds over, Landlord
shall be entitled to recover from Tenant any and all costs, expenses, legal
expenses, reasonable attorneys' fees, damages, loss of profits or any other
-----------
costs incurred by Landlord as a result of Tenant's failure or inability to
deliver possession of the Leased Premises to Landlord when required under this
Lease.
<PAGE>
27. ATTORNEY'S FEES
---------------
In the event either party requires the services of an attorney in
connection with enforcing the terms of this lease or in the event suit is
brought for the recovery of any Rent due under this lease or for the breach of
any covenant or condition of this lease, or for the restitution of the Leased
Premises to Landlord and/or eviction of Tenant during said term or after the
expiration thereof, the party prevailing in any such legal action shall be
entitled to an award for all legal costs and expenses, including but not limited
to, a reasonable sum for attorney's fees.
28. AMENDMENT
---------
This lease is the entire agreement between the parties. This lease shall
not be amended or modified except in writing signed by both parties. Failure to
exercise any right in one or more instances shall not be construed as a waiver
of the right to strict performance or as an amendment to this agreement.
29. NOTICES
-------
All notices required by this lease shall be in writing and shall be
effective when mailed by certified mail or delivered to Landlord at ASP
---
Washington, L.L.C, 3155 Noel Road, LB54, Suite 2300, Dallas, Texas 75240 Attn:
- ------------------------------------------------------------------------------
Asset Manager with a copy to: 4601 Forbes Boulevard, Suite 100, Lanham, Maryland
- -------------
20706, Attn: Trammel Crow c/o Robert G. Depew & Associates, Inc. and to Tenant
---------------------------------------------------
at 5000-A Philadelphia Way, Lanham, Maryland 20706, or to such addresses as may
-----------------------------------------------
hereafter be designated by either party by written notice.
30. BINDING EFFECT
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. It is understood and agreed that the
terms "Landlord" and "Tenant" and verbs and pronouns in the singular number are
uniformly used throughout this lease regardless of gender, number or fact of
incorporation of the parties hereto.
31. RIDERS AND ATTACHMENTS
----------------------
The typewritten riders or supplemental provisions, if any, attached or
added hereto are made a part of this lease by reference and the terms thereof
shall control over any inconsistent provisions in the paragraphs of this
instrument.
32. LIMITATION OF LANDLORD'S LIABILITY
----------------------------------
The obligations of Landlord under this lease do not constitute personal
obligations of the individual partners, directors, officers, or shareholders of
Landlord, and Tenant shall look solely to the real estate that is the subject of
this lease the value of which is presently estimated to be in excess of 4
--------------------------------------------------------------
million dollars and to no other assets of the Landlord for satisfaction of any
- ----------------
liability in respect of this lease and will not seek recourse against the
individual partners, directors, officers or shareholders of Landlord or any of
their personal assets for such satisfaction.
33. LANDLORD'S RESERVED RIGHTS
--------------------------
Without notice and without liability to Tenant, Landlord shall have the
right to:
a. Change the name or street address of the Building, but only upon the
------------------
direction of a governmental agency having jurisdiction with the Project.
------------------------------------------------------------------------
b. Install and maintain signs on the exterior of the Building so long as
----------
the placement and visibility of Tenant's signs are not interfered with or
-------------------------------------------------------------------------
obstructed.
-----------
c. Make reasonable rules and regulations as, in the judgment of Landlord,
may from time to time be needed for the safety of the tenants, the care and
cleanliness of the Building and the preservation of good order therein.
Tenant shall be notified in writing when each such rule and regulation is
promulgated. Any such rules and regulations shall be uniformly enforced
----------------------------------------------------------
against all tenants.
--------------------
d. Grant utility easements or other easements to such parties, or re-plat,
subdivide or make such other changes in the legal status of the Land
underlying the Building, as Landlord shall deem necessary, provided
<PAGE>
such grant or changes do not substantially interfere with Tenant's use or
occupancy of the Leased Premises as intended under this lease.
e. Sell the Building or Project and assign this lease and the Deposit to
the purchaser (and upon such assignment to be released from all of its
obligations under this lease). Tenant agrees to attorn to such purchaser,
or any other successor or assign of Landlord through foreclosure or deed of
foreclosure or otherwise and to recognize such person as the Landlord under
this lease.
34. ESTOPPEL CERTIFICATE
--------------------
Within ten days after request therefor by Landlord, its agents, successors,
or assigns, Tenant shall deliver, in recordable form, a certificate to any
proposed mortgagee or purchaser, or to Landlord, together with a true and
correct copy of this lease, certifying (i) (if such be the case) that this lease
is in full force and effect without modification, (ii) the amount, if any, of
prepaid rent and security deposit paid by Tenant to Landlord, (iii) that
Landlord has performed all of its obligations due to be performed under this
lease and that there are no defenses, counterclaims, deductions, offsets
outstanding or other excuses for Tenant's performance under this lease, and (iv)
any other fact reasonably requested by Landlord or such proposed mortgagee or
purchaser, or stating those claimed by Tenant. Tenant's failure to deliver the
above described certificate in time shall be conclusive upon Tenant: (i) that
this lease is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counterclaim, defenses or
deduction against Rent or the Landlord hereunder, (iii) that no more than one
period's Base Rent has been paid in advance, and (iv) that the amount of the
Security Deposit held by Landlord is as represented by Landlord.
35. ACCORD AND SATISFACTION
-----------------------
No receipt and retention by Landlord of any payment tendered by Tenant in
connection with this lease will give rise to or support or constitute an accord
and satisfaction, notwithstanding any accompanying statement, instruction or
other assertion to the contrary (whether by notation on a check or in a
transmittal letter or otherwise), unless Landlord expressly agrees to an accord
and satisfaction in a separate writing duly executed by the appropriate persons.
Landlord may receive and retain, absolutely and for itself, any and all payments
so tendered, notwithstanding any accompanying instructions by Tenant to the
contrary. Landlord will be entitled to treat any such payments as being received
on account of any item or items of Rent, interest, expense or damage due in
connection herewith, in such amount and in such order as Landlord may determine
at its sole option.
36. SEVERABILITY
------------
The parties intend this lease to be legally valid and enforceable in
accordance with all of its terms to the fullest extent permitted by law. If any
term hereof shall be finally held to be invalid or unenforceable, the parties
agree that such term shall be stricken from this lease, the same as if it never
has been contained herein. Such invalidity or unenforceability shall not extend
to or otherwise affect any other term of this lease, and the unaffected terms
hereof shall remain in full force and effect to the fullest extent permitted by
law, the same as if such stricken term never had been contained herein.
<PAGE>
37. WAIVER No assent or consent to changes in or waiver of any part of this
------
Agreement shall be deemed or taken as made, unless the same be done in writing
and attached hereon and signed by the Tenant and Landlord. No covenant or term
------ -----------
of this lease shall be waived, except by express written consent of the party to
--------
be benefited, whose forbearance or indulgence in any regard whatsoever shall not
- ------------
constitute a future waiver of any covenant, term or condition to be performed.
------ ---
Unless said covenant, term or condition is waived in writing, the benefited
-------------------- ---------
party shall be entitled to invoke any remedies available under this lease or by
- -----
law despite such forbearance or indulgence.
38. SUBORDINATION
-------------
The rights of Tenant hereunder are and shall be, at the election of any
mortgagee, subject and subordinate to the lien of any mortgage or mortgagees, or
the lien resulting from any other method of financing or refinancing, now or
hereafter in force against the Building of which the Leased Premises are a part,
and to all advances made or hereafter to be made upon the security thereof
("Superior Instruments"). Tenant has as of the date hereof, executed the
==============================================
Subordination, Nondisturbance and Attornment Agreement attached hereto as
=========================================================================
Exhibit "G".
============
39. TIME
----
Time is of the essence hereof.
40. APPLICABLE LAW
--------------
This agreement shall be construed according to the laws of the State of
Maryland.
41. BROKER'S INDEMNIFICATION
------------------------
As part of the consideration for the granting of this lease, each party
----------
hereto represents and warrants to the other that no broker or agent negotiated
- ------ -----
or was instrumental in negotiating or consummation of this lease except the
Broker of Record, and each party hereto agrees to indemnify the other against
----------------- ---------
any other loss, expense, cost or liability incurred as a result of a claim by
any broker or finder claiming through the other.
---------
42. WAIVER OF JURY TRIAL
--------------------
Landlord and Tenant each hereby waives all right to trial by jury in any
claim, action, proceeding or counterclaim by either party against the other on
any matters arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant and/or Tenant's use or occupancy of the
Leased Premises.
<PAGE>
43. ENTIRE AGREEMENT
----------------
This lease sets forth all the covenants, promises, agreements, conditions
and understandings between Landlord and Tenant concerning the Leased Premises,
Building, and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than as are herein
set forth. Except as herein otherwise provided, no subsequent alteration,
amendment, change or addition to this lease shall be binding upon Landlord or
Tenant unless reduced to writing and signed by them.
EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
LANDLORD:
ASP Washington L.L.C.
________________________ By:_________________________
________________________ By:_________________________
WITNESSES AUTHORIZED SIGNATORIES
TENANT:
Integral Systems, Inc.
----------------------
________________________ By:_________________________
Witness ____President
________________________ By:_________________________
Witness ____Secretary
Where Tenant is a Corporation, this Lease shall be signed by a President or
Vice President and Secretary or Assistant Secretary of Tenant. Any other
signatories shall require a certified corporate resolution.
<PAGE>
SCHEDULE 1
NOT APPLICABLE
<PAGE>
SCHEDULE 2
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, halls, corridors, elevators and stairways of the
Building and Project shall not be obstructed or used as a waiting or lounging
place by tenants, and their agents, servants, employees, invitees, licensees and
visitors. All entrance doors leading from any Leased Premises to the hallways
are to be kept closed at all times.
2. In case of invasion, riot, public excitement or other commotion, Landlord
also reserves the right to prevent access to the Building during the continuance
of same. Landlord shall in no case be liable for damages for the admission or
exclusion of any person to or from the Building.
3. Landlord will furnish Tenant with two keys to each door lock on the Leased
Premises, and Landlord may make a reasonable charge for any additional keys and
access cards requested by any tenant. No tenant shall have any keys made for the
Leased Premises; nor shall any tenant alter any lock, or install new or
additional locks or bolts, on any door without the prior written approval of
Landlord which shall not be unreasonably withheld. If Landlord approves any lock
alteration or addition, Tenant shall supply Landlord with a key for any such
lock or bolt. Tenant, upon the expiration or termination of its tenancy, shall
deliver to Landlord all keys and access cards in Tenant's possession for all
locks and bolts in the Building.
4. No tenant shall cause any unnecessary labor by reason of such tenant's
carelessness or indifference in the preservation of good order and cleanliness
of the Leased Premises. Tenants will see that (i) the windows are closed, (ii)
the doors securely locked, and (iii) all water faucets and other utilities are
shut off (so as to prevent waste or damage) each day before leaving the Leased
Premises. In the event tenant must dispose of crates, boxes, etc. which will not
fit into office waste paper baskets, it will be the responsibility of tenant to
dispose of same. In no event shall tenant set such items in the public hallways
or other areas of the Building or garage facility, excepting tenant's owned
Leased Premises, for disposal.
5. No iron safe or other heavy or bulky object shall be delivered to or removed
from the Building, except by experienced safe men, movers or riggers approved in
writing by Landlord. All damage done to the Building by the delivery or removal
of such items, or by reason of their presence in the Building, shall be paid to
Landlord, immediately upon demand, by the tenant by, through, or under whom such
damage was done. There shall not be used in any space, or in the public halls of
the Building, either by tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires.
6. Tenant shall not cover or obstruct any skylights, windows, doors and
transoms that reflect or admit light into passageways or into any other part of
the Building.
7. The toilet rooms, toilets, urinals, wash bowls and water apparatus shall not
be used for any purpose other than for those for which they were constructed or
installed, and no sweepings, rubbish, chemicals, or other unsuitable substances
shall be thrown or placed therein. The expense of any breakage, stoppage or
damage resulting from violation(s) of this rule shall be borne by the tenant by
whom, or by whose agents, employees, invitees, licensees or visitors, such
breakage, stoppage or damage shall have been caused.
8. No sign, name, placard, advertisement or notice visible from the exterior of
any Leased Premises, shall be inscribed, painted or affixed by any tenant on any
part of the Building or Project without the prior written approval of Landlord.
All signs or letterings on doors, or otherwise, approved by Landlord shall be
inscribed, painted or affixed at the sole cost and expense of the tenant, by a
person approved by Landlord.
<PAGE>
(Schedule 2 rules and regulations)
page two
9. No signaling, telegraphic or telephonic instruments or devices, or other
wires, instruments or devices, shall be installed by Tenant in connection with
any Leased Premises without the prior written approval of Landlord not to be
---------
unreasonably withheld, conditioned or delayed or specifically identified and
- ---------------------------------------------
located on Construction Documents as defined in EXHIBIT A. Such installations,
---------
and the boring or cutting for wires, shall be made at the sole cost and expense
of the tenant and under control and direction of Landlord. Landlord retains, in
all cases, the right to require (i) the installation and use of such electrical
protecting devices that prevent the transmission of excessive currents of
electricity into or through the Building, (ii) the changing of wires and of
their installation and arrangement underground or otherwise as Landlord may
direct, and (iii) compliance on the part of all using or seeking access to such
wires with such rules as Landlord may establish relating thereto. All such wires
used by tenants must be clearly tagged at the distribution boards and junction
boxes and elsewhere in the Building, with (i) the number of the Leased Premises
to which said wires lead, (ii) the purpose for which said wires are used, and
(iii) the name of the company operating same.
10. Tenant, their agents, servants or employees, shall not (a) go on the roof
of the Building, (b) use any additional method of heating or air conditioning
the Leased Premises, (c) sweep or throw any dirt or other substance from the
Leased Premises into any of the halls, corridors, elevators, or stairways of the
Building, (d) bring in or keep in or about the Leased Premises any vehicles or
animals of any kind, (e) install any radio or television antennae or any other
device or item on the roof, exterior walls, windows or window sills of the
Building, (f) place objects against glass partitions, doors or windows which
would be unsightly from the interior or exterior of the Building, (g) use any
Leased Premises (i) for lodging or sleeping, (ii) for cooking (except that the
use by any tenant of Underwriter's Laboratory-approved equipment for
microwaving, brewing coffee, tea and similar beverages shall be permitted,
provided that such use is in compliance with law), (iii) for any manufacturing,
or sale of merchandise or property of any kind, (h) cause or permit unusual or
objectionable odor to be produced or permeate from the Leased Premises,
including, without limitation, duplicating or printing equipment fumes. Tenant,
its agents, servants and employees, invitees, licensees, or visitors shall not
permit the operation of any musical or sound producing instruments or device
which may be heard outside Leased Premises, Building or garage facility, or
which may emit electrical waves which will impair radio or television broadcast
or reception from or into the Building.
11. No canvassing, soliciting, distribution of hand bills or other written
material, or peddling by Tenant shall be permitted in the Building or the
Project, and tenants shall cooperate with Landlord in prevention and elimination
of same.
12. Tenant shall give Landlord prompt notice of all accidents to or defects in
air conditioning equipment, plumbing, electrical facilities or any part or
appurtenances of Leased Premises.
13. If any Leased Premises becomes infested with vermin by acts of Tenant, the
Tenant, at its sole cost and expense, shall cause its premises to be
exterminated from time to time to the satisfaction of the Landlord and shall
employ such exterminators as shall be approved by Landlord.
14. No curtains, blinds, shades, screens, awnings or other coverings or
projections of any nature shall be attached to or hung in, or used in connection
with any door, window or wall of the premises of the Building by Tenant without
the prior written consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by tenant which,
in Landlord's opinion, tends to impair the reputation of Landlord or of the
Building, or its desirability for existing or prospective tenants who require
the highest standards of integrity and respectability, and upon written notice
from Landlord, tenant shall refrain from or discontinue such advertising.
<PAGE>
(Schedule 2 rules and regulations)
page three
16. Wherever the word "tenant" occurs, it is understood and agreed
that it shall also mean tenant's associates, employees, agents and any other
person entering the Building or the Leased Premises under the express or implied
invitation of tenant. Tenant shall cooperate with Landlord to assure compliance
by all such parties with rules and regulations.
17. Landlord will not be responsible for lost or stolen personal property,
equipment, money or any article taken from Leased Premises, Building or garage
facilities regardless of how or when loss occurs.
18. All contractors and or technicians performing work for Tenant within the
Leased Premises, Building or garage facilities shall be referred to Landlord for
approval before performing such work. This shall apply to all work including,
but not limited to, installation of telephones, electrical devises and
attachments, and all installations affecting floors, walls, windows, doors,
ceilings, equipment of any other physical feature of the Building, Leased
Premises or garage facilities.
19. Showcases and any other articles shall not be placed in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules by Tenant without the prior written consent of Landlord.
20. The Tenant shall not do anything in the Leased Premises, or bring or keep
anything herein, which will in any way increase or tend to increase the risk of
fire or rate of insurance, or which shall conflict with the Regulations of the
Fire Department, any fire laws, with any insurance policy on the Building or any
part thereof, or with any rules or ordinances established by any governmental
authority.
21. The requirements of Tenant will be attended to only upon application to
the Managing Agent. Employees of Landlord shall not perform any work or do
anything outside of their regular dates unless under special instructions from
Landlord, and no employee will admit any person (Tenant or otherwise) to any
office without specific instructions from Landlord.
22. Landlord reserves the right to make reasonable amendments, modifications
and additions to the rules and regulations heretofore set forth, and to make
additional reasonable rules and regulations, as in Landlord's reasonable
judgment may from time to time be needed for the safety, care, cleanliness and
preservation of good order of the Building.
<PAGE>
SCHEDULE 3
WORK LETTER
-----------
1. Definitions The terms defined in this paragraph, for purposes of this
-----------
Schedule, shall have the meanings specified below, and, in addition to the
terms defined below, terms defined in the Lease shall, for purposes of this
Schedule, have the meanings specified in the Lease.
1.01 "Leasehold Improvements" means those items which are supplied, installed
----
and finished by Landlord, according to and described in the Construction
Documents (as hereinafter defined) and which shall be paid for by Landlord
(subject to the Allowance) as provided for in paragraph 2.03 below.
1.02 "Construction Documents" means the approved construction drawings, plans
----
and specifications referred to in paragraph 2.03.
1.03 "Substantial Completion" means that the Leasehold Improvements have been
----
substantially completed according to the Construction Documents, except for
items which will not materially affect the use of the Leased Premises and
---
which customarily are deemed to be "punch list work".
2. Construction Documents: Payments
--------------------------------
2.01 The parties have approved a preliminary floor plan for the Leased
----
Premises, a copy of which is attached to the Lease as Exhibit A (the
----------
"Preliminary Plan").
2.02 Landlord shall cause to be prepared and submitted to Tenant for approval
----
all drawings, plans and specifications necessary to construct the Leasehold
Improvements. Within five (5) business days from the date the documents are
submitted ("Document Approval Period"), Tenant shall approve or disapprove
the documents. If Tenant fails to respond within the Document Approval
Period. Tenant shall be deemed to have approved the Documents. If the Tenant
-----------------------------------------------------
disapproves the documents within the Approval Period, then the Landlord and
Tenant shall attempt to resolve the objections of Tenant; and if a resolution
cannot be reached within ten (10) days of Tenant's notice of disapproval,
then either Tenant or Landlord shall have the right to terminate the Lease by
written notice to the other.
The fees and expenses for preparing the drawings, plans and specifications
shall be included in the Final Cost (defined in paragraph 2.03 below).
2.03 It is hereby agreed by both Tenant and Landlord that the plans attached
---- -----------------------------------------------------------------------
hereto as Exhibit A constitute the approved Construction Documents which
------------------------------------------------------------------------
shall be built by Landlord for the $1,100,000.00 Tenant Finish Allowance
------------------------------------------------------------------------
contained herein. Tenant acknowledges that Landlord's sole monetary
-----------------
obligation is to pay the costs attributable to the construction of the
Leasehold Improvements, up to an aggregate maximum limit of $1,100,000.00
-------------
(the "Allowance"), and Tenant shall pay all other costs of the construction
of the Leasehold Improvements ("Tenant's Share"). In addition, all costs
attributable to changes and variations requested by Tenant from the
-------------------
Construction Documents in excess of the Allowance (including, without
----------
limitation, any fees and expenses of the Consultants and any increased costs
of construction) shall be paid by Tenant. Any said changes or variations for
----------------------------------
which Tenant is responsible shall be undertaken by Landlord upon receipt of
---------------------------------------------------------------------------
50% of the costs therefore. The remaining 50% shall be due within 10
---------------------------------------------------------------------
business days after completion and receipt of an invoice from Landlord.
-----------------------------------------------------------------------
<PAGE>
Schedule 3 work letter)
page 2
3. Leasehold Improvements
----------------------
3.01 The following provisions shall apply to the construction of the
----
Leasehold Improvements:
(a) All work involved in the completion of the Leasehold Improvements
shall be carried out by Landlord and its agents and contractors under the
sole direction of Landlord. Tenant shall cooperate with Landlord and its
agents and contractors to promote the efficient and expeditious completion
of the Leasehold Improvements; and
(b) Landlord agrees to construct the Leasehold Improvements in accordance
with the Construction Documents, provided Tenant has complied with all the
applicable provisions of this Schedule and the Lease. Landlord agrees to
------------------
construct the Leasehold Improvements in accordance with all applicable law
--------------------------------------------------------------------------
and Building codes.
-------------------
3.02 If there are any changes in the Leasehold Improvements requested by, or
----
on behalf of, Tenant from the work as reflected in the Construction
Documents, each such change must receive the prior written approval of
Landlord, and Tenant shall bear the net cost of all such changes.
---
3.03 Landlord shall have no obligation to commence construction of any work
----
in the Leased Premises until (a) Tenant has approved the Construction
Documents and the Final Cost for the construction of the Leasehold
Improvements as required by the provisions hereof, and (b) Landlord shall
have received Tenant's advance payment in an amount equal to 50% of Tenant's
------
Share, if any.
3.04 Upon Substantial Completion, Landlord and Tenant shall walk through the
----------------------------------------------------------------------------
Premises and agree as to punchlist items. Landlord shall use reasonable
-----------------------------------------------------------------------
efforts to complete punchlist items within thirty (30) days after the
---------------------------------------------------------------------
Commencement Date.
------------------
4. Lease Commencement Date
-----------------------
4.01 Landlord shall notify Tenant when Substantial Completion has been
----
achieved and the Lease Commencement Date shall be established as set forth in
the Lease. Notwithstanding anything to the contrary contained in the Lease or
this Schedule, the Lease Commencement Date shall not be extended for any
delay in Substantial Completion to the extent that such delay is caused in
whole or in part by any act or omission attributable to Tenant, including
without limitation:
(a) Tenant's request for any Leasehold Improvements which require
materials which need to be ordered and are not immediately available
provided that at the time the materials were ordered Landlord informed
----------------------------------------------------------------------
Tenant of the unavailability and Tenant does not substitute such materials
--------------------------------------------------------------------------
with materials which are available;
----------------------------------
(b) Tenants failure to furnish promptly information concerning Tenant's
requirements pertaining to construction of the Leasehold Improvements or
any other information requested by the Landlord as necessary or useful to
prepare the Construction Documents;
<PAGE>
(Schedule 3 work letter)
page three
(c) Tenant's failure to approve promptly the Construction Documents and
Final Cost; and
(d) Tenant's request for any changes in the Leasehold Improvements from
the work as reflected in the Construction Documents.
4.02 In any event, Rent payable under the Lease shall not abate by reason of
----
any delay, expense or other burden arising out of or incurred in connection
with the design or construction of the Leasehold Improvements to the extent
that such delay, expense or other burden is caused in whole or in part by any
act or omission attributable to Tenant (including, without limitation, the
acts and omissions referred to in subparagraphs (a) through (d) of paragraph
4.01 above).
5. Tenant's Access To Leased Premises
----------------------------------
5.01 Landlord, in its sole discretion, may permit Tenant and Tenant's agents
----
or independent contractors to enter the Leased Premises prior to the
scheduled Lease Commencement Date in order that Tenant may do other work as
may be required by Tenant to make the Leased Premises ready for Tenant's use
and occupancy. Such permission must be in writing prior to entry. If Landlord
permits such prior entry, then such license shall be subject to the condition
that Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers,
and invitees shall work in harmony with and not interfere with Landlord and
its agents and contractors in doing its work in the Leased Premises or the
Building or with other tenants and occupants of the Building or the Project.
If at any time such entry shall cause or threaten to cause disharmony or
interference, Landlord, in its sole discretion, shall have the right to
withdraw and cancel such license upon notice to Tenant. Tenant agrees that
any such entry into the Leased Premises shall be deemed to be under all of
the terms, covenants, conditions and provisions of the Lease, except as to
the covenant to pay periodic Rent. Tenant further agrees that, to the extent
permitted by law, Landlord and its principals shall not be liable in any way
for any injury or death to any person or persons, loss or damage to any of
the Leasehold Improvements or installations made in the Leased Premises or
loss or damage to property placed therein or there about, the same being at
Tenant's sole risk.
5.02 In addition to any other conditions or limitations on such license to
----
enter the Leased Premises prior to the Lease Commencement Date, Tenant
expressly agrees that none of its agents, contractors, workmen, mechanics,
suppliers or invitees shall enter the Leased Premises prior to the Lease
Commencement Date unless and until each of them shall furnish Landlord with
satisfactory evidence of insurance coverage, financial responsibility and
appropriate written releases of mechanics' or materialmen's lien claims.
6. Miscellaneous Provisions Landlord and Tenant further agree as follows:
------------------------
6.01 Except as herein expressly set forth with respect to the Leasehold
----
Improvements, Landlord has no agreement with Tenant and has no obligation to
do any work with respect to the Leased Premises. Any other work in the Leased
Premises which may be permitted by Landlord pursuant to the terms and
conditions of the Lease shall be done at Tenant' s sole cost and expense and
in accordance with the terms and conditions of the Lease.
6.02 This Schedule shall not be deemed applicable to: (a) any additional
----
space added to the original Leased Premises at any time, whether by the
exercise of any options under the Lease or otherwise, or (b) any portion of
the original Leased Premises or any additions thereto in the event of a
renewal or extension of the original Lease Term, whether by the exercise of
any options under the Lease or any amendment or supplement thereto. The
construction of any additions or improvements to the Leased Premises not
contemplated by this Schedule shall be effected pursuant to a separate work
letter agreement or other document, in the form then being used by Landlord
and specifically addressed to the allocation of costs relating to such
construction.
<PAGE>
(Schedule 3 work letter)
page four
6.03 Landlord shall be responsible for correcting defects in construction,
---------------------------------------------------------------------------
including latent defects discovered at any time during the Lease Term. For
---------------------------------------------------------------------------
any work constructed or equipment installed by Landlord as part of Leasehold
----------------------------------------------------------------------------
Improvements for which Tenant is responsible to maintain and repair under
-------------------------------------------------------------------------
terms of Lease, Landlord will assign all warranties and guaranties to Tenant
----------------------------------------------------------------------------
or cause Tenant to receive the benefit of same.
-----------------------------------------------
<PAGE>
SCHEDULE 4
CERTIFICATE OF ACCEPTANCE
-------------------------
TENANT INTEGRAL SYSTEMS, INC.
----------------------
LEASED PREMISES 66,700 Square Fee
-----------------
LOCATED AT 5000-A Philadelphia Way and 5200-A Philadelphia Way, Lanham, Maryland
---------------------------------------------------------------------
20706
- -----
This letter is to certify that:
1. The above referenced Leased Premises have been accepted by the Tenant for
possession.
2. The Leased Premises are substantially complete in accordance with the plans
and specifications used in constructing the demised premises.
3. The Leased Premises can now be used for intended purposes.
The execution of this certificate shall not relieve the Landlord of its
obligation to expeditiously complete all work to which the Tenant is entitled
under the terms of its lease with the Landlord. Neither this certificate, nor
Tenant's occupancy of the Leased Premises, shall be construed to relieve the
Landlord of its responsibility to remedy, correct, replace, reconstruct or
repair any deviation, deficiency or defect in the work or in the materials or
equipment furnished by the Landlord, without cost to Tenant, if a claim with
respect thereto is made by Tenant.
Commencement Date June 1, 1999.
------ --
Expiration Date May 31, 2009.
------ --
Executed this ____ day of _______,19__.
TENANT
BY:_________________________________
Authorized Signatory
____________________________________
(PLEASE PRINT NAME)
<PAGE>
EXHIBIT D
WASHINGTON BUSINESS PARK
TENANT'S ESTIMATED SHARE OF OPERATING EXPENSES 1998
---------------------------------------------------
WBP #16 WBP #11
------- -------
<TABLE>
<CAPTION>
<S> <C> <C>
REAL ESTATE TAXES & FRONT FOOT BENEFIT $ .70 $ .80
WATER & SEWER .05 .05
ELECTRICITY - EXTERIOR .10 .10
LANDSCAPING & GROUNDS MAINTENANCE .20 .20
SNOW REMOVAL .15 .15
LOT SWEEPING & TRASH REMOVAL .04 .04
REPAIRS .10 .10
SECURITY .05 .05
EXTERIOR MAINTENANCE .05 .10
INSURANCE .06 .06
PROPERTY MANAGEMENT FEE .25 .30
----- -----
TOTAL COST $1.75 $1.95
===== =====
</TABLE>
<PAGE>
EXHIBIT E
HVAC MAINTENANCE SCHEDULE
-------------------------
SERVICE CONTRACT FOR PREVENTIVE MAINTENANCE OF HEATING, VENTILATING AND/OR AIR
CONDITIONING EQUIPMENT SERVING THE PREMISES.
The scope of the maintenance contract shall be as follows:
I. Four quarterly inspection/maintenance service calls to inspect and
maintain the equipment in accordance with the Check List.
II. Tune-up, inspection and start-up at the beginning of the heating and
cooling seasons.
III. Four filter changes per year. Two will be in conjunction with the
Spring and Fall start-up inspections.
IV. Contractor shall provide all lubricants, cleaning materials, filters,
belts, pulleys and labor required to conduct the preventive maintenance.
V. Annual chemical cleaning of condenser and evaporator coils.
CHECK LIST:
AIR CONDITIONING SYSTEMS
------------------------
1. Lubricate moving parts.
2. Clean and adjust controls.
3. Check belts and drives: adjust and/or replace as necessary.
4. Inspect filters; replace as required.
5. Check evaporator air temperatures.
6. Check wiring and connections.
7. Check refrigerant and charge as necessary.
8. Check evaporator and condenser coils for cleanliness.
9. Check operating pressures.
10. Check voltage and amperage - all motors.
11. Clean and adjust thermostats.
12. Clean condensate drain.
13. Check and adjust all contractor contacts.
14. Check and adjust pressure switch cut-out settings.
15. Check performance and efficiency of cooling system.
HEATING SYSTEMS
---------------
1. Lubricate moving parts.
2. Clean and adjust controls.
3. Adjust heater for efficiency.
4. Check belts and drives; adjust and/or replace as necessary.
5. Inspect filters; replace as required.
6. Check air temperature rise.
7. Check all wiring and connections.
8. Clean and adjust thermostat.
9. Check performance and efficiency of heating equipment.
<PAGE>
EXHIBIT F
DECLARATION OF COVENANTS
------------------------
CC&F MARYLAND, INC., a corporation organized and existing under the laws of
the State of Maryland, owner of the land included within and as a part of the
Cabot, Cabot and Forbes Washington Industrial Park, Lanham District, Prince
George's County, Maryland, and being the land conveyed by The United Clay
Products Company to CC&F Maryland, Inc. by Deed recorded among the Land Records
of Prince George's County, Maryland in Liber 4256 at folio 84 (said land, less
any land dedicated or being dedicated to public use, being hereinafter referred
to as the "land" or as the "Protected Area"), as such owner and for itself and
its successors in title to any and all of the land comprising the Protected
Area, hereby declares that all such land shall be held subject to and with the
benefit of the restrictions and provisions hereof, that any and all successors
in title to CC&F Maryland, Inc. to the land shall hold their land, or their
respective interests therein, and that CC&F Maryland, Inc. shall hold the land
retained by it subject to and with the benefit of said restrictions and
provisions, as covenants running with the land and as equitable servitudes, for
the mutual benefit of such lands and their owners and lessees, all to assure
development of the land as Protected Area and as a Controlled Industrial Center.
1. As used in this Instrument:
(a) "Declaration of Covenants" means this Instrument together with any
supplemental instruments hereafter executed and recorded as provided in clause
(c) of this Paragraph.
(b) "Plan-Approving Agent" means CC&F Maryland, Inc. until they cease to
own of record any land in the Protected Area and thereafter, if it has conveyed
of record all land then owned by
<PAGE>
it in the Protected Area by conveyance containing an express grant to the
grantee of rights to approve plans and grant variances as hereinafter provided,
Plan-Approving Agent shall mean such grantee and successive grantees under like
conveyances until such a grantee ceases to own of record any land in the
Protected Area; but after conveyance by CC&F Maryland, Inc. or such a grantee of
all land in the Protected Area then owned by the grantor or grantors without
such an express grant of rights, there shall no longer be a Plan-Approving
Agent.
(c) "Protected Area" means the land not dedicated to public use and lying
within the Cabot, Cabot and Forbes Washington Industrial Park, as resubdivided
as aforesaid, and also each additional area of land now or hereafter owned by
the Plan-Approving Agent or others which, whether or not such land adjoin the
Protected Area as then constituted, is designated as an Additional Protected
Area by a supplemental instrument which (i) declares that such Additional
Protected Area shall be held subject to and with the benefit of the restrictions
and provisions set forth in this Declaration, (ii) is executed by the Plan-
Approving Agent and such other persons, if any, as may be necessary to subject
such Additional Protected Area to said restrictions and provisions, and (iii) is
duly recorded.
(d) "Site" means an area of land in the Protected Area in the same
ownership, either shown as one lot on a recorded plan, or, if not so shown,
described as the site for one or more buildings by the owner in a recorded
instrument, whether or not in either case (i) acquired at one time, (ii)
previously so shown as more than one lot or (iii) also shown or described for
the purpose of lease, but not conveyance, as more than one lot.
(e) "Street" means any publicly maintained roadway and also any private
roadway which has been expressly offered in any
<PAGE>
recorded plan or instrument to be dedicated to the public use. Lands lying on
opposite sides of a Street shall be regarded as "Adjoining".
(f) "Controlled Industrial Center" means an industrial development having
open areas, landscaping, exterior appearance, access and parking and loading
facilities conforming in overall effect to those provided by the restrictions
set forth in this Declaration.
2. Until December 31, A. D. 2025 and except as provided in Paragraphs 3 and
4 below, the Protected Area shall be subject to restrictions as follows:
(a) No building shall be located within forty feet of any Street or
fifteen feet of the side or rear boundary lines of the Site, nor occupying more
than 50% of the lot area, nor have exterior walls other than of brick, stone or
exposed aggregate, or other durable material (such as metal panels) of equal or
greater aesthetic and structural acceptability, and all such material, so long
as there is a Plan-Approving Agent, shall be subject to the approval (as to
color, permanence and architectural conformity with a planned industrial park)
in writing of such Agent, and such approval may be conditioned upon requirements
of special maintenance to assure its continued acceptability as an exterior
surface including, if require, painting and repainting at least every four (4)
years. No part of the roof line of any building, as visible from any Street or
adjoining Site, shall be more than two feet higher or lower than a line
projected between extreme uppermost corners of the wall(s) of the building as so
viewed.
(b) As a condition to the permanent occupancy of any Site, at least two-
thirds (2/3rds) of the area of the Site lying within forty feet from any Street
shall be established and utilized only
<PAGE>
as landscaped area, which shall be planted and maintained in lawn, plants,
shrubs and trees, in accordance with a landscaping plan which shall have been
submitted to and approved in writing by the Plan-Approving Agent prior to
implementation of the landscaping. All such landscaping shall be done in a good
and workmanlike manner with all plantings to be of first or best quality locally
available, and properly installed and maintained. The surface of so much of the
remainder of each Site which is not covered by buildings, paving, lawns or
landscaping, shall be treated and maintained so as to be and remain dust-free.
No existing tree having a trunk diameter of more than four inches, measured
three feet off the ground, which is not located within a portion of the Site
proposed to be occupied by a building or other improvements, or required for
access or loading, whether or not within a landscaped area, shall be removed
unless replaced with a similar tree, approved in writing by the Plan-Approving
Agent, of at least that diameter.
The Plan-Approving Agent shall have the right, in the event that any Site is
occupied or used without such landscaping having been effected as aforesaid or
in the event that such landscaping is not adequately maintained or in the event
any existing tree is removed contrary to the provisions hereof, to cause such
landscaping or maintenance (including replacing dead or inadequate stock) or
replacement of improperly removed trees to be done, provided that the Plan-
Approving Agent shall have given the owner of such Site at least thirty (30)
days written notice of intention to do so, and such notice shall not have been
complied with. In such case the Plan-Approving Agent shall be reimbursed
forthwith by the owner of the Site (with the Plan-Approving Agent having no
obligation to share in such costs), plus interest at the prime rate in effect as
of the expenditures; and the amount of such costs
<PAGE>
and expenses, plus interest, shall constitute a lien upon the Site until paid,
subordinate, however, to the lien of any existing mortgage or like encumbrance
upon the Site.
(c) There shall be maintained on each Site facilities for parking,
loading and unloading sufficient to serve the business conducted thereon without
using adjacent streets therefor; and no use shall be made of any Site which will
attract or generally require parking in excess of the parking spaces then
available thereon, or which will require loading and unloading facilities beyond
the normal capacity of the then existing facilities therefor, it being
understood that all parking (including employees' parking) on public ways is to
be discouraged by all means reasonably available to each grantee or lessee or
occupant of the Protected Area.
(d) Each Site shall be used only for manufacturing, processing, storage,
wholesale, office, laboratory, professional, research and development activities
(and minor service and retail uses for accommodation of those employed therein);
and there shall not be permitted any junk or salvage yard or any other use which
will be offensive to the neighborhood by reason of odor, fumes, dust, smoke,
noise or pollution or will be hazardous by reason of danger of radiation, fire
or explosion. The Plan-Approving Agent shall have the right to approve
development not to exceed 10% of the Protected Area for retail uses limited to
the sale of goods and services reasonably required for the convenience of
occupants within the Protected Area such as restaurants, drugstores, hotel and
motel, barber and beauty shops, shoe repair shops, cleaners, post offices,
recreational facilities, banks and automobile service stations.
(e) Each Site, including the paved and landscaped areas of same and the
exterior of all buildings and other structures
<PAGE>
thereon, shall be maintained in good order, condition and repair, including (if
required by the Plan-Approving Agent) repainting of painted surfaces at least
every four years, so that when viewed from any Street or adjoining land, the
appearance of the Site and the paving, landscaping and buildings of same will be
orderly and harmonious with a Controlled Industrial Center.
(f) No open storage shall be permitted unless the following conditions
shall have been satisfied with respect thereto: (i) the storage area shall be so
sited and so screened so that the items stored therein shall not be viewable
from Streets or abutting land, (ii) the location, size and nature of the storage
area and the kind of items to be stored therein are not detrimental to the
appearance of a Controlled Industrial Center, and (iii) the Plan-Approving Agent
shall have approved the same in writing, which approval shall not be
unreasonably withheld if the same conforms to the preceding (i) and (ii).
(g) No exterior signs of any type which normally would be visible from
any Street or adjoining Site shall be placed or maintained on any Site or
building unless the same shall have been first approved in writing by the Plan-
Approving Agent. The plans for the proposed sign(s) and the location of same on
the Site or building must be submitted to the Plan-Approving Agent and the
design, type and location must conform to any sign standards as may be then
generally established by the Plan-Approving Agent and in effect with respect to
the Protected Area.
(h) So long as there is a Plan-Approving Agent, no building or structure
shall be erected or exterior structural alteration or addition made unless both
building and landscaping plans, as aforesaid, shall have been submitted to and
approved in writing by the Plan-Approving Agent, which approval shall not be
unreasonably withheld, provided that the plans (i) provide for
<PAGE>
the retention and preservation of as much of the natural growth on the Site as
is reasonable under the circumstances - or replacement within areas which are
required or planned to be maintained in landscaping, (ii) are consistent with
the provisions hereof, and (iii) provide for a development of the Site which
otherwise will be in conformity, architecturally, with a Controlled Industrial
Center.
The date of December 31, 2025, shown at the commencement of this Paragraph 2,
shall be subject to extension, from time to time, by a supplement to this
Declaration of Covenants, duly executed by the Plan-Approving Agent and duly
recorded among the Land Records of Prince George's County, Maryland, provided
that no extension hereof shall be for a term of more than twenty (20) years, and
provided further that upon the lapse hereof without the recordation of any such
supplement extending the term hereof to this Declaration of Covenants shall be
conclusively deemed to have been extinguished for all purposes.
3. So long as there is a Plan-Approving Agent, such Agent may from time to
time by written instrument grant variances from application of particular
provisions of Paragraph 2 above to particular buildings or Sites where, in the
opinion of the Agent as certified in the instrument, desirable relief can be
granted without substantial detriment to the development of the Protected Area
as a Controlled Industrial Center and without substantial detriment to the
portions thereof theretofore built upon. The restrictions and provisions set
forth in this Declaration shall run with the land, and so long as there is a
Plan-Approving Agent, such Agent may enforce the same, but no owner other than a
PlanApproving Agent may enforce the same.
4. Enforcement and remedy under this Declaration shall be by proceeding in
equity to restrain, remove or end violations and
<PAGE>
also as provided for in Paragraph 5. Any permanent construction (other than
exterior signs, driveways, parking areas, grading and landscaping), completed
for more than four months shall be deemed to comply unless (i) written notice of
violation theretofore shall have been given by the Plan-Approving Agent to the
owner or occupier of the land on which the violation has occurred or (ii)
proceeding for enforcement has theretofore been commenced under Paragraph 5 or
in Court of Record or other court having jurisdiction; and, unless the violation
hereof is with respect to the restrictions set forth in clause (a) of Paragraph
2, compliance shall not be attributed thereto because of lapse of time without
notice concerning the violation.
5. If, in the judgment of the Plan-Approving Agent, there shall be any
violation of any condition to any approval previously given by the Plan-
Approving Agent or any failure to comply with the provisions of Paragraphs 2
(c), (e), (f) or (g), the Plan-Approving Agent shall have the right, after
giving the record owner of the Site in question at least thirty (30) days prior
written notice, to enter upon the Site and take such steps and cause such things
to be done as, in the judgment of the Plan-Approving Agent are appropriate to
achieve compliance herewith; and all costs and expenses incurred by the Plan-
Approving Agent in so doing shall be paid by the owner of the Site to the Plan-
Approving Agent upon demand. If any owner contests the reasonableness of the
judgment or the propriety or cost of any action taken by the Plan-Approving
Agent pursuant to the foregoing, such controversy shall be determined only by
arbitration as follows.
The owner of the Site and the Plan-Approving Agent each shall appoint an
arbitrator and the two so appointed shall select a third arbitrator and if the
two arbitrators cannot agree on such selection, the selection of the third
arbitrator shall be made by
<PAGE>
The American Arbitration Association.
The Plan-Approving Agent and the owner shall submit the questions involved to
the Arbitration Panel within twenty (20) days after the Panel shall have been
formed and the Panel shall render its decision, a majority to be controlling,
within thirty (30) days thereafter. Each party shall be responsible to pay one-
half of the fees and other charges of the arbitrators including expenses with
respect to the arbitration. The decision of the arbitrators shall be final and
binding upon both the Plan-Approving Agent and the owner and neither shall have
recourse to any Court or other forum to alter or challenge the propriety of the
decision which decision, however, shall be enforceable in accordance with law.
6. Failure to enforce any restriction or provision of this Declaration shall
not, except as provided in Paragraph 4, be deemed a waiver of the right to do so
thereafter as to the same breach or as to one occurring prior to or subsequent
thereto. Invalidation by Judgment of Court of any one of said restrictions or
provisions or of any act done pursuant thereto shall in nowise affect any other
restriction or provision of this Declaration or act done pursuant thereto as
herein provided, which shall remain in full force and effect. No owner shall be
responsible except for violations occurring on his land while owner.
7. This Declaration of Covenants shall be immediately effective upon the
first grant or demise of any part of the land in the Protected Area by CC&F
Maryland, Inc., and each such grant or demise shall include, in the granting
clause or the language of demise, words substantially as follows:
<PAGE>
Together with the benefits and subject to the burdens of that certain
Declaration of Covenants dated _________, 1975 and recorded among the
Land Records of Prince George's County, Maryland, grantee [or lessee,
if appropriate], hereby acknowledging that each and all of the
benefits and burdens therein contained shall run with the land.
If, by reason of inadvertence or otherwise such words are not set forth in any
such deed or lease, such words shall be deemed to have been set forth therein
for all purposes, and any such deed or lease shall be construed as if such words
were set forth therein.
IN WITNESS WHEREOF, and intending to be legally bound hereby, CC&F Maryland,
Inc. has caused these presents to be duly signed in its corporate name and its
corporate seal to be hereunto affixed and attested by its duly authorized
corporate officers as of the _______ day of ___________, 1975.
CC&F MARYLAND, INC.
ATTEST:
__________________________________ By____________________________________
Secretary President
Washington, District of Columbia) to wit:
I hereby certify that on this ______ day of _______, 1975, before the
subscriber, a Notary Public in and for the District aforesaid, personally
appeared __________________ President of CC&F Maryland, Inc., and on behalf of
the said Corporation did acknowledge the aforegoing Declaration of Covenants
bearing date as of the _______ day of ________ 1975, to be the act and deed of
said Corporation.
GIVEN under my hand and official seal this ______ day of _______, 1975.
_________________________
Notary Public, D.C.
<PAGE>
My Commission Expires:______________________
<PAGE>
AMENDMENT TO DECLARATION OF COVENANTS
CADILLAC/SHEPPARD PROPERTIES, a general partnership under the laws of the
State of Maryland, does hereby declare as follows:
WHEREAS, CC&F Maryland, Inc. prepared, executed and recorded among the Land
Records of Prince Georges County, Maryland, in Liber 4505 at folio 216, a
Declaration of Covenants intended to protect and preserve certain features of
property therein described and therein referred to as the "protected area" now
being owned by Cadillac/Sheppard Properties, party hereto; and
WHEREAS, there are no other parties in ownership required to execute these
presents to effectuate the amendments herein set forth;
NOW, THEREFORE, the said Declaration of Covenants recorded as aforesaid in
Liber 4505 at folio 216, is hereby amended as follows:
1. The designation of the "Plan-Approving Agent" in paragraph l(b) is hereby
changed from "CC&F Maryland, Inc." to "Cadillac/Sheppard Properties," all other
terms and provisions of the said paragraph l(b) to remain unaffected hereby.
2. Paragraph 2(a) is hereby amended to cause the first two lines of the said
subparagraph to read as follows: "No building shall be located within 40 feet of
any curb line on any street or within 15 feet of the side or rear boundary lines
of the...."
3. The term "retail uses" appearing in the tenth line of paragraph 2(d) (at
Liber 4505, folio 220 on the said Land Records) is hereby amended to read
"general retail uses."
4. The indented portion at the top of page 10 of the said Declaration of
Covenants (at Liber 4505, folio 225, on
<PAGE>
the said Land Records shall be appropriately amended to be reflective of this
amendatory Declaration of Covenants.
5. Except as expressly amended hereby, the said Declaration of Covenants
is hereby reaffirmed and the same shall remain in full force and effect as
amended hereby.
IN WITNESS WHEREOF and intending to be legally bound hereby,
Cadillac/Sheppard Properties, a general partnership, has caused these presents
to be duly signed by its duly authorized corporate partner, with the affixing of
the corporate seal of the said corporate partner, all as of the _______day of
______, 1976.
CADILLAC/SHEPPARD PROPERTIES,
a General Partnership.
By: CADILLAC FAIRVIEW/MARYLAND,
INC., Authorized General Partner
By_____________________________
<PAGE>
STATE OF MARYLAND )
COUNTY OF PRINCE GEORGE'S) to wit:
I HEREBY CERTIFY that on this 10th day of November, 1976, before me, a
Notary Public in and for the County and State aforesaid personally appeared
Harry Walters, who acknowledged himself to be the President of Cadillac
Fairview/Maryland, Inc., which corporation is a General Partner of
Cadillac/Sheppard Properties, a General Partnership under the laws of the State
of Maryland and the same Harry Walters being personally known to me to be the
person whose name is subscribed to the foregoing instrument and that he executed
the same on behalf of the said corporate General Partner as the act and deed of
Cadillac/Sheppard Properties.
________________________________
Notary Public
My Commission expires: July 1, 1978
<PAGE>
EXHIBIT G
SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
This Subordination, Nondisturbance and Attornment Agreement ("Agreement") is
entered into as of _______, 1999, by Integral Systems, Inc. a __________
corporation ("Tenant"), for the benefit of the holder, from time to time, of the
"Mortgage" (as hereinafter defined) ("Lender").
WITNESSETH;
-----------
A. ASP Washington, L.L.C. ("Landlord") has executed and delivered a Class
A Mortgage Note, a Class B-1 Mortgage Note and a Class B-2 Mortgage Note, each
dated as of September 23, 1998 (together and as amended or modified, the
"Note").
B. The Note is held by the Lender and is secured in part by an Indenture
of Mortgage, Deed of Trust, Deed to Secure Debt, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
dated as of September 23, 1998, among Landlord, as grantor, the trustee(s) named
therein, as trustee, and Lender, as beneficiary (as amended or modified, the
"Mortgage"), which Mortgage is recorded in the Official Records in the County in
which the real property which is commonly known as Washington Business Park (the
"Project") is located, such real property being more particularly described on
Exhibit A attached hereto and made a part hereof.
C. Tenant has entered into a lease with Landlord, of even date herewith,
pursuant to which Tenant has let certain premises at the Project (the "Lease")
and pursuant to which the Tenant's leasehold interest in the Project is and
shall be subordinate to the interest of Lender under the Mortgage.
NOW THEREFORE, in consideration of the premises and landlord's execution of
the Lease, Tenant agrees as follows:
1. Subordination. The Lease shall be subject and subordinate in all
-------------
respects to the Mortgage, and to any and all advances to be made thereunder and
all renewals, modifications, consolidations, replacements and extensions thereof
2. Nondisturbance. So long as Tenant pays all rents and other charges as
--------------
specified in the Lease and is not otherwise in default of any of its obligations
and covenants pursuant to the Lease beyond any applicable grace periods
thereunder, Tenant's possession of the premises as described in the Lease and
Tenant's other rights under the Lease will not be disturbed during the term of
the Lease, as said term may be extended pursuant to the terms of the Lease or
said premises may be expanded as specified in the Lease, and any successor in
interest to the rights and obligations of the Landlord under the Lease will
abide
<PAGE>
by the provisions of the Lease, notwithstanding any other provisions in the
Mortgage. For purposes of this paragraph, a foreclosure shall include a
sheriff's or trustee's sale under the power of sale contained in the Mortgage
and any other transfer of the Landlord's interest in the Project under peril of
foreclosure, including without limiting the generality of the foregoing, an
assignment or sale in lieu of foreclosure.
3. Attornment: Subject (i) to Landlord's successor in interest's full
----------
compliance with the conditions relating to nondisturbance as set forth in
Section 2 above and (ii) to the performance by the same of all obligations of
the Landlord under the Lease with respect to obligations arising and accrued
from and after the date that said successor in interest acquires its interest in
the Project, Tenant agrees to attorn to, accept and recognize said successor in
interest as the landlord under the Lease for the then remaining balance of the
term of the Lease, and any extensions thereof as made pursuant to the Lease.
Tenant agrees to execute and deliver, at any time and from time to time, upon
the request of Lender or the purchaser at any foreclosure sale or any other
successor to landlord, as the case may be, any reasonable instrument which may
be necessary or appropriate to such successor landlord to evidence such
attornment.
4. Limitation on Liability. Notwithstanding anything to the contrary
-----------------------
contained herein or in the Lease, it is specifically understood and agreed that
Lender or any receiver, purchaser or successor landlord shall not be:
(a) liable for any act, omission, negligence or default of any prior
landlord; provided, however, that such successor landlord shall be liable and
responsible for the performance of all covenants and obligations of landlord
under the Lease from and after the date that it takes title to the Project; or
(b) subject to any offsets, claims or defenses which Tenant might have
against any prior landlord except those permitted under the Mortgage; or
(c) bound by any rent or additional rent which is payable on a monthly
basis and which Tenant might have paid for more than one (1) month in advance to
any prior landlord.
Notwithstanding the foregoing, Tenant reserves its rights to any and all claims
or causes of action against such prior landlord for prior losses or damages and
against the successor landlord for all losses or damages arising from and after
the date that such successor landlord takes title to the Project.
5. Successors. The obligations and rights of the parties pursuant to this
----------
Agreement shall bind and inure to the benefit of the successors, assigns, heirs
and legal representatives of Tenant and Landlord.
<PAGE>
IN WITNESS WHEREOF, Tenant has executed and delivered this Agreement in
Lanham, Prince George's County, State of Maryland, as of the date set forth
- ------ --------------- --------
above.
TENANT:
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
STATE OF Maryland )
--------
)ss:
COUNTY OF Prince George's )
---------------
On January 22, 1999, before me personally came Thomas L. Gough, to be
----------- ---------------
known, who, being by me duly sworn, did depose and say that he resides at 1395
----
Cedar Avenue, Annapolis, MD 21403; that he is the President of Integral Systems,
- --------------------------------- --------- ----------------
Inc., the company described in and which executed the above instrument; and that
- ---- -------
he signed [his/her] name thereto by authority of the board of directors of said
corporation.
__________________________________
Notary Public
My Commission expires: April 1, 2002
-------------
[SEAL]
<PAGE>
EXHIBIT A
Legal Description
<PAGE>
EXHIBIT "H"
RIGHT OF FIRST OFFER AT 5200 PHILADELPHIA WAY
---------------------------------------------
EXHIBIT "H" RIGHT OF FIRST OFFER AT 5200 PHILADELPHIA WAY attached to and
made a part of Lease dated _________________, 1999 between ASP WASHINGTON,
L.L.C. ("Landlord') and INTEGRAL SYSTEMS, INC. ("Tenant") is hereby agreed
---------------------
to as follows:
Provided Tenant is not in default under any of the terms of this Lease and
subject to any similar options previously in existence granted to other tenants,
Tenant is hereby given a one time RIGHT OF FIRST OFFER on the 5,000 plus or
minus square foot area contiguous to the Premises at 5200 Philadelphia Way, as
shown on Exhibit H-1 attached hereto.
Tenant shall have fifteen (15) days from receipt of written notice from
Landlord that said space is being seriously considered by another company to
execute a lease amendment agreement that will commence within 30 days thereof.
The rent shall be at fair market value as reasonably determined by Landlord for
a mutually agreeable Term.
LANDLORD:
ASP WASHINGTON, L.L.C.
___________________________________ By:__________________________________
___________________________________ By:__________________________________
WITNESSES AUTHORIZED SIGNATORIES
TENANT:
Integral Systems, Inc.
----------------------
___________________________________ By:__________________________________
Witness _______President
___________________________________ By:__________________________________
Witness _______Secretary
<PAGE>
EXHIBIT "I"
RIGHT OF FIRST OFFER AT 5000 PHILADELPHIA WAY
---------------------------------------------
EXHIBIT "I" RIGHT OF FIRST OFFER AT 5000 PHILADELPHIA WAY attached to and made a
part of Lease dated ________ 1999 between ASP WASHINGTON, L.L.C. ("Landlord")
and INTEGRAL SYSTEMS, INC. ("Tenant") is hereby agreed to as follows:
---------------------
Provided Tenant is not in default under any of the terms of this Lease and
subject to any similar options previously in existence granted to other tenants,
Tenant is hereby given a one time RIGHT OF FIRST OFFER on the 10,521 plus or
minus square foot area contiguous to the Premises at 5000 Philadelphia Way, as
shown on Exhibit I-1 attached hereto.
Tenant shall have fifteen (15) days from receipt of written notice from
Landlord that said space is being vacated by the current tenant to execute a
lease amendment agreement that will commence within 30 days after the
termination of the then tenant's lease. The rent shall be at fair market value
as reasonably determined by Landlord for a mutually agreeable Term.
LANDLORD:
ASP WASHINGTON, L.L.C.
____________________________________ By:_________________________________
____________________________________ By:_________________________________
WITNESSES AUTHORIZED SIGNATORIES
TENANT:
Integral Systems, Inc.
----------------------
____________________________________ By:_________________________________
Witness ___________President
____________________________________ By:_________________________________
Witness ___________Secretary
<PAGE>
FIRST LEASE AMENDMENT AGREEMENT
This First Lease Amendment Agreement Is made on the _____ day of __________,
1999 between ASP WASHINGTON, LLC ("Landlord") whose address is c/o Trammell Crow
Company, 4601 Forbes Boulevard, Suite 100, Lanham, Maryland 20706 and INTEGRAL
SYSTEMS, INC.("Tenant") whose address is 5000-A Philadelphia Way, Lanham,
Maryland 20706 who agrees as follows:
1. Recitals - This Lease Amendment Agreement is made with reference to the
--------
following facts and objectives:
(a) Landlord and Tenant entered into a written lease dated January 29, 1999
(the "Lease") in which Landlord leased to Tenant and Tenant leased from
Landlord. premises located at 5000 and 5200 Philadelphia Way, Lanham,
Maryland 20706, described in Exhibit A attached to that Lease and made a
part thereof ("Premises") and comprising 65,700 square feet (20,000
square feet in 5200 Philadelphia Way & 45,700 square feet in 5000
Philadelphia Way).
(b) The Lease Term begins on or about March 15, 1999 and expires on May 31,
2009.
(c) The Landlord and Tenant are currently negotiating the terms of the Second
Lease Amendment Agreement, which will increase the size of the Premises.
Such incremental additional space will be located contiguous to the
Premises at 5200 Philadelphia Way and shall be hereinafter referred to as
the "Expansion Space".
(d) The Tenant desires that the Landlord commence construction of the
improvements to the Expansion Space prior to the execution by the parties
of the Second Lease Amendment Agreement.
2. Improvements to the Expansion Space - Upon the execution of this First
-----------------------------------
Lease Amendment Agreement by the parties, Landlord shall commence construction
of the improvements to the Expansion Space as outlined in the construction
drawings dated February 24, 1999 by James Lloyd Architects.
3. Tenant's Indemnification - In the event that the Landlord and Tenant do
not execute the anticipated Second Lease Amendment Agreement for any reason, the
Tenant agrees to reimburse the Landlord within 30 days after written demand for
the actual alteration expenses incurred in relation to the modifications to the
Expansion Space, including but not limited to, space planning costs,
construction costs, and construction management costs. The failure to make such
reimbursement shall constitute a default under the Lease.
4. Remeasurement of the Premises - The Landlord's architect shall measure
-----------------------------
and confirm the square footage of the entire portion of the Premises located at
5200 Philadelphia Way, inclusive of the Expansion Space. Such measurement shall
conform to the National Association of Industrial and Office Parks (NAIOP)
standards. The Second Lease Amendment Agreement shall amend the Lease to reflect
such new square footage measurement.
5. Interpretation - Nothing set forth in this First Lease Amendment
--------------
Agreement shall be construed to obligate either Landlord or Tenant to execute
the Second Lease Amendment Agreement, or any other amendment to the Lease.
6. Effectiveness of Lease - Except as set forth in this First Lease
----------------------
Amendment Agreement, all the provisions of the Lease shall remain unchanged and
in full force and effect.
WITNESS: LANDLORD:
ASP WASHINGTON, L.L.C.
______________________________ By:______________________________________
By:______________________________________
TENANT:
INTEGRAL SYSTEMS, INC.
_____________________________ By:______________________________________
By:______________________________________
<PAGE>
Exhibit 10.6
[Letterhead of Hughes Space Communications Appears here]
03 March 1999
Integral Systems Incorporated
5000 Philadelphia Way
Lanham, MD 20706
In Reply Refer To: 98/176:JLP
Attention: Mr. W. Nigh, Program Manager
Subject: Firm Fixed-Price Subcontracts, J8-759124-C3JP
This Subcontract, by mutual agreement of the parties hereto, is entered into
between Hughes Space and Communications Company, a Delaware Corporation
(hereinafter referred to as "HUGHES", or "BUYER") and Integral Systems
Incorporated (hereinafter referred to as "ISI", or "SELLER") for Buyer's
procurement of the Spacecraft Support Ground System (SSGS), Spacecraft Test and
Integration Support, Spacecraft Emulator Development and Support for the GOES N-
Q Program.
This Subcontract, and the attachments and documents incorporated herein,
constitutes the complete and exclusive statement of the terms and the agreement
between Buyer and Seller, and supersedes all prior representations,
understandings and communications between the parties with respect hereto. The
invalidity, in whole or in part, of any provision of this Subcontract shall not
affect the validity of other provisions. The failure by either party to insist,
in any one or more instances, upon the performance of any terms or requirements
of this Subcontract shall not be construed as a waiver or relinquishment of such
party's right to such performance or to future performance of such terms or
requirements, and the other party's obligation in respect thereto shall continue
in full force and effect.
This is a definitive Subcontract contemplated by Buyer's Letter Subcontract
dated 20 February 1998 as modified by Revision 1 dated 29 May 1998, Revision 2
dated 27 July 1998, and Revision 3 dated 12 November 1998 which supersedes said
Letter Subcontract and modifications in their entirety. All work performed,
actions taken and costs incurred by Seller in performance of Seller's
obligations under Buyer's Letter Subcontract from 20 February 1998 to issuance
of this Subcontract shall be deemed to have been performed, taken or incurred
under this Subcontract, provided such performance, actions, or costs are
reasonable and such costs are allowable and allocable to this Subcontract.
1.0 STATEMENT OF WORK
-----------------
The Seller, as an independent contractor and not as an agent of Buyer, shall, in
conformance with the terms and conditions more particularly set forth herein,
provide the necessary personnel, material, and facilities and do all things
necessary or incidental to the furnishing and delivery to the Buyer of the
supplies and services set forth in Product Specification for the GOES N-Q
Spacecraft Support Ground Systems (SSGS) Rev "-", and Statement of Work for the
GOES N-Q Spacecraft Support Ground System Rev "-", in accordance with the
drawings and other requirements applicable thereto and referenced therein, all
of which documents are incorporated in this Subcontract by Reference.
The Buyer is procuring under this subcontract an SSGS system consisting of
hardware and software. Seller acknowledges and agrees that Buyer's acceptance
of the hardware is contingent upon the
<PAGE>
hardware operating in conjunction with the software and Buyer's acceptance of
the software is contingent upon the software operating in conjunction with the
hardware.
<PAGE>
2.0 CONSIDERATION AND PAYMENT
-------------------------
2.1 Price
-----
For the full, satisfactory and timely completion of performance to the
requirements of this Subcontract by Seller, Buyer shall pay Seller *** for
the performance of the work under this Subcontract. Payment shall be made
for delivered items as noted in this Subcontract under Section 3.0
Deliverable Line Items. The Seller shall deliver the items set forth in the
Statement of Work in strict compliance with the schedule attached thereto.
Upon the full satisfactory and timely completion and delivery as required,
of the items of Work specified in this Subcontract, including delivery of
all reports and data required hereunder, Seller shall be entitled to
payment by Buyer in accordance with the provisions herein.
2.2 Invoices
--------
Invoice payment terms shall be Net 30 days. Invoices shall be mailed to
Buyer as shown below when unit deliveries have been completed. The time
for payment shall not commence before such delivery. Without limiting
Buyer's other remedies, if data is not furnished when scheduled, Buyer may
withhold remaining payments (or such portion thereof as Buyer may deem
equitable) until such data is furnished. All shipping costs, when
applicable, are included in the fixed price of this subcontract. Any and
all tax exemption certificates shall be accepted by Seller.
The original and one copy to:
Hughes Space and Communications Company
Post Office Box 902
El Segundo, California 90245-0902
Attention: Jill L. Perkins
EO/E1/D148
2.3 Total Sum Allotted
------------------
Pursuant to the "Allotted Funds under Fixed Price Procurement" provisions,
Attachments SF-05 of this subcontract, the total sum (Phase Funding)
presently available for payment and allocated to this subcontract is ***,
which covers all items of work required by this subcontract from its
inception through 4/9/99 (Performance Period). Phase Funding will reflect
the cumulative billing milestone value for the corresponding Performance
Period plus the next billing milestone increment (to cover potential
termination costs).
***Confidential portions omitted and filed separately with the Commission.
<PAGE>
3.0 DELIVERABLE LINE ITEMS
----------------------
Seller shall provide all labor, equipment, parts and materials necessary to
fabricate, test and deliver the following items in strict compliance with the
documents, attachments and requirements set forth herein.
<TABLE>
<CAPTION>
Item Part Number/Description Unit Price Extension
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01 Spacecraft Emulator ***
- ----------------------------------------------------------------------------------------------------------------
02 Ground Support Equipment ***
- ----------------------------------------------------------------------------------------------------------------
03 Spacecraft Support Ground System ***
- ----------------------------------------------------------------------------------------------------------------
04 Source Code: COTS only** NSP
- ----------------------------------------------------------------------------------------------------------------
Total: ***
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*Excludes *** proposed for the Panametrics EPOCH Licenses.
**Immediately deliverable to Escrow, under the terms of Exhibit F.
4.0 DELIVERY SCHEDULE
-----------------------------------------------------------------
Seller shall deliver the hardware and software items as identified in the
Preliminary Statement of Work dated 12/11/98, Paragraph 3.1.3.9 and Paragraph
3.1.4.7, respectively.
5.0 APPLICABLE DOCUMENTS AND ATTACHMENTS
-------------------------------------
THE FOLLOWING DOCUMENTS AND ATTACHMENTS, INCLUDING ALL DOCUMENTS REFERENCED
THEREIN, OF THE REVISION OF ISSUE SHOWN, FORM A PART THIS SUBCONTRACT AND ARE
INCORPORATED HEREIN BY THIS REFERENCE.
<TABLE>
<CAPTION>
ATTACHMENT TITLE DATE
-------------- --------------------------------------------------------------- --------------
<S> <C> <C>
GL-21 PURCHASE ORDER GENERAL PROVISIONS & SHIPPING INSTRUCTIONS, AS 10/96
AMENDED BY EXHIBIT B
40-0100 MODIFICATIONS TO PURCHASE ORDER GENERAL PROVISIONS 10/96
GL-14 INSURANCE PROTECTION, INDEMNIFICATION, & SECURITY REQ'TS 09/91
GL-17 OPTIONAL FAR, DFARS CLAUSES: F 10/96
SS-01 AND Contract and Consultant Services Contracts, as modified below: 06/97
EXHIBIT A
Delete the following Articles:
II. PAYMENT,
VIII. DISCLOSURE OF INFORMATION, paragraph A., only
IX. INVENTIONS, and
X. COPYRIGHTS.
Delete the following Articles from Exhibit A, INDUSTRIAL
PROPERTY RIGHTS AGREEMENT:
I. DISCLOSURE OF INFORMATION, paragraph A., only
II. COPYRIGHTABLE MATERIAL, and
III. INVENTIONS.
Exhibit B Modifications to GL-21 2/99
Exhibit C List of Known Deliverable Software and Software Licenses 2/99
Exhibit D ISI COTS Software License Agreement 02/99
Exhibit E Third Party COTS Software Sublicense Agreement 02/99
Exhibit F Escrow Agreement TBD
</TABLE>
***Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
Attachment Title Date
-------------- --------------------------------------------------------------- --------------
<S> <C> <C>
Exhibit G Developmental Software License Agreement 2/99
PF-03 Property In Possession of Seller 09/91
SF-05 Allotted Funds Under Fixed Price Procurement, amended as 09/91
follows:
II. LIMITATIONS OF OBLIGATIONS. In the last sentence, after
"Buyer's personnel" insert "other than Buyer's representative".
III. ADDITIONAL ALLOTMENTS. Add the following to the end of
this section: "Provided, however, that Buyer's right to
terminate this order for convenience shall be limited to the
circumstance where Buyer's prime contract with the Government
has been terminated, thereby necessitating termination of this
order for convenience."
VIII. CHANGES TO PURCHASE ORDER. Revise article title to read
as follows: "VII. CHANGES TO PURCHASE ORDER."
Attachment A Customer Furnished Equipment (CFE) and Intellectual Property 2/99
Need Dates
Year 2000 Compliance Requirements, as represented by Seller in Seller's
letter 230-04, dated 27 Oct. 98
<CAPTION>
The following documents:
<S> <C>
5.1 PRODUCT SPECIFICATION FOR SPACECRAFT SUPPORT GROUND SYSTEMS (SSGS) PS80667-H00-002, REV "-", DATED 02
MARCH 1999
5.2 STATEMENT OF WORK FOR THE GOES N-Q SPACECRAFT, SPACECRAFT SUPPORT GROUND SYSTEM SW80667-H00-003, REV
"-", DATED 02 MARCH 1999
</TABLE>
6.0 MILESTONE PAYMENT
-----------------
THE BUYER SHALL HAVE THE RIGHT TO REDUCE OR SUSPEND MILESTONE PAYMENTS TO THE
SELLER IN THE EVENT SELLER FAILS TO COMPLETE ON SCHEDULE, THE MILESTONE EVENTS
IDENTIFIED HEREIN.
PAYMENT FOR COMPLETED MILESTONES SHALL BE MADE BY BUYER AFTER 1) BUYER'S RECEIPT
OF SELLER'S DETAILED INVOICE CERTIFIED BY AN APPROPRIATE COMPANY OFFICER THAT
THE PARTICULAR MILESTONE EVENT FOR WHICH PAYMENT IS CLAIMED HAS BEEN COMPLETED
AND 2) BUYER'S RECEIPT AND ACCEPTANCE OF ALL WRITTEN DOCUMENTATION AND/OR
DELIVERABLE ITEMS AS REQUIRED BY THE MILESTONE EVENT. BUYER SHALL NOTIFY SELLER
OF BUYER'S ACCEPTANCE OR REJECTION OF THE DOCUMENTATION AND/OR DELIVERABLE ITEMS
WITHIN 30 DAYS OF RECEIPT OF THE DOCUMENTATION AND/OR DELIVERABLE ITEMS. IF
BUYER FAILS TO NOTIFY SELLER WITHIN 30-DAY PERIOD, PAYMENT SHALL BE MADE NO
LATER THAN 30 DAYS AFTER RECEIPT OF INVOICE.
THE RIGHTS AND REMEDIES OF THE BUYER AND THE SELLER, WITH RESPECT TO THIS
PROVISION, SHALL NOT BE EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND
REMEDIES PROVIDED BY LAW OR IN EQUITY UNDER THIS SUBCONTRACT.
<PAGE>
<TABLE>
<CAPTION>
MILESTONE NO. DESCRIPTION DATE VALUE MILESTONE $'s
- ------------------ ------------------------------------------------ ---------------- ---------- -----------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 SSGS PDR COMPLETE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
2 GSE BUILD 1 DELIVERY *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
3 GTACS PROOF-OF-CONCEPT DEMO *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
4 SSGS CDR COMPLETE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
5 SSGS BUILD 1/GSE BLD 2 DELIVERY *** *** ***
(FOR FLIGHT SWTRR)
- ----------------------------------------------------------------------------------------------------------------------
6 SSGS BUILD 2 DELIVERY *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
7 SSGS BUILD 3 DELIVERY (FINAL) *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
8 PRE-SHIPMENT REVIEW/SHIPMENT TO SOCC *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
9 END-TO-END COMPATIBILITY TEST 1A COMPLETED *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
10 PRELIMINARY ACCEPTANCE TEST COMPLETE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
11 SSGS TRAINING COMPLETE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
12 END-TO-END COMPATIBILITY TEST 4 COMPLETE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
13 SPACECRAFT ENGINEERING HANDOVER *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
14 SSGS FINAL ACCEPTANCE *** *** ***
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
- -----
1. This schedule assumes a GOES-N launch of 10/01. If the launch is delayed,
then Milestones 13 and 14 shall also be delayed.
2. An additional payment of Prime, plus *** interest, for cost of money for
post-launch payment(s) to cover period from 15 October 2001 until launch
actually occurs may be billed by Seller on a monthly basis.
7.0 CUSTOMER FURNISHED MATERIAL AND INTELLECTUAL PROPERTY
-----------------------------------------------------
In strict compliance with purchase order attachment PF-03, Hughes will furnish
the following item(s) on or before the specified date(s) for Seller's use in the
performance of this subcontract. See Attachment "A" to this purchase order for
list.
In the event the Buyer causes any delay which does not exceed thirty (30) days
in furnishing materials, parts, supplies, tools or HSC processes for Seller's
use hereunder, Seller's sole remedy for any such delay, damages or losses
occasioned by such delay shall be an extension of the delivery date(s) of the
item(s) procured hereunder on a maximum day for day basis. Seller shall enter
into good faith negotiations with the Buyer to determine a "Recovery Schedule".
Delays in excess of thirty (30) days will be considered a change in accordance
with the changes clause. In the event Buyer orders Seller to delay delivery of
items associated with a milestone, Seller may be entitled to changes, including
but not limited to a modification of the delivery schedule and/or adjustment of
the price of this order, in accordance with the "Changes" clause set forth in
GL-21 - Purchase Order General Provisions, Section 2.
Seller should anticipate that incorporation of Buyer's intellectual property
into any final design by Seller, may create a licensing requirement with buyer
for the final design that may require the negotiation of an intellectual
property agreement between Buyer and Seller for Seller's use of Buyer's
intellectual property in future products or programs.
***Confidential portions omitted and filed separately with the Commission.
<PAGE>
8.0 ADMINISTRATIVE AUTHORITY
------------------------
No request, notice, authorization, direction or order received by Seller and
issue either pursuant to an article, part or clause of this subcontract or to a
provision of any document incorporated into this subcontract, reference or
otherwise shall be binding upon either Seller or Buyer unless issued or amended
in writing by Buyer's representative named on the face of this subcontract.
Seller shall immediately notify, in writing Buyer's representative whenever a
change request, notice, authorization, direction or order has been received from
a representative of Buyer than above cited, which affects existing terms and
conditions, price or schedule of this subcontract.
9.0 DEFENSE PRIORITIES AND ALLOCATIONS SYSTEMS
------------------------------------------
This Subcontract is certified for National Defense use under Defense Priorities
and Allocations System (DPAS) Regulation (15 CFR Part 700) and has a rating of
DO-A2.
10.0 NOTICES
-------
Any notice, consent, demand, or request required or permitted by this
subcontract shall be in writing and shall be deemed to have been sufficiently
given with personally delivered or deposited in the United States mail, postage
paid, addressed as follows:
If to Seller: Integral Systems, Inc.
5000 Philadelphia Way, Suite A
Lanham, Maryland 20706
Attention: Albert Alderete,
Contracts Administrator
Telephone: (301) 731-4233, ext. 223
Fax: (301) 731-9606
email: [email protected]
If to Buyer: Hughes Space and Communications Company
P. O. Box 902
Los Angeles, CA 90245
Attention: Jill L. Perkins,
Subcontracts Manager
Building E01, Mail Station D148
Telephone: (310) 662-7121
Fax: (310) 364-5471
email: [email protected]
11.0 ESCROW AGREEMENT
----------------
The parties agree that the Development Software addressed by Exhibit G to this
subcontract will be delivered by Seller to Buyer in accordance with this
subcontract and shall not be placed into Escrow. In order to support Buyer's
integration and testing of the Option "P" and "Q" GOES Spacecraft, the Seller
further agrees to deposit and maintain the COTS software source code in Escrow
from its initial delivery, in accordance with this subcontract, through to five
(5) years after Buyer's final acceptance of the GOES "N" SSGS.
<PAGE>
12.0 SELLER'S ACCEPTANCE
-------------------
Seller agrees to perform to the terms and conditions contained within this
order, and acknowledge receipt of this order by signing below.
HUGHES hereby limits acceptance of this Subcontract to the terms herein,
including those appearing on the face of and those set forth in the body of the
Subcontract, and the attachments, specifications and drawings incorporated
herein by reference. This Subcontract, which Seller agrees to by the signature
below of a duly authorized representative of Seller, constitutes the entire
Subcontract.
IN WITNESS HEREOF, the parties hereto have executed this Subcontract as of the
later date entered below.
HUGHES SPACE AND COMMUNICATIONS COMPANY
By ______________________________________
Title ______________________________________
Date ______________________________________
INTEGRAL SYSTEMS, INC.
By ______________________________________
Title ______________________________________
Date ______________________________________
<PAGE>
PURCHASE ORDER ATTACHMENT GL-21
PURCHASE ORDER GENERAL PROVISIONS
---------------------------------
AND SHIPPING INSTRUCTIONS
-------------------------
SHIPPING INSTRUCTIONS
1. TARIFF PROVISIONS: All shipments shall be made to strict conformity with
governing tariff rules and regulations and packaging specifications, except
where otherwise specifically required provisions of this Order or military
regulations.
2. CLASSIFIED SHIPMENTS: Classified shipments must be handled in conformance
with specified instructions made part of this Order as well as the
requirements of the "Industrial Security manual for safeguarding Classified
Information" (DoD 5220.22-M).
3. ROUTING INSTRUCTIONS:
a. Freight shipments are to be routed via Order instructions as authorized
by Buyer, Seller will request prior routing instructions for delicate
equipment, emergency shipments, or shipments exceeding 10,000 pounds
gross weight.
b. Freight Charges: Shipments are to be made "Freight Collect" on FOB
orgin shipments, unless otherwise specified herein. United Parcel
Service shipments are to have freight charges prepaid and added to the
goods invoice. Attach copies of paid freight bills to any invoice that
includes transportation charges.
c. Insurance: DO NOT DECLARE ANY VALUE FOR CARRIAGE OR INSURANCE.
Shipments shall be released to minimum value of governing classification
or tariff, or insured for minimum value for traceability. No shipment
exceeding $10,000 shall be sent Parcel Post. No shipment exceeding
$50,000 shall be sent via courier service. Seller will provide advance
notice to Buyer of shipments exceeding $1,000,000.
d. Consolidation: Except for limited by Clause 3 (C) above, consolidate
all shipments to the delivery point specified herein, for any one day,
on one bill of lading.
e. Purchase Order Number(s) must appear on all; shipping labels; invoices;
and shipping documents, including Packing Sheets, Bills of Lading, and
Airbills.
f. Packing Sheets: Seller is to provide two (2) copies of each packing
sheet with the shipment.
4. HAZARDOUS MATERIAL PACKING, LABELING, AND SHIPPING: Seller shall comply
with Provision 10 below.
5. PACKING AND PACKAGING: Seller shall use best commercial practice for
packing and packaging of items to be delivered under this order, unless
otherwise specified herein.
1/96 Edition 1
<PAGE>
ETHICAL STANDARDS OF CONDUCT
Seller hereby represents that it has neither received or given any gifts or
gratuities, nor participated in any other unethical conduct as defined in
Buyer's booklet entitled "Ethics & Buying" in connection with this Order. If,
at any time, Buyer determines that Seller is in violation due to the foregoing
representation, Buyer may cancel this Order upon written notice to Seller and
Buyer shall have no further obligation to Seller.
1. Deleted.
2. CHANGES: By written order, Buyer may, from time to time, order work
suspension or make changes in drawings, designs, specifications, place of
delivery, methods of shipment and packaging, and property and services
furnished by Buyer. If any such change causes an increase or decrease in the
price of the Order or in the time required for its performance, Seller
shall, within 20 days after the change is ordered, notify Buyer of its
intent to submit a proposal for adjustment and an equitable adjustment shall
be made. However, nothing in this provision shall excuse Seller from
proceeding immediately with the Order as changed. Whether made pursuant to
this provision or by mutual agreement, changes shall not be binding upon.
Buyer except when specifically confirmed in writing by a member of Buyer's
Purchasing Department. Information, advice, approvals, or instructions given
by Buyer's technical personnel or other representatives shall be deemed
expressions of personal opinions only and shall not affect Buyer's and
Seller's rights and obligations hereunder unless set forth in a writing
which is signed by a member of Buyer's Purchasing Department and which
expressly states that it constitutes an amendment or change in this Order.
3. INFRINGEMENT INDEMNITY:
a. In lieu of any other warranty by Buyer or Seller against infringement,
statutory or otherwise, it is agreed that Seller shall defend, at its
expense, any suit against Buyer or its customers based on a claim that
any item furnished under this Order or the normal use of sale thereof
infringes any U.S. Letters Patent or copyright, other than claims under
Letters Patent covering combinations of such items with items not
furnished by Seller, unless such claim is due solely to Seller's item
irrespective of the combination, and shall pay costs and damages finally
awarded in any such suit, provided that Seller is notified in writing of
the suit and given authority, information, and assistance at Seller's
expense for the defense of same. If the use or sale of said item is
enjoined as a result of such suit, Seller, at no expense to Buyer, shall
obtain for Buyer and its customers the right to use and sell said item
or shall substitute an equivalent time acceptable to Buyer and extend
this patent indemnity thereto.
b. Notwithstanding the foregoing provision, when this Order is performed
under the authorization and consent of the U.S. Government to infringe
U.S. Patents, Seller's liability for infringement of such Patents in
such performance shall be limited to the extent of the obligation of the
Buyer to indemnify the U.S. Government.
4. SELLER'S DATA
a. Seller agrees that all information, including but not limited to
technical data, computer software and documentation, tapes, photo
prints, and other information, furnished with items or required to be
furnished by this Order, together with any information furnished orally,
shall be free from proprietary restriction except if elsewhere
authorized in this Order. Subject to Provision 4(b) below, Seller's data
for which a restrictive use marking is authorized by the DFARS or
elsewhere, in this order, may be duplicated, modified, distributed or
otherwise used by Buyer in performance of its customer contracts. Such
usage includes, as a minimum, preparation of logistics and instructional
information and delivery thereof as required by such customer's
contract. Any other specific rights, not inconsistent with these minimum
right, shall be listed or described in a license or agreement and made a
part of this Order. Seller also grants to the Buyer the same rights
granted above to the Government for use by Buyer in performance of its
higher tier contracts.
b. Except as to data available to Buyer, without restriction from other
sources or independently developed by Buyer or released by Seller
without restriction, Seller's data subject to an authorized restrictive
use marking shall not without Seller's permission be: (1) used by Buyer
for procurement
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from other that Seller, (2) used by Buyer for manufacture of items
described by such data, or (3) disclosed outside Buyer or its customers.
c. (1) To the extent that Seller established a claim to statutory
copyright in any data first produces of this Order, Seller grants the
Buyer a royalty-free, nonexclusive, transferable , world-wide license to
consider, duplicate or perform any such data copyrighted by the Seller.
(2) The Seller further agrees not to knowingly include any data
copyrighted by others in technical data delivered under this Order
without first obtaining, at no additional cost and for the benefit of
the Buyer, a license therein of the same scope as set forth in Provision
4 (C)(1).
5. BUYER'S PROPRIETARY RIGHTS, AND DISCLOSURE
(a) Seller shall not use or disclose, without Buyer's prior written
consent and agrees that Buyer owns all intellectual property rights in, any
tools or other items or drawings, specifications, technical information,
computer software, or other data which have been specially designed for
Buyer in connection with this Order or furnished by Buyer, provided,
however, that if the U.S. Government has the right to authorize the use of
such tools, items, drawings, specifications, technical information or data
Seller may, to the extent of such right use them as authorized by the U.S.
Government; provided, further that, Seller gives Buyer notice of such
authorization prior to such use. This paragraph shall not apply to technical
data generated by Seller in which the Government has unlimited rights.
(b) Seller agrees that it will not publicize this Order or disclose,
confirm, or deny any details thereof to third parties, or use Buyer's name
in connection with Seller's sales promotion or publicity without prior
written approval from. Buyer.
(c) Nothing in this Provision 5, however, shall restrict Seller's right to
use or disclose drawings, specifications, technical information, and other
data which are rightfully obtained from other sources without restriction.
6. DEFAULT
(a) Buyer may terminate this Order for Seller's default in accordance with
FAR 52.249-8 if circumstances set forth therein occur, or if Seller becomes
insolvent, fails to pay its debts as them become due, or makes or proposes
an assignment for the benefit of creditors. Buyer shall have such additional
remedies for default as may be available at law or in equity whether or not
it terminates this Order. To be relieved of liability for excess cost as
provided in paragraph (c) of FAR 52.249-8, Seller must provide Buyer written
notice of the cause of failure to perform which is beyond its control and
without its fault or negligence within twenty (20) days of occurrence of the
cause.
(b) (1) If at any time it appears that the Seller has not or will not meet
this Order's delivery schedule, or any extension thereof, the Buyer shall
have the right to require the Seller to submit a revised delivery schedule
together with adequate documentation to support the reasonableness of the
revised schedule. The revised schedule shall provide a specific date for the
delivery of each deliverable item under this Order and shall not be
submitted subject to any contingencies.
(2) Unless the Buyer has extended the time in writing, the Seller
shall submit the revised delivery schedule within thirty (30) calendar days
after receipt of the Buyer's written request for said schedule Such request
shall not be deemed a waiver of any existing delivery schedule. The Buyer
shall have thirty (30) calendar days after receipt of the Seller's response
within which to approve or disapprove the Seller's revised schedule. If it
is approved, the parties shall incorporate it into the Order using a
bilateral modification issued by the Buyer.
(3) If the Seller fails to submit a revised delivery schedule as
specified above, or any extension thereof granted by the Buyer, the Seller
shall be deemed to have failed to make delivery within the meaning of the
"Default" clause of this Order and this Order shall be subject to
termination.
(c) FAR 52.249-8 is modified as follows for the purposes of this Order and
is subject to the Definitions Provision herein: "Contracting Officer" means
Buyers' Purchasing Representative, and "Government" means Buyer, except in
paragraph (c) where it means Government and in paragraph (e)
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where it means Government or Buyer. In the second sentence of paragraph
(c), add "acts of Buyer" to the list of examples.
7. ASSIGNMENTS AND SUBCONTRACTING:
(a) Neither this Order nor any interest herein nor claim hereunder may be
assigned or delegated by Seller, nor may all or substantially all of this
Order be further subcontracted by Seller without the prior written consent
of Buyer. Buyer's consent shall not be deemed to relieve Seller of its
obligations to comply fully with the requirements hereof.
(b) Notwithstanding the above, Seller may, without Buyer's consent, assign
monies due or to become due hereunder provided Buyer shall continue to have
the right to exercise any and all its rights hereunder, settle any and all
claims arising out of, and enter into amendments tot his Order without
notice to or consent of the assignee. Buyer shall be given notice of any
assignment and all invoices shall refer to the assignment.
8. PRICES:
Seller warrants that any unit prices charged herein do not exceed the unit
prices charged by Seller to the U.S. Government or other customers in
substantially similar transactions.
9. Deleted.
10. HAZARDOUS MATERIAL PACKAGING, LABELING, AND SHIPPING
(a) Seller shall package, label, transport, and ship hazardous material or
items containing hazardous material in accordance with all applicable
Federal, state, and local laws and regulations, including but not limited to
current published issues of tariffs and regulations reflecting 49 CFR
Articles 100-199, FAR 52.223-3, DFARS 252.223-7001, the Explosive Safety
Manual AFM 127-100, and Federal Aviation Regulation 103, as amended (e.g.,
the current Hazardous Materials Regulations of the Department of
Transportation; the Official Air Transport Restricted Articles Tariff;
Packaging and Handling of Dangerous Materials for Transportation by Military
Aircraft, Joint Manual AFM 71-4; and subsequent reissues thereof) and, if
applicable, to furnish appropriate Material Safety Data Sheets in accordance
with California Hazardous Substances Information and Training Act. Seller,
prior to each hazardous material shipment, shall notify Buyer of its nature
and shipment date by such means of communications as will allow for proper
preparation for acceptance of delivery by the carrier of the material and
shall identify same on all shipping documents.
(b) The 1990 Clean Air Act Amendments and implementing regulations
established labeling requirements for products manufactured with, containers
of, and products containing specific ozone depleting substances. This label
must be "clear and conspicuous". There is not requirement that suppliers
label directly on the hardware. Because labeling hardware may not conform
with requirements contained in the technical data package (if any),
pertinent to this Purchase Order, Buyer prefers that the hardware deliveries
under this purchase order not be labeled, and that alternative labeling be
used. The EPA regulation provides for the use of alternative labeling.
Supplemental printed material may also be appropriate, i.e., where the
statement would be conspicuous on printed material as it would be on the
product. For specific requirements and options on labeling regulations,
refer to 40 CPR 82.
11. ADDITIONAL PURCHASE ORDER AMENDMENTS:
Seller, upon the request of Buyer, shall negotiate amendments to this Order
to incorporate additional provisions herein or to change provisions hereof
as Buyer may reasonably deem necessary in order to comply with the
provisions of this contract between Buyer and its customer or with the
provisions of amendments to such contract. If such amendments to this
Order cause an increase or decrease in the cost of, or the time required
for, performance of this Order, an equitable adjustment shall be made in
the price or delivery schedule, or both, pursuant to the Changes provision
herein.
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12. DISPUTES:
Buyer and Seller agree to make a good faith attempt to settle any dispute
arising under or related to this Order without resort to legal action. If
such good faith efforts fail, the Buyer, at its option, may submit the
dispute to mediation and/or binding arbitration in the State and County in
which the Order was issued. The selection of an independent and neutral
mediator shall be at the mutual agreement of the parties. Buyer reserves
the right to abandon arbitration and pursue all available legal and
equitable remedies in the event Seller does not comply with a demand for
arbitration within sixty days of notice. The cost of mediation and
arbitration, including the fees of the mediator(s) or arbitrator(s) shall
be divided equally by the parties unless the award provides otherwise.
Each party shall bear its own cost of preparing and presenting its case.
Pending resolution of any dispute arising hereunder, Seller shall proceed
diligently with the performance of this Order in accordance with Buyer's
direction concerning the subject matter of such dispute. Irrespective of
the place of performance, this Order will be construed and interpreted
according to the laws of the state from which Buyer's Order is issued
without resort to said state's Conflicts of Law rules.
13. GENERAL
This Order and the attachments and documents incorporated herein constitute
the complete and exclusive statement of the terms of this agreement between
Buyer and Seller and supersede all prior representations, understandings,
and communications relating hereto. The invalidity in whole or in part of
any provision of this Order shall not affect the validity of other
provisions. Buyer's failure to insist, in any one or more instances, upon
the performance of any term of this Order, shall not be construed as a
waiver or relinquishment of Buyer's right to such performance or to future
performance of such a term or terms, and Seller's obligation in respect
thereto shall continue in full force and effect. Time shall be of the
essence hereunder. Seller shall perform work and make deliveries hereunder
no earlier that and only to the minimum extent consistent with delivery
schedules and other requirements.
14. PRECEDENCE:
Conflicting provisions hereof, if any, shall prevail in the following
descending order of precedence; (1) typed provisions set forth in this
Order, (2) specifications attached or incorporated by reference, (3)
Buyer's Purchase Order Attachments, (4) the preprinted portion of this
Order, including these Purchase Order General Provisions and (5) statement
of work. Buyer's specifications shall prevail over those of an agency of
the U.S. Government, and both shall prevail over those of Seller.
15. DEFINITIONS FOR FAR/DFARS CLAUSES:
The following definitions shall apply to this Order except as otherwise
herein provided. The date of the FAR.DFARS clauses shall be the same as
the date of the FAR/DFARS clauses in Buyer's prime contract, unless
otherwise stated in the body of the Order.
"Buyer" - the legal entity issuing this Order.
"Contract" - this contractual instrument, including changes.
"Contractor" - Seller.
"Contracting Officer" - the Government Contracting Officer for the prime
contract, or authorized representative.
"DFARS" - Department of Defense, Federal Acquisition Regulation Supplement.
"FAR" - Federal Acquisition Regulation.
"Government" - the Government of the United States.
"Prime Contract" - the Government contract under which this Order is issued.
"Purchasing Representative" - Buyer's authorized representative.
"Seller" - the legal entity which contracts with the Buyer.
"Subcontract" - Seller's subcontractors.
"This Order" - this contractual instrument, including changes.
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16. FAR CLAUSES APPLICABLE TO ALL ORDERS: The text of clauses identified herein
by FAR reference number are incorporated herein by this reference, subject
to the Definitions Provision herein and to the modifications indicated:
52.211-1 New Material, in which "Contracting Officer" means Buyer's
Purchasing Representative and "Government" means Buyer in the last two
sentences of the clause.
52.222-1 Notice to the Government of Labor Disputes, in which "Contracting
Officer" means Buyer's Purchasing Representative.
52.245-2 Government Property (Fixed-Price Contracts), in which:
. "Contract Officer" means Buyer's Purchasing Representative.
. "Government" means Government or Buyer.
. The fourth sentence of paragraph (h) is changed to read: "Neither the
Government nor the Buyer shall be liable..."
52.246-2 Inspection of Supplies (Fixed-Price), in which "Contracting
Officer" means Buyer's Purchasing Representative or his/her authorized
designee, and "Government" means Buyer except that the first time it
appears in the first sentence of paragraph (b) and in the fourth sentence
of paragraph (b) it means Buyer and the Government (provided, however, that
an inspection system accepted by the Government will be deemed acceptable
to the Buyer), and the first time it appears in paragraph (k) it means
Government or Buyer. The provisions in the clause for access, rights to
inspect, safety protection, and relief from liability apply equally to
Buyer and the Government. The rights and remedies of the Buyer shall be in
addition and not in limitation of those set forth in Provision 1,
Warranties.
Responsibility for Supplies, in which "Contractor" means Seller and
"Government" means Buyer, except in paragraph (d) where "Government" means
Government or Buyer.
52-249-2 Termination for Convenience of the Government (Fixed-Price), in
which "Contracting Officer" means Buyer's Purchasing Representative, and
"Government" means Buyer except in paragraph (m). In paragraph (c) the
term "45 days" is changed to "90 days." The term "1-year" in paragraph (d)
is changed to "6 months". The term "90 days" in paragraph (k) is changed
to "45 days." If the Government is unable or unwilling in a timely manner
to conduct any audit of Seller's books and records, an audit may be
conducted by a mutually acceptable independent certified public accounting
firm.
52.249-8 Default (Fixed-Price Supply and Service), in which "Contracting
Officer" means Buyer's Purchasing Representative, and "Government" means
Buyer.
17. FAR/DFARS CLAUSES APPLICABLE TO ALL GOVERNMENT WORK. If it is noted on the
face of the Order that U.S. Government work is involved, the following FAR
and DFARS Clauses are incorporated herein by this reference, subject to the
Definitions Provision herein and to the modifications indicated, unless
indicated otherwise in the typed provisions of this Order:
(a) All Orders include the following:
52.204-2 Security Requirements.
52.208-1 Required Sources for Jewel Bearings and Related Items.
Communication required under this clause from Seller to Contracting
Officer shall be through Buyer's Purchasing Representative.
52.211-7 Other Than New Material, Residual Inventory, and Former
Government Surplus Property
52.211-15 Defense Priority and Allocation Requirements.
52.215-26 (Alternate 1) Integrity of Unit Prices.
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52.223-3 Hazardous Material Identification and Material and Material
Safety Data, in which "Government" means Government and Buyer
52.225-10 Duty-Free Entry, in which "Contracting Officer" means
Buyer's Purchasing Representative. The last sentence of paragraph (h)
"the contract" means prime contract.
52.225-11 Restrictions on Certain Foreign Purchases.
52.227-1 Authorization and Content.
52.227-10 Filing of Patent Applications - Classified Subject Matter.
52.227-11 Patent Rights - Retention by the Contractor (Short Form), if
Seller is a small business or nonprofit organization
52.227-12 Patent Rights - Retention by the Contractor (Long Form), if
Seller is other than a small business or nonprofit organization and if
this Order requires the performance of research, experimental, or
development work.
52.229-3 Federal, State, and Local Taxes, in which "Government" means
Buyer and "Contracting Officer" means Buyer's Purchasing Representative.
52.247-63 Preference for U.S. Flag Air Carriers.
52.247-64 Preference for Privately Owned U.S. Flag Commercial Vessels.
252.223-7002 Safety Precautions for Ammunition and Explosives, in
which "Contacting Officer" means Buyer or Contracting Officer.
"Government" shall not mean Buyer except in paragraph (c) where it
means Buyer or government. Seller shall send simultaneously to Buyer
a coy of each notification and report sent to the Contracting Officer.
252.225-7009 Duty-Free Entry - Qualifying Country End Products and
Supplies, in which "Contracting Officer" means Buyer's Purchasing
Representative acting pursuant to authorization of the Contracting
Officer. In paragraph (k) "this contract" means the prime contract.
252.225.7010 Duty Free Entry - Additional Provisions.
252.225-7014 Preference for Domestic Specialty Metals (Alternate 1).
252.225-7025 Foreign Source Restrictions, in which "Contracting
Officer" s hall also mean Buyer's Purchasing Representative in
paragraph (e).
252.227-7013 Rights in Technical Data Noncommercial Items.
252.227-7014 Rights in Noncommercial Computer Software and Noncommercial
Computer Software Documentation.
252.227-7015 Technical Data-General Items.
252.227-7016 Rights in Bid or Proposal Information.
252.227-7017 Identification and Assertion of Restrictions.
252.227-7019 Validation of Asserted Restrictions-Computer Software.
252.227-7027 Deferred Ordering of Technical Data or Computer
Software, provided, however, that this right is solely for the purpose
and only to the extent necessary to fulfill obligations to the
Government in the prime contract under which this Order is issued.
The work "Government" shall mean the Buyer or the Government except in
the last sentence.
252.227-7037 Validation of Restrictive Markings on Technical Data.
252.227-7039 Patents-Reporting of Subject Inventions.
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252.228-7005 Accident Reporting and Investigating Involving Aircraft,
Missiles, and Space Launch Vehicles, in which "Administrative
Contracting Officer" means Buyer and Administrative Contracting
Officer, and "Government" means Buyer or Government.
252.247-7024 Notification of Transportation of Supplies by Sea. In
paragraph (a), the first sentence and the word "however" in the second
sentence are deleted.
(b) Orders exceeding $2,500 also include:
52.222.-36 Affirmative Action for Handicapped Workers. (41 CFR 60)
(c) Orders exceeding $10,000 also include:
52.222-20 Walsh-Healey Public Contract Act.
52.222-26 (b) Equal Opportunity, (41 CFR 60)
52.222-35 Affirmative Action for Special Disabled and Vietnam Era
Veterans. (41 CFR 60)
52.222-37 Employment Reports on Special Disabled Veterans and Veterans
of the Vietnam Era.
(d) Orders exceeding $100,000 also include:
52.203-6 Restrictions on Subcontractor Sales to the Government.
52.203-7 Anti-Kickback Procedures.
52.203-11 Certification and Disclosure Regarding payments to Influence
Certain Federal Transaction
52.203-12 Limitations on Payments to Influence Certain Federal
Transactions.
52.215-2 Audit-Negotiation. If the Government is unable or unwilling in
a timely manner to conduct any audit of Seller's books or records, an
audit may be conducted by mutually acceptable independent certified
public accounting firm.
52.219-8 Utilization of Small, Small Disadvantaged and Women-Owned Small
Business Concerns...
52.222-4 Contract Work Hours and Safety Standards Act - Overtime
Compensation. Buyer may withhold or recover from Seller such sums as the
Contracting Officer withholds or recovers from Buyer because of
liabilities of Seller or its subcontractors under this clause.
52.223-2 Clean Air and Water.
52.223-13 Certification of Toxic Chemical Release Reporting.
52-223-14 Toxic Chemical Release Reporting.
52.227-2 Notice and Assistance Regarding Patent and Copyright
Infringement.
52.244-5 Competition in Subcontracting.
52.247-63 Preference for U.S. Flag Air Carriers.
52.247-64 (Alternate 1) Preference for Privately Owned U.S. Flag
commercial Vessels.
252.203-7001 Special Prohibition on Employment.
252.209-7000 Acquisition for Subcontractors Subject to On-site
Inspection Under the INF Treaty.
252.247.7023 Transportation of Supplies by Sea.
252.249-7002 Notification of Proposed Program Termination or Reduction.
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(e) Orders exceeding $500,000 also include:
52.219-9 Small Business and Small Disadvantaged Business Subcontracting
Plan, in which "Contracting Officer" means Buyer's Purchasing
Representative in the first sentence of subparagraph (c).
252.249-7001 Notification of Substantial Impact on Employment.
18. SPECIAL PROVISIONS:
(a) Jigs and Fixtures: In manufacture of items to be supplied hereunder.
Seller shall use jigs, fixtures, and/or other devices or appliances, in
all processes where such use is conductive to interchangeability for
uniformity of the product, or such character as will reduce the need for
selective assembly.
(b) Indemnification:
(1) Seller hereby indemnifies Buyer and agrees to hold Buyer harmless
from any and all violations of import/export laws and regulations
of the United States which result either directly or indirectly
from Seller's acts or omissions to act.
(2) By acceptance of this purchase order, Seller hereby agrees to
indemnify, hold harmless, and exonerate Buyer for any losses or
damages, resulting from any claim, action, proceeding or suit
relating to the Seller's violation of the provisions of Subsection
27 of the Office of Federal Procurement Policy Act (41 U.S.C. 423),
Procurement Integrity. In addition to any other remedies that Buyer
may have, Seller shall defend at its expense, any such claim
action, proceeding or suit against Buyer or its Customer(s) and
shall pay all costs and damages incurred either through judgment or
settlement. Seller further agrees to provide Buyer with
certifications of compliance with the provisions of the Act if
required to do so.
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Attachment 40-0100 Release 001
01 April 1998
HUGHES SPACE AND COMMUNICATIONS COMPANY
MODIFICATIONS TO VARIOUS PURCHASE ORDER ATTACHMENTS
A. Modify the Purchase Order Attachments cited below as directed:
1. For all Federal Acquisition Regulation references in the Purchase Order
Attachments cited below, insert the following language at the onset of
each clause:
"Contract Officer/Government: references shall be read to indicate
`Buyer' `Contractor' shall be read to indicate the `supplier'."
2. Modify Hughes Aircraft Company Purchase Order General Provisions and
Shipping Instructions, GL - 21 as follows:
a. Add the following clauses to Paragraph 17, Clauses Applicable to All
Government Work:
52.203-3 Gratuities (APR 1984)
52.203-5 Covenant Against Contingent Fees (APR 1984)
52.203-8 Cancellation, Recission and Recovery of Funds for
Illegal or Improper Activity (JAN 1997)
52.203-10 Price or Fee Adjustment for Illegal or Improper Activity
(JAN 1997)
52.209-6 Protecting the Government's Interest when subcontracting
with Contractors Debarred, Suspended, or Proposed for
Debarment (SEP 1990)
18-52.219-75 Small Business and Small Disadvantaged Business
Subcontracting Reporting (SEP 1992)
52.222-3 Convict Labor (APR 1984)
52.223-6 Drug Free Work Place (JUL 1990)
52.225-3 Buy American Act - Supplies (JAN 1994)
52.227-14 Rights in Data-General (JUN 1987), as modified by NASA
FAR Supplement 18.52.227-14, Alternate II (JUN 1987)
52.227-21 Technical Data Certification, Revision and Withholding
of Payment Major Systems (JUN 1987)
52.244-6 Subcontracts for Commercial Items and Commercial
Components (OCT 1995)
18-52.221-70 Safety and Health (DEC 1988)
18-52.227-70 New Technology (JUL 1995)
18-52.244-70 Geographic Participation in the Aerospace Program (APR
1985) $100,000 Threshold
18-52.245-70 Acquisition of Centrally Reportable Equipment (JUN 1997)
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52.203-12 Limitation on Payments to Influence Certain Federal
Transactions (JAN 1990) $100,000 Threshold
18-52.245-73 Financing Reporting of NASA Property in the Custody of
Contractors (SEP 1996)
18-52.243-71 Shared Savings (DEC 1996)
B. QUALITY AND PERFORMANCE ASSURANCE BY THE GOVERNMENT AT
SUBCONTRACTOR PLANTS
1. The Government may perform audits of quality and performance assurance
functions in accordance with seller's internal quality and performance
assurance procedures and applicable terms of this subcontract.
2. The seller shall provide for timely Government access to seller and
lower tier subcontractor facilities for these purposes.
3. Government audits of quality and performance assurance functions shall
not relieve the seller of any of its responsibilities under this
subcontract.
4. All seller documentation data, and analysis generated for, or
applicable to, this subcontract, whether formal or informal, shall be
made available to the Government upon request.
C. DESIGNATION OF THE NEW TECHNOLOGY REPRESENTATIVE AND PATENT REPRESENTATIVE
1. For purposes of administration of the clause of this subcontract
entitled "New Technology" or "Patent Rights" - Retention b the
Contractors (Short Form)": whichever is included, the following
named representatives are hereby designated to administer such clause:
<TABLE>
<CAPTION>
Title Office Code Address
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<S> <C> <C>
New Technology Representative 204 Goddard Space Flight Center
Greenbelt, MD 20771
Patent Representative 204 Goddard Space Flight Center
Greenbelt, MD 20771
</TABLE>
D. RIGHTS IN DATA GENERAL (52.227-14) as modified by NASA FAR Supplement
18-52.227-14 ALTERNATE II (JUN 1987)
(a) Definitions
"Computer Software," as used in this clause, means computer programs,
computer data bases, and documentation thereof.
"Data," as used in this clause, means recorded information, regardless of
form or the media on which it may be recorded. The term includes technical
data and computer software. The term does not include information
incidentals to contract administration, such as financial, administrative,
cost or pricing, or management information.
"Form, fit, and function data," as used in this clause, means data
relating to items, components, or processes that are sufficient to enable
physical and functional interchangeability, as well as data identifying
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source, size, configuration, mating, and attachment characteristics,
functional characteristics, and performance requirements, except that for
computer software it means data identifying source, functional
characteristics, and performance requirements but specifically excludes the
source code, algorithm, process, formulae, and flow charts of the software.
"Limited-Rights," as used in this clause, means the rights of the
Government in limited rights data as set forth in the Limited Rights Notice
of subparagraph (g)(2) if included in this clause.
"Limited-Rights data," as used in this clause, means data (other than
computer software) that embody trade secrets or are commercial or
financial and confidential or privileged, to the extent that the data
pertain to items, components, or processes developed at private expense,
including minor modifications thereof.
"Restricted computer software," as used in this clause, means computer
software developed at private expense and that is a trade secret; is
commercial or financial and is confidential or privileged; or is published
copyrighted computer software, including minor modifications of such
computer software.
"Restricted rights," as used in this clause, means the rights of the
Government in restricted computer software, as set forth in the Restricted
Rights Notice of subparagraph (g)(3) if included in this clause, or as
otherwise may be provided in a colladeral agreement incorporated in and
made part of this contract, including minor modifications of such computer
software.
"Technical data," as used in this clause, means data (other than
computer software) which are of a scientifical or technical nature.
"Unlimited Rights," as used in this clause, means the rights of the
Government to use, disclose, reproduce, prepare derivative works,
distributed copies to the public, and perform publicity and display
publicity, in any manner and for any purpose, and to have or permit others
to do so.
(b) Allocation of rights. (j) Except as provided in Paragraph (c) of this
clause regarding copyright, the Government have unlimited rights in -
(i) Data first produced in the performance of this company;
(ii) Form, fit, and function data delivered under this contract;
(iii) Data delivered under this contract (except for restricted
computer software) that constitute manuals or instructional and training
material for installation, operation, or routine maintenance and repair of
items, components, or processes delivered or furnished for use under this
contract; and
(iv) All other data delivered under this contract unless provided
otherwise for limited rights data or restricted computer software in
accordance with paragraph (g) of this clause.
(2) The Contractor shall have the right to -
(i) Use, release to others, reproduce, distribute, or publish any
data first produced or specifically used by the Contractor in the
performance of this contract unless provided otherwise in paragraph (d) of
this clause:
(ii) Protect from unauthorized disclosure and use those data which
are limited rights data or restricted computer software to the extent
provided in paragraph (g) of this clause:
(iii) Substantiate use of, add, or correct limited rights,
restricted rights, or copyright notices and to take other appropriate
action, in accordance with paragraphs (e) and (f) of this clause: and
(iv) Establish claim to copyright subsisting in data first
produced in the performance of this contract to the extent provided in
subparagraph (c)(1) of this contract.
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(c) Copyright. (1) Data first produced in the performance of this contract.
Unless provided otherwise in paragraph (d) of this clause, the Contractor
may establish, without approval of the Contracting Officer, claim to
copyright subsisting in scientific and technical articles based on or
containing data first produced in the performance of this contract and
published in academic, technical or professional journals. Symposia
proceedings or similar works. The prior, express written permission of the
Contracting Officer is required to establish claim to copyright subsisting
in all other data first produced in the performance of this contract. When
a claim to copyright is made, the Contractor shall affix the applicable
copyright notices of 17 U.S.C. 401 or 402 and acknowledgement of Government
sponsorship (including contract number) to the data when such data are
delivered to the Government, as well as when the data are published or
deposited for registration as a published work in the U.S. copyright
Office. For data other than computer software the Contractor grants to the
Government, and others acting on its behalf, a paid-up, nonexclusive,
irrevocable, worldwide license in such copyrighted data to reproduce,
prepare derivative works. Distribute copies to the public, and perform
publicity and display publicity by or on behalf of the Government. For
computer software, the Contractor grants to the Government and others
acting on its behalf, a paid-up nonexclusive, irrevocable worldwide license
is such copyrighted computer software to reproduce, prepare derivative
works, and perform publicly and display publicly by or on behalf of the
Government.
(2) Data not first produced in the performance of this contract. The
Contractor shall not, without prior written permission of the Contracting
Officer. Incorporate in data delivered under this contract any data not
first produced in the performance of this contract and which contains the
copyright notice of 17 U.S.C 401 or 402, unless the Contractor identifies
such data and grants to the Government, or acquires on its behalf, a
license of the same scope as set forth in subparagraph (c)(1) of this
clause; provided however, that if such are computer software the Government
shall acquire a copyright license as set forth if subparagraph (g)(3) of
this clause if included in this contract or as otherwise may be provided in
a collateral agreement incorporated in or made part of this contract.
(3) Removal of notices. The Government agrees not to remove any
copyright notices placed on data pursuant to this paragraph (c), and to
include such notices on all reproductions of the data.
(d) Release, publication and use of data. (1) The Contractor shall have the
right to use, release to others, reproduce, distribute, or publish any data
first produced or specifically used by the Contractor in the performance of
this contract, except to the extent such data may be subject to the federal
export control or national security laws or regulations, or unless
otherwise provided in this paragraph of this clause or expressly set forth
in this contract.
(2) The contractor agrees that to the extent it receives or is given
access to data necessary for the performance of this which contains
restrictive markings, the contractor shall treat the data in accordance
with such markings unless other wise specifically authorized in writing by
the Contracting Officer,
(3) (NFS 18-52.227-14 addition)
(i) the contractor agrees not to establish claim to copyright nor
to publish or release to others any computer software first produced in the
performance of this contract without the prior written permission of the
Contracting Officer.
(ii) If the Government desires to obtain copyright in computer
software first produced in the performance of this contract and permission
has not been granted as set forth in paragraph (d)(3)(I) of this clause,
the Contracting Officer may direct the contractor to assert, or authorize
the assertion of, claim to copyright in such data and to assign, or obtain
the assignment of, such copyright to the Government or its designated
assignee.
(iii) Whenever the word "establish" is used in this clause, with
reference to a claim to copyright, it shall be construed to mean "assert".
4
<PAGE>
(e) Unauthorized markings of data. Notwithstanding any other provisions of
this contract concerning inspection or acceptance, if any data delivered
under this contract are marked with the notices specified in subparagraph
(g)(2) or (g)(3) of this clause and use of such is not authorized by this
clause, or if such data bears any contract, the Contracting Officer may at
ant time either return the data to the Contractor, or cancel or ignore the
markings. However, the following procedure shall apply prior to canceling
or ignoring markings.
(i) The Contracting Officer shall make written inquiry to the
Contractor affording the Contractor 30 days from receipt of the inquiry to
provide written justification to substantiate the property of the markings.
(ii) If the Contractor fails to respond or fails to provide written
justification to substantiate the propriety of the markings within the 30-
day period (or a longer time not exceeding 90 days approved in writing by
the Contracting Officer for good cause shown), the Government shall have
the right to cancel or ignore the markings at any time after said period
and the data will no longer be made subject to any disclosure prohibitions.
(iii) If the Contractor provides written justification to substantiate
the propriety of the markings within the period set in subdivision
(e)(1)(I) of this clause, the Contracting Officer shall consider such
written justification and determine whether or not the marking are to be
cancelled or ignored. If the Contracting Officer determines that the
markings are authorized, the Contractor shall be notified in writing. If
the Contracting Officer determines, with concurrence of the head of the
contracting activity, that the markings are not authorized, the Contracting
Officer shall furnish the Contractor with written determination, which
determination will become the final agency decision regarding the
appropriateness of the markings unless the Contractor files suit in a court
of competent jurisdiction within 90 days of receipt of the Contracting
Officer's decision. The Government shall continue to abide by the markings
under this subdivision (e)(1)(iii) until final resolution of the matter
either by the Contracting Officer's determination becoming final (In which
instance the Government shall thereafter have the right to cancel or ignore
the markings at any time the data will no longer be made subject to any
disclosure prohibitions), or by final disposition of the matter by court
decision if suit is filed.
(2) The time limits in the procedures set forth in subparagraph
(e)(1) of this clause may be modified in accordance with agency regulations
implementing the Freedom of Information Act (5 U.S.C. 552) if necessary to
respond to a request thereunder.
(3) This paragraph (e) does not apply if this contract is for a major
system or for support of a major system by a civilian agency other than
NASA and the U.S. Coast Guard agency subject to the provisions of Title III
of the Federal Property and Administrative Services Act of 1949.
(4) Except to the extent the Government's action occurs as the result
of final disposition of the matter by a court of competent jurisdiction,
the Contractor is not precluded by this paragraph (e) from bringing a claim
under the Contract Disputes Act, including pursuant to the Disputes clause
of this contract, as applicable, that may arise as the result of the
Government removing or ignoring authorized markings on data delivered under
this contract.
(f) Omitted or incorrect markings.
(1) Data delivered to the Government without either the limited rights
or restricted rights notice as authorized by paragraph (g) of this clause,
or the copyright notice required by paragraph (e) of this liability for the
disclosure, use, or reproduction of such data. However, to the extent the
data has not been disclosed without restriction outside the Government, the
Contractor may request, within 6 months (or a longer time approved by the
Contracting Officer for good cause shown) after delivery of such data,
permission to have notices placed on qualifying data at the Contractor's
expense, and the Contracting Officer may agree to do so if the Contractor-
(i) Identifies the data to which the omitted notice is to be
applied;
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<PAGE>
(ii) Demonstrates that the omission of the notice was inadvertent;
(iii) Establishes that the use of the proposed notice is
authorized: and
(iv) Acknowledges that the Government has no liability with
respect to the disclosure, use, or reproduction of any such data made prior
to the addition of the notice or resulting from the omission of the notice.
(2) The Contracting Officer may also (I) permit correction at the
Contractor's expense of incorrect notices if the Contractor identifies the
data on which correction of the notice is to be made, and demonstrates that
the correct notice is authorized, or (ii) correct any incorrect notices.
(g) Protection of limited rights data and restricted computer software.
(1) When data other than that listed in subdivisions (b)(1)(i), (ii),
and (iii) of this clause are specified to be delivered under this contract
and qualify as either limited rights data or restricted computer software,
if the Contractor desires to continue protection of such data, the
Contractor shall withholding, the Contractor shall identify the data being
withheld and furnish form, fit, and function data in lieu thereof. Limited
rights data that are formatted as a computer data base for delivery to the
Government are to be treated as limited rights data and not restricted
computer software.
(2) Notwithstanding subparagraph (g)(1) of this clause, the contract
may identify and specify the delivery of limited rights data that has been
withheld or would otherwise be withholdable. If delivery of such data so
required, the Contractor may affix the following "Limited Rights Notice" to
the data and the Government will thereafter treat the data, subject to the
provisions of paragraphs (e) and (f) of this clause, in accordance with
such Notice:
LIMITED RIGHTS NOTICE (JUN 1987)
(a) These data are submitted with limited rights under Government contract
No. NASS-98069, Hughes Space & Communications Company subcontract/purchase
order No.____________________. These data may be reproduced and used by
the Government with the express limitation that they will not, without
written permission of the Contractor, be used for purposes of manufacture
nor disclosed outside the Government; except that the Government may
disclose these data outside the Government for the following purposes, if
any, provided that the Government makes such disclosure subject to
prohibition against further use and disclosure:
(i) Use (except for manufacture) by support service contractors.
(ii) Evaluation by non-government evaluators.
(iii) Use (except for manufacture) by other contractors
participating in the Government's program of which the specific contract is
a part, for information and use in connection with the work performed under
each contract.
(b) This Notice shall be marked on any reproduction of these data, in
whole or in part.
(End of notice)
(3) (Reserved).
(h) Subcontracting. The Contractor has the responsibility to obtain from
its subcontractor all data and rights therein necessary to fulfill the
Contractor's obligations to the Government under this contract. If a
subcontractor refuses to accept terms affording the Government such rights,
the Contractor shall promptly bring such refusal to the attention of the
Contracting Officer and not proceed with subcontract award without further
authorization.
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<PAGE>
(i) Relationship to patents. Nothing contained in this clause shall imply
a license to the Government under any patent or be construed as affecting
the scope of any license or other right otherwise granted to the
Government.
E. POTENTIALLY HAZARDOUS ITEMS (NASA FAR SUPP. 18-52.223-72)
1. This clause applies to subcontracts requiring delivery of the
following categories of materials such as pyrotechnics, pressure
systems, propellants, flammables, solvents, fuel oxidizers, batteries,
electrolytes, fuel oxidizers, pyros, bolt cutters, ext.
2. The supplier shall furnish complete design information and drawings
showing all details of construction, including materials, for all
potentially hazardous items. These items or components are designated
as potentially hazardous to employees and subcontractors who are to
perform work in connection with installing them in combination with
other equipment, or in testing them either alone or in combination
with other items or components, or in handling them. The supplier
shall inform such employees or subcontractors of the potentially
hazardous nature of these items or components before requesting or
directing the performance of the work.
3. This requirement for the delivery of data supersedes any terms of this
contract permitting withholding of data.
4. This clause, including this paragraph D, shall be included in each
subcontract at any tier that calls for the manufacture or handling of
potentially hazardous items or components as defined in paragraph A
above.
F. SUBCONTRACTING PLAN AND REPORTS FOR SMALL BUSINESS AND SMALL DISAVANTAGED
BUSINESS CONCERNS
1. This clause is not applicable to subcontracts with small business and
small disadvantaged business or to subcontracts valued at less than
$500,000.
2. FAR clause 52.219-9, "Small Business and Small Disadvantaged Business
Subcontracting Plan", included in this subcontract requires the
submission of a Subcontracting Plan prior to award of a subcontract,
and submission of status reports. The reports shall be submitted as
set forth in "C" and "D" of this clause.
3. The Seller shall prepare and submit Standard Form 294 (Rev. 1-90)
"Subcontracting Report for Individual Contracts" in accordance with
the instructions on the back of the form. The SF 294 must be
submitted to: Contracting Officer, Code 254.6, NASA/Goddard Space
Flight Center, Greenbelt, MD 20771 on a semi-annual basis. Seller
shall provide a copy of each report to Buyer's Procurement
Representative. A final SF 294 must be submitted after subcontract
completion. The final SF 294 submittal must be received no later than
the due date for what would have been the next periodic report.
4. The Seller shall prepare and submit Standard Form 295 (Rev. 1-90),
"Subcontracting Report for Individual Contracts" in accordance with
the instructions on the back of the form and in accordance with NASA
FAR Supplement clause 18-52.219-75, "Small Business and Small
Disadvantaged Business Subcontracting Reporting. The SF 294 must be
submitted to NASA, Office Procurement (HM), Washington, D.C. 210506 on
a quarterly basis no later than 30 days after the close of each
reporting period which end: December 31, March 31, June 30, and
September 30. Seller shall provide a copy of each report to Buyer's
Procurement Representative.
G. RELEASE OF INFORMATION
It is NASA policy to encourage publication of scientific and technological
advances and information developed under its contracts. However,
publication or distribution of such data requires prior clearance
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<PAGE>
from NASA. Likewise, any news release, including photographs and films,
public announcements, denial or confirmation of same on any part or phase
of the subject matter of this subcontract requires similar approval.
Requests for approval shall be received by Buyer's Procurement
Representative at least 20 working days prior to the desired publication,
distribution or release date.
H. CONTRACTOR ASSISTANCE
NASA has retained the services of the following organizations for technical
assistance in management of the GOES N,O, P, Q Program; UNIYSYS CORP;
SWALES AND ASSOCIATES; MCDONNEL DOUGLAS CORPORATION, AND; JACKSON & TULL.
In addition, NASA may designate additional organizations.
Seller agrees to cooperate with personnel of the designated organizations
by providing access to technical and schedule data, authorizing attendance
at meetings, engaging in technical discussions and entering into agreements
which will allow access to proprietary data and will protect disclosed
data.
J. FINANCIAL REPORTING OF GOVERNMENT-OWNED/CONTRACOR-HELD PROPERTY
The Seller shall prepare and submit annually a NASA Form 1018, Report of
Government-Owned/Contractor-Held Property, in accordance with 18-45.505-14
and the instructions on the form and in section 18-45.7101 of the NASA FAR
Supplement, except that the reporting of space hardware shall be required
only as directed in clause 18-52.245-78, Space Hardware Reporting, of this
contract, if applicable.
Then annual reporting period shall be from July 1 of each year to June 30
of the following year. The report shall be submitted by July to the
following:
Hughes Space & Communications Company
P.O. Box 92919
Los Angles, CA 90009
Attention: Leathy A. Allen
Bldg. S41, Mail Station A330
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<PAGE>
HUGHES AIRCRAFT COMPANY
PURCHASE ORDER ATTACHMENT GL-14
INSURANCE PROTECTION, INDEMNIFICATION, AND SECURITY REQUIREMENTS
----------------------------------------------------------------
I. Prior to initiation of work, Seller shall deposit with Buyer's Purchasing
Representative evidence of adequate insurance protection in the form of
certificates. The amounts shall not be less then the amounts specified
below, or such other amounts as specified in advance in writing by Buyer's
Insurance Office
<TABLE>
<CAPTION>
Insurance Coverage Limits of Liability
-------------------------------------------------------------
<S> <C>
A. Worker's Compensation Statutory
B. Employer's Liability $ 5000,000 Each Accident
$ 500,000 Disease-Policy Limit
$ 500,000 Disease-Each Employee
C. General Liability $ 500,000 Combined Single Limit
(Bodily Injury & Property Damage) Each Occurrence
D. Automobile Liability $ 500,000 Combined Single Limit
(Bodily Injury & Property Damage) Each Occurrence
</TABLE>
II. Seller agrees to waive any rights of subrogation which Seller may have
against Buyer under applicable Worker's Compensation Status. The insurance
certificates must include Buyer as an additional insured. All certificates
of insurance shall provide that the insurer give thirty (30) days written
notice to the Buyer prior to the effective date of expiration, any material
change, or cancellation. Said notice shall be submitted to Buyer's
Purchasing Representative.
III. Notwithstanding the forgoing requirements, Seller shall indemnify and hold
harmless Buyer, its office, employees, agents, and invitees from and
against all claims, judgements liabilities, losses, injuries and damages of
every nature (including incidental costs and expenses) caused by the acts
or omissions to act by the Seller, its officers, employees, agents,
invitees or vendors, directly or indirectly arising out of the performance
of this purchase order or any act or failure to act by subcontractors or
suppliers of the Seller. Seller agrees that its employees shall work at
Seller's risk, except as to damage or injuries caused directly by Buyer's
agents or employees.
IV. Seller and its employees shall comply with all applicable State and local
laws, ordinance codes and regulations, and all applicable Federal laws,
Executive Orders, and Government Regulations; and Seller hereby indemnifies
and agrees to hol Buyer harmless from and against all liabilities and
penalties imposed for failure to do so.
V. Seller agrees that all its personnel who, pursuant to this purchase order,
will be on Buyer's premises shall have appropriate authorization issued by
Buyer's Security Office prior to being accorded access to Buyer's premises.
Buyer will furnish the necessary security forms and Seller shall secure
their execution and return to Buyer's Buyer's Security Office at least
twenty-four (24) hours prior to the desired access to premises. Denial of
access because of failure to comply with Buyer's security procedures shall
not be basis for breach, nor substantiate any other claim whatsoever by the
Selller.
9/91 Edition
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Purchase Order Attachment GL-17
Optional FAR/DFARS Clauses
--------------------------
The following Federal Acquisition Regulation (FAR) Clauses and Department of
Defense Supplement Clauses (DFARS) are added to and made a part of the Purchase
Order General Provisions effective for this Purchase Order.
ONLY THOSE CLAUSES CITED ON THE FACE OF OR IN THE TEXT OF THIS ORDER ARE
INCORPORATED BY THIS REFERENCE.
FAR/DFARS
REFERENCES TITLE
- ---------- -----
A. Reserved
B. 52.215-22 Price Reflection for Defective Cost or Pricing Data. Buyer's
prime contract contains the clause. The obligation which FAR
clause 52.215-24 in the prime contract requires the
subcontractors are required of Seller. In addition to any
other remedies provided by law or under this Order, if Buyer
is subjected to any liability as the result of Seller's or
lower-tier subcontractors' failure to comply with the of
clause 52.215-24, then Seller agrees to indemnify and hold
Buyers harmless to the full extent of any loss, damage or
expenses resulting from such failure.
C. 52-215.23 Price Reflection for Defective Cost or Pricing Data. Buyer's
prime contract contains their clause. The obligation which
FAR clause 52.215-25 in the prime contract requires the
subcontractors are required of Seller. In addition to any
other remedies provided by law or under this Order, if Buyer
is subjected to any liability as the result of Seller's or
lower-tier subcontractors' failure to comply with the of
clause 52.215-25, then Seller agrees to indemnify and hold
Buyers harmless to the full extent of any loss, damage or
expenses resulting from such failure.
D. 52.215.24 Subcontractor Cost or Pricing Data. The certificate required
by paragraph (b) is Buyers Form 9784A CS.
E. 52.215-25 Subcontractor Cost or Pricing Data Modifications. The
certificate required by paragraph (c) is Buyer's Form 9784A
CS.
F. Authorization and Comment (Alternate 1)
G. Reserved
H. 52.227-9 Refund and Royalties
I. 52.227-11 Patent Rights- Retention by the Contractor (Short Form). In
addition, FAR 52.227-12 in hereby deleted from Buyer's
Purchase Order General Provisions.
J. 52.227-13 Patent Rights- Acquisition By The Government. In addition,
FAR 52.227-12 is hereby deleted from Buyer's Purchase Order
General Provisions.
K. 52.229-4 Federal, State, and Local taxes (Non-competitive Contract).
"Government" means Buyer except in the definition of
"Excepted Tax" and "Contracting Officer" means Buyer's
Purchasing Representative. FAR 52.229-3 in hereby deleted
from Purchase Order General Provisions.
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<PAGE>
L. 52.230-2 Cost Accounting Standards. Paragraph(b) of the clause is
deleted. Seller shall communicate and otherwise deal directly
with the Contracting Officer to the extent practicable and
permissible as to all matters relating to Cost Accounting
Standards. Seller shall provide Buyer with copies of all
communications between Seller and the Contracting Officer
respecting this clause and clause 52.230-6, provided Seller
shall not be required to disclose to Buyer such
communications containing information which is privileged and
confidential to the Seller. In addition to any other remedies
provided by law or under this Order, Seller agrees to
indemnity and hold Buyer harmless to the full extent of any
loss, damage or expense if Buyer is subjected to any
liability as the result of a failure of the Seller or its
lower-tier subcontractors to comply with the requirements of
this clause or clause 52.230-6.
M. 52.230-6 Administration of Cost Accounting Standards.
N. 52.230-3 Disclosure and Consistency of Cost Accounting Practices.
Paragraph(b) of the clause is deleted. Seller shall
communicate and otherwise deal directly with the Contracting
Officer to the extent practicable and permissible as to all
matters relating to Cost Accounting Standards. Seller shall
provide Buyer with copies of all communications between
Seller and the Contracting Officer respecting this clause and
clause 52.230-6, provided Seller shall not be required to
disclose to Buyer such communications containing information
which is privileged and confidential to the Seller. In
addition to any other remedies provided by law or under this
Order, Seller agrees to indemnity and hold Buyer harmless to
the full extent of any loss, damage or expense if Buyer is
subjected to any liability as the result of a failure of the
Seller or its lower-tier subcontractors to comply with the
requirements of this clause or clause 52.230-6.
O. 52.230-5 Cost Accounting Standards-Educational Instructions. Paragraph
(b) of the clause is deleted. Seller shall communicate and
otherwise deal directly with the Contracting Officer to the
extent practicable and permissible as to all matters relating
to Cost Accounting Standards. Seller shall provide Buyer with
copies of all communications between Seller and the
Contracting Officer respecting this clause and clause 52.230-
6, provided Seller shall not be required to disclose to Buyer
such communications containing information which is
privileged and confidential to the Seller. In addition to any
other remedies provided by law or under this Order, Seller
agrees to indemnity and hold Buyer harmless to the full
extent of any loss, damage or expense if Buyer is subjected
to any liability as the result of a failure of the Seller or
its lower-tier subcontractors to comply with the requirements
of this clause 52.230-6.
P. 52.237-2 Protection of Government Buildings, Equipment, and
Vegetation.
Q. Reserved
R. 52.245-2 Government Property (Fixed-Price Contracts) (Alternate 1).
This provision is only applicable with the prior approval of
Buyer's Contracting Officer.
. "Contracting Officer" means Buyer's Purchasing Representative
. "Government" means U. S. Government or Buyer.
. The fourth sentence of paragraph (b) is changed to read:
"Neither the Government nor the Buyer shall be liable."
S. 52.245-17 Special Tooling. "Contracting Officer" means Buyer's
Purchasing Representative, and "Government" means Buyer
except in paragraph (c) where it means U. S. Government or
Buyer. The term "90 days" is changed to "120 days" in
paragraph (f).
T. 52.245-18 Special Test Equipment. "Contracting Officer" means Buyer's
Purchasing Representative. In paragraph (b)(4), "Government-
owned" means Buyer-owned and/or Government-owned. The term
"30 days" in the second sentence of paragraph (b) and in the
second and third sentence of paragraph (c) is changed to "45
days."
10/96 Edition 2
<PAGE>
U. 52.246-23 Limitation of Liability.
V. 52.246-24 Limitation of Liability - High-Value Items. This Provision is
only applicable with the prior written approval of the
Buyer's Contracting Officer. Insert the following preamble
before paragraph (a) of the clause. This clause shall apply
only to those items identified in this Order as being subject
to the clause."
W. 52.246-25 Limitation of Liability - Services Contract.
X. Reserved
Y. 252.225-7026 Reporting of Contract Performance Outside the United States.
Z. Reserved
AA. 252.225-7001 Buy-American Act and Balance of Payments Program.
"Government" means Buyer or U. S. Government as applicable.
BB. 252.225-7007 Trade Agreements Act. "Government" means Buyer or U. S.
Government or applicable.
CC. 52.215-27 Termination of Defined Benefit Pension Plans. "Contracting
Officer" shall mean Buyer.
DD. 52.215-39 Revisions or Adjustment of Plans for Post retirement Benefit
Other than Pensions (PRB). "Contracting Officer" shall mean
Buyer.
EE. 252.225-7002 Qualifying Country Sources as Subcontractors.
FF. 252.235-7003 Frequency Authorization. "Contracting Officer" means Buyer's
Purchasing Represenative.
GG. Reserved
HH. Reserved
II. 52.225-7 Balance of Payments Program.
JJ. 52.225-9 Buy-American Act - Trade Agreements Act - Balance of Payments
Program.
KK. 252.225-7027 Limitations on Sales Commissions and Fees.
LL. 252.227-7036 Certification of Technical Data Conformity.
MM. Reserved
NN. 52.232-16 Progress Payments. Buyer's contract provides for progress
payments in accordance with the cited PAR provision. A
request for progress payments will not be considered as a
handicap or adverse factor in the award of Purchase Order.
Seller certifies that if awarded progress payments, it has an
accounting system which will adequately accumulate costs and
accommodate progress payments. All invoicing by Seller shall
be on a properly completed and submitted SF1443. All
references to "Contracting Officer" and "Government" shall
mean Buyer in all instances within the clauses except in
sections (a), (1) (z), and in those subparagraphs involving
vesting of title and title of loss.
OO. 52.232-16 Progress Payments (Small Business) (Alternate 2). Buyer's
contract provides for progress payments in accordance with
the cited FAR provision. A request for progress payments will
not be considered a handicap or adverse factor in the award
of Purchase Orders. Seller
10/96 Edition 3
<PAGE>
certifies that if awarded progress payments, it has an
accounting system which will adequately accumulate costs and
accommodate progress payments. All invoicing by Seller shall
be a properly completed and submitted SF1443. All references
to "Contracting Officer involving
PP. Reserved
QQ. Reserved
RR. 252.232-7003 Flexible Progress Payments. Buyer's contract allows flexible
progress payments in accordance with the cited DFARS
provision. References to "Government" in paragraphs (c) and
(d) shall mean Buyer.
THE TEXT OF THIS DOCUMENT SHALL NOT BE CHANGED EXCEPT BY WRITTEN AGREEMENT
BETWEEN BUYER AND SELLER
10/96 Edition 4
<PAGE>
PURCHASE ORDER ATTACHMENT SS-01
CONTRACT AND CONSULTANT SERVICES CONTRACTS
I. PERFORMANCE. Seller shall use its best efforts, shall perform or assign
work personnel satisfactory to Buyer, shall perform the work in accordance
with the highest standards, shall effect completion of each assigned task
on or before the date specified, if any, and shall pay promptly, when due,
all claims by Seller's personnel for services relating to the work.
II. Deleted by HSC
III. TIME. Time is of the essence; however, Seller shall not be liable for any
delay in performance due to causes beyond Seller's reasonable control and
without Seller's fault or negligence.
IV. SECURITY. When access to Buyer's facility is required by Seller or
Seller's personnel in the performance of services under this agreement,
Seller shall secure and execute Buyer's security forms furnished by the
Buyer for facility access. These forms shall be returned at least twenty-
four (24) hours prior to the desired access. If access to classified
information is required in performance of the services, Seller shall meet
the security clearance requirements of the U. S. Government as set forth
in the current edition of the Industrial Security Manual for Safeguarding
Classified Information (Attachment to DD Form 441). In the event such
security clearance requirements are not met by Seller, this agreement
shall be of no force or effect. Seller agrees that all of Seller's
personnel who, pursuant to this agreement, will have access to classified
information shall have appropriate personal security clearances which are
still in effect, prior to being accorded access to such information.
Seller shall at all times safeguard all classified information received,
generated or reproduced during the performance of this agreement in
accordance with the provisions of the current edition of the DoD Security
Manual (Attachment to DD Form 441).
V. ACCESS TO PLANT PROPERTY. Without limiting Seller's obligations under
Clause IV. above, Seller shall comply with all rules and regulations
established by Buyer for access to and activities in and around Buyer's
plants and properties.
VI. RELATIONSHIP.
A. For service contracts, Seller and all individuals assigned by the
Seller to assist the Buyer will, at all times during the performance
of this agreement and in connection with any services rendered to
Buyer, be considered employees of Seller. No relationship of employer-
employee is created by this agreement or by Seller's service.
B. For consultant services contracts, Seller will at all times during the
performance of this agreement and in connection with any services
rendered by Buyer, be considered an independent contractor.
Seller hereby acknowledges that Buyer is not obligated to provide
Worker's Compensation Insurance covering Seller's personnel or any
other employee insurance or benefits of Buyer. Seller is notified that
Buyer considers the Federal Insurance Contributions Act and the
withholding provisions of the Federal or State Revenue Codes as not
being applicable to any payments by Buyer to Seller pursuant to this
agreement.
VII. INSURANCE. Seller shall comply with Buyer's Attachment GL-14, "Insurance
Protection, Indemnification and Security Requirements", and said
attachment is incorporated into this agreement by this reference. However,
if Seller is an individual who will personally perform all the work,
Seller shall not be required to submit evidence of Worker's
The text of this document shall not be changed except by written agreement
between Buyer and Seller.
6/97 Edition Page 1 of 3
<PAGE>
PURCHASE ORDER ATTACHMENT SS-01 (continued)
Compensation of Employer's Liability Insurance.
VIII. DISCLOSURE OF INFORMATION.
A. Deleted by HSC.
B. Any information disclosed by personnel of Buyer or observed within
any facility of Buyer, will be used only by said personnel or agents
of Seller in performing under this purchase order and shall not
otherwise be disclosed to others except to Buyer's personnel on a
need-to-know basis in performing under said purchase order. The
foregoing restrictions shall not apply to documented information
already in possession of Seller, already in the public domain, or
received from a third party without restrictions.
C. Information which is disclosed to any employee of Buyer or submitted
as a deliverable item during or as a result of Seller's performance
under this purchase order, shall not be deemed disclosed or received
in confidence unless pursuant to an agreement in writing between
Buyer and Seller or predetermined and agreed to in this agreement.
D. The obligations of confidentiality and restrictions on use and
disclosure set forth herein shall survive completion or termination
of the purchase order into which this attachment is incorporated.
IX. Deleted by HSC.
X. Deleted by HSC.
XI. INDUSTRIAL PROPERTY RIGHTS AGREEMENT. Whenever an employee of Seller
performs services under this agreement in Buyer's facilities with
personnel of Buyer, excluding the attending of meetings, Seller consents
to said employee by signing the "Industrial Property Rights Agreement"
attached as Exhibit "A" and incorporated by this reference, and agrees
that any conflicts with Seller agreements with said employee shall be
resolved in favor of such Industrial Property Rights agreement with Buyer.
Each executed agreement shall be furnished to Buyer prior to said employee
entering Buyer's facilities.
XII. IMMIGRATION REFORM AND CONTROL ACT. Seller shall comply with the
requirements of the Immigration Reform and Control Act of 1986 and in
particular, Seller shall be responsible for the completion and maintenance
of the applicable I-9 forms. Seller hereby indemnified and agrees to hold
Buyer harmless from any and all liability, damages, and penalties imposed
by reason of Seller's failure to fully comply with said act.
XIII. TERMINATIONS.
A. In addition to any other rights of Buyer hereunder and not in
limitation thereof, this agreement may be terminated by Buyer at no
cost to Buyer upon three (3) days written notice; provided however,
that all rights of the parties under this agreement arising by calls
or work assignments from the Buyer which were issued prior to the
time of such termination shall survive such termination (see XIII.B
below).
B. Calls or work assignments under this agreement may be terminated by
Buyer by giving written notice to Seller. Upon receipt of Notice of
Termination, Seller shall terminate all work and deliver to Buyer
the results of Seller's performance to that time, including, without
limitation, the documents called for under Clauses VIII., IX., X.,
and XII. Above. In the event of such termination, Buyer shall make
to Seller, and Seller shall accept as full compensation, payment at
the rates prescribed in this agreement for travel expense as
stipulated in this agreement and work performed up to the time of
receipt of the Notice of Termination, less any and all previous
payments made, and Buyer shall then be released from further
obligation to make payments under this agreement.
The text of this document shall not be changed except by written agreement
between Buyer and Seller.
6/97 Edition Page 2 of 3
<PAGE>
XIV. CONTROLS.
A. The Seller shall maintain careful records in such a manner as to be
able to determine at all times the exact current balance of the not-
to-exceed funds in this agreement. If at any time Seller has reason
to believe that the applicable payments which will accrue in the
performance of this order in the next succeeding thirty (30) days,
when added to all other payments and costs previously accrued, will
exceed seventy-five percent (75%) of the not-to-exceed price then
set forth, Seller shall give written notice to Buyer to that effect.
B. Buyer shall not be obligated to pay Seller any amount in excess of
the not-to-exceed price set forth in this agreement, and Seller
shall not be obligated to continue performance if to do so would
exceed the price, unless and until Buyer shall have notified Seller
in writing that such no-to-exceed price has been increased and shall
have specified in such notice a revised not-to-exceed amount which
shall constitute the price for performance of the agreement. When
and to the extent that the not-to-exceed price set forth has been
increased, any time expended and authorized costs incurred by Seller
in excess of the not-to-exceed price prior to the increase shall be
allowable to the same extent as if such time expended and costs had
been incurred after such increase.
The text of this document shall not be changed except by written agreement
between Buyer and Seller.
6/97 Edition Page 3 of 3
<PAGE>
EXHIBIT A
INDUSTRIAL PROPERTY RIGHTS AGREEMENT
I, _______________________________, in consideration of my being granted access
to Hughes Aircraft Company's (hereinafter referred to as "Hughes") facility for
the purpose of performing under my employer's contract with Hughes, do hereby
agree as follows:
I. DISCLOSURE OF INFORMATION
A. Deleted by HSC
B. I hereby agree that any information disclosed by personnel of Hughes or
observed by me within any facility of Hughes will be used solely by me
in performing under my employer's contract with Hughes and shall not
otherwise be used by me or disclosed to others except Hughes personnel
on a need-to-know basis as required for my performance and that
documents disclosing said computer software or other information shall
not be duplicated or portions copied without prior permission of
Hughes. The above restrictions shall not apply to documented
information already in my possession, to documented information already
in the public domain, or to documents rightfully received from third
party without restriction.
C. I further agree that no information which is disclosed to any Hughes
employee during or as a result of my performance is to be deemed
disclosed or received in confidence unless pursuant to an agreement in
writing between Hughes and my employer.
D. I agree that the restrictions on use and disclosure of information set
forth herein shall survive completion of termination of my employer's
contract with Hughes.
II. COPYRIGHTABLE MATERIAL
Deleted by HSC.
II. INVENTIONS
A. Deleted by HSC.
B. Deleted by HSC.
Employer __________________________
Signature _________________________
Date ______________________________
The text of this document shall not be changed except by written agreement
between Buyer and Seller.
6/97 Edition Page 1 of 1
<PAGE>
EXHIBIT B
Additional Terms and Conditions
The following modified terms and conditions shall apply to this Subcontract:
<TABLE>
<CAPTION>
NUMBER TITLE DATE
- ------ ---------------------------------------------------------------------------- -----
<S> <C> <C>
GL-21 PURCHASE ORDER GENERAL PROVISIONS AND 10/96
SHIPPING INSTRUCTIONS, WITH THE FOLLOWING
MODIFICATIONS:
1. WARRANTIES, Delete this paragraph in its entirety,
and substitute the following in lieu thereof:
Seller warrants that the SSGS system will operate in accordance with the
requirements of this subcontract for a period of five years from the
date of launch of the GOES-N Satellite. Seller further warrants to Buyer
that the SSGS shall (1) be free from all defects in manufacture and
workmanship, and (2) to the extent not manufactured pursuant to designs
furnished by Buyer, be free from all defects in design. Seller further
warrants that (1) it has the right to license the Exhibit C software to
Buyer, (2) the Exhibit C software will be free of time-based and event-
based self-disabling codes, and (3) any software documentation will
faithfully and accurately support the Exhibit C software.
In the event a nonconformity, defect or error is found in the SSGS
system, Seller will repair or replace the nonconforming errant or
defective software or hardware within a reasonable time, not to exceed
90 days, after receipt of notice of the nonconformity, defect or error.
The above warranty applies if it is established that the nonconformity,
error or defect arises from the SSGS originally delivered to Buyer, as
certified by Buyer in its "Acceptance Letter", or the SSGS subsequently
modified, upgraded, replaced or substituted by Seller. In addition,
operator error that causes a malfunction to the SSGS or the GOES-N
Satellite shall not be covered by this warranty.
4. SELLER'S DATA: Revise paragraph 4(c)(1), revise the opening portion
of the sentence as follows: "To the extent that Seller establishes a
claim to statutory copyright in any data first produced in the
performance of this Order, Seller grants the Buyer..."
9. INVOICES: This Section is deleted in its entirety.
14. PRECEDENCE: The following order of precedence is applicable under
this subcontract:
1) The subcontract, including attachments (and modifications),
2) The Software License Agreements
3) The Statement of Work and Specification
</TABLE>
<PAGE>
EXHIBIT B
Additional Terms and Conditions
The following modified terms and conditions shall apply to this Subcontract:
<TABLE>
<CAPTION>
NUMBER TITLE DATE
- ------ ---------------------------------------------------------------------------- -----
<S> <C> <C>
GL-21 PURCHASE ORDER GENERAL PROVISIONS AND 10/96
SHIPPING INSTRUCTIONS, WITH THE FOLLOWING
MODIFICATIONS (Continued):
The following paragraphs are incorporated herein:
19. FINAL ACCEPTANCE:
Buyer and Buyer's customer shall perform final acceptance tests of the
SSGS within nine (9) months of launch of the GOES N spacecraft. Final
acceptance tests shall determine whether (1) the SSGS conforms to the
requirements of this subcontract, (2) is free from all defects in
manufacture and workmanship, and (3) to the extent not manufactured
pursuant to designs furnished by Buyer, is free from all defects in
design. Final acceptance shall further determine whether (1) the
Exhibit C software is free of time-based and event-based self-disabling
codes, and (2) the Exhibit C software documentation faithfully and
accurately support the Exhibit C software.
If the SSGS successfully meets the above requirements, Buyer shall
notify Seller in writing that the SSGS is being finally accepted. Upon
final acceptance of the SSGS, Seller may submit its final invoice for
payment under this subcontract. Final acceptance and final payment
shall not relieve Seller of its warranty obligations under Article 1.
If the SSGS fails to meet any of the above requirements, Buyer shall
promptly notify Seller in writing, and Seller shall have a reasonable
time, not to exceed 90 days, thereafter within which to make corrections
to the SSGS to meet such requirements, and Buyer shall thereafter have
an additional reasonable time, not to exceed 30 days, to reconduct
acceptance tests. Seller shall make such corrections to the SSGS at
Seller's sole risk and expense. If the SSGS fails to meet any of the
above requirements upon the second test, such failure may, at Buyer's
option, be deemed a failure to deliver the SSGS and Buyer shall have all
rights and remedies afforded to it as are applicable to nondelivery.
20. INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES:
In no event shall Seller be liable to Buyer for indirect, special,
incidental or consequential damages under this subcontract. However,
for a period of five years from the date of launch of the GOES-N
Satellite, it is agreed that the Seller shall be responsible for all of
its costs, both necessary and incidental, to participate and support
Buyer and Buyer's customer in performing anomaly investigation(s) and
inspection(s), and in establishing work around(s).
</TABLE>
<PAGE>
Exhibit C
List of Known Deliverable Software and Software Licenses
DELIVERABLE SOFTWARE SOFTWARE LICENSE
ISI COTS SOFTWARE: Exhibit D
EPOCH 2000
ABE (Archive Browser & Extractor)
OASYS (Orbit Analysis System Software)
Third Party COTS SOFTWARE: Exhibit E
***
***
***
***
***
Development Software: Exhibit G
GTACS Support Software
Scheduler Support Software
MRS&S Software (MDL Receive System & Server)
DID Software (Dynamic Interaction Diagnostics)
OATS Software (Orbit and Attitude Tracking System)
***Confidential portions omitted and filed separately with the Commission.
<PAGE>
EXHIBIT D
ISI COTS SOFTWARE LICENSE AGREEMENT
This Software Agreement ("Agreement") is entered into between Integral
Systems Inc. ("Licensor") and Hughes Space & Communications Company ("Licensee",
"HSC" or "Buyer").
1. Definitions
a. Product Activation Sheet. The term "Product Activation Sheet"
means a written form, signed by Licensor, containing information necessary for
the generation of, and including, the activation key(s).
b. Software. The term "Software" shall mean, but is not limited to, the
computer program or programs listed in Exhibit C, attached hereto, in machine
readable form, and any and all related materials pertinent to the software
requirements specifications, interface specifications, flow charts, logic
diagrams, training materials, operating procedures, primers, version description
documents, and includes permitted reproductions made by HSC. Such other
software, as the Licensor may require in its performance of the GOES
Subcontract, shall be included in future updates to Exhibit C. "Software"
includes the object code and documentation as it is originally provided, or in
any form it may be converted into by the HSC. The term Software includes any
corrections, bug fixes, enhancements, updates or other modifications to such
computer programs and documentation.
c. COTS Software. The term "COTS Software" shall mean Integral Systems,
Inc.'s commercial off the shelf software, object code only.
d. Certificate of Installation. The term "Certificate of Installation"
means a written notice, signed by Licensor, certifying that the Software has
been installed and that the Software operates as described in the user manuals.
e. Agreement. The term "Agreement" means all the provisions contained
herein.
f. Order or GOES Subcontract. The terms "Order" or "GOES Subcontract"
means Subcontract No. J8-759124-C3JP, between Hughes Space & Communications
Company and Integral Systems, Inc..
g. Use. The term "Use" shall mean copying any portion of software into a
computer or transmitting any portion thereof to a computer for execution of the
instructions or statements contained in the software.
h. Documentation. The term "Documenation" shall mean training materials,
operation manuals, and other information or data furnished by ISI in support of
the software.
i. Defective Software. The term "Defective Software" shall mean any
software that does not meet ISI's specifications.
j. CPU. The term "CPU" shall mean HSC's designated central processing
unit and its associated peripheral equipment on which the software is to be
used.
k. Site. The term "Site" shall mean the authorized business operating
unit or geographic location of HSC at which the software is to be used as stated
in the order.
l. Licensor. The term "Licensor" shall mean Integral Systems, Inc. ("ISI")
m. Licensee. The term "Licensee" shall mean Hughes Space & Communications
Company ("HSC").
n. Licensee's Customer. The term "Licensee's Customer" shall mean the
U. S. Government.
<PAGE>
2. License
a. Grant of License. In consideration for the GOES Subcontract award by
Licensee to Licensor, Licensor grants Licensee, pursuant to the terms and
conditions of this Agreement, a perpetual, nonexclusive, transferable (to
Licensee's Customer or Licensee's Customer's representatives), royalty free
license to use the Software on a single computer. The terms and conditions of
this Agreement do not apply to development or any third-party software that may
be required for successful implementation of Licensor's Software.
-
b. Authorized Equipment. Licensee shall use the Software only on the
computer equipment ("Authorized Equipment") listed in the Product Activation
Sheet(s). Licensee may temporarily transfer the Software to back-up computer
equipment if the Authorized Equipment is inoperative and Licensee provides
Licensor notice, in writing, identifying the new computer equipment and its
location.
c. Restrictions on Use. Licensee agrees to use the Software only for
Licensee's, Licensee's representatives Licensee's Customer and Licensee's
Customer's representatives own business in support of the GOES Program. Except
as previously stated and/or otherwise provided for under this Agreement,
Licensee shall not (i) permit any parent, subsidiaries, affiliated entities or
third parties to use the Software without first obtaining written permission
from Licensor, or (ii) allow access to the Software through any terminals
located outside of Licensee's Site.
d. Copies. Licensee, solely to enable it to use the Software, may make two
(2) archival copies of the Software, provided that the copy shall include
Licensor's copyright and any other proprietary notices. The Software delivered
by Licensor to Licensee and the archival copies shall be stored at Licensee's
Site. Licensee shall have no other right to copy, in whole or in part, the
Software. Any copy of the Software made by Licensee is the exclusive property
of Licensor.
e. Modifications, Reverse Engineering. Neither Licensee nor Licensee's
Customer shall disassemble, decompile or reverse engineer the COTS Software
computer programs.
f. Material Terms and Conditions. Licensee specifically agrees that each of
the terms and conditions of this Section, 2. License, are material and that any
use inconsistent with the terms and conditions of this Section 2 may cause
irreparable injury to Licensor and that an adequate remedy at law would not be
available to Licensor. Accordingly, Licensee acknowledges the right of Licensor
to seek injunctive relief to cause the improper and inconsistent use of the
software to cease.
Prior to seeking such relief, Licensor agrees to provide Licensee a cure
notice for any improper use of the Software. Licensee shall have sixty (60)
days thereafter within which to cease and desist the improper use. If Licensee
fails to cease such improper use in this cure period, Licensor may pursue any
legal or equitable relief available to remedy such improper use, including but
not limited to the relief acknowledged above.
3. Acceptance
a. Acceptance. Acceptance of deliverable software shall be in accordance
with the provisions of the GOES Subcontract and it's applicable documents (i.e.,
Statement of Work and Product Specification).
4. Ownership
a. Title. Licensee and Licensor agree that Licensor owns all proprietary
rights, including patent, copyright, trade secret, trademark and other
proprietary rights, in and to the Software and any corrections, bug fixes,
enhancements, updates or other modifications, including custom modifications, to
the Software, whether made by Licensor or any third party.
<PAGE>
b. Transfers. Except as previously stated and/or otherwise provided for
under this Agreement, under no circumstances shall Licensee sell, license,
publish, display, distribute, or otherwise transfer to a third party the
Software or any copy thereof, in whole or in part, without Licensor's prior
written consent.
5. Confidential Information
In the event that the software and documentation are proprietary to either
Party and it is clearly defined as such, both Parties agree to take reasonable
steps to protect the confidentiality of the disclosing Party's software and to
ensure against any unauthorized transfer or disclosure of the software by the
receiving Party without the prior written consent of the disclosing Party. The
receiving Party shall have no obligation to maintain the confidentiality of any
information which: (a) is now, or which hereafter, through no act or failure on
the part of the receiving Party, becomes generally known or publicly available;
(b) is known to the receiving Party at the time of disclosure by the disclosing
Party; (c) is developed independently by the receiving Party as evidenced by
written records; or (d) becomes known to the receiving Party without restriction
from another source.
Licensee shall reproduce and include, on any copies of the software or
documentation, any notices, including any proprietary notices, copyright
notices, and restricted rights legends appearing on the software or
documentation.
6. Warranty
See GOES Subcontract
7. Limitations Period
Deleted.
8. Consequential Damages
See GOES Subcontract, EXHIBIT B
9. Limitation on Recovery
See GOES Subcontract
10. Indemnification
See GOES Subcontract
11. Term and Termination
See GOES Subcontract
12. Assignment
See GOES Subcontract
13. Force Majeure
See GOES Subcontract
14. Arbitration
See GOES Subcontract
<PAGE>
15. Notices
See GOES Subcontract
16. General Provisions
See GOES Subcontract
17. Escrow Agreement
Licensor and Licensee acknowledge under this agreement that the
Developmental and COTS Software are the subject of an Escrow Agreement,
incorporated into the GOES Subcontract.
AGREED:
LICENSOR: LICENSEE:
Signature: Signature:
------------------------ ------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
Address: Address:
------------------------ ------------------------
- ---------------------------------- ----------------------------------
Date: Date:
------------------------ ------------------------
<PAGE>
PRODUCT ACTIVATION SHEET
FOR
EPOCH TELEMETRY AND COMMANDING SOFTWARE
<TABLE>
<CAPTION>
<S> <C>
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
</TABLE>
_________________________________ _________________
LICENSOR Representative Signature Date
<PAGE>
PRODUCT ACTIVATION SHEET
FOR
EPOCH DATABASE SOFTWARE
<TABLE>
<CAPTION>
<S> <C>
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------- -------------------------
Host ID: Host ID:
------------------------- -------------------------
EPOCH Serial Number: EPOCH Serial Number:
-------------- --------------
Activation Key: Activation Key:
------------------- -------------------
</TABLE>
_________________________________ _________________
LICENSOR Representative Signature Date
<PAGE>
PRODUCT ACTIVATION SHEET
FOR
EPOCH TRENDING SOFTWARE
<TABLE>
<CAPTION>
<S> <C>
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
Licensee: Licensee:
------------------------- -------------------------
Host Name: Host Name:
------------------------ ------------------------
Host ID: Host ID:
-------------------------- --------------------------
*** Key: *** Key:
---------------------- ----------------------
</TABLE>
_________________________________ _________________
LICENSOR Representative Signature Date
**Confidential portions omitted and filed separately with the Commission.
<PAGE>
PRODUCT ACTIVATION SHEET
FOR
OASYS ORBIT ANALYSIS SOFTWARE
<TABLE>
<CAPTION>
<S> <C>
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
Licensee: Licensee:
------------------------------ ------------------------------
System Name: System Name:
--------------------------- ---------------------------
Machine ID No.: Machine ID No.:
------------------------ ------------------------
No. of Concurrent Users: No. of Concurrent Users:
--------------- ---------------
OASYS Serial Number: OASYS Serial Number:
------------------- -------------------
Activation Key: - - - - Activation Key: - - - -
------------------------ ------------------------
</TABLE>
_________________________________ _________________
LICENSOR Representative Signature Date
<PAGE>
EXHIBIT E
THIRD PARTY COTS SOFTWARE SUBLICENSE AGREEMENT
This Software Agreement ("Agreement") is entered into between Integral
Systems Inc. ("Licensor") and Hughes Space & Communications Company ("Licensee",
"HSC" or "Buyer").
1. Definitions
a. Application Program. The term "Application Program" means
Sublicensor's value-added application software with which the
Runtime Programs are to be coupled (e.g. EPOCH, OASYS).
b. End Product. The term "End Product" means the Runtime Programs
coupled with the Application Programs.
c. Full Use Program. The term "Full Use Program" means unaltered
Programs with all functions intact.
d. Hardware. The term "Hardware" means computer hardware and operating
systems.
e. Runtime Program. The term "Runtime Program" means Programs with the
following restrictions imposed by the End Product on the operation
of the Programs:
(i) The End Product under Application Program control may be
used to create new tables or alter tables only to the
extent necessary to implement the End Product's
functions. The End Product may not allow use of the Full
Use Program's Create or Alter commands, or any other
command that would allow the user to create tables or
alter tables outside the scope of those necessary for the
operation of the End Product;
(ii) The End Product may not allow use of the SQL*Forms or any
other functionality that would enable modification of
SQL*Forms created by the End Product or generation of new
SQL*Forms; and
(iii) The End Product may not allow use of the Programs outside
the scope of the End Product or for general purpose
database management.
f. Program(s). The term "Program" shall mean the object code computer
software programs.
g. Product Activation Sheet. The term "Product Activation Sheet" means
a written form, signed by Licensor, containing information necessary
for the generation of, and including, the activation key(s).
h. Software. The term "Software" shall mean, but is not limited to, the
third-party proprietary software listed in Exhibit C, attached
hereto, in machine readable form, and any and all related materials
pertinent to the software requirements specifications, interface
specifications, flow charts, logic diagrams, training materials,
operating procedures, primers, version description documents, and
includes permitted reproductions made by HSC. Such other software,
as the Licensor may require in its performance of the GOES
Subcontract, shall be included in future updates to Exhibit C.
"Software" includes the object code and documentation as it is
originally provided, or in any form it may be converted into by the
HSC. The term Software includes any corrections, bug fixes,
enhancements, updates or other modifications to such computer
programs and documentation.
i. COTS Software. The term "COTS Software" shall mean *** commercial
off the shelf software, object code only.
j. Certificate of Installation. The term "Certificate of Installation"
means a written notice, signed by Licensor, certifying that the
Software has been installed and that the Software operates as
described in the user manuals.
***Confidential portions omitted and filed separately with the Commission.
<PAGE>
k. Agreement. The term "Agreement" means all the provisions contained
herein.
l. Order or GOES Subcontract. The terms "Order" or "GOES Subcontract"
means Subcontract No. J8-759124-C3JP, between Hughes Space &
Communications Company and Integral Systems, Inc..
m. Use. The term "Use" shall mean copying any portion of software into
a computer or transmitting any portion thereof to a computer for
execution of the instructions or statements contained in the
software.
n. Documentation. The term "Documenation" shall mean training
materials, operation manuals, and other information or data furnished
by ISI in support of the software.
o. Defective Software. The term "Defective Software" shall mean any
software that does not meet third-party's specifications.
p. CPU. The term "CPU" shall mean HSC's designated central processing
unit and its associated peripheral equipment on which the software is
to be used.
q. Site. The term "Site" shall mean the authorized business operating
unit or geographic location of HSC at which the software is to be
used as stated in the order.
r. Sublicensor. The term "Sublicensor" shall mean Integral Systems,
Inc. ("ISI")
s. Sublicensee. The term "Sublicensee" shall mean Hughes Space &
Communications Company ("HSC").
t. Sublicensee's Customer. The term "Sublicensee's Customer" shall mean
the U.S. Government.
2. Sublicense
a. Grant of License. In consideration for the GOES Subcontract award by
Sublicensee to Sublicensor and COTS Software owners grants of
authority to Sublicensor to sublicense their COTS Software Programs
listed in Exhibit B (attached hereto), Sublicensor grants
Sublicensee, pursuant to the terms and conditions of this Agreement,
a nonexclusive, transferable (to Sublicensee's representatives,
Sublicensee's Customer or Sublicensee's Customer's representatives),
royalty free limited license to use an object code copy of the
Runtime Programs with the Application Programs on the Hardware listed
in the "Product Activation Sheets" attached to the Integral Systems
Inc. Software License Agreement.
b. Restrictions on Use. Sublicensee agrees to use the Runtime Program
only for Sublicensee's and Sublicensee's Customer's own business in
support of the GOES Program. Sublicensee agrees not to use the
Runtime Program for any purpose outside the scope of the GOES
Subcontract. Except as previously stated and/or otherwise provided
for under this agreement, Sublicensee shall not (i) permit any
parent, subsidiaries, affiliated entities or third parties to use the
Program(s), or (ii) allow access to the Program(s) through any
terminals located outside of Sublicensee's' Site.
c. Copies. Sublicensee or Sublicensee's Customer, solely to enable it to
use the Runtime Program, may make one (1) archival copy of the
Program(s), provided that the copies shall include the COTS
Software's owner's copyright and any other proprietary notices. The
Program(s) delivered by Sublicensor to Sublicensee and the archival
copies shall be stored at Sublicensee's Site. Sublicensee shall have
no other right to copy, in whole or in part, the Program(s). Any copy
of the Runtime Program made by Sublicensee is the exclusive property
of the COTS' Software's owner(s).
<PAGE>
d. Modifications, Reverse Engineering. Sublicensee agrees that only
Sublicensor shall have the right to alter, maintain, enhance or
otherwise modify the Program(s). Sublicensee shall not disassemble,
decompile or reverse engineer the Program(s).
3. Acceptance
a. Acceptance. Acceptance of deliverable software shall be in accordance
with the provisions of the GOES Subcontract and its applicable documents (i.e.,
Statement of Work and Product Specification).
4. Ownership
a. Title. Sublicensee and Sublicensor agree that the creator of the COTS
Software owns all proprietary rights, including patent, copyright, trade secret,
trademark and other proprietary rights, in and to the Runtime Program and any
corrections, bug fixes, enhancements, updates or other modifications to the
Runtime Program.
b. Transfers. Except as previously stated and/or otherwise provided for
under this agreement, under no circumstances shall Sublicensee sell, license,
publish, display, distribute, or otherwise transfer to a third party the
Program(s) or any copy thereof, in whole or in part, without Sublicensor's prior
written consent.
5. Confidential Information
In the event that the software and documentation are proprietary to either
Party and it is clearly defined as such, both Parties agree to take reasonable
steps to protect the confidentiality of the disclosing Party's software and to
ensure against any unauthorized transfer or disclosure of the software by the
receiving Party without the prior written consent of the disclosing Party. The
receiving Party shall have no obligation to maintain the confidentiality of any
information which: (a) is now, or which hereafter, through no act or failure on
the part of the receiving Party, becomes generally known or publicly available;
(b) is known to the receiving Party at the time of disclosure by the disclosing
Party; (c) is developed independently by the receiving Party as evidenced by
written records; or (d) becomes known to the receiving Party without restriction
from another source.
Licensee shall reproduce and include, on any copies of the software or
documentation, any notices, including any proprietary notices, copyright
notices, and restricted rights legends appearing on the software or
documentation.
6. Warranty
See Goes Subcontract.
7. Inherently Dangerous Activity
The Program(s) are not specifically developed, or licensed for use in any
inherently dangerous applications. Sublicensee agrees that Oracle and
Sublicensor shall not be liable for any claims or damages arising from such use
if the Sublicensee uses the Program(s) for such applications. Sublicensee
agrees to indemnify and hold Oracle and Sublicensor harmless from any claims for
losses, costs, damages, or liability arising out of or in connection with the
use of the Program(s) in such applications.
The parties acknowledge and agree that the software is intended for use in
(1) moving the spacecraft into geosyncronous orbit after separation from the
launch vehicle, and (2) for controlling the spacecraft in geosyncronous orbit.
The parties further acknowledge and agree that such use of the software does not
constitute an 'inherently dangerous application' as set forth above and Licensor
shall make no claim or assertion that it constitutes an 'inherently dangerous
application'.
<PAGE>
8. Consequential Damages
See GOES Subcontract.
9. Limitation on Recovery
See GOES Subcontract.
10. Indemnification
See GOES Subcontract.
11. Term and Termination
See GOES Subcontract.
12. Assignment
See GOES Subcontract.
13. Force Majeure
See GOES Subcontract.
14. Arbitration
See GOES Subcontract.
15. Notices
See GOES Subcontract.
16. General Provisions
See GOES Subcontract.
AGREED:
SUBLICENSOR: SUBLICENSEE:
Signature: Signature:
---------------------- ----------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
Address: Address:
------------------------ ------------------------
Date: Effective Date:
--------------------------- -----------------
<PAGE>
Exhibit F
Preferred Escrow Agreement Introduction
The Preferred agreement caters to those customers who demand more sophisticated
escrow arrangements. It is a three-party contract that involves constant
administration by DSI and ongoing contact between DSI, the depositor and the
beneficiary. The depositor and beneficiary will receive signed and inspected
confirmations from DSI for every deposit; an account history report every six
months to notify them of the status of the escrow; and ongoing monitoring
services to ensure compliance of contract terms. In addition, the Preferred
escrow provides audit rights to both parties; technical verifications for the
the beneficiary; tailored release conditions; grant of use rights and deposit
content definition; and overall ability to modify terms for unique requirements.
DSI's Preferred customers benefit from these unique features:
. Technical Verification options.
. Tailored release conditions.
. Written notification detailing the contents of the initial deposit and each
update.
. Semi-annual account histories listing all deposit activity.
. DSI direct billing to beneficiary.
. Technology Protection Program services.
. Deposit inspection with signed receipt for both the depositor and
beneficiary.
For additional benefits, choose DSI's Comprehensive Preferred addendum and
receive these additional features:
. Recurring Level I Verification.
. Continual DeposiTrack Service.
. Unlimited updates/replacements and one additional storage unit.
<PAGE>
PREFERRED ESCROW AGREEMENT
Account Number ______________________
This Agreement is effective __________________, 1999 among Data Securities
International, Inc. ("DSI"), Integral Systems Inc. ("ISI") ("Depositor") and
Hughes Space and Communications (HSC) ("Preferred Beneficiary"), who
collectively may be referred to in this Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor (referred to in this Agreement as
"the license agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
--------------------------
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Beneficiary. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
--------------------------------
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed
by Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the
<PAGE>
obligation to notify the parties regarding the status of the deposit account as
required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and the
------------------
Exhibit B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
---------------------
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted; and (c) provide a copy of the Exhibit B
to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the deposit
materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
---------------------------
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance;
d. The deposit materials consist of the proprietary information and other
materials identified either in the license agreement or Exhibit A, as
the case may be; and
e. The deposit materials are readable and useable in their current form
or, if the deposit materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
------------
Beneficiary's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
---------------
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which
<PAGE>
is subject to the license agreement. Such updates will be added to the existing
deposit. All deposit updates shall be listed on a new Exhibit B and the new
Exhibit B shall be signed by Depositor. Each Exhibit B will be held and
maintained separately within the escrow account. An independent record will be
created which will document the activity for each Exhibit B. The processing of
all deposit updates shall be in accordance with Sections 1.2 through 1.6 above.
All references in this Agreement to the deposit materials shall include the
initial deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
----------------------------
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
---------------
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Beneficiary to challenge any such
order; provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey
any court or other judicial tribunal order. (See Section 7.5 below for notices
of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
--------------
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
------------
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
--------------
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
--------------------
deposit materials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure,
<PAGE>
and other proprietary notices and titles contained on the deposit materials onto
any copies made by DSI. With all deposit materials submitted to DSI, Depositor
shall provide any and all instructions as may be necessary to duplicate the
deposit materials including but not limited to the hardware and/or software
needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
------------------------------
transfer the deposit materials to Preferred Beneficiary upon any release of the
deposit materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the deposit materials.
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
------------------
mean the following:
a. Depositor's failure to carry out obligations imposed on it pursuant to
the license agreement; or
b. Depositor's failure to continue to do business in the ordinary course.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
------------------
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor, by certified mail, return receipt requested, or by
commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
---------------------
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred or
has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
------------------
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the deposit materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. This
Agreement will terminate upon the release of the deposit materials held by DSI.
<PAGE>
4.5 Right to Use Following Release. Unless otherwise provided in the license
------------------------------
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the license agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
-----------------
one year. Thereafter, this Agreement shall automatically renew from year-to-
year unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in
writing that the Agreement is terminated; or (b) the Agreement is terminated by
DSI for nonpayment in accordance with Section 5.2. If the deposit materials are
subject to another escrow agreement with DSI, DSI reserves the right, after the
initial one year term, to adjust the anniversary date of this Agreement to match
the then prevailing anniversary date of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
--------------------------
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
-------------------------------------------------
Agreement, DSI shall destroy, return, or otherwise deliver the deposit materials
in accordance with instructions. If there are no instructions, DSI may, at its
sole discretion, destroy the deposit materials or return them to Depositor. DSI
shall have no obligation to return or destroy the deposit materials if the
deposit materials are subject to another escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the deposit
materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the deposit materials has occurred prior to
termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
<PAGE>
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
------------
applicable to the services provided. DSI shall notify the party responsible for
payment of DSI's fees at least 90 days prior to any increase in fees. For any
service not listed on DSI's standard fee schedule, DSI will provide a quote
prior to rendering the service, if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless
-------------
the payment for such service and any outstanding balances owed to DSI are paid
in full. Fees are due upon receipt of a signed contract or receipt of the
deposit materials whichever is earliest. If invoiced fees are not paid, DSI may
terminate this Agreement in accordance with Section 5.2. Late fees on past due
amounts shall accrue interest at the rate of one and one-half percent per month
(18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
---------------
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the
preceding sentence, Depositor and Preferred Beneficiary each agree to indemnify,
defend and hold harmless DSI from any and all claims, actions, damages,
arbitration fees and expenses, costs, attorney's fees and other liabilities
incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
------------------
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in San Diego, California, U.S.A. Any
court having jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
<PAGE>
7.5 Notice of Requested Order. If any party intends to obtain an order from
-------------------------
the arbitrator or any court of competent jurisdiction which may direct DSI to
take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's obligation,
DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such
order; and
c. Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other duties.
<PAGE>
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
----------------
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. DSI is not a party to the license
agreement between Depositor and Preferred Beneficiary and has no knowledge of
any of the terms or provisions of any such license agreement. DSI's only
obligations to Depositor or Preferred Beneficiary are as set forth in this
Agreement. No amendment or modification of this Agreement shall be valid or
binding unless signed by all the parties hereto, except that Exhibit A need not
be signed by DSI, Exhibit B need not be signed by Preferred Beneficiary and
Exhibit C need not be signed.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
-------
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify
each other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
------------
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
----------
benefit of the successors and assigns of the parties. However, DSI shall have
no obligation in performing this Agreement to recognize any successor or assign
of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative
and conclusive written evidence of the change of parties.
<PAGE>
8.5 Regulations. Depositor and Preferred Beneficiary are responsible for and
-----------
warrant compliance with all applicable laws, rules and regulations, including
but not limited to customs laws, import, export, and re-export laws and
government regulations of any country to which the deposit materials may be
delivered in accordance with the provisions of this Agreement.
<TABLE>
<CAPTION>
<S> <C>
____________________________________ ____________________________________
Depositor Preferred Beneficiary
By: ________________________________ By: _________________________________
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:________________________________
</TABLE>
Data Securities International, Inc.
By:__________________________
Name:________________________
Title:_______________________
Date:________________________
<PAGE>
EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
GOES N-Q SSGS GSE Build 1 Source Code (COTS only)
GOES N-Q SSGS Build 1/GSE Build 2 Source Code (COTS only)
GOES N-Q SSGS Build 2/GSE Build 3 Source Code (COTS only)
GOES N-Q SSGS Final/GSE Build 4 Source Code (COTS only)
<TABLE>
<CAPTION>
<S> <C>
____________________________________ ____________________________________
Depositor Preferred Beneficiary
By: _________________________________ By: _________________________________
Name:_______________________________ Name:_______________________________
Title:________________________________ Title:________________________________
Date:________________________________ Date:________________________________
</TABLE>
<PAGE>
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name
--------------------------------------------------
Account Number
----------------------------------------------------------
Product Name Version
------------------------------- -------------
(Product Name will appear on Account History report)
DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size Label Description of Each Separate Item
(Please use other side if additional space
is needed)
______ Disk 3.5" or ____
______ DAT tape ____mm
______ CD-ROM
______ Data cartridge tape ____
______ TK 70 or ____ tape
______ Magnetic tape ____
______ Documentation
______ Other ______________________
PRODUCT DESCRIPTION:
Operating System
----------------------------------------------
Hardware Platform
---------------------------------------------
DEPOSIT COPYING INFORMATION:
Is the media encrypted? Yes / No If yes, please include any passwords and the
decryption tools.
Encryption tool name Version
------------------------------------ ------------
Hardware required
---------------------------------------
Software required
---------------------------------------
I certify for Depositor that the DSI has inspected and
above described deposit materials accepted the above materials
have been transmitted to DSI: (any exceptions are noted above):
Signature Signature
----------------------- -----------------------
Print Name Print Name
----------------------- -----------------------
Date Date Accepted
----------------------- -----------------------
Exhibit B#
-----------------------
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
(619) 694-1900
<PAGE>
EXHIBIT C
DESIGNATED CONTACT
Account Number ______________________
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
Company Name:
--------------------------- -------------------------------
Address:
-------------------------------- -------------------------------
-------------------------------- -------------------------------
Designated Contact: Contact:
--------------------- ------------------------
Telephone:
------------------------------ --------------------------------
Facsimile: P.O.#, if required:
------------------------------ -------------
Notices and communications to Invoices to Preferred Beneficiary
Preferred Beneficiary should be addressed to: should be addressed to:
Company Name:
--------------------------- -------------------------------
Address:
-------------------------------- -------------------------------
-------------------------------- -------------------------------
Designated Contact: Contact:
--------------------- ------------------------
Telephone:
------------------------------ --------------------------------
Facsimile: P.O.#, if required:
------------------------------ -------------
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
<TABLE>
<CAPTION>
<S> <C>
Contracts, deposit materials and notices to Invoice inquiries and fee remittances
DSI should be addressed to: to DSI should be addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date:
---------------------------------
</TABLE>
<PAGE>
EXHIBIT G
DEVELOPMENT SOFTWARE LICENSE AGREEMENT
In the event that Integral Systems, Inc. ("Licensor") establishes a claim
to copyright of the Development Software and associated documentation and data,
in accordance with FAR 52.227-14 Rights In Data - General, as modified by NASA
FAR Supplement 18-52.227-14, Alt. II, and such claim is perfected, this Software
License Agreement ("Agreement") will be entered into between Licensor and Hughes
Space and Communications Company ("Licensee", "HSC" or "Buyer").
1. Definitions
a. Product Activation Sheet. The term "Product Activation Sheet"
means a written form, signed by Licensor, containing information necessary for
the generation of, and including, the activation key(s).
b. Software. The term "Software" shall mean, but is not limited to, the
computer program or programs listed in Exhibit C, attached hereto, in machine
readable and human readable form, and any and all related materials pertinent to
the software requirements specifications, interface specifications, flow charts,
logic diagrams, training materials, operating procedures, primers, version
description documents, and includes permitted reproductions made by HSC. Such
other software, as the Licensor may require in its performance of the GOES
Subcontract, shall be included in future updates to Exhibit C. "Software"
includes the software program, source and object code and documentation as it is
originally provided, or in any form it may be converted into by the HSC. The
term Software includes any corrections, bug fixes, enhancements, updates or
other modifications, including custom modifications, to such computer programs
and documentation.
c. COTS Software. The term "COTS Software" shall mean Integral Systems,
Inc.'s commercial off the shelf software, object code only.
d. Certificate of Installation. The term "Certificate of Installation"
means a written notice, signed by Licensor, certifying that the Software has
been installed and that the Software operates as described in the user manuals.
e. Agreement. The term "Agreement" means all the provisions contained
herein.
f. Order or GOES Subcontract. The terms "Order" or "GOES Subcontract"
means Subcontract No. J8-759124-C3JP, between Hughes Space & Communications
Company and Integral Systems, Inc..
g. Use. The term "Use" shall mean copying any portion of software into a
computer or transmitting any portion thereof to a computer for execution of the
instructions or statements contained in the software.
h. Documentation. The term "Documenation" shall mean training materials,
operation manuals, and other information or data furnished by ISI in support of
the software.
i. Defective Software. The term "Defective Software" shall mean any
software that does not meet ISI's specifications and any other specifications
set forth in the order.
j. CPU. The term "CPU" shall mean HSC's designated central processing
unit and its associated peripheral equipment on which the software is to be
used.
k. Site. The term "Site" shall mean the authorized business operating
unit or geographic location of HSC at which the software is to be used as stated
in the order.
l. Licensor. The term "Licensor" shall mean Integral Systems, Inc. ("ISI")
<PAGE>
m. Licensee. The term "Licensee" shall mean Hughes Space &
Communications Company ("HSC").
n. Licensee's Customer. The term "Licensee's Customer" shall mean the
U.S. Government.
2. License
a. Grant of License. In consideration for the GOES Subcontract award by
Licensee to Licensor, Licensor grants Licensee, pursuant to the terms and
conditions of this Agreement, a perpetual, nonexclusive, transferable (to
Licensee's Customer or Licensee's Customer's representatives), royalty free
license to use the Software on a single computer. The terms and conditions of
this Agreement do not apply to any COTS software or third-party software that
may be required for successful implementation of Licensor's Software.
-
b. Authorized Equipment. Licensee shall use the Software only on the
computer equipment ("Authorized Equipment") listed in the Product Activation
Sheet(s). Licensee may temporarily transfer the Software to back-up computer
equipment if the Authorized Equipment is inoperative and Licensee provides
Licensor notice, in writing, identifying the new computer equipment and its
location.
c. Restrictions on Use. Licensee agrees to use the Software only for
Licensee's, Licensee's representatives Licensee's Customer and Licensee's
Customer's representatives own business in support of the GOES Program. Except
as previously stated and/or otherwise provided for under this Agreement,
Licensee shall not (i) permit any parent, subsidiaries, affiliated entities or
third parties to use the Software without first obtaining written permission
from Licensor, or (ii) allow access to the Software through any terminals
located outside of Licensee's Site.
d. Copies. Licensee, solely to enable it to use the Software, may make two
(2) archival copies of the Software, provided that the copy shall include
Licensor's copyright and any other proprietary notices. The Software delivered
by Licensor to Licensee and the archival copies shall be stored at Licensee's
Site. Licensee shall have no other right to copy, in whole or in part, the
Software. Any copy of the Software made by Licensee is the exclusive property
of Licensor.
e. Modifications, Reverse Engineering. Licensee's Customer shall retain the
right to modify the Developmental Software or merge the Developmental Software
into other programs to form an updated work for Licensee's Customer's own
internal use. Any portion of Licensor's original software included in this
updated work will continue to be subject to all terms and conditions of this
agreement. Licensor retains exclusive right, title, and interest in any such
modifications made by Licensee's Customer.
f. See GOES Subcontract.
3. Acceptance
a. Acceptance. Acceptance of deliverable software shall be in accordance
with the provisions of the GOES Subcontract and it's applicable documents (i.e.,
Statement of Work and Product Specification).
4. Ownership
a. Title. Licensee and Licensor agree that Licensor owns all proprietary
rights, including patent, copyright, trade secret, trademark and other
proprietary rights, in and to the Software and any corrections, bug fixes,
enhancements, updates or other modifications, including custom modifications, to
the Software, whether made by Licensor or any third party.
b. Transfers. Except as previously stated and/or otherwise provided for
under this Agreement, under no circumstances shall Licensee sell, license,
publish, display, distribute, or otherwise transfer to a third party the
Software or any copy thereof, in whole or in part, without Licensor's prior
written consent.
<PAGE>
5. Confidential Information
In the event that the software and documentation are proprietary to either
Party and it is clearly defined as such, both Parties agree to take reasonable
steps to protect the confidentiality of the disclosing Party's software and to
ensure against any unauthorized transfer or disclosure of the software by the
receiving Party without the prior written consent of the disclosing Party. The
receiving Party shall have no obligation to maintain the confidentiality of any
information which: (a) is now, or which hereafter, through no act or failure on
the part of the receiving Party, becomes generally known or publicly available;
(b) is known to the receiving Party at the time of disclosure by the disclosing
Party; (c) is developed independently by the receiving Party as evidenced by
written records; or (d) becomes known to the receiving Party without restriction
from another source.
Licensee shall reproduce and include, on any copies of the software or
documentation, any notices, including any proprietary notices, copyright
notices, and restricted rights legends appearing on the software or
documentation.
6. Warranty
See GOES Subcontract
7. Limitations Period
Deleted.
-
8. Consequential Damages
See GOES Subcontract
9. Limitation on Recovery
See GOES Subcontract.
10. Indemnification
See GOES Subcontract
11. Term and Termination
See GOES Subcontract
12. Assignment
See GOES Subcontract
13. Force Majeure
See GOES Subcontract
14. Arbitration
See GOES Subcontract
15. Notices
See GOES Subcontract
<PAGE>
16. General Provisions
See GOES Subcontract
17. Escrow Agreement
Licensor and Licensee acknowledge under this agreement that the
Developmental Software is to be delivered to Licensee and is not the subject of
an Escrow Agreement.
AGREED:
LICENSOR: LICENSEE:
Signature: Signature:
--------------------- ---------------------
Name: Name:
-------------------------- --------------------------
Title: Title:
------------------------- -------------------------
Address: Address:
----------------------- -----------------------
Date: Date:
-------------------------- --------------------------
<PAGE>
HUGHES AIRCRAFT COMPANY
PURCHASE ORDER ATTACHMENT PF-03
PROPERTY IN POSSESSION OF SELLER
I. The Purchase Order General Provisions incorporate the Government clause
entitled "Government Property" (FAR 52.245-2) the provisions of which are
applicable equally to both Buyer- and Government-furnished property. The
requirements set forth in this attachment shall not be construed to limit
or relieve Seller of any of its obligations set forth or incorporated into
Buyer's purchase order of which this is a part.
A. This attachment applies to all property, including but not limited to,
production and raw material, Special Tooling and Special Test
Equipment in possession of Seller (and any subcontractor or supplier
of Seller at any tier) which is furnished to, acquired by, or
fabricated by Seller (or any subcontractor or supplier at any tier),
title to which is or becomes vested in the Buyer or the Government.
For the purpose of this purchase order, such property is referred to
as Buyer/Government-furnished property.
B. In the event the provisions of Buyer's prime contract from the U.S.
Government require that title to Special Tooling and Special Test
Equipment shall vest in the Government, title to such property shall
vest in the Government upon acquisition by the Seller. Title to such
property shall at that time immediately and directly pass to the
Government so that title shall not a any time vest in the Buyer.
II. Seller shall maintain a system to ensure the adequate control and
protection of Buyer/Government-furnished property. Upon receipt of
notification from the Buyer, the Seller shall complete and return within
fifteen (15) working days a Property system Certification describing the
system that will be used to control Buyer/Government-furnished property.
Additionally, the Buyer's representative may, at its option and at no
additional cost to this purchase order or the Buyer, conduct surveillance
at a reasonable time of the Seller's or the Seller's subcontractor's
Property Control System as the Buyer deems necessary to assure compliance
with the terms and conditions of Buyer's purchase order.
III. Seller shall, commencing with its receipt and during its custody of user
of any Buyer/Government-furnished property, accomplish not less than the
following:
A. Examine upon receipt to detect damage in transit;
B. Verify the contents of the shipment against the packing sheet as to
the completeness and content and return a signed copy promptly to
Buyer. If no discrepancy is reported within (5) working days, the
property shall be deemed to have been received in acceptable condition
and to be as listed and described on the accompanying packing sheet;
C. Unless otherwise specified, perform functional testing prior to
further processing or installation to determine satisfactory
operation;
D. Establish and maintain records to satisfy the requirement of FAR
45.505 and make such records available for review upon Buyer's
request;
E. Provide the necessary precautions to guard against damage from
handling and deterioration during storage;
F. Perform periodic inspection to assure adequacy of storage conditions;
and
09/01 EDITION 1
<PAGE>
G. Ensure that Buyer/Government-furnished property is used only for
performing this purchase order, unless otherwise provided in this
order or approved by the cognizant contracting officer.
IV. As partial fulfillment of the requirements of FAR 45.508, the Seller
shall, at no additional cost to this purchase order or the Buyer, perform
a physical inventory, at no less than a biennial basis or the direction of
the Buyer, of all Buyer/Government-furnished property in the possession of
the Seller. Within thirty (30) days after the completion of the inventory,
Seller shall report the results, including all such property located a the
facilities of any of Seller's subcontractor's at any tier, and shall
certify to the Buyer the accuracy and completeness of such physical
inventory. Seller shall assist Buyer, at no additional cost to this
purchase order or the Buyer, in resolving all discrepancies related to
either Seller's or Buyer's inventory results.
V. Seller shall not modify, add-on, or replace any Buyer/Government-furnished
property without Buyer's prior written authorization. Any such
modification, addition, or replacement made by Seller without such
authorization, is the sole responsibility of the Seller and is
accomplished at Seller's expense. Modification, addition, or replacement
subsequent to the original acquisition or fabrication of property which is
necessary in order to reach full-rate capability and/or life expectancy as
specifically required under the provisions of the applicable purchase
order shall be made at no cost to Buyer. Title to any such additional or
modified property required for rate capability or life expectancy shall
vest in the Government in accordance with the provisions of the applicable
purchase order relating to title to all additional or modified property.
A. Sell shall immediately report to the Buyer's purchasing representative
the loss of any Buyer/Government-furnished property or any such
property found damaged, malfunctioning, or otherwise unsuitable for
use. The Seller shall determine and report the probably cause and
necessity for withholding such property from use.
B. Seller agrees, at no additional cost to this purchase order or the
Buyer, to store and maintain in serviceable condition, including the
performance of the calibration and preventative maintenance, all
Buyer/Government-furnished property in the Seller's or Seller's
subcontractor's possession.
VI. Immediately upon termination or completion of this purchase order, the
Seller shall perform a physical inventory, adequate for accountability and
disposition purposes, of all Buyer/Government-furnished property
applicable to such terminated or completed purchase order and shall cause
its subcontractors and suppliers at every tier to do likewise.
A. Upon completion of this purchase order, if scrap or excess property in
the value of $100.00 or more results from the use of any
Buyer/Government-furnished property, Seller shall execute Buyer's
Scrap and Excess Property Warranty Form and return it to the Buyer.
B. Seller shall prepare inventory schedules using applicable Government
Inventory Schedule Forms, Standard Forms 1426 through 1434, of all of
the Buyer/Government-furnished property in the possession of the
Seller, or its Subcontractors at any tier. The Inventory Schedule
Forms shall be in such details as acceptable to the Buyer. Pending
written disposition instructions by the Buyer, all Buyer/Government-
furnished property, at Buyer's option, may remain in the Seller's
possession and control and shall be maintained in accordance with the
provisions referenced in the paragraph entitled "Property
Administration" as contained in the "Government Property" clause of
the
09/01 EDITION 2
<PAGE>
Purchase Order General Provisions at no additional expense or cost to
either the Government or the Buyer.
VII. Seller agrees that in placing any lower-tier subcontracts or purchase
orders under this purchase order which involve the user of
Buyer/Government-furnished property, Seller shall include appropriate
provisions to obtain rights comparable to those granted to Buyer or
the Government by the "Government Property" clause contained in the
Purchase Order General Provisions and this attachment, and agrees that
it shall exercise rights for the benefit of the Buyer and the
Government, as Buyer may direct.
VIII. If Buyer's purchase order authorizes the user of Government-owned
facilities in the performance of this order, Seller is authorized to
use the Government-owned facilities set forth in the accountability
orders listed in the body of this purchase order on a no-charge basis;
provided, such accountability orders authorize such no-charge use and
all conditions and restrictions in such orders are first fully
complied with. Any change in the amount of Government-owned facilities
furnished pursuant to this purchase order is subject to the Changes
clause of the Purchase Order General Provisions. Seller agrees that it
will not directly or indirectly, through overhead charges or
otherwise, include in the price of this order, or seek reimbursement
under this order for, any rental charge paid by Seller for the use on
other contracts of the facilities referred to herein.
09/01 EDITION 3
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
Customer Furnished Equipment (CFE) and HSC Intellectual Property Need Dates
Dated 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
No. Item Date Required Item/Activity Impact
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 Existing OATS Software 6/1/98 OATS Re-code/reuse allocations
- -----------------------------------------------------------------------------------------------------------------------------------
2 Existing OATS Design Documentation 6/1/98 OATS Re-code/reuse allocations
- -----------------------------------------------------------------------------------------------------------------------------------
3 PSTE Interface Document (Main Power Rack Controller) 6/1/98 GSE Build #2 Development
- -----------------------------------------------------------------------------------------------------------------------------------
4 S/C to ground RF/IF specification 10/6/98 Cortex front end processor
- -----------------------------------------------------------------------------------------------------------------------------------
5 S/C SSED database for GSE 11/1/98 GSE Build #1 delivery
- -----------------------------------------------------------------------------------------------------------------------------------
6 PA 9000 Document 11/25/98 QA
- -----------------------------------------------------------------------------------------------------------------------------------
7 Ops scenarios for the SSGS interfaces for use in our SSGS Loading Analysis 11/25/98 SDRL 17 completion
(SDRL 17). Refer to section 3.1.2.2 in SOW.
- -----------------------------------------------------------------------------------------------------------------------------------
8 S/C and instrument commanding constraints (memo) 12/11/98 Scheduler Design
- -----------------------------------------------------------------------------------------------------------------------------------
9 *** 12/15/98 GSE Build #2 Development
- -----------------------------------------------------------------------------------------------------------------------------------
10 *** telemetry frame sync packet - need definition *** 12/15/98 MRS&S frame sync software
procurement
- -----------------------------------------------------------------------------------------------------------------------------------
11 *** Control Document 12/15/98 GSE Build #2 Development
- -----------------------------------------------------------------------------------------------------------------------------------
12 *** 12/15/98 DID CDR design
- -----------------------------------------------------------------------------------------------------------------------------------
13 *** 1/4/99 MRS&S CDR design
- -----------------------------------------------------------------------------------------------------------------------------------
14 *** 1/4/99 MRS&S Development
- -----------------------------------------------------------------------------------------------------------------------------------
15 *** 1/4/99 MRS&S CDR design
- -----------------------------------------------------------------------------------------------------------------------------------
16 *** 1/15/99 GTACS CDR design
- -----------------------------------------------------------------------------------------------------------------------------------
17 *** definition and flatfile) 1/15/99 GSE Build #2 Development
- -----------------------------------------------------------------------------------------------------------------------------------
18 On-board S/C clock correlation and update - detailed operational scenarios 1/15/99 GTACS CDR design
(memo)
- -----------------------------------------------------------------------------------------------------------------------------------
19 *** GTACS mimics 1/15/99 GTACS CDR design
*** or is different. If this interface will be different from ***,
first cut at interface definition needed at this time) (memo)
- -----------------------------------------------------------------------------------------------------------------------------------
19.1 Need resolution on whether ranging data during *** will require SSGS 1/15/99 GTACS CDR design
support, ***
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
Customer Furnished Equipment (CFE) and HSC Intellectual Property Need Dates
Dated 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
No. Item Date Required Item/Activity Impact
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
20 Ops concept: *** 1/15/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
21 Ops concept: *** 1/15/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
22 Ops concept: *** algorithm changes for N-Q 1/15/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
23 Ops concept (particularly data flow changes): *** landmark 1/15/99 OATS CDR
measurements using stellar inertial reference (preprocessing/residuals for
*** and residuals/partials for ***)
- -----------------------------------------------------------------------------------------------------------------------------------
24 Ops concept: *** 1/15/99 GTACS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
25 Data archiving requirements for eclipse history and *** 1/15/99 OATS CDR and Development
- -----------------------------------------------------------------------------------------------------------------------------------
26 Ops concept: Eclipse attitude model, *** 1/15/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
27 *** 1/15/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
28 *** 1/15/99 OATS CDR and Development
- -----------------------------------------------------------------------------------------------------------------------------------
29 Ops concept: *** 2/1/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
30 Ops concept: *** for house-keeping 2/1/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
31 Ops concept: *** for station-keeping 2/1/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
32 Ops concept: *** verification from telemetry 2/1/99 OATS CDR
- -----------------------------------------------------------------------------------------------------------------------------------
33 Momentum Management (Preliminary) 2/1/99 OATS CDR
. Ops scenario (with earlier
. Algorithms *** inputs as
. Required telemetry list available)
. Computation *** and/or ***
- -----------------------------------------------------------------------------------------------------------------------------------
34 *** 2/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
35 *** 2/1/99 GTACS Development ?
- -----------------------------------------------------------------------------------------------------------------------------------
36 On-board S/C clock correlation and update - detailed algorithms (memo) 2/15/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
37 Requirement Definition: *** 2/15/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
Customer Furnished Equipment (CFE) and HSC Intellectual Property Need Dates
Dated 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
No. Item Date Required Item/Activity Impact
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
38 ADD: *** algorithm changes for N-Q 2/15/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
39 ADD: *** algorithm changes for N-Q 2/15/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
40 Interface document (preliminary) *** software 3/1/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
41 ADD - *** equations based on *** reference: 3/1/99 OATS Development
preprocessing/residuals for ***
- -----------------------------------------------------------------------------------------------------------------------------------
42 ADD: Eclipse operation attitude model, *** and scenarios 4/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
43 *** Interface Document 4/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
44 ADD: *** (changes from OASYS methods) 4/1/99 OATS MSS Development
- -----------------------------------------------------------------------------------------------------------------------------------
45 ADD: *** verification from telemetry 4/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
46 *** maintenance requirements 4/1/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
47 ADD: Momentum Management: ops scenario, algorithms (*** command 4/1/99 OATS Development
residual ***), telemetry list, and s/c *** code
- -----------------------------------------------------------------------------------------------------------------------------------
48 ADD: ***: operational scenario, 4/1/99 OATS Development
calibration algorithms, *** estimation algorithms
- -----------------------------------------------------------------------------------------------------------------------------------
49 ADD: ***: operational scenario, 4/1/99 OATS Development
calibration algorithms
- -----------------------------------------------------------------------------------------------------------------------------------
50 ADD: ***: preprocessing (removal and residual computation) and 4/1/99 OATS Development
regression
- -----------------------------------------------------------------------------------------------------------------------------------
51 ADD: *** scenarios for *** 4/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
52 ADD: *** algorithms *** 5/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
53 Interface document: *** 5/1/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
54 *** with valid data for all *** 6/1/99 MRS&S Development
(ten minutes of data) for validation of MRS&S processing (SSGS Build 1)
- -----------------------------------------------------------------------------------------------------------------------------------
55 *** 6/1/99 OATS Development
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
Customer Furnished Equipment (CFE) and HSC Intellectual Property Need Dates
Dated 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
No. Item Date Required Item/Activity Impact
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
56 New version (contents) of SSED database, including *** packet 6/15/99 GTACS Development
decom definition and *** parameter EU coefficients - in support of SSGS build
- -----------------------------------------------------------------------------------------------------------------------------------
57 Sample S/C PCM data (PCM 1 and 2, dwell and normal minor frames) 6/15/99 GTACS Development
corresponding to database provided on same date (15 minutes of data) - in
support of SSGS build 1
- -----------------------------------------------------------------------------------------------------------------------------------
58 *** 6/15/99 OATS Integration testing
- -----------------------------------------------------------------------------------------------------------------------------------
59 Final definition of *** 7/12/99 MRS&S Development and GTACS
Development
- -----------------------------------------------------------------------------------------------------------------------------------
60 *** (final detailed definition of *** to GTACS 7/12/99 GTACS Development
interface, if different from ***) (memo)
- -----------------------------------------------------------------------------------------------------------------------------------
60.1 *** Interface Definition (final detailed definition of *** to 7/12/99 GTACS Development
GTACS interface, if different from) (memo)
- -----------------------------------------------------------------------------------------------------------------------------------
60.2 Need definition (memo) of processing and formatting required for tlm 7/12/99 GTACS Development
***
- -----------------------------------------------------------------------------------------------------------------------------------
60.3 ***, need detailed definition of incoming and outgoing formats and 7/12/99 GTACS Development
protocols (memo)
- -----------------------------------------------------------------------------------------------------------------------------------
61 *** for validation of MRS&S processing (SSGS build 2) 8/15/99 MRS&S Development
- -----------------------------------------------------------------------------------------------------------------------------------
62 *** ISI for integration and testing with SSGS build 2 8/15/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
63 *** processing (SSGS build 2) 8/16/99 MRS&S Development
- -----------------------------------------------------------------------------------------------------------------------------------
64 New version (contents) of SSED database, including *** housekeeping packet 9/1/99 GTACS Development
decom definition and *** - in support of SSGS build 2
- -----------------------------------------------------------------------------------------------------------------------------------
65 Sample S/C PCM data (PCM 1 and 2, dwell and normal minor frames) 9/1/99 GTACS Development
corresponding to database provided (15 minutes of data) - in support of SSGS
build 2
- -----------------------------------------------------------------------------------------------------------------------------------
66 *** 9/1/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
Customer Furnished Equipment (CFE) and HSC Intellectual Property Need Dates
Dated 2/99
- -----------------------------------------------------------------------------------------------------------------------------------
No. Item Date Required Item/Activity Impact
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
67 New version (contents) of SSED database, including *** 12/1/99 GTACS Development
decom definitions and *** - in support of SSGS build 3
- -----------------------------------------------------------------------------------------------------------------------------------
68 *** (as applicable) to match SSED database delivered on same date 12/1/99 GTACS Development
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
ISI-230-04
October 27, 1998
Hughes Space and Communications Company
Attention: Ms. Jill Perkins
Subcontracts Management
P.O. Box 902
Bldg. E1, Mail Station D 148
El Segundo, CA 90245-0902
Subject Y2K Compliance Requirements
Reference A: Letter dated September 29, 1998, 98/148:JLP
Dear Ms. Perkins:
Per your request, ISI assessed the Year 2000 Compliance requirements contained
in Reference A. The requirements in Articles I and II will be met by the
delivered GOES N-Q GSE and SSGS software and hardware components as presently
defined in our baseline. Article III does not apply since we are not providing
non-compliant components. Under Article IV, the reference to milestones is not
clear. If it is referring to the milestones in Article III, then we have no
comment. If it is referring to milestones above and beyond the requirements in
Articles I and II, then we need clarification of Article IV.
Lastly, we will flow down these requirements to our vendors and consultants
unless directed otherwise.
Please contact the undersigned if there are any questions regarding these
matters. Thank you for your consideration.
Sincerely,
William L. Nigh
GOES N-Q Program Manager
cc:
Albert Alderete
Bill Tittley
Jack Lauderdale
<PAGE>
13 April 1999
Integral Systems Incorporated
5000 Philadelphia Way
Lanham, MD 20706
In Reply Refer To: 99/064:JLP
Attention: Mr. W. Nigh, Program Manager
Subject: Part 5.0 Applicable Documents and Attachments
Reference: Firm Fixed-Price Subcontracts, J8-759124-C3JP, Revision 1
Pursuant to the Buyer's Purchase Order General Provisions GL-21 dated 10/96 and
Exhibit "B", Modifications to GL-21 dated 02/99, the following is hereby
modified in the referenced document:
5.0 APPLICABLE DOCUMENTS AND ATTACHMENTS
------------------------------------
Exhibit "C" is modified and forms an integral part of this Subcontract and is
incorporated herein by this reference.
<TABLE>
<CAPTION>
Attachment Title Date
---------- ----- ----
<S> <C> <C>
Exhibit C List of Known Deliverable Software and Software 4/99
Licenses
</TABLE>
Your acknowledgment of receipt of this revision will be indicated by having a
duly authorized official of your company sign and return one (1) copy of same
within even (7) days from the data hereof to:
Hughes Space and Communications Company
Attention: Jill L. Perkins
P.O Box 902
Bldg. E1, Mail Station D 148
El Segundo, CA 90245-0902
HUGHES SPACE AND COMMUNICATIONS COMPANY
By /s/
------------------------------
Title Subcontracting Manager
------------------------------
Date 13 April, 1999
------------------------------
INTEGRAL SYSTEMS, INC.
By /s/
-----------------------------------
Title President & Chief Operating Officer
-----------------------------------
Date 6 May, 1999
-----------------------------------
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
Buyer and Seller agree that certain provisions in Exhibit B, Additional Terms
and Conditions do not apply to the added Developmental Software, GOES I-M OATS
Database Repartition, under this revision. Specifically, the following clauses
are inapplicable to this Government Furnished Software:
1. Warranties,
19. Final Acceptance, and
20. Indirect, Special, Incidental or Consequential Damages.
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
Exhibit C
List of known Deliverable Software and Software Licenses
SOFTWARE
DELIVERABLE SOFTWARE LICENSE
- -------------------- --------
ISI COTS SOFTWARE Exhibit D
EPOCH 2000
ABE (Archive Browser & Extractor)
OASYS (Orbit Analysis System Software)
Third Party COTS Software Exhibit E
***
***
***
***
Developmental Software Exhibit G
GTACS Support Software
Scheduler Support Software
MRS&S Software (MDL Receive System & Server)
DID Software (Dynamic Interaction Diagnostics)
OATS Software (Orbit and Attitude Tracking System)
GOES I-M OATS Database Repartition
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
11 May 1999
Integral Systems Incorporated
5000 Philadelphia Way
Lanham, MD 20706
In Reply Refer To: 99/082:JPL
Attention: Mr. W. Nigh, Program Manager
Subject: Part 5.0 - Applicable Documents and Attachments
Part 6.0 - Milestone Payment
Reference: Firm Fixed-Price Subcontracts, J8-759124-C3JP, Revision 2
Pursuant to the Buyer's Purchase Order General Provisions GL-21 dated 10/96 and
Exhibit "B" Modifications to GL-21 dated 2/99, the following is hereby modified
in the referenced document:
5.0 - APPLICABLE DOCUMENTS AND ATTACHMENTS
Exhibit "C" is modified and forms an integral part of this Subcontract and is
incorporated herein by this referenced.
Attachment Title Date
---------- ----- ----
Exhibit C List of Known Deliverable Software and Software 4/26/99
Licenses
6.0 MILESTONE PAYMENTS
------------------
The Buyer shall have the right to reduce or suspend milestone payments to the
Seller in the event Seller fails to complete on schedule, the milestone events
identified herein.
Payment for completed milestones shall be made by buyer after 1) Buyer's receipt
of Seller's detailed invoice certified by an appropriate company officer that
the particular milestone event for which payment is claimed has been completed
and 2) Buyer's receipt and acceptance of all written documentation and/or
deliverable items as required by the milestone event. Buyer shall notify Seller
of Buyer's acceptance or rejection of the documentation and/or deliverable items
within 30 days of receipt of the documentation and/or deliverable items. If
Buyer fails to notify Seller within 30-day period, payment shall be made no
later than 30 days after receipt of invoice.
The rights and remedies of the Buyer and the Seller, with respect to this
provision, shall not be exclusive and are in addition to any other rights and
remedies provided by law or in equity under this subcontract.
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
PO J8-759124-C3JP, Revision 2
Integral Systems, Inc.
Page 2
This change incorporates Milestones 3A and 5A, and revises the Date, Value and
Milestone dollars for Milestones 4,5,6 and 7.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Milestone No. Description Date Value Milestone $'s
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 SSGS PDR Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
2 GSE Build 1 Delivery *** *** ***
- -----------------------------------------------------------------------------------------------------------
3 GTACS Proof-of-Concept Demo *** *** ***
- -----------------------------------------------------------------------------------------------------------
3A GSE Build 1A Delivery *** *** ***
- -----------------------------------------------------------------------------------------------------------
4 SSGS CDG Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
5 SSGS Build 1/GSE Bld 2 Delivery *** *** ***
(for flight SWTRR)
- -----------------------------------------------------------------------------------------------------------
5A System CDR Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
6 SSGS Build 2 Delivery (Current Capability) *** *** ***
- -----------------------------------------------------------------------------------------------------------
7 SSGS Build 3 Delivery (Final) *** *** ***
- -----------------------------------------------------------------------------------------------------------
8 Pre-Shipment Review/Shipment to SOCC *** *** ***
- -----------------------------------------------------------------------------------------------------------
9 End-to-End Compatibility Test 1A *** *** ***
Completed
- -----------------------------------------------------------------------------------------------------------
10 Preliminary Acceptance Test Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
11 SSGS Training Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
12 End-to-End Compatibility Test 4 Complete *** *** ***
- -----------------------------------------------------------------------------------------------------------
13 Spacecraft Engineering Handover *** *** ***
- -----------------------------------------------------------------------------------------------------------
14 SSGS Final Acceptance *** *** ***
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Balance of 6.0 and Purchase order remains unchanged.
Your acknowlegement of receipt of this revision will be indicated by having a
duly authorized official of your company sign and return one (1) copy of same
within seven (7) days from the date hereof to:
Hughes Space and Communications Company
Attention: Jill L. Perkins
P.O. Box 902
Bldg. E1, Mail Station D 148
El Segundo, CA 90245-0902
HUGHES SPACE AND COMMUNICATIONS COMPANY
By /s/
-----------------------------------
Title Subcontract Manager
-----------------------------------
Date 5/11/99
-----------------------------------
INTEGRAL SYSTEMS, INC.
By /s/
-----------------------------------
Title VP Government Programs
-----------------------------------
Date 5/27/99
-----------------------------------
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GOES N-Q SSGS/GSE License Breakdown
- -----------------------------------------------------------------------------------------------------------------------------------
Item # Type of License Subsystem/Location Init. Build Quantity Host Name Host ID
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 EPOCH Server GTACS SOCC SSGS 1 4 SOCC
- -----------------------------------------------------------------------------------------------------------------------------------
2 ABE GTACS SOCC SSGS 1 4
- -----------------------------------------------------------------------------------------------------------------------------------
3 *** GTACS SOCC SSGS 1 4
- -----------------------------------------------------------------------------------------------------------------------------------
4 *** GTACS SOCC SSGS 1 1
- -----------------------------------------------------------------------------------------------------------------------------------
5 *** GTACS SOCC SSGS 1 1
- -----------------------------------------------------------------------------------------------------------------------------------
6 OASYS OATS SOCC SSGS 1 3
- -----------------------------------------------------------------------------------------------------------------------------------
7 *** MRS&S SOCC SSGS 1 4
- -----------------------------------------------------------------------------------------------------------------------------------
8 EPOCH Server GTACS WCDA SSGS 2 2 WCDA
- -----------------------------------------------------------------------------------------------------------------------------------
9 ABE GTACS WCDA SSGS 2 2
- -----------------------------------------------------------------------------------------------------------------------------------
10 *** GTACS WCDA SSGS 2 2
- -----------------------------------------------------------------------------------------------------------------------------------
11 *** GTACS WCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
12 *** GTACS WCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
13 OASYS OATS WCDA SSGS 2 2
- -----------------------------------------------------------------------------------------------------------------------------------
14 *** MRS&S WCDA SSGS 2 4
- -----------------------------------------------------------------------------------------------------------------------------------
15 *** NTACTS WCDA SSGS 2 6
- -----------------------------------------------------------------------------------------------------------------------------------
16 EPOCH Server GTACS BUCDA SSGS 2 1 BUCDA
- -----------------------------------------------------------------------------------------------------------------------------------
17 ABE GTACS BUCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
18 *** GTACS BUCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
19 *** GTACS BUCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
20 OASYS OATS BUCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
21 *** MRS&S BUCDA SSGS 2 2
- -----------------------------------------------------------------------------------------------------------------------------------
22 *** NTACTS BUCDA SSGS 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
23 *** MRS&S SEC 3 SEC
- -----------------------------------------------------------------------------------------------------------------------------------
24 EPOCH Server GTACS Server GSE GSE 1 1 *** *** GSE
- -----------------------------------------------------------------------------------------------------------------------------------
25 *** GTACS Server GSE GSE 1 1
- -----------------------------------------------------------------------------------------------------------------------------------
26 *** NTACTS GSE GSE 1 2
- -----------------------------------------------------------------------------------------------------------------------------------
27 *** MRS&S GSE GSE 3 1
- -----------------------------------------------------------------------------------------------------------------------------------
28 EPOCH Client User W/S GSE (client) 4
- -----------------------------------------------------------------------------------------------------------------------------------
29 ABE User W/S GSE 4
- -----------------------------------------------------------------------------------------------------------------------------------
30 *** User W/S GSE 4
- -----------------------------------------------------------------------------------------------------------------------------------
31 GTACS EPOCH MST 1 LM-SXI 1 *** *** MST
- -----------------------------------------------------------------------------------------------------------------------------------
32 GTACS EPOCH ST 2 - to ISI - to SOCC 1 *** ***
- -----------------------------------------------------------------------------------------------------------------------------------
33 GTACS EPOCH MST 3 SDVE 1 *** ***
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GOES N-Q SSGS/GSE License Breakdown
(con't)
- -----------------------------------------------------------------------------------------------------------------------------------
Type of License Subsystem/Location Init. Build Qty for HSC Host Name Host ID
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
34 GTACS EPOCH MST 4 SOCC 1 *** ***
- -----------------------------------------------------------------------------------------------------------------------------------
35 GTACS EPOCH MST 5 at HSC 1 *** ***
- -----------------------------------------------------------------------------------------------------------------------------------
36 GTACS EPOCH MST 6 at HSC 1 TBD TBD
- -----------------------------------------------------------------------------------------------------------------------------------
37 GTACS EPOCH MST 7 at HSC 1 TBD TBD
- -----------------------------------------------------------------------------------------------------------------------------------
38 GTACS EPOCH MST 8 at HSC 1 TBD TBD
- -----------------------------------------------------------------------------------------------------------------------------------
39 OASYS MST (to SOCC) 2
- -----------------------------------------------------------------------------------------------------------------------------------
40 EPOCH Server GOC 1 GOC
- -----------------------------------------------------------------------------------------------------------------------------------
41 EPOCH Client GOC 4
- -----------------------------------------------------------------------------------------------------------------------------------
42 EPOCH ABE GOC 4
- -----------------------------------------------------------------------------------------------------------------------------------
43 *** GOC 4
- -----------------------------------------------------------------------------------------------------------------------------------
44 *** GOC 1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*** Confidential portions omitted and filed separately with the Commission.
<PAGE>
Exhibit 11.1
INTEGRAL SYSTEMS INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
Basic: 1999 1998 1999 1998
----------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Weighted average number of
common shares 6,342,882 5,813,976 6,043,982 5,779,850
Net income $1,074,535 $ 804,854 $2,359,702 $1,596,058
Earnings per share $ 0.17 $ 0.14 $ .39 $ .28
Diluted:
Weighted average number of 6,881,653 6,216,684 6,512,550 6,132,469
common shares
Net income $1,074,535 $ 804,854 $2,359,702 $1,596,058
Earnings per share $ 0.16 $ 0.13 $ .36 $ .26
</TABLE>
- 19 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 23,734,532
<SECURITIES> 240,845<F1>
<RECEIVABLES> 14,420,752
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,396,129
<PP&E> 4,631,961<F2>
<DEPRECIATION> 1,108,160
<TOTAL-ASSETS> 41,919,930
<CURRENT-LIABILITIES> 10,421,342<F3>
<BONDS> 0
0
0
<COMMON> 71,364
<OTHER-SE> 31,427,224
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 28,473,028
<TOTAL-REVENUES> 28,473,028
<CGS> 20,722,853
<TOTAL-COSTS> 7,750,175
<OTHER-EXPENSES> 3,807,726
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,147
<INCOME-PRETAX> 3,844,302
<INCOME-TAX> 1,484,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,359,702
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.36
<FN>
<F1>Includes Trade A/R, Fee Retainage and Unbilled
</FN>
</TABLE>
